Ask\/Bid <\/h2>\n\n\n\n
Shorthand for the price you can <\/strong>buy and sell<\/strong><\/a> stocks at<\/strong>. The ask is the higher of the two prices. Conversely, the bid is the lower amount a buyer is willing to pay for the asset listed by the seller. <\/p>\n\n\n\n The difference between the ask (selling) and bid (buying) prices of an asset is called the The process of dividing your portfolio among different types of investments<\/strong>, such as stocks, bonds, cash, and other assets. Asset allocation is important to diversify risk and maximize returns. <\/p>\n\n\n\n A market characterized by falling stock prices<\/strong>, typically highlighted by a 20% decline or more over a period of time. Bear markets generally indicate investors are pessimistic<\/strong> about the market and are selling off stocks in anticipation of further losses. <\/p>\n\n\n\n A bear market is usually caused by The opposite of a bear market. A bull market is one characterized by rising stock prices<\/strong> and increased investor confidence. Bull markets are generally seen as a sign of economic growth and stability<\/strong>. <\/p>\n\n\n\n The amount of money an investor makes<\/strong> when they sell a stock for more than its original purchase price. Capital gains<\/a> are taxed as income, either at the short-term or long-term capital gains rate, depending on how long the stock was held.<\/p>\n\n\n\n A financial marketplace where investors buy and sell stocks<\/strong>, bonds, and other securities. Capital markets help firms expand and raise funds and offer investors the chance to grow their wealth. <\/p>\n\n\n\n Capital markets are typically divided into two segments: primary markets, which allow companies to raise funds by issuing new stock, and secondary markets, which facilitate the buying and selling of already-issued securities<\/strong>.<\/p>\n\n\n\n The process of earning interest<\/strong> on both the principal amount (or the initial capital you invested) and any accumulated interest from previous periods. Compounding<\/a> is a powerful growth tool, as it allows investors to potentially earn more money in the long run by rolling over their returns from time to time.<\/p>\n\n\n\n An investing strategy that involves spreading <\/strong>risk<\/strong><\/a> across different asset classes<\/strong> in order to reduce overall exposure to market volatility<\/a> and instability. Diversifying reduces the impact of individual stock or sector performance on the overall performance of your portfolio. <\/p>\n\n\n\n A common diversification approach is investing in A part of a company\u2019s profit that it pays out to its shareholders<\/strong>. Dividends<\/a> are usually paid out in cash, but may also be distributed in the form of stock or other property. Payments are typically made quarterly and come with tax advantages. <\/p>\n\n\n\n A type of investment that is traded on a stock exchange, similar to an individual stock. Exchange-traded funds are designed to track the performance of a particular <\/strong>market index<\/strong><\/a> or sector, offering investors the chance to diversify their portfolios without having to buy multiple stocks.<\/p>\n\n\n\n An Initial Public Offering (IPO) involves a private company offering its shares for sale to the public for the first time <\/strong>on a stock exchange. An IPO can provide investors with an opportunity to own a piece of a company but comes with some risk since there is no track record of the company\u2019s performance. <\/p>\n\n\n\n When an investor borrows money to invest<\/strong> with the expectation that the return on the investment will be greater than the cost (and interest) of borrowing, they\u2019ve used leverage. <\/p>\n\n\n\n Leveraging can potentially amplify gains, but also increases risk<\/strong>, as investors are responsible for repaying the loan even if their investments do not perform as expected. <\/p>\n\n\n\n Taking a long position means buying a stock at a low price<\/strong> with the hope the stock\u2019s value will appreciate. Taking a short position involves selling a stock at a high price with the expectation the price will decline and you can purchase it back at a lower price.<\/p>\n\n\n\n Taking a long or short position can also be done through derivatives<\/strong> such as options or futures contracts. However, this trading strategy is better suited to experienced traders and investors.<\/p>\n\n\n\n The total value of all a company\u2019s outstanding shares<\/strong>. It\u2019s calculated by multiplying the stock’s price per share<\/a> (PPS) by the number of shares outstanding. Market capitalization can be used to measure how large a company is. <\/p>\n\n\n\n A pooled investment fund<\/strong>, managed by professionals, which allows investors to purchase shares in the fund and benefit from the diversification of its investments. <\/p>\n\n\n\n Mutual funds invest in a wide variety of securities<\/strong> such as stocks, bonds, and money market instruments, and investors\u2019 returns are determined by the accumulated gains from the fund and investors\u2019 share of ownership. <\/p>\n\n\n\n A type of contract that gives holders the right to buy or sell <\/strong>a certain asset at a predetermined price on or before a set date. Options can be used as a A measurement is used to value a company<\/strong> and identify if they are overvalued and undervalued. The P\/E ratio is calculated by dividing the current price of a stock by its earnings per share. It can also be used to compare different stocks or sectors to determine the most profitable options. <\/p>\n\n\n\n The relationship between the level of risk<\/strong> taken on by an investor and the potential return <\/strong>expected from their investments. Generally, the higher the risk, the higher the potential return. Conversely, lower levels of risk are associated with lower returns. <\/p>\n\n\n\n An investor\u2019s willingness to take on risk in order to reach potential returns.<\/strong> Risk tolerance ranges from conservative to aggressive, and can help determine a trader\u2019s psychology of investing<\/a>. <\/p>\n\n\n\n A type of security that represents ownership in a company<\/strong>. Stockholders are entitled to voting rights, potential dividends, and capital gains resulting from increases in the stock\u2019s value. <\/p>\n\n\n\n Stock splits<\/a> occur when a company increases the number of its shares outstanding without changing its market capitalization<\/strong>. For example, if company $TSTR has 1 million shares at $100 and does a 2:1 split, then the company now has 2 million shares, each $50. <\/p>\n\n\n\n A stock split is used to reduce the share price so that it is more affordable to individual investors and easier to trade on the market. <\/p>\n\n\n\n A measure of how much the price of a security fluctuates<\/strong> over time. High levels of volatility<\/a> indicate that securities are more risky and may be prone to significant fluctuations in value. Low levels of volatility indicate that a security is less risky and more stable in price. <\/p>\n\n\n\n Understanding important investment terms can offer a greater understanding of short-hand investment discourse<\/strong>. Both beginner and advanced investors should consider implementing these terms into their trading conversations and practice explaining key investment concepts to solidify trading knowledge. <\/p>\n\n\n\n Visit the eToro Academy<\/a> to learn intermediate and advanced investment terms. <\/p>\n\n\n\n\n\n A bearish market<\/a> refers to a market where prices fall and investor sentiment is pessimistic. On the other hand, a bullish market indicates that investor sentiment is positive and prices are rising.<\/p>\n<\/dd><\/div>\n\n\n\n Stocks and shares are often used interchangeably in beginner investment<\/a> discourse, however these are separate concepts. A stock is a financial instrument that represents part ownership of a company, for example, an Amazon or Apple stock. A share is a single unit of a stock.<\/p>\n<\/dd><\/div>\n\n\n\nAsset allocation <\/h2>\n\n\n\n
Bear market <\/h2>\n\n\n\n
Bull market<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.etoro.com\/wp-content\/uploads\/2023\/06\/Investing-Terms-You-Need-to-Know_Body-Image-2_-Bear-vs-Bull-Markets-1.png\")
<\/figure>\n\n\n\nCapital gains<\/h2>\n\n\n\n
Capital markets<\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.etoro.com\/wp-content\/uploads\/2023\/06\/Investing-Terms-You-Need-to-Know_Body-Image-1_-What-are-Capital-Markets_-1.png\")
<\/figure>\n\n\n\nCompounding interest <\/h2>\n\n\n\n
Diversification <\/h2>\n\n\n\n
Dividend<\/h2>\n\n\n\n
Exchange-traded funds <\/h2>\n\n\n\n
IPO<\/h2>\n\n\n\n
Leveraging <\/h2>\n\n\n\n
Long \/ Short<\/h2>\n\n\n\n
Market capitalization <\/h2>\n\n\n\n
Mutual funds <\/h2>\n\n\n\n
Options<\/h2>\n\n\n\n
Price-to-earnings ratio<\/h2>\n\n\n\n
Risk and Return<\/h2>\n\n\n\n
Risk Tolerance <\/h2>\n\n\n\n
Stock <\/h2>\n\n\n\n
![\"\"](\"https:\/\/www.etoro.com\/wp-content\/uploads\/2023\/06\/Investing-Terms-You-Need-to-Know_Body-Image-3_-What-is-the-Stock-Market_-1.png\")
<\/figure>\n\n\n\nStock Split<\/h2>\n\n\n\n
Volatility<\/h2>\n\n\n\n
Final thoughts<\/h2>\n\n\n\n
FAQs<\/h2>\n\n\n\n
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