Top 10 Basic Stock Market Terms Every Beginner Must Know

For those who are new to investing in stocks, each term can be unfamiliar and difficult. That’s why I’d like to introduce 10 basic stock market terms that beginners must know. If you learn these terms, I think you’ll be able to start investing in stocks more confidently.

1. Stock

Stocks are securities that a company issues to raise capital. By owning stocks, you own a portion of the company, and if the stock price rises with the company’s growth, the investor can benefit. Stocks also give you the right to receive dividends.

2. Stock Price

Stock prices represent the price of a stock. This is determined by trading between buyers and sellers in the market and fluctuates due to a number of factors, such as corporate performance, economic conditions, or investor sentiment. The rise and fall of stock prices are important factors that determine investors’ profits and losses.

3. Dividends

A dividend is an amount that distributes a portion of a company’s profits to its shareholders. If you hold shares in a company that pays dividends, you can receive a certain amount of money on a regular basis. Dividends act as an important factor for investors who regularly want stable returns.

4. Market Capitalization

Market capitalization is the sum of a company’s total shares multiplied by its current stock price, and is one of the key indicators for assessing a company’s value. It is divided into large, medium, and small stocks, and the larger the market capitalization, the greater its influence in the market.

5. Price to Earnings Ratio

The P/E ratio is the stock price divided by earnings per share (EPS). It is used to valuation stocks. If this ratio is low, the stock can be considered undervalued, and if it is high, it can be considered overvalued. This P/E ratio allows investors to judge the appropriate price of stocks.

6. Earnings Per Share (EPS)

EPS is the company’s net profit divided by the number of issued shares. It represents the profit earned per share. A high EPS means that a company is profitable, which is an important factor in the stock price increase.

7. Buy and Sell

Buying means buying stocks, selling means selling stocks. This is the basic act of investing in stocks. Investors aim to make a profit by buying at a low price and selling at a high price.

8. Portfolio

A portfolio is a set of various assets held by an investor. It is a strategy that maximizes returns while reducing risk by diversifying into various assets such as stocks, bonds, and real estate. Investing in various stocks to form a portfolio is one of the important parts of managing risk.

9. Dollar-Cost Averaging

Split buying is a strategy of buying stocks in a fixed amount on a regular basis. Even if the stock price fluctuates, the average purchase unit price can be lowered because the stock price is continuously divided into the same amount. This is a way to reduce the risk of stock price fluctuations, which is widely used by long-term investors rather than short-term investors.

10. Risk

Risk refers to the likelihood of a loss in an investment. Stock investments are always accompanied by risks, and the higher the return you expect, the greater the risk. Therefore, we must always understand the scope of our risk acceptance and take our investment strategy carefully.

Conclusion (Top 10 Basic Stock Market Terms Every Beginner Must Know)

If you’ve finished reading this, you’ve learned 10 stock market terms to start investing in stocks. Since these stock market terms are often used in the stock market, I think understanding them well is the first step to a successful investment. Stock investment is always a market where risks and opportunities coexist, so you always need to study and prepare thoroughly. Based on the terms you’ve learned, I hope you gain deeper investment knowledge. I’ll be rooting for you. Thank you.