Value investor need to konw the following investment terms.

(i) you must know before you start investing in stocks,

(ii) you probably should know, and

(iii) it would be a good idea if you did know but its not really necessary to start

 .(i) The investment terms you absolutely must know– before you start investing

Ask Price – the lowest price a seller is willing to accept when selling thestock.

At Limit – setting the minimum price at which you wish to sell, or themaximum price at which you wish to buy, the stock on the market.

Bear market – a term used to describe a market that is falling (as opposed toa Bull, or Bullish, market which is a market that has either risen already or isexpected to do so).  and was finding it difficult to cometo terms with the myriad of investment terms – I used little tricks to jogmy memory.

For example, for a ‘bear’ market I visualized a bear, clawing thingsDOWN, and for a ‘bull’ market I pictured a bull with his horns, throwingthings UP in the air. Try it, it works a treat. It helped make me wealthy!

Bid Price – the price at which an investor may sell shares to the market. Theopposite is an Ask Price.

Book Value – the value of a company if all liabilities are subtracted from thetotal assets.

Broker/Dealer – a member of an Exchange who functions both as a marketmaker (setting a price) and as the stockbroker (buying and selling the shares).Blue Chip Stock – a company that has a history of solid earnings, regularand ever increasing dividends, an impeccable balance sheet and regarded asa safe if unspectacular investment.

Bull Market – when the majority of stocks are rising in price, and continue todo so over several months.

Capital Gain – the profit you make when you sell your stock (on the otherhand if you make a loss, that’s called a Capital Loss).

Commission – the percentage a particular broker/dealer charges you forhis/her services.Dividend – the distribution of profits to the company shareholders.

EPS (Earnings Per Share) – shows how a company is performing for shareholders. It’s worked out by dividing the profits by the number of shares issued.
Equities – alternative name for stocks and shares.
Exchange (Stock Exchange) – the marketplace where members gather to trade securities on behalf of both themselves and others.
Exposure – the risk taken when you are buying or selling the shares.
Gross – before the deduction of taxes or commissions. (The opposite of which is “Net” – what you receive after deductions have been made).
Holding – the number of shares you own in any one company.

New Issues – companies that are either coming onto the market for the first time or are issuing new shares.
Offer Price (sometimes referred to as the “ask” price) – the price at which you can buy from the market.
Ordinary Shares – the most common type in issue, are fully paid shares which carry voting rights.
P/E Ratio (Price/Earnings Ratio) – obtained by dividing the share price by the EPS. Shows the investor how the company is performing. A high P/E ratio
suggests that the market holds a good view of the future earnings of the company concerned.
Let’s look at an example. If a company reports a profit of $2.50 per share, and the stock is selling for $15 per share, the P/E ratio is 6, because you are
paying sixtimes earnings ($15 per share divided by $2.50 per share earnings = 6/PE).
Portfolio (of stocks/shares) – your collection of stocks in the various companies you have an interest in.
Settlement – the transferring process of ownership of the stocks and cash between the buyer and seller.
Types of Shares –there are two types of stock, Common and Preferred –with by far the most prevalent being Common. That’s what we’ll be referring
to in this book.

ii) Investment terms you should know

  
Cash Dividend – is simply a cash payment per share you hold.
Fund Manager – individual or company that invests money on behalf of their clients.
Inflation – the rate at which prices rise for a basket of commodities. Usually restrained by the movement of interest rates.
Interim Dividends – a company’s distribution of profits to shareholders halfway through the financial year.
Market Capitalization – number of shares in an issue multiplied by the share price.
Mergers – the joining together of two companies to form one – thereafter sharing assets, clients, debts and so on.
Return on Net Assets –the profit before interest and tax (of the company) expressed as a percentage of the net assets.
Yield – the annual dividend or interest income expressed as a percentage of the price of the shares/stocks or bonds.
Say the stock is trading for $10 per share and it pays a dividend of $0.75 per share. The yield would then be 7.5%, because for every $10 you invested,
you’d receive 7.5% back annually on your money (75￠).

(iii) Investment terms that it would be a good idea if you knew –but you don’t positively need them to start with.

AGM (Annual General Meeting) – this is where directors are appointed and reappointed, the Annual Report and Accounts are presented, views are aired
and a range of matters discussed and resolutions passed.
ARCs (Annual Reports & Accounts) – all PLCs (publicly listed companies) are obliged to make these available to shareholders. They set out the company’s yearly financial performance.
Discount – when the market price of a newly issued company is lower than the stock’s issue price.
EGM (Extraordinary General Meeting) – any meeting of the company shareholders that is not the AGM.
Gearing – a company’s debts expressed as a percentage of its equity. Watch out for a high gearing (which of course would signify the debts are
high).
Premium –the opposite of a discount, being an increase in the price of a newly issued stock, over the issue price.
Tender Offer – potential investors are asked to stipulate the offer price per share that they are willing to pay.
Volume – the number of shares of stock traded in a day.