Your Cheat Sheet to Stock Market Investing for COMPLETE Beginners
Written By: Nick Nguyen | Read full profile
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When I got into the Stock Market in March of 2020, I had no idea what I was doing. I mean I understood one thing: “Buy low, sell high.” But, that isn’t enough. Even setting up your brokerage account and knowing what everything says can be so daunting. This is meant for the complete beginner. Your one stop shop to all the terms that might show up as you’re opening your account, setting it up, and reading about as you get your feet wet in your stock market investing journey.
Asset Allocation - How you diversify and spread out your risk across different sectors, positions, holdings, etc.
Balance - The total value inside of your account, including your cash, stocks, bonds, funds, ETFs, etc.
Bear Market - When the market goes on defense and starts to go down. ➘
Beneficiary - If you die, this is who you'll leave the account with all the money and positions to. You can have multiple beneficiaries.
Bond - When you create a loan for the government or a corporation. Basically, you give them money, and they'll give you a percentage of interest back on a regular basis until the bond "matures" or is paid back in full.
Bond Market Index - A tracker that shows you the value of certain bonds. For example, the J.P. Morgan Government Bond Index tracks the value of bonds offered by the U.S. government.
Brokerage Account - An account issued by a brokerage company that allows you to buy/sell stocks, bonds, funds, ETFs, etc.
Bull Market - When the market surges up ➚
Capital Asset - A stock, bond, fund, ETF, REIT, etc. that can appreciate or depreciate in value
Capital Gains - The amount of money you gain when you sell a position.
Contributions - Typically used when talking about retirement accounts. It's the amount of money you're allowed to put into the account each year. Some have set limits that change each year.
Core/Cash Account - Essentially your wallet in your brokerage account that carries all the cash you'll use to buy stocks, bonds, funds, ETFs, REITs, etc. When you open any sort of brokerage account, you can elect to have your money sit in there like a checking account. When you buy a stock, it will take money out of your core/cash account and buy the stock. You'll see it as another "position" in your brokerage account.
Cost Basis - The average cost of all your shares of a stock, bond, fund, ETF, REIT, etc. For example, if you buy a share of Apple for $300 on one day, but then it goes on sale and you buy another share at $250, your cost basis would be the average cost of all your shares, ($300 + $250)/2 shares = $275/share.
Day Change - This can be shown as either a percent or a dollar amount in your account. It tells you how much the price has moved either up or down for that day.
Dividend - Certain companies pay you a portion of their profits for being a shareholder, because you know, you're an owner of that company. These can be paid out monthly, quarterly, bi-yearly, or yearly.
Dollar Cost Averaging (DCA) - When you continue to buy shares of a capital asset to try and bring your Cost Basis down.
Exchange-Traded Fund - Think of a stock but instead of just owning 1 company, you get to own multiple companies, bonds, REITs, etc. It's the stock version of a fund.
Expense Ratio - That fee you pay each year for a fund/ETF. It basically covers the cost to load multiple different assets into one bundled fund/ETF...cause you know the fund managers got to get paid somehow.
Gain/Loss - Yes...it’s that straightforward. How much your capital asset goes up or down in value.
Index Fund - A fund that mimics and tracks all positions in an index like the S&P 500, Dow Jones, or Nasdaq.
Margin - Borrowing money from your brokerage to buy capital assets. Don't do it if you're new, because you could find yourself in a lot of debt or paying a lot of interest.
Market Timing - Thinking you're a fortune teller and waiting for the market to make certain dips/gains before you buy/sell. Just don't, cause you can't.
Market Value - The value of the capital asset at that exact point in time. This can constantly change.
Mutual Fund - A fund of a lot of different companies, bonds, etc. that is actively managed by a financial manager. These typically charge higher expense ratios than index funds.
Option - You buy a contract that lets you buy/sell an asset. Think of it like buying those big coupon books. You could redeem some of the coupons to get money back before they expire, let them expire, or just sell the book to someone else.
Order - How you buy a stock, bond, fund, ETF, REIT, etc. through your brokerage account.
Position - What assets you own and how many shares you own of them.
Prospectus - Where you should start your research. It's that super long document that tells you literally EVERYTHING about the asset
Real Estate Investment Trust (REIT) - Companies that manage real estate investments and sell shares of their company. Two that you probably know about are Simon Properties Group (SPG) and Tanger Outlets (SKT). They own a lot of malls and outlets across the United States.
Real Time Quotes - Typically a feature you have to enable in your brokerage account when you set it up. Let's you see prices real time instead of delayed.
Reinvesting Dividends - This is the option to let the company give you more shares of their stock instead of just paying you the dividend money up front. It makes you answer the question: "Do I want cash or more of your stock?"
Risk Tolerance - Your psychology. It tells you if you get super stressed and want to sell everything the minute your assets lose even $0.01, or if you're strong and can wait it out and hope that your assets regain value. You can train yourself to be more risk tolerant.
Roth IRA - A tax advantaged account that lets you put after-tax money in to buy capital assets on the stock market and lets them grow tax-free.
Share - A position you hold in the company. Now, more and more companies let you buy fractional shares. Prices typically reflect the cost of 1 share or position in the company.
Speculation - When you buy an asset hoping it will increase in value in the short-term or near future.
Stock Market Index - A tracker that shows you the value of a certain set of stocks. For example, the S&P 500 covers the 500 companies largest in the U.S. whereas the Nasdaq tracks technology and biotech companies.
Stock - When a company decides to sell a small ownership of their company to the public, they issue stocks. When you buy a stock, you have equity in that company. Stocks are meant to try and capture the overall value of that company based on the general public.
Tax-Advantaged Account - Any type of investment or brokerage account that allows your money to grow tax-deferred or tax-free for a certain period of time.
Taxable Account - Typically a brokerage account where when you sell an asset, any gains you make become taxable.
Ticker Symbol - The letters used to designate the asset whether it's a stock, bond, fund, ETF, or REIT. For example, Apple's ticker symbol is AAPL.
Traditional IRA - A type of retirement account that allows you to contribute pre-tax money that you can deduct from your annual income while letting that money grow tax-deferred until retirement.
Unrealized Capital Gain/Loss - Prices of assets are constantly changing. This feature in your brokerage account lets you see how green (gains) or red (losses) your account is if you were to sell all your positions at that moment. It's unrealized until you sell.
*Note this is not a comprehensive list. It’s meant to just get you started thinking about stock market investing and to answer any questions that might come up as you navigate your brokerage’s page.
*Nguyening Lifestyles is not a registered financial service provider and does not give financial advice. All information in these posts are for entertainment purposes only. Nguyening Lifestyles is not liable for any actions or outcomes that transpired after your reading of the following post.
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