Quickie Definitions
More details about many of these terms in links. I think some need better clarification, while keeping them brief, so I will be tweaking them.
STOCK – Used to be a piece of paper giving you a slice of ownership of a company. The stock market has gone “paperless”. For purposes of this blog / website, the word “stock” will be general in meaning, and will be used to also reference ETFs, bonds, mutual funds, etc.
Fundamental Analysis – Looks at a myriad of details of a companies financial numbers, and other items to determine if the stock would be worth buying, usually for an investment. View this post about Fundamental and Technical Analysis
Technical Analysis – Uses “charts” and “Technical Indicators” in an effort to determine if a stock price is going up or down. Used mostly by traders for short term buys (or time to sell), but investors will use this also.
Technical Indicator – Can be used to get information on many items of a stocks price / history. The most common T.I. is “Volume”, or how many shares have been bought / sold during a day or over a period of time. Another popular one is “Moving Average”.
PAPER TRADING - Make believe or fantasy buying / selling of stocks. Read the Yahoo! Portfolios post and pdf tutorial to learn how trade / invest without using real money.
STOCK SIMULATOR – Many websites have these which allow users to create fantasy portfolios and do paper trading / investing. I used a couple of these simulators before I figured out that I can paper trade / invest with Yahoo! portfolios.
STOCK SCREENER / SCREEN - A way of searching for stocks. Read the Yahoo! Stock Screener post and PDF tutorial to learn how to use a stock screener.
BACK TEST – A way of testing a potential stock pick with historical data, to see how the trade / investment would have turned out. I “Current test” with Yahoo! portfolios using today’s data! I can back test with a portfolio too, by choosing a date, getting an approximate purchase price, and enter info into the portfolio.
SECTOR – This is how the market organizes “Industry” groupings of companies. In Yahoo! There are 9 sectors, like Financial, Healthcare, Services, etc. Dow Jones lists 10 sectors.
Yahoo! Sectors Link
Dow Jones Sectors Link (Dow Jones actually calls them Industries)
INDUSTRY – This is how the market organizes companies of similar type. In Yahoo!, the Sectors are divided into sub groups called Industries. Example – Yahoo! Services sector has some of my favorite industries, such as Industrial Equipment and Railroads. Dow Jones has railroads listed in their Industrials sector.
INVESTOPEDIA: What is the difference between an industry and a sector?
PORTFOLIO – A collection, or variety of stocks / ETFs, bonds, etc that one has obtained shares of. A portfolio could have just one share of one stock. I think of this like a file folder and the paper(s) inside.
DISCOUNT BROKER – Refers to online websites / companies that people use to actually buy / sell stocks.
PER TRADE – A generic term used by brokers for actually buying and selling stocks. Buying 5 shares would be a “trade”. Buying 5 shares a week for 4 weeks, would be four “trades” for the month.
ETF – Exchange Traded Fund- Like a mutual fund in a way, where it has a whole bunch of different companies stock in one “basket”, but I can trade an ETF like an individual stock.
INVESTING / INVESTOR – Generally means holding onto a stock for a long time, say over one year. Tax bite is lower if stocks are held for more than one year. Investors seem to focus on fundamental analysis for long term prospects, and some Technical analysis to judge when to buy.
TRADING / TRADER – Generally means holding onto a stock for a short time, say less than one year. Term seems mostly associated with persons who hold onto a stock for a few seconds to a few days / weeks. Tax bite is higher if stocks are held for less than one year. Traders seem most interested in Technical analysis, not being too concerned about Fundamentals, as they do not intend to hang onto the stock very long.
RISK – Wikipedia definition – EVERY stock, etf, mutual fund, etc will contain the phrase “Investing involves risk, including possible loss of principal…”
GAMBLING - Wikipedia definition