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If you’re entering the world of stocks and bonds, you’re going to need to familiarise yourself with some of the lingo that does the rounds. Here are a few common (and not so common) terms to add to your repertoire:

Stock or share: Best to begin with the basics. Stock refers to ownership, with a company split up into shares of stock that are then sold to investors, with the purpose of raising money for the business.

Dividend: Company owners in turn owe shareholders a percentage of the company profits, in return for the investment they have made into the business. This pay-out, which occurs at the discretion of company management, is known as a dividend.

The Dow Jones Industrial Average: This stock market index shows how 30 large, publicly traded companies in the United States have traded during a standard trading session in the US. It was created in 1896 by Charles Dow, one of the founders of Dow Jones & Co., the same firm that established the Wall Street Journal. The original 12 stocks in the Dow Jones Industrial Average consisted almost entirely of commodity-based firms (oil, tobacco, cotton etc) while today they have been replaced by companies across many diverse sectors.

The NASDAQ: The National Association of Securities Dealers Automated Quotations System is an electronic exchange, with trading operating via an automatic network. Technology stocks are often traded on the NASDAQ.

The S&P 500: The Standard & Poor’s 500 is considered by many to be the best representation of the market and is one of the most widely followed indices. It is based on the stock prices of 500 publicly traded American companies and differs from the Dow and NASDAQ in that it weights the stocks differently.

Market capitalisation: This important concept helps investors understand the size of a company relative to others. Essentially, it is the amount that it would cost you if you were to buy every single share of stock that a company has issued. Coca-Cola, for example, sells shares at around $50 a piece, and has about 2.3 billion shares of stock, giving it a market capitalisation figure of approximately $115 billion. Another smaller company might sell shares for a higher price, but only be a fraction of Coca-Cola’s total size.

Ticker symbol: These codes help investors look up information on different stocks and place orders – it’s like a unique form of identification for each stock. For example, ABSA’s ticker symbol is ASA.

Bull: This common term describes an upward trending market.

Bear: A bear market is a downward trending market.

Capital gain: This refers to the increase in the share price (or any asset for that matter) above the figure you purchased it for (when entering into a long trade). Capital gains have significant tax advantages over regular income.

Core holding: An investment that is held for a long time, generally due to its proven track record of high quality security, is known as a core holding.

Load: This is the sales charge or commission paid to a broker, not to the fund. If the load is paid at the time when the shares are purchased, it is called a front-end load; and it becomes a back-end load when deferred till the sale of the shares.

Standard deviation: This measure shows how much an investment fluctuates from its annual or expected return, and is an indication of volatility. If a fund has a standard deviation of 10, it means that about two-thirds of the time it will be within 10% of its average price.

Once you’ve swallowed all the terminology above, all that remains is to ensure your “risk tolerance” is sufficient – which is the investor’s ability to psychologically endure the risk of losing money. Then you’re all set to enjoy the big wins. Good luck!

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