If you have a long-term investment strategy and can afford to leave your money invested for many years, the stock market can be a good place to put that money. The stock market is subject to wild swings in the short term, but over the long term it can be a good investment. You can increase the odds that your investment will grow by learning as much as you can about the stock market before you put your money at risk. Wall Street uses its own unique language, and savvy investors know that learning that terminology is critical to their success.
Items you will need
- Financial publications
Pick up several quality financial publications at your local newsstand, or read them at your favorite library. There are a number of excellent publications related to the world of money, including magazines like Kiplinger's Personal Finance, Fortune and Money Magazine, and daily newspapers like Investors Business Daily and the Wall Street Journal.
Read these financial publications on a regular basis to get used to the language used by Wall Street investors and stock market professionals. Look up any unfamiliar words on financial websites like Yahoo! Finance and CNN Money. The more you can learn about the terms stock brokers and other Wall Street professionals use, the better off you will be.
Turn to the stock tables in your favorite financial publications, and review the headings at the top of each column. Each stock table contains a wealth of information, and interpreting that data can make you a better investor.
Start at the leftmost column in the stock table; this contains the stock ticker symbols. Each company has its own assigned ticker symbol, and that is the symbol used to buy and sell the stock. The stock tables are sorted by a ticker symbol rather than company name, so you will need to know the ticker symbol for any company you want to track. You can look up the ticker symbol by the name of the company on the Internet at any financial website.
Examine the next column in the stock table. This column lists the last closing price of the stock, and is often labeled "Last Close" or "Closing Price." The subsequent columns list the previous close of the stock and the price change from that previous close. Some stock tables also include the high and low trading price of the stock for the previous day.
Locate the column headings are labeled "52 Week High" and "52 Week Low." The 52 week high and low gives you a good idea of how volatile a particular stock has been. A low spread between the 52 week high and low indicates that the stock is not very volatile, while a wide trading range indicates a high level of volatility.
Look for a column labeled "EPS" or "Earnings." This is the earnings per share for the stock. Also look for a column labeled "P/E." This is the price/earnings ratio of the stock. This rate is calculated by dividing the current price of the stock by the earnings per share. For instance, a stock with a selling price of $26 and earnings per share of $2 has a P/E ratio of 13. If the EPS and PE columns show as "N/A," the company has no earnings and operates at a loss.
Locate the columns labeled "Div" and "Div. Yld." These columns show the dividends paid by the company and the dividend yield. Dividend yield is calculated by dividing the purchase price of the stock by the annual dividend rate. For instance, a company with a selling price of $20 and an annual dividend rate of $1.00 has a dividend yield of 5 percent.
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