Full transcript
0:00In today's video, I'm going to explain
0:02over a 100 stock market terms that every
0:05beginner should know. To make it simple,
0:08I've divided everything into nine simple
0:10topics. So, if you want to finally
0:12understand how the stock market works
0:14and learn some essential investing
0:16terms, this video is definitely for you.
0:20Welcome to Martic Finance, where we
0:22explain investing concepts in a simple
0:24way. But first of all, a quick
0:27disclaimer. This is not financial
0:29advice.
0:33Let's start with the most important
0:34question. What is a stock? A stock
0:38represents ownership in a company. If
0:40you own a stock, you literally own a
0:42piece of that business. There are two
0:45main types, common stock and preferred
0:47stock. Common stock is what most
0:50investors buy. You get a claim on the
0:52company's profits and the right to vote
0:54on big decisions, but dividends aren't
0:56guaranteed. Preferred stock is
0:59different. You usually don't get voting
1:01rights, but you're more likely to
1:02receive steady dividends, and you get
1:04priority if the company pays out money
1:06to shareholders. Now, instead of just
1:09owning one stock, most investors build a
1:12portfolio. A portfolio is simply a
1:15collection of all the investments you
1:17hold. Some of those investments might
1:19pay a dividend. That's when a company
1:22shares part of its profits directly with
1:24shareholders.
1:26But not every company's stock is
1:28available to the public. A public
1:30company is one that has listed its
1:31shares on the stock market. While a
1:34private company keeps its shares owned
1:36by founders or private investors.
1:39To measure how groups of stocks are
1:41doing, we look at something called an
1:42index. An index is a collection of
1:45stocks designed to represent a piece of
1:47the market and it's used as a benchmark
1:49for performance.
1:51For example, the S&P 500 tracks 500 of
1:54the biggest US companies. The NASDAQ is
1:58known for tech stocks
2:00and the Russell 2000 tracks smaller
2:03companies.
2:05When investors talk about trying to beat
2:07the market, they usually mean earning a
2:09return that's higher than one of these
2:11major indexes, especially the S&P 500.
2:15Since the S&P 500 is often treated as
2:17the standard benchmark, if your
2:19portfolio does better than it, you've
2:21beaten the market. This is actually
2:24really difficult and only a few
2:26investors managed to do it.
2:28All these stocks trade on a stock
2:30exchange. That's the marketplace where
2:33buying and selling happens. The largest
2:35in the US is the New York Stock
2:37Exchange. To actually trade, you'll need
2:40a brokerage, a platform, or service that
2:44connects you to the exchange. They may
2:46charge a commission, which is just a fee
2:49for making the trade. Every stock is
2:52identified by a short code called a
2:54ticker symbol, like AAPL for Apple or
2:57TSLA for Tesla.
3:00Trading happens during official market
3:01hours, typically 9:30 a.m. to 400 p.m.
3:05Eastern time. The stock price is the
3:07current price of one share. At the start
3:10of the day, we have the opening price
3:12and at the end, the closing price. But
3:15trading doesn't stop there. There's
3:17pre-market trading before the open and
3:19after hours trading once the market
3:21closes. This is when investors can still
3:23buy and sell stocks outside of normal
3:25hours, often reacting to news like
3:27earnings reports or economic
3:29announcements. The catch is that these
3:31sessions usually have lower volume and
3:33lower liquidity. Here is the volume
3:36which shows how many shares are being
3:38traded. High volume means lots of
3:40activity while low volume means fewer
3:43trades. And finally liquidity which
3:46tells you how easy it is to buy or sell
3:48a stock without moving the price too
3:50much. Big popular companies like Apple
3:52or Microsoft are very liquid.
3:59We'll start with market capitalization
4:01which is the total value of a company's
4:03stock on the market. You simply multiply
4:05the stock price by the number of shares.
4:07Then there is the enterprise value which
4:10looks not just at stock but also at debt
4:12and cash the company holds giving a
4:15fuller picture of what the business is
4:16worth.
4:18Revenue is the total income from sales.
4:21After expenses are subtracted. What's
4:23left is net income. That's the profit.
4:25On the balance sheet, you'll also see
4:27assets and liabilities. Assets are what
4:30the company owns like cash, equipment or
4:33property. Liabilities are what it owes
4:36things like loans or debt. Now to
4:39compare companies, investors use ratios.
4:43One of the most common is earnings per
4:45share EPS. This shows how much profit is
4:48made for each share of stock. For
4:51example, if a company earns $100 million
4:53in profit and has 50 million shares
4:56available, the EPS would be $2 per
4:59share. From there, we get the price to
5:02earnings ratio. It compares the stock
5:04price to the earnings per share, showing
5:07whether a stock looks expensive or cheap
5:09compared to its profits. The PEG ratio
5:12goes a step further. It's the PE ratio
5:15adjusted for expected growth, helping
5:17investors see if a fast growing
5:19company's stock is fairly valued. For
5:21income focused investors, there's
5:23dividend yield. This measures how much
5:26you earn in dividends compared to the
5:27stock price. Another key factor is free
5:30cash flow. This is the cash a company
5:33has left after paying its expenses and
5:35investments. It's what can be used for
5:37dividends, buybacks, or growth.
5:41Finally, let's look at profitability
5:44margins. Gross margin tells you how much
5:46money a company keeps from sales after
5:49paying for the direct costs of making
5:51its product. Operating margin goes a
5:54step further, showing what's left after
5:56paying for things like salaries, rent,
5:58and other business expenses. Finally,
6:01net profit margin is the true bottom
6:03line, the percentage of revenue left
6:06after all costs, including taxes and
6:08interest, are taken out.
6:14A growth stock is a company that's
6:16expected to grow quickly, often
6:18reinvesting profits instead of paying
6:20dividends. Think of tech companies that
6:22focus on expansion. A value stock is the
6:25opposite. It's a company that looks
6:27cheap compared to its fundamentals.
6:29Investors buy them hoping the market
6:31will eventually recognize their true
6:33worth.
6:35Then we have blue chip stocks. These are
6:38large, wellestablished companies with
6:39strong reputations like Coca-Cola or
6:42Johnson and Johnson. They're considered
6:44stable and reliable. Some stocks move
6:47with the economy. These are called
6:49cyclical stocks. For example, car
6:52companies or airlines usually do well
6:54when the economy is booming, but
6:56struggle during recessions.
6:59On the other hand, defensive stocks are
7:01more stable in any economy. Companies
7:04that sell essentials like food,
7:06utilities, or healthcare tend to hold up
7:08even in tough times. Stocks can also be
7:12grouped by size. A large cap company is
7:15worth over 10 billion. A midcap is
7:17between $2 and $10 billion, and a small
7:20cap is under $2 billion. And finally,
7:23penny stocks are very lowpriced shares,
7:26usually under $5. They're highly
7:29speculative and risky, but sometimes
7:31attract investors looking for big wins.
7:39A mutual fund pulls money from many
7:41investors to buy a mix of stocks, bonds,
7:43or other assets. A professional manager
7:46chooses the investments and adjusts the
7:48portfolio over time. An ETF or
7:51exchangeraded fund works a lot like a
7:54mutual fund, but trades like a stock on
7:56an exchange.
7:58You can buy or sell at any time during
8:00market hours, making it flexible and
8:02easy to trade. Many ETFs track a whole
8:05market index or a sector like technology
8:08or healthcare.
8:10An index fund is a type of mutual fund
8:12or ETF that simply tracks a market index
8:16like the S&P 500. Instead of trying to
8:19beat the market, it aims to match it,
8:21which keeps costs low and makes it a
8:24favorite for long-term investors.
8:27Some funds are more specialized like a
8:29hedge fund which uses advanced
8:31strategies like shortselling or leverage
8:34to try to generate high returns. Hedge
8:36funds are usually for wealthy investors
8:39because they carry higher risk and
8:41require more capital to get started.
8:43There are also tax advantaged accounts
8:46like a Roth IRA which allows your
8:48investments to grow tax-free. You
8:50contribute with after tax money and when
8:52you retire withdrawals including growth
8:56are generally tax-free. It's a popular
8:58way to save for retirement.
9:01Beyond stocks and funds, there are
9:03commodities like gold, oil, or
9:06agricultural products which can be
9:08bought directly or through funds. Bonds
9:11are essentially loans you give to a
9:13company or government. In return, they
9:15promise to pay you interest, usually at
9:18a fixed rate, over a set period, and
9:20then return your original investment
9:22called the principal when the bond
9:24matures. Currencies let you invest in
9:27money from around the world like
9:28dollars, euros, or yen. And then there's
9:32cryptocurrencies like Bitcoin or
9:35Ethereum, which are digital assets that
9:37trade independently of traditional
9:39markets.
9:44One key concept is volatility, which
9:47measures how much stock prices move up
9:49and down. Highly volatile stocks swing a
9:51lot in price, while low volatility
9:53stocks are more stable.
9:56Investors often track the VIX, also
9:58called the fear index. It measures
10:01expected volatility in the S&P 500 over
10:03the next 30 days. When the VIX is high,
10:07it shows that traders expect big swings
10:09in the market.
10:11A bull market happens when prices are
10:13rising over a long period. Optimism is
10:16high and investors are confident. The
10:18opposite is a bare market when prices
10:20are falling and pessimism dominates.
10:24Sometimes the market pulls back
10:26temporarily without changing the overall
10:28trend. This is called a correction.
10:31Usually a drop of about 10% from recent
10:33highs. When prices climb sharply after a
10:36dip, that's a rally.
10:39On the extreme end, a crash is a sudden
10:41and severe drop in stock prices, often
10:44caused by panic or major events.
10:47A market bubble happens when prices rise
10:50far above a company's actual value,
10:52driven by speculation or hype.
10:54Eventually, bubbles burst and prices can
10:57fall dramatically. Finally, market
11:00sentiment describes how investors feel
11:02about the market overall. Are they
11:04optimistic, fearful, or somewhere in
11:07between? Sentiment can strongly
11:10influence trends, sometimes even more
11:12than company fundamentals.
11:19Passive investing is a long-term
11:21approach where you buy a broad market
11:22index or fund and hold it without trying
11:25to pick individual winners. It's simple,
11:28lowcost, and often matches market
11:31returns. A common tactic within passive
11:34investing is dollar cost averaging or
11:36DCA. This is when you invest a fixed
11:39amount regularly, like every month. It
11:42helps smooth out market ups and downs
11:43over time. Alternatively, lumpsum
11:47investing is putting a large amount of
11:48money in the market all at once. While
11:51it can grow faster if the market rises,
11:53it's riskier if prices drop right after.
11:59Active investing is the opposite of
12:00passive. Active investors pick
12:03individual stocks or try to time the
12:05market to outperform the averages. Some
12:08strategies are about timing and
12:10opportunity. Buy the dip means
12:12purchasing a stock after it drops in
12:14price, hoping it will recover.
12:19Buy and hold is simply buying good
12:21companies and holding them for years,
12:23letting compounding work its magic.
12:27Market timing is trying to predict the
12:29best moments to enter or exit the
12:31market. It's very difficult and risky
12:34even for professionals. Some approaches
12:37are more analytical. Speculation is
12:40taking high-risk positions hoping for
12:42big gains.
12:45While fundamental analysis studies a
12:47company's financial health, management,
12:49and industry, technical analysis looks
12:52at price charts and trends to forecast
12:54movements. And macro analysis examines
12:57the overall economy, interest rates, and
13:00global trends to guide investment
13:02decisions.
13:08One of the most famous corporate actions
13:09is the initial public offering. This is
13:12when a private company sells shares to
13:14the public for the first time, opening
13:16up ownership to everyday investors.
13:19After a company is public, it might do a
13:21secondary offering, issuing additional
13:24shares to raise more money. Sometimes a
13:27company wants to reduce the number of
13:28shares on the market. A buyback or share
13:32repurchase happens when a company buys
13:34its own stock, which can increase the
13:36value of remaining shares.
13:39A stock split increases the number of
13:41shares by dividing existing ones. For
13:44example, in a two for one split, you get
13:47two shares for everyone you own and the
13:49stock price is hald.
13:52A reverse stock split does the opposite.
13:55It combines shares to increase the
13:57price, often to meet exchange
13:58requirements.
14:00Companies also grow by buying others. An
14:03acquisition happens when one company
14:05purchases another which can affect stock
14:07prices for both. Investors in dividend
14:10paying stocks should know key dates. The
14:13X dividend date is the cutoff to qualify
14:15for the next dividend.
14:19The payment date is when the dividend is
14:21actually sent to shareholders.
14:24Finally, an insider is someone with
14:26access to non-public company information
14:29like executives or board members.
14:31Insider actions and trades are closely
14:34monitored to prevent unfair advantages.
14:41One of the most important tools is
14:43diversification.
14:45This means spreading your investments
14:46across different stocks, sectors, or
14:49asset types so that a loss in one area
14:52doesn't sink your whole portfolio.
14:56Asset allocation takes diversification a
14:58step further. It's about dividing your
15:00money between different types of assets
15:02like stocks, bonds, or cash based on
15:05your goals and risk tolerance.
15:08Over time, some investments grow faster
15:10than others, which can throw your
15:12portfolio out of balance. Rebalancing is
15:15the process of adjusting your holdings
15:17to return to your original target
15:18allocation.
15:20Investors also measure performance using
15:23metrics like alpha and beta. Alpha shows
15:26how much a portfolio outperforms or
15:28underperforms the market. Beta measures
15:30how sensitive your portfolio is to
15:32overall market movements. Higher beta
15:35means more volatility. The sharp ratio
15:38is another key metric. It shows how much
15:40return you're getting for the risk
15:42you're taking. A higher sharp ratio
15:44means better risk adjusted returns.
15:46Correlation tells you how closely two
15:48investments move together. If two stocks
15:51are highly correlated, they tend to rise
15:53and fall together, which affects your
15:55diversification strategy.
15:59Finally, understanding types of risk is
16:01crucial. Systematic risk affects the
16:04entire market like recessions or
16:06interest rate changes. Unsistatic risk
16:09is specific to a single company or
16:11sector and can usually be reduced
16:13through diversification.
16:19Inflation is when prices for goods and
16:21services rise over time, which means
16:24your money buys less than before.
16:26Deflation is the opposite, when prices
16:29fall, which can slow economic growth.
16:33Sometimes the economy faces a rare
16:35situation called stagflation, where
16:37prices rise but growth stalls and
16:39unemployment is high. A recession
16:42happens when the economy shrinks for
16:44several months, often measured by
16:45falling GDP. During recessions,
16:48companies earn less and stock prices
16:50often drop. Governments and central
16:53banks use different tools to manage the
16:55economy. Monetary policy is controlled
16:58by central banks like the Federal
17:00Reserve in the US and includes actions
17:03like changing the interest rate or
17:04controlling money supply to influence
17:06growth and inflation. Fiscal policy, on
17:09the other hand, is what the government
17:10does with spending and taxes. Increasing
17:14spending or cutting taxes can stimulate
17:16the economy, while reducing spending or
17:18raising taxes can slow it down. And
17:20that's a wrap for today's video. Of
17:22course, we didn't dive deeply into every
17:25single term because the goal was to
17:27cover as many stock market terms as
17:29possible for beginners. If you found
17:31this video helpful, I'd really
17:33appreciate it if you like this video and
17:35subscribe to the channel for more
17:37content like this. Thanks so much for
17:39watching and I'll see you in the next
17:41one. Bye.