Investing your cash is crucial and it is important to understand how the investment world works. Sometimes these if confusion around the terms that go along with investment. The following five terms are some of the most common that you will hear, and you should get to know what they mean!
The “ask price” is the lowest price the seller will be willing to agree on for the sale. Along with the price, the ask quote might also stipulate the amount of the security available to be sold at the stated price. The bid is the price a buyer is willing to pay for a security, and the ask will always be higher than the bid.
What is a bid? A bid occurs when a buyer is purchasing a security. The bid price is the highest price the buyer will agree to pay for the sale. A bid also refers to the price at which a market maker is willing to buy; unlike a retail buyer, a market maker also displays an ask price.
This refers to the time when the stock prices drop for a considerable amount of time in the stock market. In a bear market, investor confidence is extremely low. Many investors opt to sell off their stocks during a bear market for fear of further losses, thus fueling a vicious cycle of negativity. The opposite of this type of market is known as a bull market.
Blue Chip Company
An international or national company whose stock maintains solid growth on a consistent basis is known as a blue chip company. Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth.
When businesses or governmental agencies issue these investors in order to grow capital, this is called a bond. Investors receive an interest amount over a specific amount of time until the point of maturity. At this point, a mature bond will provide the investor with of money initially used in the investment.
If you’d like to invest but feel like investors are speaking another language, maybe you just need to learn the language first. The above isn’t a comprehensive list by any means, but understanding these terms will make you feel more confident about investing.