What you need to know to invest in the stock market

In the stock market it is common to use  stock market jargon with specialized terms whose meaning the investor may or may not know, therefore, we share some of the key concepts of the sector.

When referring to the stock market we find that the stock market is a global indicator that is interconnected between different countries and currencies, so it is not surprising the use of stock slang, which are generally Anglo-Saxon terms or specialized concepts.

For example, some of the most used phrases or words in the financial markets may be the insider, which is used to define the boards and managers who buy or sell shares of the companies they serve.

Currently there are simple tools to use and made to invest in assets or to make a profit if you have the knowledge and experience. However, it is common that in the stock market there is a specialized language aimed at more sophisticated investors.

Glossary of financial terms

To start in the stock market, it is important for the investor to have basic knowledge of the financial markets and, especially, of the stock market, with the intention of becoming familiar with the technical language used by the issuers and institutions that participate in the sector.

We list you some basic financial terms to invest in the market:

  • Action: are the fractions into which the share capital of a company is divided.
  • Stock market: it is a market to sell and buy a wide variety of investment instruments such as stocks, bonds, certificates, debt securities, among others. It works with a free market dynamic, that is, prices are set by supply and demand. In addition, the purchase and sale of investment instruments are made through stock brokers.
  • Bonds: they are debt securities that can be issued by a company or the State. This financial instrument specifies the amount and term determined as well as the issuer's obligations.
  • Credit quality: is the degree of the issuer's ability to pay its creditors. The rating firms are responsible for evaluating the experience and history of the public or private broadcaster, as well as its possibilities of meeting its obligations.
  • Venture capital: Venture capital is said to be when investors place funds in high-risk companies, transactions, or instruments to achieve high returns or high profits.
  • Placement of securities: is the sale of financial assets by an issuer through a stock broker.
  • Derivative: are the financial instruments that are linked to an underlying or reference value. Derivative products emerged as hedging instruments against price fluctuations in products such as commodities that contain high volatility.
  • Issuers: companies that issue equity or debt securities.
  • Investment funds: it is a mechanism that contains various securities and debt securities to diversify risks and returns.
  • Futures: it is a market in which contracts for the purchase or sale of services or products are made on a long-term date to agree on the present price —as is the case of commodities or currencies— with an expiration date.
  • Stock index: this indicator reflects the behavior of a set of shares. The objective is to analyze the development of the stock market in a certain time.
  • Stock index: is a number that reflects the evolution over time of the prices of the titles, stocks, bonds, or government papers that are listed on a market. This index is also a statistical record that considers the variables to which the actions that comprise it are exposed.
  • Settlement: it is a mechanism by which the securities are transferred to the securities accounts of a new owner after carrying out a transaction of securities.
  • Stock market: in this securities transactions are carried out by stock brokers, these, in turn, capture the resources from investors, national and foreign, with the intention of obtaining the financing required by an issuer, credit institutions and government agency.
  • Money market: in this space are the providers and demanders of short-term resources. Instruments in this market are characterized by their high level of security and low level of risk.
  • Public Offering: it is the initial placement of securities among the investing public through the Mexican Stock Exchange or the Institutional Stock Exchange (BIVA).
  • Term: is the period of time that elapses before the maturity of a debt security. It can go from one day to 30 years.
  • Returns: the profit produced by an investment. Yields are not only generated by the difference between the purchase price and the sale price, there is also a gain on the interest that the instrument provides, in the case of debt.
  • Risk: it is a vision of unexpected results in the future that can negatively affect the equity of an investor.
  • Market risk: it is said to be the risk that the investor or owner of a financial asset of any type incurs in the face of price fluctuations.
  • Interest rate: is the percentage of return (for the investor) or cost (for the issuer), with respect to the capital committed by a debt instrument.
  • Market value: price of an investment instrument. This can be obtained from the quotes that appear in specialized publications, in the case of articles or merchandise listed in the market, or from quotes and invoice prices from suppliers, among others.
  • Volatility: it is said to exist when there is an intensity of changes in the prices of an asset, which causes a variability in the profitability of the price of the financial instrument with respect to its average in a given period of time.
What you need to know to invest in the stock market

The language used in the stock market to define stock operations, quotes or financial situation can be very specific, therefore, it is essential to understand in detail how the stock market operates to understand how your investments are going.

The stock market allows everyone to access, regardless of whether they are experts or not, the financial system and the instruments listed on it. However, the day-to-day use of technical concepts can be more difficult for an inexperienced investor.