Discover the essentials of the stock market, investment funds, and ETFs with our beginner-friendly guide to help you make informed and confident investment decisions.
General
A stock symbol or ticker is a unique series of letters assigned to a security for trading purposes. Stocks listed on the New York Stock Exchange (NYSE) can have four or fewer letters. Nasdaq-listed securities can have up to five characters.
Ticker symbols are a shorthand way of describing a company's stock so there's no significant difference between those that have three letters and those that have four or five.
Buying a financial instrument means taking ownership of it from someone else, whether it is a commodity, stock or another asset. Often in trading, buying an asset will not result in taking possession of it in physical form. Buying can also be referred to as 'going long', depending on the security being traded.
Selling a financial instrument means transferring ownership to someone else. When you sell an asset in trading, you're effectively disposing of your stake in that particular security. Selling can also be called 'going short' in certain contexts. In stock trading, you can only sell shares that you already own unless you're engaging in more advanced strategies like short selling.
Amount refers to the total monetary value of a transaction. In stock trading, it is calculated by multiplying the price per share by the number of shares in the transaction. For example, if you buy 10 shares at $50 each, the amount of your transaction would be $500. This represents your total investment in that particular trade.
Last price represents the most recent price at which a security traded. It indicates the current market value of the asset based on the most recent completed transaction. This price constantly updates throughout trading hours as new trades are executed. The last price is important for traders as it provides the most up-to-date information on a security's value.
Percentage change shows how much the price of a security has increased or decreased relative to a previous reference point, typically expressed as a percentage. It's calculated by taking the difference between the current price and the reference price, dividing by the reference price, and multiplying by 100. For example, if a stock moves from $100 to $110, the percentage change would be +10%
Transaction type refers to the nature of the trade being executed. The most common transaction types are buy and sell orders, but there are various subtypes like market orders, limit orders, stop orders, and more. Each transaction type has different execution parameters that determine how and when the trade will be processed, providing traders with flexibility in their strategy.
Transaction costs are fees associated with buying or selling securities. These typically include brokerage commissions, exchange fees, and sometimes taxes. Even in commission-free trading platforms, there may be hidden costs like spread markups or payment for order flow. In our simulator, we include realistic transaction costs to help you understand how these expenses can impact your overall investment returns over time.
Quantity refers to the number of shares or units of a security that you wish to buy or sell in a transaction. For stocks, this is typically expressed as whole numbers (e.g., 10 shares, 100 shares). Some brokerages also allow for fractional share trading, enabling investors to buy portions of a share based on a dollar amount
Type refers to the classification of an order that specifies how it will be executed. Common order types include market orders (executed immediately at the current market price), limit orders (executed only at a specified price or better), and stop orders (triggered when the stock reaches a certain price). Each order type serves different purposes in trading strategies and offers varying levels of price control and execution certainty.
Valid until indicates the time period during which an order remains active before it is either executed or expires. Common options include Day Orders (valid until the end of the trading day), Good-Till-Canceled (GTC, valid until manually canceled), and Good-Till-Date (GTD, valid until a specified date). This parameter helps investors control how long their orders stay in the market if they aren't immediately executed.
Minimum price refers to the lowest price at which you are willing to sell a security in a limit order. When placing a sell limit order, you set this price to ensure you don't sell for less than your specified amount. This feature gives you control over your exit price and helps protect against unexpected market downturns that could result in selling at an undesirable price.
Maximum price represents the highest price at which you are willing to buy a security in a limit order. When placing a buy limit order, you set this price to ensure you don't pay more than your specified amount. This feature allows you to maintain discipline in your trading by preventing purchases above your predetermined price threshold, especially in volatile market conditions.
Investment Funds
NAV (Net Asset Value) represents the per-share value of an investment fund. It's calculated by dividing the total value of all the fund's assets, minus its liabilities, by the number of outstanding shares. NAV is typically calculated once at the end of each trading day. Unlike stocks, mutual funds trade at their NAV rather than at prices determined by supply and demand in the market. This makes NAV an essential metric for evaluating a fund's performance.
Long term return measures the performance of an investment fund over an extended period, typically 3, 5, or 10 years. It provides investors with insight into how the fund has performed consistently over time, beyond short-term market fluctuations. Long term returns are usually expressed as an annualized percentage, allowing for easier comparison between funds with different investment horizons. This metric is crucial for investors with long-term financial goals.
Long term cumulative return shows the total percentage gain or loss of an investment over a specific period without annualizing it. Unlike the annualized long-term return, this metric displays the actual total return over the entire period. For example, if a fund has a cumulative return of 50% over five years, it means an initial investment would have increased in value by 50% during that time, regardless of the path it took to get there.
Management fees and other costs refer to the expenses associated with running an investment fund. These typically include the management fee (charged by the fund manager for their expertise), administrative costs, trading costs, and sometimes performance fees. These expenses are typically expressed as an expense ratio, which is the percentage of fund assets used for administrative and other operating expenses. Higher fees can significantly impact long-term returns, so investors should carefully consider a fund's cost structure.
Standard deviation is a statistical measure of volatility or risk in an investment fund. It indicates how much the fund's returns fluctuate from its average return over a specific period. A higher standard deviation suggests greater volatility and potentially higher risk. For instance, a fund with a standard deviation of 20% will typically experience more significant price swings than one with a 5% standard deviation. Investors use this metric to assess risk tolerance alignment.
TD (Year-to-Date) return represents the fund's performance from the beginning of the current calendar year to the most recent date. This metric provides investors with an understanding of how the fund is performing in the current market environment. YTD returns are especially useful when comparing multiple funds or benchmarking against market indices during the same time period.
Investable amount refers to the minimum amount of money required to invest in a fund. Many investment funds have minimum initial investment requirements, which can range from a few hundred to several thousand dollars. Some funds also have minimum amounts for subsequent investments. This threshold helps fund managers maintain efficient operations while ensuring the fund has sufficient capital to execute its strategy.
Frequency in the context of investment funds typically refers to how often the fund distributes income or capital gains to its shareholders. Common distribution frequencies include monthly, quarterly, semi-annually, or annually. Some investors prefer funds with regular distributions for income purposes, while others may prefer funds that reinvest dividends automatically. Understanding a fund's distribution frequency is important for cash flow planning
Investment date refers to the specific day on which an investor purchases shares of a fund. This date is important for tracking performance, calculating returns, and for tax purposes. Most funds process investment orders received before a certain cutoff time (typically 4:00 PM Eastern Time) at that day's NAV. Orders received after the cutoff are processed at the next business day's NAV price
Allocation refers to how a fund's assets are distributed across different investment categories, sectors, or geographic regions. A fund's allocation strategy typically reflects its investment objectives and risk profile. For example, a conservative fund might allocate more to bonds and less to stocks, while an aggressive growth fund might allocate heavily to technology or emerging markets. Understanding a fund's allocation helps investors ensure it aligns with their investment goals and risk tolerance.
Exchange traded funds (ETF)
The bid price represents the maximum price a buyer is willing to pay for an ETF share. In the context of ETFs, the bid is the highest price that a market maker or another investor is currently offering to buy the security. The bid price is always lower than the ask price, with the difference between them known as the spread. A narrow bid-ask spread generally indicates high liquidity and efficient pricing, while a wide spread may suggest lower liquidity or higher transaction costs.
The ask price is the minimum price a seller will accept for an ETF share. It represents the lowest price at which a market maker or another investor is currently willing to sell the security. The ask price is always higher than the bid price. When you purchase an ETF, you typically pay the ask price. The difference between the bid and ask prices (the spread) is an important consideration for ETF investors, as it represents an implicit cost of trading the security.
