NewlywedFinances.com

Basic Financial Planning for Newlyweds

 
Home

Financial
Plan
Checklist

On-line
Retirement
Calculator

Additional
Articles of 
Interest

 
Message Board

CPAs, Lawyers & Advisors

Great
Gift
Ideas

Search
Our
Site

 

 

 

Investing Terminology

 

Your Initial Financial Plan:

 

Investing in stocks if you're not familiar with the terminology is like asking for directions in Paris if you can't speak French.  Unless you're very, very lucky, you'll probably end up heading in the wrong direction.  Before you buy your first stock, make sure you can understand the stock quotes listed in the Wall Street Journal or the business section of your city's daily newspaper, or available on-line at sites like Yahoo!, SmartMoney.com, or Quote.com.

Let's take a look at how stock quotes appear in the print media.  If possible, obtain a recent Wall Street Journal and turn to the "New York Stock Exchange Composite Transactions".  Notice that the name and "ticker symbol" of each company traded on the New York Stock Exchange is listed alphabetically. 

High/Low

To the left of each company's name are two columns of numbers that reflect the stock's highest price and lowest price during the previous 52 weeks.  Many investors look at the stock's current price in relation to its 52 week high and low when deciding whether it's a good time to purchase that particular stock.

Dividends

Just to the right of the company's ticker symbol, you can see how much of a dividend each company pays to its shareholders.  The first column reflects the annual dividend paid per share and the next column reflects the current dividend yield (the annual dividend divided by the current stock price).  While some investors prefer dividend paying stocks, others like to invest in companies that pay no dividend at all.

P/E Ratio

The price-to-earnings (p/e) ratio can be found in the next column.  Generally, the higher a company's p/e ratio, the more volatile its stock price will be.

Calculating a company's p/e ratio is nothing more than dividing the stock's current price by the company's earnings per share.  For example, if a company earned $20 million in profits, and has 10 million shares of stock outstanding, the company's earnings per share is equal to $2.  If the stock is trading at $60 per share, its p/e ratio is 30.

For many stocks, you'll see that the p/e ratio is designated by letters instead of a number.  The designation "dd" indicates that the company lost money over the previous four fiscal quarters and the designation "cc" indicates that the company has a p/e of 100 or greater.

Yesterday's News

The last five columns reflect the previous day's trading activity.  The first column shows the number of shares that were traded during the session.  Next can be found the stock's highest and lowest prices of the day.  The final two columns reflect the price of the stock as of the last transaction of the day and the amount that the stock changed in value from the previous day's closing price.  All of this information is important to investors who follow their stocks on a daily basis.

Learn the Lingo

Don't let yourself get burned by making bad investments.  Instead, learn the terminology, invest sensibly and follow your stocks. 


Looking For a CPA, Lawyer or Financial Advisor who has worked with lots of other newlyweds and is familiar with the issues that affect you?

 

 

 

E-mail us at info@NewlywedFinances.com

copyright 2001-NewlywedFinances.com

This article was written by Andrew D. Schwartz, CPA for YourWriters.com and had previously been posted on Collegexit.com.