Market Fundamentals Vocabulary

a prolonged period of rising asset prices, typically defined as a 20% gain from recent lows

“The bull market of the 2010s lasted over a decade, rewarding patient investors.”

a prolonged decline in asset prices of 20% or more from recent highs

“During the bear market of 2022, many growth stocks lost over 70% of their value.”

the total market value of a company's outstanding shares, calculated as share price times share count

“Apple's market capitalization exceeded $3 trillion, making it the most valuable company in the world.”

the ease with which an asset can be bought or sold without significantly affecting its price

“Large-cap stocks have high liquidity; you can sell millions of shares without moving the price.”

the degree of variation in an asset's price over time, often measured as standard deviation of returns

“Cryptocurrency markets are known for extreme volatility — 20% swings in a single day are common.”

the difference between the highest price a buyer will pay and the lowest price a seller will accept

“The bid-ask spread on the thinly traded stock was $0.50, making it expensive to trade.”

a portion of a company's earnings distributed to shareholders, usually in cash

“The company increased its quarterly dividend for the 25th consecutive year.”

the income generated by an investment expressed as a percentage of its current price

“The bond's yield rose to 5% as its price fell in the rising rate environment.”

borrowing and selling shares you do not own, betting the price will fall so you can buy them back cheaper

“The hedge fund profited by short selling the overvalued tech stock before its collapse.”

borrowed money used to purchase securities, amplifying both gains and losses

“Trading on margin doubled his returns during the rally but wiped out his account when the market turned.”

a collection of financial investments held by an individual or institution

“She diversified her portfolio across equities, bonds, and real estate to reduce risk.”

a passively managed fund that tracks a market index such as the S&P 500

“Warren Buffett famously recommended index funds for most retail investors.”

initial public offering — the first sale of a company's stock to the public

“The company's IPO was oversubscribed ten times, reflecting enormous investor demand.”

a regulatory mechanism that temporarily halts trading when prices fall too sharply

“Circuit breakers triggered three times in a single week during the March 2020 crash.”