Stock Terms & Platform Guide
Learn essential stock investing terms and discover how to use StockSim's features effectively.
Stock
A type of security that represents ownership in a corporation. When you buy a stock, you're purchasing a small piece of that company.
Example: Buying 10 shares of Apple (AAPL) means you own a small portion of Apple Inc.
Portfolio
A collection of financial investments like stocks, bonds, mutual funds, and other assets owned by an individual or organization.
Example: Your portfolio might include stocks from different companies across various industries.
Market Cap
The total value of a company's shares of stock. Calculated by multiplying the current stock price by the total number of outstanding shares.
Example: If a company has 1 million shares at $50 each, its market cap is $50 million.
P/E Ratio
Price-to-Earnings ratio. A measure of a company's stock price relative to its earnings per share. Helps determine if a stock is overvalued or undervalued.
Example: A P/E of 15 means investors pay $15 for every $1 of earnings.
Dividend
A distribution of profits by a corporation to its shareholders, usually paid quarterly.
Example: A $2 annual dividend on a $50 stock gives you a 4% dividend yield.
Bull Market
A market condition where stock prices are rising or expected to rise, typically accompanied by investor optimism.
Example: The period from 2009 to 2020 was largely a bull market for US stocks.
Bear Market
A market condition where stock prices are falling or expected to fall, typically accompanied by investor pessimism.
Example: During the 2008 financial crisis, markets experienced a bear market.
Volatility
The rate at which the price of a security increases or decreases for a given set of returns. Higher volatility means larger price swings.
Example: Tech stocks are often more volatile than utility stocks.
Diversification
A risk management strategy that mixes a wide variety of investments within a portfolio to reduce exposure to any single asset or risk.
Example: Instead of investing only in tech stocks, you might invest in tech, healthcare, and consumer goods.
ROI (Return on Investment)
A performance measure used to evaluate the efficiency of an investment. Calculated as (Gain - Cost) / Cost × 100.
Example: If you buy a stock for $100 and sell it for $120, your ROI is 20%.