Investing Glossary

Ask: The lowest price a seller is currently willing to accept. You buy at the ask and sell at the bid; the gap between them is the spread.
Bid: The highest price a buyer is currently willing to pay. A wide bid-ask spread usually signals low liquidity.
Circuit breaker: An automatic trading halt triggered by a large, fast decline. Market-wide breakers pause US trading at 7%, 13%, and 20% declines in the S&P 500.
Designated Market Maker (DMM): The firm responsible for maintaining an orderly market in a given NYSE-listed stock, including running its opening and closing auctions.
Dividend Aristocrat: An S&P 500 company that has increased its dividend for at least 25 consecutive years. A signal of dividend durability, not of value.
Dividend yield: Annual dividends per share divided by the share price, as a percentage. It rises when the share price falls, so a very high yield often signals distress rather than generosity.
Ex-dividend date: The first day a stock trades without entitlement to the next dividend. The share price typically drops by roughly the dividend amount on this date.
Free cash flow: Cash from operations minus capital expenditure — the cash actually available to pay dividends, repay debt, or buy back shares. Harder to manipulate than reported earnings.
Limit order: An order that executes only at your specified price or better. You control the price but not whether the order fills.
Liquidity: How easily you can trade a meaningful size without moving the price. High-volume, tight-spread stocks are liquid; thinly traded ones are not.
Market capitalisation: Share price multiplied by shares outstanding — the market value of the whole company. The standard measure of company size.
Market order: An order that executes immediately at the best available price. Guarantees a fill, not a price.
P/E ratio: Share price divided by earnings per share. Roughly, how many dollars you pay per dollar of annual profit. Only meaningful compared with peers and with the company’s own history.
Payout ratio: The share of earnings paid out as dividends. Consistently above about 80% leaves little room for a bad year, though REITs and utilities run structurally higher.
Spread: The difference between the bid and the ask. It is a real cost of trading, paid on every round trip.
Volume: The number of shares traded over a period. Unusual volume often accompanies news, and thin volume makes prices less reliable.