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Stock market terms explained like you're 5

Short, simple definitions of the words you will see in financial news.

• Analyst ratingAn analyst rating is an expert's opinion on whether a stock looks attractive.
• Bear marketA bear market is a long stretch when stock prices keep falling and people feel worried.
• BetaBeta tells you whether a stock tends to swing more or less than the overall market.
• Bid ask spreadThe spread is the small gap between what buyers offer and what sellers ask.
• Blue chip stockA blue chip is a big, well established company with a long record of staying strong.
• Bull marketA bull market is a long stretch when stock prices mostly go up and people feel confident.
• DiversificationDiversification means not putting all your eggs in one basket.
• DividendA dividend is a thank you payment some companies send to the people who own their stock.
• Dividend yieldDividend yield tells you how much a stock pays each year compared with its price.
• Dow Jones Industrial AverageThe Dow follows 30 large, well known American companies.
• Earnings reportAn earnings report is a company's report card, published four times a year.
• EPS (earnings per share)EPS is how much profit a company made for each share of its stock.
• ETF (exchange traded fund)An ETF is a basket of many investments that you can buy in one click, like a stock.
• Free cash flowFree cash flow is the cash a company has left after paying to run and grow the business.
• Growth stockA growth stock is a company expected to grow its sales much faster than average.
• GuidanceGuidance is a company's own prediction of how it will do in the future.
• Index fundAn index fund copies a list of companies instead of trying to pick winners.
• IPO (initial public offering)An IPO is the first day a private company sells its shares to the public.
• Large cap stockA large cap is a really big company worth many billions of dollars.
• Limit orderA limit order says buy or sell only if the price reaches the number I choose.
• Market capMarket cap is the price tag of a whole company on the stock market.
• Market correctionA correction is a sudden drop of about 10 percent from a recent high.
• Market orderA market order means buy or sell right now at whatever the current price is.
• Nasdaq CompositeThe Nasdaq Composite tracks thousands of stocks listed on the Nasdaq, with a lot of tech companies.
• P/E ratioThe P/E ratio shows how many dollars people pay for each dollar a company earns in a year.
• Price targetA price target is where an analyst thinks a stock could trade in about a year.
• Profit marginProfit margin shows how many cents of profit a company keeps from every dollar it sells.
• RevenueRevenue is all the money a company brings in from selling things, before paying any costs.
• S&P 500The S&P 500 is a scoreboard that tracks 500 of the biggest US companies.
• Share priceThe share price is what one slice of a company costs right now.
• Short sellingShort selling is betting that a stock's price will go down.
• Stock buybackA buyback is when a company buys its own shares from the market.
• Stock exchangeA stock exchange is a marketplace where people buy and sell shares of companies.
• Stock splitA stock split cuts one share into several smaller shares, like cutting a pizza into more slices.
• Stock tickerA ticker is a short nickname, usually 1 to 5 letters, that identifies a stock.
• Trading volumeVolume is how many shares changed hands in a day.
• Value stockA value stock looks cheap compared with how much money the company makes.
• VolatilityVolatility is how bumpy a stock's price ride is.