I grew up in a finance family. We weren't "finance bros" - no pastel polo shirts here, and a fair share were women- and we certainly didn't live a Wolf of Wall Street lifestyle. But, when your family is rooted in the New York Stock Exchange, you pick up a few things and financial lingo becomes part of you in ways you don't notice or see.
When I started this project, rattling off information about shares and dividends and P/E ratios, I figured everyone knew what I was talking about. It wasn't until a friend of mine stopped me in the middle of my investment monologue and said, "Hold on. What is a 'share', exactly?", that I realized Wall Street has its own language and I might need to be a translator.*
So, let's break down some of the stuff you'll hear around here:
- Stocks: a stock is a representation of ownership in a company. When you purchase a stock, you have claim to some of the money the company earns. How much ownership is determined by how many shares you own compared to how many the company has made available for people to buy.
- Share: This is the thing you buy to have ownership in a company. So really, a company offers stock to the public and you can buy that stock in the form of shares.
- Shareholder: If you buy a share, you are a shareholder in the company. Being a shareholder gives you some perks- frequently, dividends and voting rights on issues relevant to the company. How much you earn in dividends and how much sway your vote may have on the company is determined by how large your ownership stake in the company is. In our case, The Trust Fund is a shareholder.
- Dividend: This is what a company pays you for owning shares of its company.
- ETF: An Exchange Traded Fund. This is what The Trust Fund is currently invested in. It's a collection of stocks that are sold together as a package. It's basically one of many ways to make your stock portfolio diverse and therefore more protected by changes in the market. An ETF mimics stock indexes, which demonstrate overall market health. An ETF will follow the same general shape and performance of an index.
- Return: This is the overall amount you would get back from your investment if you sold your stock, or in this case, the ETF. It can be expressed as dollars or as a percentage.
Ok, that should do it for now. As The Trust Fund really gets going, I'll do my best to loop back and update as needed. As always, thanks for your continued support in The Trust Fund!
*I know, seriously time to check my privilege here. I have a lot of feelings about how this thought alone is totally f'ed and feeds a system built on inequity and power. Stay tuned for more on THAT.