Stock market jargon isn’t straightforward. Especially when you start investing for the first time. English words, acronyms, technical terms: we will decipher some essential investment concepts for you with our small stock market glossary.
Some basic terms
Take it capital from a company. Now imagine that this capital is a huge sheet of paper. Cut it into many squares of the same size and take one of these squares. Here it is: what you “hold in your hand” is an action. That is a small portion of a company’s capital in the form of a title deed. Pay the company the current price of this small capital: congratulations, you are now a shareholder. Attention, it is neither taken back nor repaid and if, in the end, you do not want it anymore, you will have to resell it to other investors. Where is it ? On the stock exchange.
Perfect, I want to invest in the stock market! How do I do it? Do I go straight to the Palais Brongniart and join the fray? Stop it, no! It’s much simpler than that and, anyway, the Paris Stock Exchange is no longer held there (see below). No, you just need to use a broker: a company – usually online – that gives you access to trading rooms around the world via their website or mobile application (for a fee, of course).
There are basically two ways to make money in the stock market. By reselling assets (such as stocks, for example) for more than you paid to buy them, this is called capital gain. And thanks to dividends: the share of profits granted by the companies to each shareholder. Generally, when the company is doing well, it distributes it to its shareholders. If the results are negative, they are scaled down or, worse, not distributed at all. But this is not an absolute rule: Amazon, a giant still valued at several billion dollars, does not pay any – and has never paid any – preferring to reinvest all the profits in its activities to support its growth. .
As mentioned above, capital gain is the difference between the price of an asset when you buy it and the price of the asset when you sell it. Specifically, you buy a share at 100 euros and sell it for 150 euros a month later, congratulations: you have made a capital gain of 50 euros. Well, actually, a little less. Since you will also need to take into account the various costs related to buying and reselling your stock, such as brokerage costs (we explain everything to you in our dedicated article) and taxes, but you understand the principle. Conversely, if you buy a share at 100 euros and sell it a month later at 80 euros because its price has fallen, you realize a loss. As far as possible, avoid.
Level up a little
Ordinary securities account or CTO
To invest in the stock market, you just need to have enough money available in your bank account, right? So it’s a good start but no. You also need a dedicated account for this. This is where the securities account comes into play. Similar to a traditional bank account – but to invest in the stock market, therefore – a securities account allows you to hold stock market assets, to invest in all the markets of the world or even to collect dividends and capital gains.
But it is not mandatory! If you invest through our trading service, for example, you are automatically provided with an investment account that you can fund instantly, with the swipe of your finger, with your Lydia account and you start investing in hundreds of assets (crypto, companies, ETFs, etc.)) at the step ! Yes, we love it when it’s simple and practical.
You’re planning on investing your savings and, alright, your brother-in-law works in a publicly traded tech company. One night, he calls you, overexcited: The engineers of the box have developed revolutionary software that will make the company’s stock price skyrocket. Also, he recommends that you buy the maximum number of shares before its price peaks on the official announcement. Guaranteed added value! Nice ! In a few days you will become a millionaire. Or sued. Because what he didn’t tell you is that this type of deal has a name: insider trading. And risks of up to 2 years of imprisonment and a fine of 1,500,000 euros – which can be multiplied by 10 depending on the profit made.
The Paris Stock Exchange and its sweaty traders rumored under the gilding of the Palais Brongniart, is over. Since 2000, Euronext is the main stock exchange in the euro zone and operates the regulated market in Paris, among others. As for stock market orders, they are now all placed online, in the quiet quiet of the air-conditioned offices of the La Défense business district (or from the bedroom of the youngest son due to teleworking).
Savings plan in action or PEA
Like the title account, PEA is an account that allows you to invest in the stock market, with some differences. First of all, you can only invest in the markets of the European Union. the Nasdaqthe Dow Jonesthe Nikkei : we forget. Thus, payments are limited to € 150,000 per person. On the other hand, and this is its main interest, it offers an advantageous taxation compared to the traditional securities account. If you do not withdraw money from it during the 5 years following the opening of the plan, the capital gains from your PEA are exempt from tax, excluding social security contributions. 17% tax instead of 30% of Single flat rate direct debit (also called flat tax), is always taken. As for the CTO, having a PEA is not essential if you are using our trading service.
Securities refer to all types of continuously listed and traded financial products that can be bought, held or sold on the financial markets. Stocks, bonds (a small part of a credit of a company, a community or a state), ETFs… as soon as they can be traded on the stock exchange, they are securities!
Attention, it is technical!
The spread is the difference between the possible purchase price of an asset and its possible resale price.. This gap between the two prices, an indicator of its liquidity (i.e. its ability to be negotiated easily without a significant impact on the price), also makes it possible to remunerate financial intermediaries – this is incidentally the solution that Lydia chose. Sometimes fixed, often variable, the spread fluctuates according to market conditions. The closer it is to zero, the better it is for the investor! It is for this reason that we strive to keep it as tight as possible.
Another indicator to look out for when looking to invest. From a technical point of view, it represents volatility the measure of the variation potential of an asset over a given period “. Translated into plain language, this means that the value of a volatile asset can rise very high, very quickly (useful for making a nice” hit “on the stock market) but that it can also collapse just as quickly. And there, it is less. fun.If you are new to the stock market, it is best to stay away from these picky activities, at least initially.
ETF (Exchange Traded Fund)
Invented in the 70s by John BogleAmerican financial tycoon who wanted to provide “small” savers with a diversified and economical investment solution, ETFs are assets that allow you to invest in a large number of stocks at the same time.
Exchange-tradable, these “stock meals” are, in a sense, index-based. That is, they replicate the performance of an index. Are you investing in CAC 40 ETFs and the CAC 40 is on the rise? As a result, your ETFs increase in value. Is the CAC 40 falling down? Your ETFs fall following the same trend.
It’s cheaper and less tedious than buying live, sharing by sharing; is a practical way to diversify your investments and since there are dozens of them (such as global ETFs, emerging market ETFs, commodities ETFs …), you can easily invest in the markets that make sense to you … or allow great performance! Inevitably, as it is practical and well thought out, we also offer a few with our trading service.