You've heard of bears, but what's a bear squeeze?

STOCK MARKET INVESTMENT: Tony Lyons deciphers market jargon

Whether you are an experienced investor or a stock market novice, you have to do your homework before investing. But to understand investment columns and the financial sector in general, you need to learn stock market jargon.

You may well know that a bull market is one where the prices of shares are rising, while they fall in a bear market. So what then is a stale bull? This is someone who keeps saying a share price will go up although it remains low and other investors choose to ignore the tale. A bear squeeze occurs when investors want to drive a company's share price down so that they can buy cheaply.

While a dividend is the income paid to the shareholder out of the profits the company earns, a potential investor needs to know that a share price quoted cum dividend (after the announcement of full-year or half-year results) means that he or she will be buying the share with the dividend attached. When a share price has gone ex dividend it tends to fall by the amount of the dividend paid out to shareholders.

Each company in a share price column has a p/e ratio. This is the share price divided by its last declared earnings per share. The higher the ratio compared with competitors, the more the growth normally expected.

A company's share price today reflects expectations for the next year to 18 months. When a company's shares are said to be good value, good growth is expected in the medium term. If a share is described as fully valued, the share price is unlikely to outperform its competitors so there is little reason to buy.

When you ask about a company, a broker will quote you two prices. The bid price is the price its shares are sold at while the offer price is what you pay to buy them. Prices quoted are usually for small deals, usually less than 5,000 shares. Larger deals could be at a different price.

The difference between the buying and selling prices is known as the spread, which provides the profit for the market maker, the wholesaler who buys shares to sell to a buyer.

If you want to make the purchase, you should tell the broker what price limit per share you are prepared to pay. Otherwise, the broker will buy at best, that is at the lowest price he can get in the market, and that could be more than you wish to pay.

Once you are a shareholder you are a part owner of the company, which means that you can attend the annual meeting. You can also take part in any rights issues, in which the company offers shares to its investors at a discount, typically raising money for an acquisition or to pay off expensive debts.

Sometimes a company will make a scrip issue when you can take your dividend in shares rather than cash.

If you invest in a company and its shares grow significantly, you could face capital gains tax when you come to sell. One way of reducing or removing this liability is to bed and breakfast your shares at the end of the financial year. Your broker will sell and buy back your shares overnight, for a small charge, to establish a new and higher buying price for the new financial year.

Once you become more advanced in market jargon you could ask you broker to explain what happens at the triple witching hour, what bulldogs are, or just what is a dead cat bounce.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...