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.

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