Understanding key stock exchange terms

INVESTING ON the stock exchange can appear intimidating to newcomers—largely because it comes with its own vocabulary.

- STEVEN JONES

However, understanding a handful of core terms can dramatically improve your confidence and ability to follow financial news, interpret market movements, or even begin investing. This article is a clear, comprehensive guide to 20 of the most common concepts that you will frequently encounter.

1. Share (or stock)

A share represents ownership in a company. When you own a share of a company, you essentially own a small portion of that business. If the company performs well, the value of its shares may rise; if it performs poorly, the value may fall. Shares are bought and sold on stock exchanges.

2. Stock market

The stock market refers broadly to the collection of exchanges and platforms where stocks are traded.

The most well-known markets include SA's Johannesburg Stock Exchange (JSE), whereas the major international markets include the London Stock Exchange, the New York Stock Exchange (NYSE), and the Nasdaq.

All of these entities function as a marketplace that allows investors to buy or sell shares easily and transparently.

3. Exchange

An exchange is the specific venue where securities are traded. Each exchange has its own listing requirements. Most exchanges require companies to meet certain size, governance, and profit standards to be listed.

4. Index

A market index tracks the performance of a group of stocks, offering a snapshot of the market's overall health. Indices are widely used to gauge market trends. Key indices include:

• FTSE/JSE All-Share - covers the largest 99% of the companies listed on the main board of the JSE

• FTSE/JSE ALSI 40 - the top 40 shares on the JSE

• FTSE 100 - the top 100 shares on the London Stock Exchange

• S&P 500 - the largest 500 US companies across the NYSE, Nasdaq, and Cboe BZX exchanges