All Share Index A weighted average of the market prices of all shares listed on a Stock Exchange. The index gives the best indication of general market direction because it includes shares from all sectors of the stock market.

Asking Price The latest offer price of a share.

At the close The time stock market trade ceases in the afternoon every day.

At the open The time the market opens for the current day's trade.

Bear market A period of time during which the markets display continued weakness.

Benchmark A market indicator against which you can measure the comparative performance of another investment vehicle. For instance, unit trust returns are usually judged relative to the performance of a stock market index.

Bid price The selling price of a share. The bid price is usually lower than the asking price.

Bonds Government, local authorities and companies issue bonds to fund their expenditure. They usually offer investors a bi-annual fixed or variable coupon for the life of the bond. At maturity the investor receives a principal payment.

The bond, also known as a fixed income security, is guaranteed by government or, in the case of corporate bonds, is assigned a rating that quantifies the level of risk of non-payment.

Bull market A period of prolonged market strength.

Call A call option on a block of shares gives the owner the right (but not the obligation) to buy the shares at a specific point in time (the maturity date).

It is a type of derivative because, for the life of the instrument, the value of the option is derived from an underlying share.

The price the investor will have to pay for the shares at maturity is the known as the strike price of the option. The investor can either buy the underlying shares when the option expires or can sell it in the secondary market before maturity at the prevailing market price.

Capitalisation The market value of a company calculated by multiplying the number of shares by the current share price.

Correction A sharp move, upwards or downwards, in stock market valuations.

Coupon rate The interest paid on a regular basis to a bond holder.

Cyclical shares Shares of companies whose performance are strictly dependent on the business cycle. When the economy is steaming ahead, cyclical shares perform well. In contrast, an economic downturn will affect the shares adversely.

Debenture A debt instrument usually issued by corporates. It is repayable at a future date and pays the investor a fixed interest rate. The obligation is secured against the company assets. Debenture holders are paid before the company issues dividends.

Derivative A financial contract where the value is derived from an underlying security or index. It is an agreement by the investor to buy or sell the underlying asset in the future at a set price. The value of the derivative is based on the anticipated future movements in the stock price. Derivatives either trade on a formal exchange or over-the-counter between parties in an unregulated transaction.

Dividend The distribution of part of the earnings of a company to its shareholders after the company has decided how much income to retain and plough back into the company. A dividend is usually expressed as an amount (in cents) per share.

Earnings per share (EPS) A company's earnings built up during a reporting period. Interim earnings are paid after six months and a final dividend is paid at the end of a financial year. Their value is calculated by dividing the after-tax income earned during the period divided by the number of ordinary shares in issue.

Equities The ordinary shares listed on a stock exchange by a publicly quoted company.

Exchange rate The value of one currency against another. Market sentiment and certain economic fundamentals such as the difference between the two countries' inflation and interest rates determine the level.

Ex-dividend The date after which an investor will not receive a dividend payment.

Float The number of shares publicly available to be traded.

Future A contract to buy or sell a fixed number of commodities, currencies or shares at a fixed future date and price. The contract can be traded on a formal exchange or in the over-the-counter, unregulated market.

Gilt A bond or security issued by the government with a fixed or variable rate of interest.

Goodwill The difference between the market value of a company and the value of the company's physical assets.

 
Holding Company A corporation that owns a controlling interest (above 50%) in another company.

Initial Public Offering (IPO) The process leading up to the listing of a company's shares on the stock exchange for the first time. Also known as flotation or going public.

Insider Trading Dealing in shares based on privileged information that has not been made available to the rest of the shareholders in the company and is likely to materially influence the share price. It is an illegal practice and, if an investor is found guilty of insider trader, carries a hefty fine or jail sentence.

Margin Money or securities deposited with a stockbroker and used as collateral to cover any potential losses made on investments. A broker makes a margin call to increase the funds in the account if the market moves adversely against the investor's shareholding.

Market Cap Same as a company's capitalisation. The market cap is calculated by multiplying the amount of shares by the current selling price.

Maturity The date at which the principal owed on a debt instrument is due for final and complete payment.

Money Market The wholesale funding market banks use to raise or lend money to balance their retail assets and liabilities. Money market instruments are relatively short-term in nature (maturity of one year or less) and include certificates of deposit, treasury bills and other types of interbank funding.

Net Asset Value The net value of a company after total assets have been set off against total liabilities.

Odd Lot A block of less than 100 shares. Brokers often charge a premium price on trades in odd lots.

Option The right, but not the obligation, to buy (a call option) or sell (a put option) a predetermined quantity of shares or other investments at a specified price (the strike price) during a specified period of time. Options usually expire on a specific day each month.

Over-the-counter (OTC) Trade in securities not listed on an official exchange and thus unregulated by a governing body. The agreements are struck between two parties and the terms of the deal are more flexible than exchange-traded securities.

Portfolio A spread of investments across the full range of financial vehicles, including cash, fixed income and shares.

Preference Share A share in a listed company that pays the holder a fixed rate of interest rather than a dividend. Preference shareholders are also paid out first if a company is liquidated.

Price/earnings Ratio (P/E Ratio) The market price of a share divided by the earnings per share. It is a popular measure of the market's rating of the specific counter. The higher it is the more confidence the market has invested in the company and vice versa.

Private Placement The company sells its shares directly to institutional investors such as brokers, banks, unit trusts, insurance companies and pension funds prior to the public placing of shares on the stock market.

Prospectus A legal document stipulating the history, financial standing and objectives of a company or a unit trust before the company lists or the fund launches

Put A put gives an option contract holder the right to sell a number of shares at a specified price when the option expires.

Real Rate of Return The inflation-adjusted return of an asset.

The measure strips out the increase in prices to reflect the actual increase in the assets value for the period.

Record Date Date a share must be registered in an investor's name to qualify for a dividend payment.

Resistance A higher price level that a share or other financial instrument has tested recently but failed to break through.

Return Gain or loss made on an investment for a specified period.

Rights issue New shares issued and sold by a company to raise fresh capital.

Security Financial instruments such as stocks, bonds, treasuries and debentures. Debt or equity instruments issued by a company, the government or any other institution to investors.

Settlement Date Date at which the sale or purchase transactions of securities must be settled. The JSE has a T+5 settlement period, which means that the investor must pay for the shares within five days after concluding the trade.

Share Individual or institution's stake in a listed company giving them the right to participate in a defined portion of the company's profits. Most shares have voting rights attached to them and are traded on the stock exchange.

Share Code Each share listed on the JSE has a three letter code that is an abbreviation of the company's name. For example, the code for Anglo American Corporation is AAC.

Share price The cash value of a share at any given time.

Stock or Share Split A division of shares in a company to increase the total number of shares in issue. The value of each share is reduced by the multiple of the split. For example, if a share with a market price of R100 splits two-for-one, the price of the share drops to R50. Investors are given twice as many shares so that the value of the original investment of each shareholder doesn't change.

Support Levels A price level below which a declining equity or currency is not expected to fall through easily.

Treasuries Debt securities issued by the government to fund its debt bill.

Volatility Unusually large price movements in markets or shares.

Volume Daily number of shares, bonds or currency units traded.

Warrant A derivative that gives an investor the right to buy shares at a fixed price at a pre-determined time in the future.

Yield Income from an investment (usually annually) expressed as a percentage of the price. For shares, the yield is the annual dividend divided by the purchase price. For bonds, it is the coupon rate divided by the market price.