📈 10 Essential Stock Terms Every Beginner Should Know

 

A Beginner’s Guide to Understanding the Stock Market

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✅ Introduction

Getting started with investing can be overwhelming—especially when unfamiliar jargon fills the screen. But don’t worry. Every successful investor once stood where you are now. And it all begins with learning the language of the market.

In this guide, we’ll introduce 10 of the most essential stock market terms that every beginner should understand before making their first investment.

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🧭 Table of Contents

1. Stock
2. Brokerage Account
3. Buy / Sell
4. Open / Close / High / Low Price
5. PER (Price-to-Earnings Ratio)
6. PBR (Price-to-Book Ratio)
7. Market Capitalization
8. Stock Split / Reverse Split
9. Dividend
10. KOSPI / KOSDAQ (Korean Stock Markets)

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1. 📌 Stock

A stock represents a share of ownership in a company.
When you buy a stock, you essentially own a small part of that company and gain certain rights, like receiving dividends and voting at shareholder meetings.

Example: Owning 10 shares of Samsung Electronics means you own a tiny portion of the entire company.

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2. 📌 Brokerage Account

To buy and sell stocks, you need a brokerage account—similar to a bank account but specifically for trading financial instruments like stocks, ETFs, and bonds.

Tip: In Korea, you can open brokerage accounts via apps like Kiwoom, NH Investment, or Mirae Asset.

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3. 📌 Buy / Sell

• Buy: Acquiring a stock
• Sell: Disposing of a stock you own

You can use:

• Limit Order: Set a specific price
• Market Order: Buy or sell immediately at the best current price

Beginners often start with market orders for convenience but should learn to use limit orders for better control.

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4. 📌 Open / Close / High / Low Price

Term	Description
Open	First price of the day
Close	Last traded price of the day
High	Highest price during the day
Low	Lowest price during the day

 

Understanding these helps in analyzing stock charts and market trends.

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5. 📌 PER (Price-Earnings Ratio)

PER = Price ÷ Earnings per Share (EPS)

A key valuation metric. It tells you how expensive a stock is relative to its earnings.

• Low PER = Possibly undervalued
• High PER = Possibly overvalued or growth expected

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6. 📌 PBR (Price-Book Ratio)

PBR = Price ÷ Book Value per Share (BPS)

This metric compares stock price with a company’s book value (assets – liabilities).

• PBR < 1: The stock may be undervalued.
• PBR > 1: Market sees premium value in the company.

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7. 📌 Market Capitalization

Market Cap = Stock Price × Number of Outstanding Shares

It indicates a company's total market value.
Large-cap companies are usually more stable but grow slower, while small-cap stocks are riskier but may grow faster.

Samsung Electronics has a market cap of over ₩600 trillion, making it one of Korea’s most influential stocks.

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8. 📌 Stock Split / Reverse Split

• Stock Split: One share becomes multiple shares → lowers price per share
• Reverse Split: Multiple shares become one → raises price per share

Example: If a ₩100,000 stock splits 10:1, you now own 10 shares priced at ₩10,000 each.

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9. 📌 Dividend

A dividend is a portion of a company's profits paid out to shareholders—either in cash or additional stock.

• Cash Dividend: Paid directly to your account
• Stock Dividend: Additional shares granted

Long-term investors often look for companies with consistent dividend payouts.

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10. 📌 KOSPI / KOSDAQ

These are the two major stock exchanges in South Korea:

Market	Description
KOSPI	Large-cap companies; more stable
KOSDAQ	Mid- to small-cap growth-oriented stocks

 

New investors are generally recommended to begin with KOSPI blue-chip stocks.

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✅ Summary

Understanding these 10 basic stock terms can give you the confidence to start investing with clarity.
As you become more familiar with the language of the market, you’ll find it easier to read financial news, analyze stocks, and make informed decisions.

Remember: Knowledge is the best investment. And now, you’ve just made your first one.