Stocks

The S&P 500 is an index of the stocks of 500 large U.S. companies that make up about 80% of the U.S. stock by market capitalization. It is a benchmark for large-cap U.S. stocks and is often used as a proxy for the U.S. stock market as a whole.

Cyclical stocks are stocks that tend to rise and fall in line with the broader economy. Cyclical stocks include those of technology, finance, and energy companies. This contrasts with defensive stocks which tense to have steadier returns, drop less when the economy falls, and rise less when it grows.

Common stock is a security that represents partial ownership of a company. When people colloquially refer to “stock” this is what they mean. It contrasts with preferred stock, a type of security that has aspects of both bonds and stocks.

Preferred stock is company stock that is issued at a fixed par value, similar to a bond, and that does not confer voting rights, but has priority over company earnings when allocating dividends and priority over common stock in bankruptcy proceedings. Preferred stock has characteristics of both common stock and bonds. It occupies an intermediate space between the two in terms of its risk and returns.

Floating stock, is the number of shares of stock a company has that are actively being traded by the public. It is generally referred to as “float.”

A secondary offering can refer to when a major investor sells their stock on the public market or when a company issues additional stock after its IPO. The former just puts more shares onto the market, while the latter creates more overall shares to raise additional funds for the company.

A fractional share is ownership of a portion of a single share of stock. This allows investors to buy stocks even if the price of their individual shares is extremely high, such as is the case with companies like Berkshire Hathaway.

Equity compensation is when employees of a company are paid stock, stock options, or a similar type of investment. By tying the employee’s compensation to the stock price, they are meant to encourage the employee to work to maximize shareholder value.

A meme stock is broadly any stock that has gained substantial popularity and investment online through social media. The term was popularized after investment in retailer Gamestop was driven through popularity on the r/wallstreetbets subreddit.

An IPO lock-up is a contractually specified period prohibiting large shareholders from selling their shares for a specified period of time after a company has its IPO. Lock-up periods are meant to stop major shareholders from selling large numbers of shares early on and pushing down the stock price early on.