Securities

The S&P 500 Index a market cap-weighted index, meaning that the companies that make up the index are some of the largest listed on the US share markets. To get on the S&P 500 index, a company must be publicly traded in the United States, meaning there American depositary receipts (ADRs) aren’t included on it. Companies also need to meet requirements for liquidity and have positive earnings for four consecutive quarters, including the most recent quarter. At the time of writing, there are currently 503 securities listed in the S&P 500. This is because it includes three dual-class companies, Alphabet Class A (GOOGL), Class B (GOOG), Fox Corporation Class A (FOXA), Class B (FOX), and News Corp Class A (NWSA), Class B (NWS). The S&P 500 is rebalanced quarterly, in March, June, September and December. This means that the 500 companies on the index are reviewed four times a year to see if they still meet the criteria. Learn more about the S&P 500.

An investor may create a stop-loss order to protect any gains, or to reduce any potential losses. For example, if an investor buys stock at $20, and the share price rises to $100. To protect their returns or minimise losses, they may create a stop-loss order for $80 per share, and if the stock drops to $80 or under, the shares will automatically be sold. To reduce the impact of a falling investment, an investor may decide whether a company or industry is sustainable over the long term, and opt to sell at a set price if it gets too low. Many long term investors never use stop-loss orders, however they can play a role in some short-term investing strategies, or when it’s looking like an investment or sector may flop. An example could be a company that boomed over the Covid pandemic, and dropped significantly after it, as happened with Peloton (PTON). Learn more about stop-loss orders.

A stop-buy order enables an investor to buy shares at a higher share price than the current price when they place the order. An investor chooses this order if they believe a company has huge growth potential or is undervalued. For example, if a company’s stock has sat around $18 for a while, an investor may put in a stop-buy order to buy shares at $20. This is because they believe once that share price is hit, the floodgates will open, analysts and investors will take notice, and the share price could continue to rise. Stop-buy orders come with risk because share markets are volatile. Over a normal US market day, for example, share prices could swing up or down by 10-20%. This means a stop-buy could be triggered just before the share price starts to drop, so instead of paying a slight premium to buy shares on the way up, investors may have paid top dollar for them. When an investor makes a stop-buy order, it’ll turn into a market order as soon as the share price hits their stop-buy price. This means they’ll get the best available price once the stop-buy order is triggered and the order is placed. So if the price jumps up from $120 to $125 (or $150 etc.) between the order being triggered and the market open, that’s the price they’ll pay to buy the shares. Read more about placing stop-buy orders on Hatch.

S&P Global Ratings, which is colloquially referred to as 'S&P’, is an abbreviation of Standard & Poor’s, the name the credit rating agency (CRA) was called from 1941 until 2016. S&P is an American CRA based in Manhattan and is part of S&P Global. S&P provides independent credit ratings for various financial instruments, such as stocks, bonds and commodities, and their financial analyses can help investors make informed decisions. Learn more about the S&P 500 index.

Savings is typically money stored in a bank account, ideally to earn interest but with ‘minimal returns’. Savings are considered one of the lowest risk places to store money, but low risk may mean low returns. Read more about saving vs investing.

A secondary offering is the sale of shares held by early investors of a company that has already gone through an Initial Public Offering (IPO) to list on a share market. This may happen alongside an IPO as an additional secondary transaction. Usually, the company doesn’t receive any cash or issue new shares. Instead, investors buy and sell shares directly from each other.

The legal definition varies between countries, but broadly speaking, a security is a tradable financial asset that holds monetary value, such as stocks, bonds and options.

The US Securities and Exchange Commission (SEC) is the regulator for the US share markets. The SEC is an independent government agency that aims to protect investors, maintain fair, orderly and efficient markets, and helps facilitate companies’ access to capital. Part of their job is to oversee the process of companies going public through an IPO and making sure they follow the rules.

A share refers to a single unit of ownership in a company or exchange traded fund (ETF). Think of the total value of a company as a pie, and each share is a slice of that pie. Because companies often have high market caps, one person rarely owns the whole thing. So they are broken up into shares: Share price x number of shares = value of the company. While some companies are privately held, owned by founders, financial backers and employees, once a company goes public, anyone can buy and sell their shares in the company through the share markets. Shares are not the same as stocks, but the terms are often used interchangeably.

Shareholders are people or organisations that own shares in a company or exchange traded fund (ETF). Shareholders have a shareholding, meaning they are part-owners of the company.

The total number of shares an investor owns in a company or ETF is referred to as a shareholding or holding. The combined shareholdings, which is all the shares they own, is their portfolio. Investors with shareholdings are shareholders.

People own shares hoping that as the company grows their share values grow alongside. Shareholders that own shares in a company or ETF that pays their shareholders dividends, may also receive regular cash payments when the company shares profits with their owners. Shareholders are invited to attend company AGMs, vote on their future decisions and leadership, and potentially influence how a company is run. Some companies have additional benefits for shareholders - the perks of being an owner.

A share market, or stock exchange, is where buyers - called investors - and sellers trade company stocks, exchange traded funds (ETFs) and REITs. When a company goes public, it’s usually to raise capital (or pay debt), and investors have an opportunity to potentially gain in their profits. Publicly listed companies have shares traded on stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq. While share prices can be influenced by many internal and external factors affecting a company, stock market trends can show the health of a country’s economy, as well as investor sentiment.

The share price is the price you pay for one share (aka one unit of a company’s stock or ETF). A company’s share price can go up and down depending on many things, from the loss of key staff members to a company being the first to fly to space. To calculate the market cap (or total value) of a company, use this equation: Share price x number of shares = value of the company. Learn more about how share prices are calculated.

Another way a company can list their shares on a share market is through a special purpose acquisition company (SPAC). A SPAC is essentially a shell company, or a ‘blank cheque’ company, set up by investors with the sole purpose of raising money on the share markets to merge with a private company and take it public. SPACs can be popular options to list on the share markets because they’re much faster and less complex than a typical IPO process. Companies like Rocket Lab (RKLB), Lucid (LCID) and Enovix (ENVX) have gone public in the US with a SPAC. Read more about SPACs.

Issuer sponsored shares on the ASX have a securityholder reference number (SRN), which identifies the shareholder as the legal owner - the Australian equivalent to New Zealand’s holder number (HN). The issuer sponsored subregister is typically maintained by the company that issues the shares - usually through an appointed share registry. So while a shareholder will have just one holder identification number (HIN) for their entire portfolio for broker sponsored shares, they’ll have a different SRN for each holding for their issuer sponsored securities.

Despite how they are used in everyday conversation, a stock is not the same as a share. A stock represents ownership in a company as a whole (‘I own a company’s stock’), whereas a share is a unit of a stock (‘I own five shares in a company’s stock’). Does the difference matter? We don’t think so.

A stock exchange, or share market, is where buyers - called investors - and sellers trade company stocks, exchange traded funds (ETFs) and REITs. A stock market can also be known as an equity market. When a company goes public, it’s usually to raise capital (or pay debt), and investors have an opportunity to potentially gain in their profits. Publicly listed companies have shares traded on stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq. While share prices can be influenced by many internal and external factors affecting a company, stock market trends can show the health of a country’s economy, as well as investor sentiment.

When an asset, like a share, is held in ‘street name’, it means your brokerage or custodian holds it for you. The name on the certificate belongs to the broker, but you still own the securities. This setup can make trading easier for some investors, and ensures compliance with rules. For example, brokerages and custodians are typically audited every year.

A stock symbol, stock ticker, or ticker is a series of 1-5 letters, or an abbreviation, that represents a company or ETF’s stock listed on a share market. They were introduced in November 1867, around the time of ticker tape machines, and were based on a ‘tick’ that shows movement of shares prices going up or down. They made trading across America more accurate and efficient using a shortened version of a company name. Today, some tickers are quirky and inventive, such as: Petco’s Health and Wellness Company’s WOOF, Harley-Davidson’s HOG, Cheesecake Factory CAKE, Dave & Buster's Entertainment’s PLAY, Gorilla Technology Group’s GRRR, Pacer US Small Cap Cash Cows CALF, Steven Madden’s SHOO, Southwest Airlines’ LUV, and Olympic Steel’s ZEUS. Learn more about the history of stock tickers here.

A stock split increases the number of shares of a company’s stock while reducing the price per share. This corporate action makes the stock more accessible to investors without changing the company’s market capitalisation. A reverse stock split reduces the number of shares and increases the price per share. This action may be taken by a company’s management to elevate market perception of the stock. Learn more about how share prices are calculated.