The financial world has developed a special investment-oriented language to help describe the stock market, investments, securities for the stock market, stock market analysis, and its conditions. At times you may be confronted with a term which is totally alien or has a completely different meaning from what you thought. Misunderstanding these terms can sometimes lead to the wrong conclusion, and that can cost you money!

What you don't know can hurt you.

A value stock is one that is undervalued by the stock market. Value stocks can be identified on the most basic level simply by examining the financial statements and looking at some key ratios. Is the P/E ratio well below that of the market and of other companies in the same industry? Is the price anywhere close to book value? Has a loss been reported in the past five or 10 years? Is the current ratio 2 to 1 or better? Is the quick ratio well in excess of 1? Is the interest coverage ratio 5 to 1 or better? Is there twice as much equity as debt? Every savvy value investor has his or her own favorite ratios, but the goal in identifying value stocks is to find ones whose financials are almost irresistible. The company should also be in a desirable industry that is not continually roiled by technological change, and it should not be heavily regulated. Look for a high dividend, too, but with plenty of coverage -- a company paying out more than two-thirds of earnings might not be able to keep it up.

A contrary investing strategy that aims to take advantage of the overall direction of the stock or bond market by increasing stock holdings when the market is weak and increasing bond or cash holdings when the market is strong. Basically, you change your portfolio with the market. When the stock market goes up, you lower your equity exposure by selling a part of your shares and moving your funds into cash. For example, if your overall asset allocation is 60 percent cash and 40 percent equities and the market drops by 10 percent, you would increase your percentage equity exposure."" Some advocates of variable-ratio investing say it helps you follow the golden rule of ""buying low and selling high."" That's because every time the market takes a big drop, you buy more stock at a discounted price and will be well positioned when the market moves higher again. However, if you're locked into a formula that calls for increasing your stock position as the market gets weaker, the value of your overall portfolio will also probably decline. And if the market is heading higher, a policy of increasingly shifting out of stocks will mean that your returns will suffer if the bull market lasts for months or even years.

Capital made available to fledgling operations by venture capitalists, who take a large stake in exchange for risking their money.

The amount of retirement benefits or stock options to which an employee is entitled, usually based on length of service

The tendency of a security to rise or fall sharply within a short period. Volatility is a traditional worry for investors, and is associated with fast-growing stocks, high P/Es, smaller companies, technology-based firms, and thinly traded issues. The most widely used measure of stock volatility is the beta coefficient. Companies that tend to be less volatile include those with a solid record of healthy dividend payments, large companies in stable businesses such as food and other consumer products, and companies in slow-growth industries. You can reduce the volatility of your portfolio through clever diversification. Some commentators consider volatility overrated as a concern for younger investors, who have the time to hold on through thick and thin. If you're investing for the long-term, after all, what are some bumps in the road as long as you get where you're going?

The total units of a security traded on the most recent trading day. Different people see different things in trading volume, but most people agree it means something. On the most basic level, unusually large volume means that important news has just come out, or will come out soon. Volume is also important in technical analysis. Rising volume coupled with a rising share price is considered a bullish indicator for a stock, while the opposite is considered a bearish indicator. Technical analysts also track a ""volume price trend"" to relate volume and price. On a day when a given stock closes higher, they record volume as a positive value, and on a day with a lower close they record volume as a negative value. Such a graph can shows whether a stock has more upward or downward strength. Some technical analysts believe that the biggest price gains are overwhelmingly associated with the heaviest volume trading.