I suppose I should preface this article by first explaining what an acronym is. An acronym is a delightful bit of wordplay that combines the first letters of a group of a phrase to create a new word. Does that make sense? Let’s look at some real-life examples. The acronym for the National Aeronautics and Space Administration is, of course, NASA. What about ASAP, the acronym for As Soon As Possible! I think you get the idea. Acronyms are fun ways of shortening a phrase into an easy identifier word. Stock acronyms are obviously to do with the stock market and the world of investing.
What Are Stock Terms?
There are quite a few and range from financial calculations to things investors say. Some of them are extremely helpful in determining the business operations of a company. Others are more humorous and are used in casual conversations on FinTwit or Reddit. But if you’ve ever read an investing discussion and come across an acronym you are unfamiliar with, this guide is for you!
Investor talk can often sound like a completely different language, and it certainly doesn’t help when acronyms and abbreviations are used as short hand. Well, for anyone who has ever been confused about what a stock acronym stands for, we’ve got you covered!
Some of these will be fairly obvious, and some not as much. You can hear or read these acronyms in any investing discussion, whether you are a beginner or expert. They will get more complicated as we go on, so let’s just start with some of the basics!
ETF (Exchange Traded Fund): An Exchange Traded Fund is similar to index funds or mutual funds, but they trade like individual equities. You buy shares of an ETF, whether full or fractional, rather than just adding to a giant pool. This makes trading ETFs more popular, with lower management fees and even reinvested dividends. ETFs cover a myriad of different indexes and sectors and are some of the best ways for beginners to get into investing.
NASDAQ (National Association of Securities Dealers Authorized Quotations): What? Did you know the NASDAQ itself is an acronym? I sure didn’t! The NASDAQ is a tech-heavy sector that has 3,300 different companies trading on it. It is one of the major exchanges alongside the NYSE or New York Stock Exchange. The NASDAQ is highlighted by the large FAANG stocks that make up the largest weighted portion of the U.S. stock market.
HOD vs LOD (High of Day vs Low of Day): This is a common one used when tracking the performance of individual stocks within a given trading day. Add an “N” in front of each for NHOD or New High of Day or NLOD New Low of Day. These are important levels to track as traders can use these levels to predict what the stock will do next.
Stock Acronyms: Intermediate
Okay, those were a little too easy, right? Let’s take a step up and see what some of the more experienced traders use in their lingo.
AUM (Assets Under Management): Ever hear about how certain funds have so many billions of dollars in AUM? What the heck is an AUM? It stands for Assets Under Management and is essentially a way of valuing a certain fund. Take a company like Blackrock that seems to have its hands in everything these days. In 2021, Blackrock’s AUM is roughly $9 trillion. A smaller company like Ark Invest? Its AUM is only about $52 billion, which is probably more of a statement of how dominant Blackrock is in the industry.
REIT (Real Estate Investment Trusts): These are popular amongst dividend investors as they often pay a very generous yield. REITs are ways of investing in real estate through the stock market. There are REITs for apartment buildings, movie theaters, hospitals, senior facilities, and even data centers. They are an excellent way to add some stability to your portfolio, and legally have to pay between 85-95% of its income in dividends.
FAANG or FAATMAN (various big tech stocks): FAANG got its origination from Jim Cramer on CNBC’s Mad Money, where he grouped together Facebook, Apple, Amazon, Netflix, and Google. These have gone on to be some of the largest companies in the world, although the acronym has recently been replaced by FAATMAN. This group includes Facebook, Alphabet (formerly Google), Amazon, Tesla, Microsoft, Apple, and depending on who you ask, Netflix or NVIDIA.
What Does DRIP Mean?
DRIP (Dividend Reinvestment Plan): Dividend investors are all about the DRIP! Dividend reinvestment plans are a great way to compound the growth of your stock portfolio over time. The basic premise is that your dividends will automatically be put into purchasing more shares of the same stock. Every subsequent dividend payment is then a larger one, as you will always have more shares the next time they are paid out. Investors like Warren Buffett have built fortunes off of DRIP plans, so it’s a great idea to get one started in your own portfolio.
Stock Acronyms: Advanced
CAGR (Compound Annual Growth Rate): If you are researching companies, you have more likely than not come across the term CAGR. The Compound Annual Growth Rate is a critical metric to show just how fast a company is growing from year to year. A rapidly accelerating CAGR shows the company is in high growth mode. Whereas a CAGR that is in decline is a sign that the company is maturing and growing at a slower pace.
ARPU (Average Revenue Per User): Another important metric to see how a company is growing. ARPU tells us exactly how each user is monetized by the company. For a company like Facebook, this would be through ad revenue. For a company like Etsy, this would be through purchases from sellers. A company like Roblox would look at how many Robux the user purchased.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): EBITDA is a financial measurement and is often considered the true calculation of earnings. It’s actually an accounting measure, but investors use it to get a good look at the financial picture of a company.
PNL (Profits and Loss): If you hang out on FinTwit or Reddit, you’ll definitely come across traders sharing their PNL. Don’t look too much into it, PNL can easily be faked by using the numbers from a paper trading account. It stands for Profit and Loss and is just a calculation of your total trading gains or losses for the day.
Stock Acronyms: Humorous
FOMO (Fear Of Missing Out): This definitely did not start as an investing acronym, but younger traders have incorporated it into the industry. The Fear of Missing Out usually applies to social situations, but there is definitely some FOMO in trading as well. If a stock surges and you don’t want to be left behind, investors will often buy at the highs thinking the stock will continue to rise.
YOLO (You Only Live Once): Popularized by Canadian rapper Drake, YOLO has now made its way into the investing world. We saw a lot of YOLO during the Reddit short squeeze of GameStop and AMC earlier this year. In investing, YOLOing means to throw a good portion or even your whole account value into one trade. It is definitely not advisable, and almost certainly a way to lose most or all of your money.
DOGE (Do Only Good Everyday): The acronym matches the good natured following of the popular retail cryptocurrency. DogeCoin shot to fame when Tesla CEO Elon Musk began to praise it ahead of his appearance hosting Saturday Night Live. The coin started as a joke, but in 2021, it has found some legitimacy in the crypto world. Its trademark mascot is a Shiba Inu dog that is often spotted heading to the moon.
HFSP (Have Fun Staying Poor): This is another crypto-based acronym that has made it to the mainstream. It originated as something crypto investors would say to non-crypto investors during the massive bull run earlier this year. You don’t see it much now that the price of cryptos has dropped. If crypto prices surge back up, then you can expect crypto investors to be using it again, as obnoxious as it sounds.
There are just so many stock acronyms in the investing world. As a result, I may have to write a second part to this. These are fifteen of the more widely used acronyms in today’s investing discussions. But who knows, in a few months that may change again.
These acronyms are particularly useful on Twitter where your character usage is limited. All of these are universal. Whether you’re a casual trader or an institutional market maker, you should know what these mean. Investing and financials can often be like a different language.
As a result, it’s important to make sense of the things you see and hear. So next time you are discussing a stock’s performance or sifting through a company’s financial report, keep an eye out for some of the acronyms you learned here. Just make sure you aren’t trying to YOLO your account because otherwise, we’d have to say HFSP!