What are stock acronyms? I suppose I should preface this article by first explaining an acronym. An acronym is a delightful wordplay that combines the first letters of a group of phrases to create a new word. Does that make sense? Let’s look at some real-life examples. The National Aeronautics and Space Administration acronym 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 have to do with the stock market and the investing world.
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Stock Acronyms Explained
There are quite a few, ranging from financial calculations to things investors say. Some of them are extremely helpful in determining a company’s business operations. Others are more humorous and used in casual FinTwit or Reddit conversations. But if you’ve ever read an investing discussion and encountered an unfamiliar acronym, 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 shorthand. Well, for anyone who has ever been confused about what a stock acronym stands for, we’ve got you covered!
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1. Basic Stock Acronyms
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 an expert. They will get more complicated as we go on, so let’s 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 comprising the largest weighted portion of the U.S. stock market.
HOD vs. LOD (High of Day vs Low of Day): This is commonly used when tracking individual stocks’ performance within a given trading day. Add an “N” before each for NHOD, 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.
2. Intermediate Stock Acronyms
Okay, those were a little too easy, right? Let’s step up and see what some more experienced traders use in their vocabulary.
IPO: This stands for initial public offering. It’s when a private company first sells shares of stock to the public.
AUM (Assets Under Management): Have you ever heard that 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, which seems to have its hands in everything. 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 Blackrock’s dominance 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. REITs exist for apartment buildings, movie theaters, hospitals, senior facilities, and 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 originated from Jim Cramer on CNBC’s Mad Money, where he grouped Facebook, Apple, Amazon, Netflix, and Google. These have become some of the world’s largest companies, although FAATMAN has recently replaced the acronym. This group includes Facebook, Alphabet (formerly Google), Amazon, Tesla, Microsoft, Apple, and, depending on who you ask, Netflix or NVIDIA.
3. Advanced Stock Acronyms
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 how fast a company grows yearly. A rapidly accelerating CAGR shows the company is in high growth mode. At the same time, 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 grows. ARPU tells us exactly how the company monetizes each user. 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 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 find traders sharing their PNL. Don’t look too much into it; PNL can easily be faked 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.
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 larger, as you will always have more shares the next time they are paid out. Investors like Warren Buffett have built fortunes off DRIP plans, so getting one started in your portfolio is a great idea.
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Humorous Stock Acronyms
FOMO (Fear Of Missing Out): This 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 some FOMO in trading. 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 entered the investing world. We saw a lot of YOLO during the Reddit short squeeze of GameStop and AMC earlier this year. YOLOing means throwing a good portion of your account value into one trade. It is 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 often spotted heading to the moon.
HFSP (Have Fun Staying Poor): This crypto-based acronym 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, you can expect crypto investors to use it again, as obnoxious as it sounds.
Final Thoughts
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 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 what you see and hear. So, next time you discuss a stock’s performance or sift through a company’s financial report, watch for some of the acronyms you learned here. Ensure you aren’t trying to YOLO your account because otherwise, we’d have to say HFSP!
