Risk, returns & timeframes illustration
14 min read
September 7, 2023
by

Glossary of share market terms: How to speak shares

You might be a seasoned share market investor like Warren Buffet, or an everyday Kiwi investing with KiwiSaver. Whatever your level of share market smarts, you’re probably reading this to increase your investing knowledge, so welcome! In this glossary, we cover the basic terms in simple language.
14 min read
September 7, 2023
by

Glossary of share market terms: How to speak shares

You might be a seasoned share market investor like Warren Buffet, or an everyday Kiwi investing with KiwiSaver. Whatever your level of share market smarts, you’re probably reading this to increase your investing knowledge, so welcome! In this glossary, we cover the basic terms in simple language.
14 min read
September 7, 2023
by

Glossary of share market terms: How to speak shares

You might be a seasoned share market investor like Warren Buffet, or an everyday Kiwi investing with KiwiSaver. Whatever your level of share market smarts, you’re probably reading this to increase your investing knowledge, so welcome! In this glossary, we cover the basic terms in simple language.
Table of contents
Getting Started Investing course
Free Getting Started Course
Take your first, or next, step to becoming a confident investor with Hatch's free online course – just 10 minutes a day, for 10 days.
The Fry up logo with fried egg
Weekly news from Wall St
Subscribe to The Fry Up - your weekly sizzle of headline-grabbing share market news. Read by 60,000 Kiwis to help them take charge of their investing journey.

We acknowledge and thank the FMA, Dr Karena Kelly and Brook Taurua Grant, the RBNZ and the Māori Dictionary for their research which helped us with te Reo Māori kupu for this glossary.

Active

Hohe

An active investment strategy is when investment teams or individual experts try to beat an index using their knowledge of companies and the share markets. They combine in-depth research, market forecasting and combined years of experience to make decisions. Investors may pay additional fees for their expertise and their frequent trading. Fans of active investing believe they've picked a smart investment management company that’s capable of getting slightly higher results than an index. They also may feel that when the share markets dip, active management may limit the impacts thanks to active decision making by real people, as opposed to passive funds that simply track the market down.

Allocation

Toha, or tohatoha

Once applications for shares are received, the listing company and their advisers work out how many shares applicants may receive and at what price - this is called an allocation. An IPO might be ‘oversubscribed’, which means there are more applications than there are shares available to be allocated. If so and you’re hoping to invest in the company’s IPO (when they are open to retail investors), you may receive less than, or none of the shares you applied for.

American Depositary Receipt (ADR)

Some stock symbols (aka tickers) are followed by a dash and ‘ADR’, which indicates the stocks are American Depositary Receipts (ADRs). An ADR is a certificate issued by a US depositary bank and is generated when the bank buys shares in a company that’s listed on a non-US share market and repackages them for investors to buy on to list on the US market. Each ADR share represents a specific number of shares in a company. Learn more about ADRs.

Asset & asset classes

Rawa or rironga & momo rawa

An asset is defined as anything that holds monetary value. Anything owned by you or owed to you - your car, your mobile phone, the $20 you loaned Rachel - is an asset. An asset class is a group of investments that share similar properties, behaviours and regulatory requirements. Stocks, real estate, cash and cryptocurrency are types of asset class. Investing in multiple asset classes is a common way for investors to diversify their portfolio.

Bonds

Bonds are a type of asset class. A bond is a loan to a borrower that pays investors a specific percentage return over a specific set time frame. When you buy bonds, you are essentially loaning your money to a government or company - a bond issuer - for a specific amount of time that they will use for a specific purpose. Learn more about bonds.

Book-building process

Tukanga hanga pukapuka

The book-building process is how the final issue or offer price for an IPO is decided based on the demand, and the price that institutional investors (such as fund managers) indicate they’re willing to pay for each of the company’s shares. If investors are keen on getting in on a company’s IPO, the issue price might be at the higher end of the price band or above it. If investors show less interest in a company’s IPO, the issue price might be at the lower end of the range or below it.

Buy and hold

Karioi (long term)

Buy and hold is a ‘lazy smart’ approach to investing. The definition is in the name; you buy shares and hold (own) them for the long term. A buy and hold strategy gives you the ability to get on with your life while your money works hard for you and potentially benefits from the magic of compounding growth.

Class A, Class B, Class C & dual-class companies

A company is able to create two classes of shares that allow different voting rights among their shareholders. These dual-class companies typically have Class A and Class B shares. For example, Berkshire Hathaway’s stock structure is to have Class A (BRK.A) shares, that cost around US$500,000 (at the time of writing) and Class B shares (BRK.B) - the ‘Baby Berkshires’ - that cost around US$300. The Class B shares are aimed to be more accessible for investors who want to own whole shares rather than fractional shares. Investors who own Class B shares may not get voting rights, but they do receive dividends. Learn more about Class A, Class B and dual-class companies.

Company

Pakihi

A company is a legal entity formed to operate a business (like Hatch). Because companies can be worth a lot of money (think billions), their ownership is broken into shares. When a company goes public, their shares become available for everyday investors to buy and sell through the share markets.

There are two ways to invest in a company through the share markets:

  • Choose a company to invest in and buy shares in it. With Hatch, you can become a shareholder in more than 5,800 companies and more than 1,900 ETFs, which gives you all the shareholder benefits of direct ownership
  • Invest in an exchange traded fund (ETF) to spread your money across multiple companies (or other investments) at once. This is called instant diversification.

Compounding growth

Tipu or tupu

Often referred to in investing circles as the eighth wonder of the world. Compounding growth is where you earn returns on your returns, aka interest on your interest. This can create a snowball effect, rolling through the years, potentially picking up returns on returns. Learn about compounding growth.

Day trading

Hokohoko

Day trading is the act of buying and selling shares frequently. While some professionals have experience in day trading, the term day trading can also refer to retail investors who buy shares in companies to sell them quickly for what they hope is a profit. The problem is, 99% of them tend to wind up worse off than those who invest for the long term.

Direct listing

Rārangi tika

A direct listing is an alternative way for companies to list shares on a share market without going through a traditional IPO. In a direct listing, the only shares listed are already owned by the company's founders, financial backers and employees. Unlike IPOs, no new shares are created. Direct listings can cut out the middle-person, like the underwriters, and save the company money. A direct listing allows existing investors and employees to sell their shares without new shares being issued and diluting existing shareholders. Without the middle person underwriting the listing, there is no safety net ensuring shares sell. Companies like Palantir (PLTR), Roblox (RBLX), and Coinbase (COIN) have gone public in the US with a direct listing.

Diversification

Whakakanorautanga or whakakanorau

Diversification means spreading your money over many baskets of investments to limit the impact of any one of them failing. In other words, potentially to lower the risks of investing. You can achieve this through the share markets by buying shares in many companies or an exchange traded fund (ETF) or two.

While the companies listed on the US share markets are usually billion-dollar behemoths, there is always a chance they may fail. But the chances of all of them failing at once may be unlikely. If you haven’t looked into them yet, ETFs can be a way investors can diversify.

Dividends

Hua tūtanga pakihi or moni whiwhi or moni hua

Profitable companies can decide to share their profits with shareholders and pay them out in a dividend. If you invest in companies that pay dividends, dividends will be paid into your Hatch account in USD, ready to re-invest. Learn more about dividends.

Dollar-cost averaging

Dollar-cost averaging is an investment strategy that can help lower the amount you pay for your investments and manage risk when you’re buying shares in a company or exchange-traded fund (ETF). In simple terms, dollar-cost averaging is when you invest the same amount of money in a company or fund at regular intervals over a period of time. This strategy takes the guesswork out of monitoring daily share prices to calculate the best time to buy and the amount to pay. Learn more about dollar-cost averaging.

Earnings per share (EPS)

Moni mo ia hea

EPS is calculated by dividing a company’s earnings by the number of common shares available to trade. A high EPS can indicate greater profitability and income to support the company’s future growth. However, some companies reinvest earnings straight back into the business, while others might pay out those earnings as dividends. A low EPS may mean a company is less likely to give shareholders a slice of the profits as dividends.

Effective date, or listing date

whakarārangi

The effective date, or listing date, is the day a stock exchange lists the shares and when trading in a public market commences after an IPO. This happens once shares have been allocated (and usually once they’ve been paid for) and includes the exchange having given a company the stamp of approval to have their shares listed on a share market. To do this, the exchange has made sure a company can abide by all the exchange’s rules. On this date, the total number of shares is confirmed along with the listing price, and any investor, including retail investors, can buy shares in the company on the share market (even if you missed out on an allocation in the IPO).

Exchange traded Fund (ETF)

Tahua or tahua taurima

An exchange traded fund (ETF) is a pre-filled basket with a variety of investments in it, such as companies, gold, bonds and property. As with KiwiSaver, your money gets spread across a bunch of investments in a single purchase. Because they deliver diversification, ETFs have been a popular method of investing.

An ETF that follows an index on Hatch is the S&P 500, which is a basket of the 500 largest companies on the US share markets. Investing in one of the S&P 500 ETFs means you spread your money across some of the world’s most recognisable brands. The S&P 500 has returned a historical average of 10% per year.

With Hatch, you can become a shareholder in more than 1,900 ETFs.

Form S-1, or registration statement

Puka S-1, or rehitatanga tauākī

For IPOs in the US, the S-1 is also known as a registration statement. It must by law include any material information about the company so potential investors can understand what the company does, why it is issuing shares through an IPO, the state of the company's finances (and debts), and what type of ownership structure is being offered. This document must be filed with the US Securities and Exchange Commission (SEC) before a company can list shares for sale on the US share markets. There are other ‘S’ versions as well, depending on the type of company IPO-ing. In other countries this might be called the Prospectus. The company must provide financial statements as part of these documents.

Fractional Shares

Hautau

A fraction of a share is a portion of a full share of a company or exchange traded fund (ETF). Fractional investing means you can buy portions of shares instead of buying a whole share. With fractional shares, you can invest as little as you like, regardless of the price of one share - which can cost as much as US$500,000! Owning fractional shares means you won’t have voting rights that come with owning a full share, but you’ll still receive dividends. Learn more about fractional shares.

Going public

Going public is another way of saying a company is going through an Initial Public Offering (IPO) It’s a more colloquial term to describe how a company is transitioning from private ownership - owned by their founders, financial backers and employees - to public ownership, where any investor can buy shares in the company on the share market that shares are listed on.

Holding, or shareholding

Puri

The total number of shares you own in one company or ETF is referred to as a shareholding or holding. It’s also sometimes referred to as ‘owning stock in a company’. An easy way to remember this word is that when you own shares, you hold onto them, aka shareholding. And someone with a shareholding is known as a shareholder. Your combined shareholdings, which is all the shares you own, is your portfolio.

Index

Kuputohu

An index is a categorised list of investment options, like 'the largest 500 companies on the US share markets', or 'the 10 companies with the highest dividends on the NZX'. These lists are created and managed by companies like Standard and Poor's (S&P) and are often used by investment managers as a benchmark to compare their performance.

Index Fund

Tahua or tahua taurima

These are passive funds (including exchange traded funds, or ETFs) that aim to track or mimic an index. Companies like Vanguard and BlackRock have created ETFs that both track the same S&P 500 index.

Indicative price

Utu tohu

The indicative price, or price range, is an estimated price range given to potential investors to give them an idea of the final price they’ll likely pay for shares. It’s set by both the company and the underwriter. It’s not guaranteed that the final price will be in this range; it’s meant as a guide only for potential investors.

Initial Public Offering (IPO)

An Initial Public Offering (IPO) is the process of a company moving from private ownership - owned by their founders, financial backers and employees - to a public company, where the shares are listed on a share market for anyone to buy and sell. It’s sometimes also referred to as going public. Want to know more? Learn more about how IPOs work and how to do your research.

Institutional investors

Institutional investors are the large investors who regularly participate in share markets, and are typically trading on behalf of their clients or customers – think big banks, fund managers, government and pension funds, wealth adviser groups and similar. During an IPO, institutional investors are approached by a company’s advisers to determine demand. In some IPOs, retail investors and individual investors also get a chance to participate. After the IPO, shares become available to all investors through the share markets.

Issuer

Pakihi

The issuer is the company going public in an Initial Public Offering (IPO) which is issuing - aka ‘offering’ - shares to be bought and sold by investors in the share markets.

Issue price, or offering price

The issue price, or offering price, is the final IPO share price that people who have received an allocation pay to receive shares as part of the company’s IPO. The final share price is usually not confirmed until the very last moment once the book-building process is complete. It might be different to the indicative price and is different again to the opening price. Learn more about share market supply and demand and how share prices are calculated.

Listing, or being listed

Whakarārangi

Listing is when a company’s IPO shares become available to buy and sell via a share market or stock exchange. A company goes from private ownership to public ownership by listing on a share market through an Initial Public Offering (IPO) a direct listing or a SPAC.

Listing date, or effective date

whakarārangi

The listing date, or effective date, is the day a stock exchange lists the shares and when trading in a public market commences after an IPO. This happens once shares have been allocated (and usually once they’ve been paid for) and includes the exchange having given a company the stamp of approval to have their shares listed on a share market. To do this, the exchange has made sure a company can abide by all the exchange’s rules. On this date, the total number of shares is confirmed along with the listing price, and any investor, including retail investors, can buy shares in the company on the share market (even if you missed out on an allocation in the IPO).

Lock-up period

A lock-up period is when founders and some early investors and company employees are restricted from selling their shares after an IPO lasting usually between 90-180 days. The goal of a lock-up period is to avoid flooding the share markets with too many shares in a company and causing the share price to drop due to oversupply. Once the lock-up period ends and all restrictions are lifted, investors can sell or buy as many shares as they choose and that are available.

Market capitalisation (market cap)

A company’s market cap is their total dollar market value or their worth as determined by the share market and investment professionals. A company’s share price and how many outstanding shares dictates their current value: Share price x number of shares = market cap (value of the company).

Minimum subscription

Ohaurunga iti

The minimum subscription is the lowest amount of IPO shares investors need to buy for an IPO to complete successfully, which is typically 90%. This means if the 90% threshold isn’t met, the company returns the money from the orders placed. This situation is considered an undersubscribed IPO. While it’s not common, it could be due to poor promotion, share market or economic conditions at the time.

Money market fund

Tahua or tahua taurima

A money market fund is a type of mutual fund that spreads money across lower-risk investments, such as cash, or cash equivalent securities, certificates of deposit, or US Treasury securities. These funds are managed by fund managers and backed by investment fund companies with the goal of keeping the value of the money stable. Learn more about money market funds.

Nasdaq

The Nasdaq is a US share market that formed in 1971 and has been entirely electronic from day one. Most tech companies, including Apple, Facebook, Microsoft, Amazon, Google, Tesla and NVIDIA, are listed on the Nasdaq.

Like the NYSE, the Nasdaq is a public company (Nasdaq OMX Group, Inc. - NDAQ) that you can buy and sell shares in with Hatch (yep, super meta!).

Hatch gives you access to both the NYSE and Nasdaq, and there’s no difference in how you buy and sell shares in either of them. Learn more about the Nasdaq and the Nasdaq index.

NYSE

The New York Stock Exchange (NYSE) dates back to 1792. A common nickname for the NYSE is the Big Board, and ‘big’ may be an understatement. The NYSE is the world’s largest share market, and the total value of the companies listed on it is higher than the Nasdaq, Tokyo and London share markets combined. The story of the NYSE is almost the Westernised story of America, which may make for a lively nighttime read!

It may surprise you to learn that, like the Nasdaq, the NYSE is owned by a public company (Intercontinental Exchange Inc - ICE) that you can buy and sell shares in with Hatch. Yes, you can buy shares in an entire share market through that share market #Meta.

Hatch gives you access to companies listed on the NYSE and Nasdaq, and there’s no difference in how you buy and sell shares in either of them. Learn more about the New York Stock exchange.

Opening share price

The opening price is the initial cost of one share in a company when it’s first listed on a share market. It’s often different from the offering price of an IPO, which is the price of shares before the company is listed on a share market.

Oversubscribed

Kua ohaurunga 

An IPO is oversubscribed when investors have requested more shares in a company than there are available - where demand exceeds supply. An oversubscribed IPO means investors are keen to buy the company's shares, often leading to a higher IPO share price or more shares offered for sale. This is opposite to an undersubscribed IPO.

Passive

Hāngū

A passive investment strategy means the investment team isn't making active investment decisions to try to beat an index; instead they spend their time replicating an index. Because there's no human expertise involved, passive ETFs usually have lower fees. Fans of passive investing point to evidence that in the long run, it's unusual for an actively managed fund to beat the index, and they prefer the low fees.

Price-to-Earnings (p/e) ratio

The p/e ratio is a metric that compares the share price to the earnings per share. The p/e ratio can be particularly useful when combined with other metrics for comparing similar companies working within the same industries, or the same company’s performance over a specific period of time. Like all metrics, p/e ratio is only useful when you use it within a wider context alongside other types of analysis.

Primary market

Maakete tuatahi

When a company goes public, they list their shares on the primary market where institutional investors (big dogs like hedge funds, major banks, the mega-wealthy, and since 2021, Hatch) investors can buy them during an IPO period.

After a company goes public, anyone can buy and sell shares through the secondary market, also known as a share market or stock exchange, like the Nasdaq and the NYSE.

Portfolio

Huinga haumitanga

A portfolio is a fancy name for all the investments (holdings) you own. Your share portfolio includes all the companies and exchange traded funds (ETthat you have money invested in.

Public, or going public

Going public is another way of saying a company is going through an Initial Public Offering (IPO) It’s a more colloquial term to describe how a company is transitioning from private ownership, owned by their founders, financial backers and employees, to public ownership, where anyone can buy shares in the company through the share market it’s listed on.

Price range

The price range, or indicative price, is an estimated price range given to potential investors to give them an idea of the final price they’ll likely pay for shares. It’s set by both the company and the underwriter. It’s not guaranteed that the final price will be in this range; it’s meant as a guide only for potential investors.

Prospectus, or offer document

The prospectus must be filed with the relevant exchange and be made public, along with the S-1 for listing in the US, before a company can list shares for sale on a share market. Before investing in a company, investors can use this document to conduct their due diligence - looking at the company's assets, liabilities, financial performance, risk factors, and commercial potential for growth. The prospectus is updated before the listing date when the IPO price and number of shares are determined through the IPO process.

The prospectus includes information, such as how much money the CEO stands to make when the company makes their public debut, how much money a company intends to raise in their IPO, and what the company plans to do with the money (such as for growth or to pay off debt). It also includes information about a company’s competitors, and importantly, it’s the first time the world gets to take a look at the company’s total financial picture.

Quarter & Fiscal Quarters

Hauwhā, or hau whā

A quarter is three months in a company’s calendar that measures one-quarter of the financial year. Companies listed on the share markets are required to prepare quarterly earnings reports. Quarters are numbered Q1, Q2, Q3 and Q4, often with the year, eg. Q1 2023. The fiscal year runs from 1 January to 31 December, and fiscal quarters measure Q1 Jan-Mar, Q2 Apr-Jun, Q3 Jul-Sept, Q4 Oct-Dec. Not all companies operate on the fiscal year.

Quiet period

In the US, a quiet period is when the company going through an IPO to list on a share market must be quiet about the business. This is mandated by the SEC and often covers a period between when documents are initially filed with the SEC and 40 days after the listing date. The goal is to enable the SEC to review and verify the information they’ve been given, give investors a level playing field, and protect investors by ensuring the company doesn’t falsely inflate their value leading up to the listing date.

Recession NZ

Timunga taiōhanga Aotearoa

A recession in New Zealand - also called a ‘technical recession’ - is two or more consecutive quarters of significant negative or slowing economic activity as indicated by gross domestic product (GDP). This indicator typically refers to the production approach to GDP, which tallies the value of the goods and services produced in New Zealand. Changes in GDP reveal insights about the general health of the country’s economy. Recession is a normal part of the economic cycle, which fluctuates between expansion (growth) and contraction (recession) and can occur every 5-10 years. Learn more about recession.

Recession US

Timunga taiōhanga Te Hononga o Amerika, Te Unaititi Teiti, Ngā Whenua Tōpū o Amerika

A recession in the US uses more complex formulas. Like New Zealand, a US recession is a significant downturn in economic activity over two or more consecutive quarters of negative gross domestic product (GDP). GDP also works in combination with other indicators, which may include nonfarm payrolls, industrial production, and retail sales.

REITs

Real Estate Investment Trusts known as REITs are similar to ETFs and enable investors to invest in property through a company (REIT) that finances, owns, or operates real estate that generates income (without the hassles that come with being a landlord!). REITs can include cell towers, data centres, commercial and residential property like warehouses, retail centres and malls. 

REITs have highly specific rules for how they operate, and in the US that means REITs must pass on 90% of their profits as dividends. This means REITs may suit investors seeking to generate income while they hold shares over the long term. Historically, REITs have been one of the top asset classes in times of high inflation because over time, rents typically rise to help offset this increase. The world’s largest REIT is ProLogis, providers of warehouses for companies that need shedloads of floor space, like Amazon, Walmart and DHL.

Retail investor, or everyday investor

Kaiwhakarato moni or kaituku moni

Retail investors are people just like you who are putting their money to work in the share markets.

Up until the invention of the internet, the share markets were the exclusive domain of the financial elite. Advances in technology over the last decade - and really only the past five years - have enabled investing platforms like Hatch to make investing in shares straightforward, accessible and affordable for anyone with internet access.

Between 2019 and 2021, more than 10% of Kiwis started investing shares for the first time. This rise of the retail investor revolution that democratises investing access, gained a fair bit of media interest. Here’s a sample:

Returns

Paremata or hua or hua ahumoni or tōpūtanga hua more

A return is the money made on your investments over time. With shares, you can make returns in two ways:

Through the potential of compounding growth - which works over time - investors who own shares in companies and exchange traded funds (ETFs) for many years or decades may expect to see the amount their investments grow in value over time.

Risk

Tūraru

The word ‘risk’ typically has negative connotations with investing. Risk refers to the chance your investments might fluctuate, that is go up and down in value. Also known as share price volatility, which is the short-term up and down movement based on statistics of prices in the share market. Volatility in the share markets is considered ‘normal’ and is something investors need to manage by understanding their feelings and emotions around risk and volatility. High market volatility may seem scary for investors, but is something to be aware of rather than afraid of.

Roadshow

A roadshow refers to sales presentations the company delivers to large institutional investors before an IPO when they list publicly on a share market. The company's leadership team - the issuer - holds a series of meetings with potential investors to generate interest in their IPO.

Savings

Pūtea penapena

Savings are typically money set aside after bills and spending needs are met, which is typically stored in a bank account, ideally to earn interest but with ‘minimal returns’. Savings are considered one of the lowest risk places to store your money. But the low risk may also mean low reward. Read more about saving vs investing.

Secondary offering

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.

Securities

Punga

The legal definition varies between countries, but broadly speaking, a security is a tradable financial asset that holds value, like stocks, bonds or options.

Securities and Exchange Commission (SEC)

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.

Share

Tūtanga pakihi or hea

A share usually 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 price tags (many on the US share markets are valued at over $1 billion), one person rarely owns the whole thing. So they are broken up into shares allowing thousands of investors to have a slice each: 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, even though many people use these terms interchangeably. It doesn’t matter if you confuse the two; the difference is small and has no impact on your ability to invest.

Shareholder

Whaipānga or kaipupuri hea

Shareholders are people like you (and some organisations) who own shares in a company or exchange traded fund (ETF). When you’re a shareholder, you’re a part-owner of a company or ETF, meaning you have a shareholding. You can become a shareholder with Hatch, and learn how to grow your investing confidence.

Becoming a shareholder through share ownership may give you the potential to earn money from your investments over a long period of time. But before you decide whether you want to invest your hard-earned money in shares, doing your research and taking our free Getting Started Course may help you understand what it all means

Shareholding, or holding

Puri

The total number of shares you own in one company or ETF is referred to as a shareholding or holding. It’s also sometimes referred to as ‘owning stock in a company’. An easy way to remember this word is that when you own shares, you hold onto them, aka shareholding. And someone with a shareholding is known as a shareholder. Your combined shareholdings, which is all the shares you own, is your portfolio.

Shareholder benefits

The main reason people own shares is the potential that as the company grows their share values grow alongside them. If you own shares in a company or ETF that pays their shareholders dividends, you may also receive regular cash payments into your Hatch account as the company shares their profits with their owners.

On top of the bragging rights that come with being a shareholder, you can also hold power. With Hatch, you own your shares directly, which may be important to you. Being a direct owner means you get invited to attend annual shareholder meetings, vote on their future decisions and leadership, and potentially influence how a company you own shares in is run.

Some companies have additional benefits for shareholders - the perks of being an owner.

Share market, or Stock exchange

Maakete tūtanga pakihi or hea

After a company has gone public through a primary market, their shares are listed on a secondary market, commonly referred to as a share market or stock exchange.

A share market is simply a place where shares in companies and ETFs are bought and sold. While ‘share market’ and ‘stock exchange’ may seem very different terms for the same thing:

  1. Share market: A market to buy and sell shares
  2. Stock exchange: A place to exchange (buy and sell) shares in stocks

Similar to Trade Me, they are just marketplaces. But instead of buying and selling products and services, everyday investors buy and sell shares in the companies that create them. Since their inception in the early ‘90s exchange traded funds (ETFs) have made it possible for investors to buy a basket of investments in one purchase, providing an alternative to choosing individual stocks for your portfolio.

There are 60 share markets across the world, including the NZX here in New Zealand. The world’s largest and most popular share markets are located in the USA, called the NYSE and the Nasdaq. Many of the brands you see everyday with are likely listed on these US share markets.

Share price

Utu hoko tūtanga pakihi or hea

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

It’s important to note that it’s almost impossible to decide which company is a ‘better’ investment by comparing two companies’ share prices. While it may intuitively feel like the right thing to do, it’s worth learning more about how share prices are calculated.

SPAC (Special Purpose Acquisition Company)

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.

Stock

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.

Stock symbols, stock tickers

A stock symbol or ticker is a series of one to five letters, or an abbreviation, that represents a company or ETF’s stock listed on a share market. They were created in the 1800s to make trading more efficient around time of using ticker tape machines (which were based on a ‘tick’ that shows movement of shares prices going up or down). 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, and Olympic Steel’s ZEUS. Learn more about stock tickers.

Trade, or order

Hoko

When you trade shares, it’s a similar process to trading goods and services through sites like Trade Me. A trade is when an investor sells shares to another investor through a share market. The term ‘trading’ has become loaded over the years and can be associated with buying and selling shares at speed (known as day trading). Because Hatch’s aim is to help Kiwi people work towards understanding share markets, you’ll hear us use the word ‘order’ rather than ‘trade’.

With Hatch, you can place four types of orders. Many investors simply stick with market orders, and depending on your own financial goals you may or may not not choose to use all types of orders.

  • Market order This is the most straightforward way to buy and sell shares. Market orders are named because just like in a market, you're buying and selling shares in real-time (or when the markets next open).
  • Auto-invest Auto-investing can take some of the admin out of building your portfolio. With Hatch, you can auto-invest into as many companies and exchange traded funds (ETFs) as you like. For example, if you want to invest $300 a month every month into the same company or ETFs you can set up an auto-investment. A market order will be placed on your behalf at the frequency you choose, such as ‘the 21st of every month’ or every fortnight, month, quarter, etc.
  • Limit order Limit orders can give investors more control over the price shares are bought and sold for, and are primarily used to attempt to buy or sell shares at a better price. You enter the exact number of shares you want and the price you want to buy or sell them for. If the share price doesn’t reach your target price, your order will not be completed and you won’t buy or sell the shares.
  • Stop-loss orders and stop-buy orders. Investors use stop-loss orders similarly as they would an insurance policy aiming to try and stop or reduce losses, and to control risk. Stop-loss orders give instructions to sell shares if they drop in value to a certain price, known as the stop price.

Undersubscribed

Kāre i ohaurunga 

The minimum subscription is the lowest amount of IPO shares investors need to buy for a company’s IPO to complete successfully and list on a share market - typically 90%. If the threshold isn’t met for a minimum subscription, it’s considered an undersubscribed IPO - where supply is greater than demand. While it’s not common, the company returns the money from the orders placed. An undersubscribed IPO can be due to poor promotion, overpricing, or share market or economic conditions at the time. It can also be referred to as underbooking. This contrasts with an oversubscribed IPO.

Underwriter

Kaiwhakaoati

Underwriters are investment banks like Morgan Stanley or JP Morgan that work closely with companies to manage the end-to-end IPO process. They help decide the initial offering price, promote the IPO in a roadshow and distribute shares to investors. They reduce the company’s risks during the IPO process by agreeing to assume the risk of buying all or a portion of the shares to be issued in the IPO and then selling those to the public at the IPO price. But of course, they command big fees for doing so.

We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.

Join the Kiwis who are hatching their tomorrow and have invested more than $1 billion with Hatch.

More recent news articles

Recent learn articles

8 min read
Nov 7, 2023

The story behind Dow Jones, and The Dow Jones Index explained

The Dow goes up… the Dow goes down… but even experienced investors may not understand what the Dow is, how it’s calculated and why it’s so influential. We get Dow-n into the detail of this prominent index so next time it hits the headlines, you’re infomed.
Read more
7 min read
Oct 31, 2023

The NYSE: New York Stock Exchange

Warren Buffet’s Berkshire Hathaway lists on the New York Stock Exchange, and so do some of the world’s most well-known brands. Find out what makes the NYSE the exchange of choice for the blue-chip companies, and why you’ll never confuse it for the Nasdaq again.
Read more
7 min read
Sep 19, 2023

Day trading: Is it hazardous to your wealth?

Hollywood’s made day trading look exciting - after all, watching someone invest for their retirement wouldn’t make a thrilling movie or give us Leo’s epic one-liners - but perception (and Hollywood) may not be reality. Let’s unpack the pros and cons of day trading, unravelling regulations and tax obligations.
Read more

Related news articles

More recent learn articles

6 min read
Aug 28, 2023

Investing for beginners: How to invest, and where to start

For beginners learning how to invest in stocks, it can feel like the first day in a new job; exciting and full of possibilities, but pretty overwhelming! If you’re ready to put your money to work, our guide to investing for beginners can help you learn how to invest.
Read more
6 min read
Jun 22, 2023

How to research shares: 5 simple steps for beginners

How are you supposed to research shares if you don’t know where to start? Let's sort the foundations from the fluff and get the information you need to begin your own research on companies and shares.
Read more
4 min read
Apr 26, 2023

Choosing your first shares: A step-by-step guide

Feeling overwhelmed with choosing shares to invest in? With so many options, it can be hard to decide on the best shares to buy for your situation. We can’t tell you which shares to choose, but we can share our helpful tips to boost your confidence when buying your first shares and starting your investing journey.
Read more

Recent news articles

More recent learn articles

8 min read
Nov 7, 2023

The story behind Dow Jones, and The Dow Jones Index explained

The Dow goes up… the Dow goes down… but even experienced investors may not understand what the Dow is, how it’s calculated and why it’s so influential. We get Dow-n into the detail of this prominent index so next time it hits the headlines, you’re infomed.
Read more
7 min read
Oct 31, 2023

The NYSE: New York Stock Exchange

Warren Buffet’s Berkshire Hathaway lists on the New York Stock Exchange, and so do some of the world’s most well-known brands. Find out what makes the NYSE the exchange of choice for the blue-chip companies, and why you’ll never confuse it for the Nasdaq again.
Read more
7 min read
Sep 19, 2023

Day trading: Is it hazardous to your wealth?

Hollywood’s made day trading look exciting - after all, watching someone invest for their retirement wouldn’t make a thrilling movie or give us Leo’s epic one-liners - but perception (and Hollywood) may not be reality. Let’s unpack the pros and cons of day trading, unravelling regulations and tax obligations.
Read more