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FOOL SCHOOL
Q: What does Ord 25p mean on share certificate?
A: "Ord 25p" is just the nominal worth of each share. This should not be confused with the market value of the share (the share price). The market value is what you can sell or buy that share for on the stock market. The nominal value is just a legal necessity and it sets the minimum value at which the share can initially be sold by the company itself. After that, it is of little useful consequence.
Q: Why do UK shares follow US ones?
A: The US market accounts for around 40% of the total value of all listed companies in the entire world. Therefore, as the saying goes, 'When Wall Street sneezes, London catches cold'. In addition, investors and commentators consider that the US and UK economies are quite similar. In the modern global trading world, many UK companies have contracts with US companies and vice versa. In addition, UK interest rates are similar to those in the US and both countries have similar levels of taxation. The US economy is the largest in the world. Therefore, what happens to the valuation of those US companies quoted on the Wall Street stock markets can have an effect on companies elsewhere, including those listed in London.
Q: Why do prices change overnight when the market is closed?
A: Some companies have a listing on other exchanges, such as New York, Tokyo or Hong Kong. Trades made there may also be factored in overnight. In addition, many company announcements are made outside of trading hours so that they can be digested. Therefore, the opening prices of shares may be higher or lower depending on how palatable the 'out of hours' announcement was.
Q: I've got £X to invest for a short period (varies from 2 months to 3 years) then I need it. What's the best investment?
A: You should only invest money you won't need in the short term. In most instances, this should mean five years or less. Any time shorter than that and the usual fluctuations of the market mean that your investments may be worth less than you put in, or less than there are really worth. Of course, there is no guarantee that your shares will go up over the long term, but provided you have selected good companies, it is much more likely. So if you need your money within a shorter timespan, you should put the cash in a high interest deposit account.
Q: What are those funny letters like MKS, VOD, NXT, SGE that people use when writing about shares?
A: They are EPIC codes, also referred to as 'tickers'. EPIC stands for Exchange Price Information Computer, in case you were wondering. EPICs are a unique, standarised code for every company listed on the London Stock Exchange. They are designed so computers can recognise each company and they are also much quicker for people to type. For example VOD is the EPIC for Vodafone (LSE: VOD). Note that some companies have two-letter codes that end in a full stop. You need to enter this full stop for the Fool's systems to recognise the code.. If you don't know the EPIC for a particular company, click on the Quotes/Data tab on the top bar and use the Symbol Lookup link to find it.
Q: What does <<insert investment jargon term>> mean?
A: Have a look in our glossary - it should have the answer. If it doesn't, let us know and we'll try and include it.
Q: What do Market Makers do? Is it true that they set the price of shares?
A: This article explains how they go about their business.