By MARAIA B. VULA
Global Business Journalism reporter
Almost every business reporter will be called upon to write about stocks and financial markets. To effectively cover the subject, journalists must know how to translate a collection of numbers and percentages into clear, compelling and sophisticated stories. Here are some tips that can help the beginner or biz news vet alike:
1. Understand the role the stock exchange you are reporting on plays in the economy, and why companies list on each particular stock market.
There are 60 major stock exchanges in the world. About 40% are in North America. One-third are in Asia. About 20% are in Europe. There are 16 exchanges in the "trillion dollar club" with equities valued at more than $1 trillion. More than one-fourth of global equities are traded on the New York Stock Exchange, or NYSE. You need to understand the scale of the market you are covering, the companies that list on it, and its relationship to national, regional or global economies.
2. Be able to connect the impact of changes in stock values on the lives of average citizens.
Yes, stock market stories often are numbers stories. But, at their heart, business stories are people stories, too. They are about investors, employees, consumers, manufacturing plants and headquarters towns. Never forget that market gyrations affect average citizens.
3. Understand the language of stock markets – but don’t write in economic jargon. Most of your audience does not have an MBA.
Here are a few of the basic terms for stock market beginners:
Bull market: Stocks are increasing in value. If a person is optimistic and believes that stocks will go up, he or she is called a "bull" and expresses a "bullish outlook."
Bubble: In a bull market, stocks can rise irrationally based on speculation or a herd mentality. Inevitably, stock market bubbles burst. That often leads to ...
A correction: Technically, this means a decline of 10 % or more in the price of a security from its most recent peak. Corrections can happen to individual assets, like stocks or bonds, or collectively for stock indexes or "the market" in general. Corrections sometimes last mere days, but they can last for months or even longer. If stocks continue to decline, you are faced with a ...
Bear market: A bear market begins when stocks on major U.S. stock indexes have dropped by 20% or more from their most recent peak. It usually indicates trouble with the global economy and is often a forerunner to (or result of) a recession. A stock pessimist e is called a "bear" and is said to have a "bearish outlook."
Dividend: The distribution of some of a company's earnings to its shareholders.
The Dow, or the Dow Jones Industrial Average: Created in 1885, this long-running index is the average of 30 industrial stocks.
The S&P 500: Standard & Poor’s has an index of 500 stock prices. Created in 1957, it is more broad-based than the Dow.
NASDAQ: This stock index is technology-heavy and does not reflect on economic activity as broadly as the other leading U.S. stock indexes.
4. Research and understand market trends
Keeping tabs on market announcements helps you write trend stories. You must understand historical trends both for stocks and markets: one year, five years and longer term. Journalists help readers understand what’s happening to the stocks when they report on trends. Trend stories provide a key element of reporting on stock markets: context.
5. Hone your analytical skills – but don't write for insiders alone
Analyze and interpret data in a way that average citizens can understand and use. Economic information and news stories help people understand what is happening in their country, state, town or city. Some people will make economic decisions based on your stories. That’s why it is particularly important to present more than the “what” of stock performance. Tell us “why” or “what’s next.”
6. Evaluate companies
Carefully study the regulatory filings of companies you are writing about. Understand how and why traders and investors buy and sell shares of companies. Understanding different stocks makes you understand the volatility of stocks. You must develop a wide range of sources. But be careful of experts or insiders who are touting individual stocks. Beware of hidden agendas.
7. Understand corporate governance
Learn about different shareholders and classes of shares. Be able to explain the differences simply and clearly to your readers. Learn how decisions are made at publicly traded companies and the powers of different classes or factions of shareholders. You need to understand corporate governance to effectively cover the stock market.
8. Understand Splits
Be able to explain how the number of shares in publicly traded companies can change through the process of splitting. Two terms you need to know:
Stock split: When a company's board decides to increase the number of shares by issuing more shares to existing shareholders. For example, in a 2-for-1 stock split, an additional share is given for each share held by a shareholder.
Reverse Stock Split: When a company reduces the total number of its outstanding shares to increase its per share price.
9. Develop good contacts
Talk to financial advisors and stock brokers. It’s always good to have good contacts in the financial markets sector. You need independent analysts. Do not rely on experts who have a vested interest in the companies (or stock indexes) you are covering.
10. Use simple language.
You are not reporting just for investors!. You want to write clearly without oversimplifying. Think of your entire audience and not just people with a stake in the stock market.