For beginners, the jargon of Wall Street can be rather confusing. I'll use this column periodically to define common Wall Street phrases:

"Long term" — Ask two different investors what "long term" means, and you'll get two different answers. For daytraders, long term means lunchtime. For some investors, "long term" means forever. In general, when Wall Street refers to "the long term," it usually means 12-24 months at a minimum, and more likely 5 years or more.

"Going public" — This is the phrase used to describe a private company that is offering stock to the public for the first time. Companies go public via an "Initial Public Offering," also known as an "IPO." A company that is going public hires an investment bank, such as Merrill Lynch or Goldman Sachs, to manage the public offering. The investment bank will line up a bunch of brokerage firms to help sell the new shares to investors. There's been a lot of activity in the IPO market over the last year as a result of the boom in Internet stocks.

"Stock buyback" — A stock buyback occurs when a company decides to buy back its own stock. Companies buy back stock usually when they believe their stock is offering a good value. Investors view stock buybacks as bullish events for the stock.

"P/E Ratio" — A stock's P/E ratio is merely the value of the company's stock price divided by 12-month earnings per share. For example, a company whose stock price is 50 and whose 12-month earnings per share is $2 has a P/E ratio (price/earnings ratio) of 25. P/E ratios are gauges to measure the popularity of stocks. High P/E ratios usually mean investors are bullish on a company's prospects. Low P/E ratios mean investors are not optimistic about the company's prospects. When using P/E ratios, make sure you compare a company's P/E ratio to its historical range as well as to the overall market. In the last few years, P/E ratios on stocks have been at historically high levels.

"Market Capitalization" — A stock's market capitalization is the number of outstanding common shares times the stock price. A company that has 50 million shares outstanding and a stock price of $10 per share has a market capitalization of $500 million. Wall Street breaks down stocks via market capitalizations. Stocks with market capitalizations under $1.5 billion are "mid-cap" or "small-cap" stocks.

"Asset allocation" — Diversification is a common investment principle that means, simply, "don't put all your eggs in one basket." In order to diversify, you allocate your investment funds across a variety of assets ? stocks, bonds, cash, etc. Asset allocation will differ from investor to investor depending on a variety of criteria ? age, income, investment time horizon, assets, etc.

"Stock Split" — Occasionally, companies will split their stock price to make the stock more affordable for investors. Common splits are 2-for-1 and 3-for-2. With a 2-for-1 split, an investor who holds 100 shares will hold 200 shares after the split. The stock's price is cut in half, too. No real value is created with a split. It's the same as receiving two ten-dollar bills for a twenty. Some investors like to buy stocks that split frequently.

"Dividend Yield" — A stock's yield is simply the 12-month dividend per share divided by the stock price. For example, if a stock pays $1 per share per year in dividends and trades for $20 per share, the yield is 5% (1 divided by 20 equals 0.05). A stock's yield is similar to the interest earned on a savings account or the interest paid on a bond. It is the return generated by the annual cash flows thrown off by the investment. In the stock world, higher-yielding stocks (yields of 4% or more) generally are associated with slow-growth companies — utilities, real estate investment trusts, etc. Conversely, it is very common that high-growth companies will not pay a dividend.