Stock Market Terms:
If you want to invest or trade in Stock market, you should educate yourself with the terms that are frequently used. Here’s a mini guide that will help you through!
If you have stepped on to the world of Stock Market, then you should equip yourself with the basic knowledge of stocks and the technical terms. You can also equip yourself with the basic tools and keep a track of the market movements to take correct decisions at all times.
But before doing all that, you should have a good understand of the basic terminologies used in the stock market. Knowing these will help you navigate through the market easily.
- Agent: Your broker/brokerage firm is your agent. It will act on your behalf while buying or selling shares. Your agent will not own any of your shares.
- Ask/Offer: The ask is basically the lowest possible price an owner is willing to sell his stocks for.
- Assets: Assets are everything that an organization owns in its name, which consists of cash, equipment, vehicles, land, technology etc. Assets basically represent the wealth of a company.
- Bear Market: Any market where the stock prices keep falling consistently is a bear market.
- Bull Market: A bull market is completely opposite to the bear market and is characterized by consistent increase in stock prices.
- Beta: Beta is the measurement of the relationship between stock price of any particular stock and the movement of the entire market.
- Blue Chip Stock: Blue chip stocks are stocks of financially stable companies who provide consistent dividends over time.
- Bonds: Bonds are issued by companies or the government which act as promissory notes. It acts as a loan from you to a company or the government and you get paid back the principle amount along with interest within a stipulated time frame.
- Broker/Brokerage Firm: Brokers or brokerage firms are registered with SEBI and act as advisor for you while you purchase and sell stocks in the stock market. They do not own any stock that you buy but they charge a commission for the services that they render.
- Commodities: Commodities are the commercial products like gold, silver, oil etc. that are traded separately on the commodities platform. Apart from the products mentioned above the commodities market also enlists agricultural products and other natural resources for trading.
- Debentures: Debentures are debt instruments that are backed only by creditworthiness and reputation of the issuer. It is an unsecure form of investment and has no security in the form of physical assets or any type of collateral.
- Defensive Stock: Any stock that keeps providing stable dividends and earnings in an economic slump is termed as a defensive stock.
- Delta: Also referred to as the hedge ration, the delta has a range from 0 to 1 and the ratio compares the change in the price of the underlying asset to the change in the price of the derivative.
- Derivatives: Derivatives are securities whose prices are normally derived from underlying asset(s). The most common assets include stocks, bonds, currencies, market indexes, etc.
- Diversification: By diversification, you reduce the risk of your investments by spreading the risk across different industries, sectors, assets.
- Index: An index will come handy every time because it is an essential statistical measurement of the change in the economy or the security market. They have their own method of calculation and is measured using a percentage change in the base value in course of time.
- Mutual Fund: A mutual fund is a pool of money managed by financial experts who invest it in stocks, bonds, securities and improve the returns over time. Mutual funds are very good examples of diversified portfolios.
- P/E Ratio: Price to earnings ratio is ratio of the last traded share price of a certain company to the latest earnings of the company per share.
- Securities: These are transferable certificates of ownership of investment in products such as stocks, bonds, contracts etc.
- Yield: Yield is basically the measure of return on your investments in terms of percentage value. To calculate stock yield, you have to divide the current price of the share by the annual dividend paid by that company for that share.
With these terms in hand, you will be able to navigate the stock market better. Not only will it be extremely easy to understand the expert opinions, Investing and trading will become a tad easier for you as well.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges.
As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Past performance of securities/instruments is not indicative of their future performance. This post is only for Educational purpose.