Well, you already know millennial slang, FOMO, LOL, TTYL, BRB. These cool words make you feel up to the trend, isn’t it? Now that we are actually getting to know the new way of becoming wealthy. Let us know the cool stock market words.
Taking you to the world of the stock market and trading. Know A-Z terminology quickly and easily. Knowing the stock market is beneficial while making investment decisions further. You can be your own boss, and make a financial decision with high profits.
Let us start it alphabetically.
This acts as the middleman from a brokerage firm that serves between buying and selling of shares. They act as a third party for your negotiation and have authority in decision-making.
People who have time constraints and lack negotiation skills mostly hire agents to make their work easier. They have a set of members researching on the market behavior and advice you for the same.
It refers to the money, securities, property, and real estate a company owns that is listed in the balance sheet. Asset gives the company value in the market through the wealth it reflects.
The assets of a company grow in time, it can be major offices or property worth some cost.
Bear market states the condition of protracted price decline which converts to the downfall of the economy and leads to recession. It happens when the securities fall 20% or even more.
Factors such as government policy change, economic downfall, a recession could lead to a bear market.
It is a standard to judge the performance of any stock. These benchmark by the word itself has some set up standards to judge what performance is there for the stock in the market. BSE Sensex, NSE Nifty is the famous benchmarks.
Beta estimates the alliance between the worth of one stock to the movement of the entire market. It is the measure of the volatility of stocks in the market.
If the beta is to a greater extent than 1, it is said that the stock is more unstable than the market. If the beta is underneath 1, it shows the stock is less volatile.
A board lot is a standardization given by the stock exchange for shares. The board lot makes it easier and more efficient by defining block shares that are used for trading.
This can lead to tighter spreads and liquidity which also leads to lower transaction costs. One of the common lots is 100 units, apart from that some others are 50, 500, 1000 units.
Bonds are fixed-income instruments that are inversely proportional to interest rates. It has a maturity period to pay a fixed debt or risk it.
For the introduction of new projects, government or private companies issue bonds. These are also available as mutual fund units for income purposes.
By the name itself, this type of share comes with no extra fees to shareholders through companies. It totally depends on the number of shares you possess.
Companies issue this bonus to uplift their retail participation and uplift their base equity. This increase in the shares lowers the price per share.
The future of price stock is determined by the terms: bottom and peak. When the price is reache lowest in a certain time it is referred to as the bottom. While the price hike in a certain period of time is peak.
A blue-chip stock is a reputable company. Investors depend on this company because of dependable finances and likely pay dividends.
It is the faith of investors that this stock chip is stable and worthy of giving capital. They are expected to turn up when hit by downfall.
The bull market is the state where the stock is raised for a longer period of time. It is the vice-versa of a bear market. This gives a positive outlook for investors. In such tenure, the market value of the stock is lower for an extended time.
By the term “buy” itself, to buy stock in return for money. This again should be done with proper learning and decision together with analysts.
Sell, is the exchange of stock in the portfolio with money.
Holding the stock is always a good idea unless you witness or are about to witness downfall. This gives high returns.
It is a secondary contract between two parties, the buyer gets to buy the shares at a particular date and time under no commitments.
This gives buyers full power to call options over certain prices discussed earlier with the seller.
It is the final pricing on a particular trading day. Stock Exchangers decide the closing of trading for a day.
As the close alarm rings, the end negotiation price becomes the final price. Tho, this does not mean is the end of the trading for a particular stock.
These securities can be converted into other securities. The most common convertible security is preferred stock.
Security with this convertible feature has lower-pay which is converted into common stock.
This ratio provides the liquidity status. It is assumed that a company that has a higher current ratio has a chance to meet better short-term liabilities.
To rephrase it, a company has a backup to not get affected by the pressure of working capital.
It is a kind of debt instrument that is not backed up with any kind of collateral and has a term period of more than 10 years. It is backed by the creditworthiness and reputation of the issuer.
This has a fixed rate of interest and can be easily paid off yearly or partly. Issue of debentures is done to raise funds by the government or corporations.
It is a ratio of comparison between a company’s liabilities to shareholders’ equity. It is an important ratio used in corporate finance.
It is seen that the lower the D\E, the better the outcomes.
A defensive stock provides a constant dividend and stable earnings. Companies such as Johnson & Johnson, Coca Cola are considered defensive stocks.
They provide long-term gains with lower risk in stocks. This stock is often known as a non-cyclical stock. It has a beta of less than 1. This might not give a high return but has promising dividends.
Delta is the comparing ratio of change in asset price to change in corresponding derivatives price. Delta for call option can be in 0-1 and for put-option(definition is mentioned below) is negative from 1-0. The common way of spreading delta is through calendar spread.
Diversification by the word itself is buying stocks of different companies of a variety of sectors. By this, it lower and distributes the risk amongst different sectors.
This makes the loss experienced by one company get cured or balanced by the gains of the other company.
The dividend is termed as a profit that is gained by the company and is distributed to shareholders. This distribution is governed and determined by the board of directors.
Most companies instead of paying dividends, take that profits for the overall company’s profit. Usually, the dividend approval by shareholders is done by a rightful voting system.
It indicates the ownership in the company and is also known as common shares. This gives you the right to say in the company’s affairs. Giving meaningful advice and participating in the company’s management is one of the advantages you can experience besides the valuation profit.
When a company lists its share, it has some face value. This value of the stock at the time of listing is called face value. It is the company that decides the face value of stock and remains interchangeable. Also, par value and face value are the same
It is a strategy to reduce the price movement of assets, which could grind down the gains of the portfolio. To have a constant gain, one has to be well versed with this strategy.
This is the kind of stock that provides stable incomes, most often in the form of dividends, that has low vulnerability to risk. These have large market capitalization. Income stock is usually inversely proportional to interest rates. So, if the interest rates increase, the price decreases.
Stock Market Index measures the change in the stock market reflections. These indexes act as benchmarks to estimate investment performance.
This is created by picking and grouping unique kinds of stocks from the listest exchange securities.
IPO or Initial Public Offering is the procedure by which companies list themselves as public and get listed for trading. This is the way to raise the capital of the company.
The listing is done in the primary market and further traded in the secondary market. Underwriters and investment bank handles the process.
The trading done through the internet platforms is internet trading. When the trader buys a particular order, their database is put-up to trading members’ platforms and the exchange platform.
This gives an opportunity to trade worldwide with a little inexpensive. In 2000, SEBI approved this trading.
It is the order to buy or sell a security at an agreed price. This order is executed in a limited price.
This has a downfall as the fast pace market can miss opportunities, due to limited ordering stable price.
It is the ratio used to measure the total number of stocks that are rising to the number that are falling. The objective is to know the flow in which the stock market is moving.
If the ratio is more than 1, it indicates positive sentiment. If the ratio is less than 1, this indicates negative sentiment.
It is the accumulated estimation of a company based on the progressive share price compounded by the total number of outstanding stocks.
For example, If a company has an outstanding share of 10 million, with a current market price of 50 per share. Then the market capitalization of the company is Rs. 50 Crores.
This is one of the important factors for investors to know maximum risk and returns.
When the price of the stock is higher than what it should actually be is called overvalued stock. The price-to-earning ratio can determine this value easily. In case the stock is overvalued, it is expected that the price drops.
Overweight is the investment in a particular asset, asset type, or sector within a portfolio. Let us imagine, Radhika holds 30 % of her investment in the banking sector. Despite that, the benchmark portfolio, says that the Midcap 100 index holds, only 20% of the banking sector. Now this means Radhika’s is 10% more overweight.
It is the overall capital keeping of an individual or company, the securities of multiple companies are operated from different sectors. Any investor can be able to construct the portfolio according to the risk they can take up.
It is the measure of current share to the share\per earnings. This is also called price multiple.
If the company’s stock is overvalued or the investors expect high growth, the P\E ratio is high.
RETURN ON EQUITY
ROE is the to take the round of overall performance of a company and also getting to manage the profitability of different companies under same industry.
When the ROE is high, the company is flourishing and adding a wealth of shareholders.
It is the process of increasing outstanding shares number by splitting the ongoing ones. To make the shares available this stunt is pulled.
This is one of the states of the market where the buyer and seller of different stocks are low for a single or entire stock.
This rises high price volatility yet low liquidity due to slow market progress. It becomes difficult in the case to bid as the biddings are fewer.
It is said to be the measure of Return of Investment by some percentage. To calculate yield the current share price is divided by the annual dividend paid by the company.
Now that you have read the entire stock market glossary, you seem quite enthusiastic and optimistic to go bid for your price. So, next time someone come up with the word “ Thin Market” you know what exactly he/she meant.