When we start investing in the stock market, there are some definitions which we have to understand and only then we can invest properly. Keeping this in mind, I will give you information about some such words, knowing which you can invest well in the stock market.
1. NSE and BSE
These are two markets of India where companies list their shares. Companies can list their shares in these two markets so that people can buy and sell those shares.
2. SEBI
SEBI, or Securities and Exchange Board of India, oversees the securities and financial markets in India to protect investors from any kind of fraud and prevent any wrongdoing. Can control the market through antics.
It was established in 1988 and comes under the jurisdiction of the Ministry of Finance. The primary mission of SEBI is to protect the interests of investors, ensure fairness and transparency of the securities markets and promote the development of these markets.
SEBI works to formulate and enforce rules and regulations for various participants in the securities markets including stock exchanges, brokers, listed companies and investors. It also plays an important role in preventing fraud and unfair trading practices and maintains surveillance on market activities.
3. Stock Market Broker
There are many brokers in the stock market. They have to register with SEBI and after that they help investors in buying and selling in the stock market. You must have seen many brokers or seen their advertisements like – Zerodha, Angel One, Motilal Oswal, Upstox, Groww and many more. Some banks also provide this service.
If you want to invest in the stock market, you need a demat account, and for this a stock market broker can help you. After getting a demat account, you can buy and sell shares.
4. Bull and Bear
Bull means in the stock market that the market is going up. Bull market means the stock market is upward. And bear market means the market is currently falling and is going lower. Many investors use these terms.
5. What is Sensex and Nifty
Sensex is a group of top 30 stocks in the BSE market. Only BSE decides which stocks or companies will be included in it. Similarly, there is Nifty 50 in NSE in which there is a group of shares of 50 companies. The daily value or performance of these groups shows how the stock market is doing – bull or bear.
The group of these stocks is called Indices in the stock market, which is the plural of Index.
6. Dividend
You must have heard this word many times. To put it in simple words, if you buy shares of a company, the company distributes the profit it makes from its business in a year among the shareholders. With this you get a share of profit as per shares directly in your bank account. You can consider it as a kind of interest like you get in a bank account.
7. Initial Public Offering (IPO)
You must have heard this word IPO many times. This simply means that the first company that wants to sell its shares in the market is called IPO (Initial Public Offering). When a company launches its shares in the stock market for the first time, we call its shares IPO. I will tell you in a separate post how you can apply for an IPO.
8. Portfolio
This word means how many company’s shares you have in your DEMAT account. Suppose you have shares of 5 companies, that too worth Rs 1 lakh, then that is called your portfolio. The portfolio consists of those shares whose delivery you take in your DEMAT account stored with CDSL. Portfolio is the list of your purchased shares.
9. Market Order
If you have heard this word, let me tell you – when you buy or sell a share in the market, it is called market order. Because you have bought or sold that share at the market price. Therefore you have to place orders at market price.
10. Limit Order
If you do not want to buy or sell shares at the market price and you want to set a price which can be above or below the market price. So for that you will have to use the limit order method.
Every broker provides these features. So you can place these orders using their website or app and buy and sell shares in your portfolio.
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11. Stop Loss
This is a big feature that stock market brokers provide to their customers. By this you can reduce your loss. Suppose you bought a share for Rs 100 and you feel that the share may go down and you may suffer loss. For that, you should use the stop loss feature in which you will place an order at the price of Rs. 95 and as soon as the share comes to Rs. 95 or below, your order will be sent to the market by your broker and you will save yourself from incurring huge losses. |
12. Intraday
You will also hear this word many times. When you buy and sell a stock on the same day, it is called Intraday in the market language. And it has many benefits, about which I will explain in detail in a separate post.
13. Equity delivery
This means that you keep a stock in your portfolio for a period of time and then after some time you sell it, then it is called delivery because you are delivering the stock.
14. Intraday Leverage
I have already told you what intraday is. But its biggest advantage is that you get the stock up to 5 times cheaper than its normal value. It is up to the broker to decide how much leverage he wants to give on which stock. This option can be utilized for Intraday trades and you will have to sell all stocks before 3:00 PM or else it will be converted into holdings with payment of full amount. .
15. Derivatives
a financial instrument that derives its performance from the performance of an underlying asset. This means you do not need to take the entire stock but can take a part of it. It consists of two parts – futures and options.
16. Futures
A type of derivative contract agreement to buy or sell a specific commodity asset or security at a set price at a future date. This is a form of agreement in which you pay some money and buy a contract in which you promise whether a stock will go up or down after a certain date. Suppose you have taken futures of a stock in which you promise your buyer that the bought stock will go up by the end of this month and today you buy it at today’s value by paying a little money. And if that stock goes up by that date, you will get profit because you bought it cheaply.
17. Options
financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed price and date. This is another form of derivative. This format is quite popular among traders. In this, they have the right to enter into a contract to buy but they have the option to break the contract, which means they do not have the right to buy or sell the stock on that date.
18. Short Term Investment
You will hear this word many times. Short term investment means you hold a stock for less than 1 year. On this, fifteen percent (15%) tax has to be paid on profits in India, if you sell within 1 year from buying a stock. We also call Short-term capital gains tax.
19. Long Term Investment
Long term investment means you keep a stock with you for more than 1 year. After that, if you sell the stock, you have to pay 10 percent tax on the profit. Therefore, to save tax and earn good profits, it is said to hold the stock for a long time.
20. Small-Cap, Mid-Cap, and Large-Cap Stocks
Large-cap companies have a market cap of Rs 20,000 crore or more. And, midcap companies have a market cap of less than Rs 5,000 crore to Rs 20,000 crore, the market cap of small-cap companies is less than Rs 5,000 crore. Make your portfolio a mix of these so that your stocks remain balanced.
This Stock market glossary will help you understand the stock market and help you in choosing better stocks. Follow my blog-finyojana.com to gain financial literacy and learn other investment strategies.
