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Understanding the stock market always starts with the basics. People often jump straight into investment but within a short time the confusion increases so much that even losses occur. In fact, the foundation of the market rests on these terminology only. If these are understood then the journey ahead becomes much easier. If you really want to understand the market, want to invest your money in the right place and want to take decisions without fear, then first strengthen your grip on these words. Below, 10 important terms of share market have been explained in simple language so that your foundation remains solid and the future building can stand strong.
Equity: Equity means your stake in a company. When you buy shares, you get a small stake in the company and you see the profit or loss according to its profit or loss.
Market Cap (Market Capitalization) Market cap tells what is the total value of the entire company in the market. It is obtained by multiplying the share price by the total number of shares of the company. On this basis, companies fall into large cap, mid cap and small cap.
IPO: When a company sells its shares to the public for the first time, it is called IPO. In this the company raises money and people can buy shares in the beginning itself.
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Bull Market: When the market goes up continuously and the confidence of investors remains strong, then it is called bull market. Most stocks rise during this period.
Bear Market: When the market goes down continuously and there is an atmosphere of fear, then it is called bear market. Investors take less risk at this time.
Dividend: The company gives a part of its profit to the shareholders which is called dividend. It is like extra income for those who are shareholders in the company.
P/E Ratio tells whether the share price is higher or lower than its earnings. Investors decide whether a share is expensive or cheap.
Trading Volume: How many shares are bought and sold in a day or time is called trading volume. This shows how much activity there is in a stock.
Liquidity: Liquidity tells how easily a share can be bought or sold. High liquidity means that there is no problem in both buying and selling.
Portfolio: The entire collection of where you invest your money is called your portfolio. Good investors always keep it diversified so that the risk remains less.
