If you are a beginner and just starting with your stock market journey, the stock market can be a bit confusing. You may have heard people talking about the stock market, Sensex or explored a Nifty50 chart, but do you know what it means?
You can learn about a few important and commonly used stock market terms most easily. Once you are aware of these basic terms, you will get more confident about your stock market journey.
Common terms for beginners
1. Stock
One of the most common words that you hear is a stock. A stock is your share or your part in the company that you are investing in. It is also known as equity.
2. Stock market Sensex
The stock market Sensex tracks the top 30 companies that are listed on the Bombay Stock Exchange. It basically gives you an idea about how these companies are performing. It is very simple: if the Sensex is up, the market is performing well, and if it goes down, big companies are losing their value. This change in dynamics can happen due to various reasons.
3. Nifty 50
Another important index in the stock market is the Nifty 50. This helps you track the top 50 companies that are listed on the national stock exchange. It is important to explore the nifty50 chart as it tells you about the performance over time.
4. Bull market
A bull market is a positive sign for investors. It means that the prices of stocks are increasing or are expected to rise. This happens when investors are very confident about the economy. In this period, investors buy more shares, and the market remains positive.
5. Bear market
A bear market is the opposite of a bull market. In this period, stock prices fall or are expected to fall. This can happen when there is uncertainty in the economy, leading to fear among investors.
6. Initial public offering (IPO)
An IPO is when a company tends to sell their shares for the first time to the public. It is an announcement by the company to people that now you can invest in us.
7. Demat account
You store your shares in a demat account. Just as you save your money in your savings account, you will save your shares and other securities in a demat account.
8. Trading account
A trading account is used if you want to buy or sell shares in the stock market.
9. Broker
A broker is a person who will help you buy or sell your shares. An online platform can also play the role of a broker. Today, most investors are using online brokers or apps to invest.
10. Dividend
A dividend is the profit made and given to shareholders. Not all companies pay dividends, but those that do pay them quarterly or yearly. This is another way of earning money besides selling your share.
11. Blue-chip stocks
Blue-chip stocks are of bigger companies. These companies are financially stable, and you can trust them easily with your money. A few examples include reliance, TCS and Infosys. These are included in the Sensex and Nifty 50.
12. Stock split
A stock split is when a company splits their shares into smaller units, making it more affordable. The value of your investment will not change, but there will be an increase in the number of shares.
13. Repo annualisation
By this method, you can convert short-term interest rates into yearly terms. With this, you can compare your short-term returns with annual returns.
14. Arbitrage
Arbitrage is buying a share in the market at a lower price and selling it at a higher price. In this, investors make a complete profit without any risk.
15. P/E ratio
The price-to-earnings ratio shows how much an investor is willing to pay for rupees, one of our company’s earnings. If you have a high P/E, this means that the stock is expensive or is expected to grow.
16. ETF
Exchange exchange-traded fund is a type of investment that tracks your index, like the Sensex or Nifty.
17. Stop loss
A stop loss is a price that is set at which you can sell a stock and avoid bigger losses. It basically helps you limit your risk if the price of the stock goes down too much.
If you’re starting your stock market journey, it can be a bit overwhelming, but learning these few key terms will help you make your journey easier. Whether you are tracking your portfolio or want to understand the Nifty50 chart, these terms will help you understand and navigate with confidence. Investing doesn’t always require expert-level knowledge; it sometimes requires a basic understanding of a few terms.
So the next time, when you hear people talk about bulls, bears or Sensex, you will know what exactly they mean.