15 Important Investment Terms You Should Know About

1. 15ImportantInvestmentTermsYouShouldKnow About Theterm‘financialplanning’mayalarmmany, especially ifyouarenewtoinvesting.Whilesome consider ittobe replete with jargon, for some, it’s the sheer extensiveness of the process. However, it may not be as daunting, if you take it one step at a time. We list out a few terms that will help anyone who is starting out. After all, knowledgeispower. Stock:Simplyput,astockisreferredtoacertificate/proof of one’sownershipofacompany. Share: It refers to the stock certificate of a certain company. For instance, if an investor buys shares in a company,he/sheiscalledashareholder,andsharespartoftheprofits.Atthesame time,he/shearealsoatthe riskofbearinglossesifthe companyisn’tperformingwell. Bond:Bondis theloanmadebyaninvestortoaborrower. Order:Thistermisused whenoneintendstosellorbuysharesatacertainprice range. Bid: Itistheamountoneiswillingtopayforacompanyshare. Ask:Asthetermsuggests, the‘ask’isthepriceatwhich oneiswilling toselltheshare. Bid-ask spread:Moreoften thannot,thereisadifferencein theamountone iswillingto spendfortheshare andtheaskingprice.Intheworldof investing,atrade canhappenwhenthetwomatch. Forexample,ifthelowest price quoted by a company A for a particular share is Rs 10, and the maximum a buyer is willing to pay for it is Rs 8, no tradecanmaterialise. Mutual Funds: Don’t let limited funds deter you from investing. Mutual funds let you invest across a large numberofstocksbypoolingyour money withotherinvestors. Ifyouare looking toidentifythe fundstoinvestin, taketheguidanceofafinancialadvisor. Portfolio:Simplyput,aportfolioisthecollectionof all investmentsthatthe investorhasmadeand canbe referredto,asandwhenrequired. Index:Thisisabenchmarkused by investorsandportfoliomanagerstodetermine marketperformance.Nifty andSensexaresomeexamplesofthisbenchmark. Dividends: As explained above, a shareholder makes profit when the company performs well. Dividend is part oftheprofitthatthecorporationdistributesamongstits shareholders. Bullmarket:Whenthestockprices inamarketareontherise,it’stermedas abullmarket. Stockexchange:This isafacilitywhere all stocksare listedforselling or buying.AsIndiagoesdigital,all stocks arenowonlineandone caneasilyaccessthem throughabrokeragefirm. Liquidity:Thisreferstohoweasily astock canbesoldoff.Ashare which canbeeasily soldorhasahightrade volumeisconsideredhighlyliquid. Over-the-counter:Allstocksare listedonthestockexchange,butifyouchoosetotradeasecuritythatisn’t listed,itwillbecalledanover-the-countertrade.