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Beginner’s Guide to Understanding Share Market Terminology

, June 17, 2024, 0 Comments

share-market-marketexpress-inShare market investments possess risks. And if you wish to be an active trader, you need to know the ins and outs of the market. This helps you mitigate the risks involved. This holds especially true in the F&O (Futures and Options) segment.

F&O involves derivative contracts, which can be more complex and volatile than stocks. This complexity stems from the lack of technical and fundamental knowledge required to navigate the F&O segment. But fear not, because the same principle applies to any kind of investment or learning. So, allow us to walk you through the different share market terminology.

1. Shares/stocks: A share represents ownership in the company. Different types of shares dictate preference during liquidation, voting rights, or any special rights if needed.

2. Share market: A share market is a marketplace where companies are listed. People can buy and sell shares, which helps them acquire and transfer ownership of those shares. Individuals participating in the share market are known as retail investors.

3. Bull market: This is a period in the share market when most of the enlisted stocks are seeing a rise in price. It is an indicator of an optimistic future.

4. Bear market: This is a period in the share market when share prices decline. It usually occurs during economic downturns.

5. Dividends: Companies prioritize generating profits for their shareholders. While share price appreciation is a key driver of wealth creation, companies can also distribute a portion of their earnings directly to shareholders through dividends.

6. Market capitalization: This is the total value of the shares of the company that are outstanding. You can calculate the market cap for any company by simply multiplying the total number of outstanding shares with the company’s current price in the share market. Companies in the share market are valued as being large-cap, mid-cap, small-cap, or micro-cap.

7. P/E ratio: This stands for price-to-earnings ratio. It is a simple indicator of how fairly the company is valued.

8. Portfolio: This is a collection of shares of companies owned by an individual or an institution. Individuals investing in the share market should conduct a primary review of the portfolio at least quarterly or half-yearly.

9. Volatility: The stock prices in the market constantly fluctuate, displaying its volatile nature. This happens due to market pressures, policy changes, global scenarios, and more.

The world of share market investments can be an exciting frontier, and your curiosity is a valuable asset! Learn more about the share market and develop strategies that align with your financial goals and risk tolerance. So, take that first step towards securing your financial future.

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