10 Simple
Stock Market Terms
Everyone Should Know!
1) Stock
When you buy a stock, you are purchasing a
small ownership stake in a company.
Stocks, also known as equities, give you the
right to vote on company matters and earn
a share of the company’s profits.
The value of stocks can rise and fall
depending on the company’s performance
and market conditions.
2) Bull Market
A bull market refers to a market condition
where stock prices are generally rising or
expected to rise.
It's a period of optimism and confidence
among investors.
During a bull market, you’ll often see more
people buying stocks, which pushes prices
even higher.
3) Bear Market
A bear market is when stock prices are
falling, and investor sentiment is negative.
A market is typically considered a bear
market if it has fallen by 20% or more from
its most recent peak.
During this period, people might feel
hesitant to invest, leading to even lower
stock prices.
4) Dividend
A dividend is a portion of a company’s
earnings that is distributed to shareholders.
Companies that make a profit may choose
to pay out a part of it as dividends, typically
on a quarterly basis.
Dividends are usually paid in cash but can
also be issued as additional shares.
5) IPO (Initial Public Offering)
An IPO is when a private company decides
to go public by offering its shares for sale
to the general public for the first time.
This allows the company to raise capital
that can be used for expansion or other
business needs.
IPOs are often highly anticipated, and
prices can fluctuate wildly on the first day
of trading as investors react to the new
opportunity.
6) Market Capitalization
Market cap is a measure of a company’s size
and is calculated by multiplying its stock
price by the total number of outstanding
shares.
It helps investors understand the overall
value of a company.
7) P/E Ratio
The P/E ratio is one of the most commonly
used indicators to assess whether a stock
is over or under-valued.
It compares a company’s current stock
price to its earnings per share (EPS).
A high P/E ratio suggests that investors are
willing to pay more for a company’s
earnings, usually because they expect
strong future growth
8) Portfolio
A portfolio is the collection of investments
you hold, whether it’s stocks, bonds, mutual
funds, or real estate.
The goal of a portfolio is to spread out your
risk.
By holding different types of investments
(a strategy known as diversification), you
can protect yourself from the risk that
comes with any single asset or stock.
9) Volatility
Volatility refers to how much and how
quickly the price of an asset, like a stock,
moves up and down.
Stocks with high volatility can experience
large price swings, offering the potential
for higher returns but also greater risks.
Lower volatility typically means a more
stable investment, but with less potential
for huge gains. Understanding volatility can
help you assess your risk tolerance.
10) Blue-Chip Stocks
Blue-chip stocks refer to shares of large,
well-established companies that have a
long history of reliable performance and
stability.
These companies are usually leaders in
their industries and tend to pay dividends.
Examples include companies like Apple,
Microsoft, and Coca-Cola.
Avigna Capital
An initiative by NISM Alumni!
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