• Source:JND

Being a beginner to stock market investing can feel overwhelming, as complex jargon often creates confusion for new participants. However, understanding the basics and some core concepts of the equity market is the first and most critical step toward building wealth and securing a financial future. Whether you want to create wealth over a long period or your goal is to do short-term or day trading, knowing foundational terms will provide you with the clarity and confidence needed to navigate the market effectively.

10 Stock Market Terms Every Investor Should Know 

Here are 10 essential terms every investor should know before kick-starting their investment journey.

1- Stock or Equity: A share is an ownership in a company, meaning when someone buys a stock, they become a partial owner of that business.  With this,  the investor unlocks potential to earn profits if the company grows and its value increases.

2- Market Capitalisation (Market Cap): This is the total market value of a company. This is calculated by multiplying the current share price by the total number of shares. With this, you can classify companies as small, mid, or large-cap.

3- Dividend: If a company makes a profit, you are supposed to receive a chunk as investors as well. A portion of a company's profit that is paid out to its shareholders is called a dividend. Companies often pay dividends as a reward to their investors from their earnings.

4- Bull Market vs. Bear Market: When there is a buying momentum in the market and shares of the majority of listed companies are generally rising, it is termed a Bull Market.  In contrast, a Bear Market is a scenario in which share prices are falling, often causing investor pessimism.

5- P/E Ratio (Price-to-Earnings Ratio): A metric that compares a company's share price to its earnings per share (EPS) is the P/E Ratio. It helps investors understand if a company’s shares are overvalued or undervalued relative to what the company earns.

6- EPS (Earnings Per Share): This metric helps investors to understand whether the company is profitable or not. Companies allocate a portion of their profit to each outstanding share of common stock. It is a key indicator of a company's profitability.

7- Volatility:  A market is volatile when share prices move up or down. Higher volatility means the price changes rapidly in a short time, which involves more risk.

8- Portfolio: An investor’s collection of stocks, bonds, or mutual funds is known as a portfolio. Diversifying a portfolio is often considered a smart choice.

 
9- SIP (Systematic Investment Plan): A method that allows investors to invest a fixed amount of money at regular intervals (e.g., monthly) in a mutual fund scheme. SIPs are considered an excellent choice for beginners as it promotes disciplined investing and average out the cost of buying over time.
 
10- IPO (Initial Public Offering): The process by which a private company offers shares to the public for the first time. Post the IPO, the company becomes a publicly traded company.

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