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    Basics of Stock Market and Its Jargons by Ashish Siddiqui, Associate Professor, IIM Ahmedabad Investment & Need of Investment

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    RUTHVIK NETHA
    This document provides an overview of the basics of investing in the stock market, including: 1. The stock market provides opportunities to earn returns from idle savings through financial assets like stocks, bonds, and mutual funds. 2. Investing early and regularly over the long-term allows investments more time to grow through compound returns. 3. The stock market has two components - the primary market where new stock issues are sold, and the secondary market where existing stocks are traded.

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    Basics of Stock Market and Its Jargons by Ashish Siddiqui, Associate Professor, IIM Ahmedabad Investment & Need of Investment

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    RUTHVIK NETHA
    54 views3 pages
    This document provides an overview of the basics of investing in the stock market, including: 1. The stock market provides opportunities to earn returns from idle savings through financial assets like stocks, bonds, and mutual funds. 2. Investing early and regularly over the long-term allows investments more time to grow through compound returns. 3. The stock market has two components - the primary market where new stock issues are sold, and the secondary market where existing stocks are traded.

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    Stock Market Basics

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    This document provides an overview of the basics of investing in the stock market, including: 1. The stock market provides opportunities to earn returns from idle savings through financial assets like stocks, bonds, and mutual funds. 2. Investing early and regularly over the long-term allows investments more time to grow through compound returns. 3. The stock market has two components - the primary market where new stock issues are sold, and the secondary market where existing stocks are traded.

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    Download as docx, pdf, or txt
    54 views3 pages

    Basics of Stock Market and Its Jargons by Ashish Siddiqui, Associate Professor, IIM Ahmedabad Investment & Need of Investment

    Uploaded by

    RUTHVIK NETHA
    This document provides an overview of the basics of investing in the stock market, including: 1. The stock market provides opportunities to earn returns from idle savings through financial assets like stocks, bonds, and mutual funds. 2. Investing early and regularly over the long-term allows investments more time to grow through compound returns. 3. The stock market has two components - the primary market where new stock issues are sold, and the secondary market where existing stocks are traded.

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    © All Rights Reserved
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    of 3

    BASICS OF STOCK MARKET AND ITS JARGONS

    By Ashish Siddiqui, Associate Professor, IIM Ahmedabad

    Investment & Need of Investment


    The money you earn is partly spent and the rest saved for meeting future expenses. Instead of
    keeping the savings idle you may like to use savings in order to get return on it in the future.
    This is called Investment.
    One needs to invest to:
    1. earn return on your idle resources.
    2. generate a specified sum of money for a specific goal in life.
    3. make a provision for an uncertain future.

    When to Start Investing


    • The sooner one starts investing the better. By investing early you allow your investments
    more time to grow, increases your income, by accumulating the principal and the interest or
    dividend earned on it, year after year.
    • The three golden rules for all investors are: 1. Invest early 2. Invest regularly 3. Invest for
    long term and not short term.

    One may invest in:


    1. Physical assets like real estate, gold/jewellery, commodities etc.
    2. Financial assets such as fixed deposits with banks, small saving instruments with post
    offices, insurance/provident/pension fund etc or securities market related instruments like
    shares, bonds, debentures etc.

    Short & Long Term Options for Investment


    • Short Term:
    1. Savings Bank Account.
    2. Money Market or Liquid Funds.
    3. Fixed Deposit with Banks.
    • Long Term:
    1. Post Office Savings
    2. Public Provident Fund
    3. Bonds
    4. Mutual Funds

    Why Trade In Stock Market


    • 1. You do not need a lot of money to start making money, unlike buying property and
    paying a monthly mortgage.
    • 2. It requires very minimal time to trade - unlike building a conventional business
    • 3. It’s ‘fast’ cash and allows for quick liquidation (You can convert it to cash easily, unlike
    selling a property or a business).
    • 4. It’s easy to learn how to profit from the stock market. But You need to have your basics
    clear. Unless you do you will be wasting your time and losing money. You need to be crystal
    clear of each and every aspect of Investments, stock options, Stock Trading, Company,
    Shares, Dividend & Types of Shares, Debentures, Securities, Mutual Funds, IPO, Futures &
    Options, what does the Share Market consist of? Exchanges, Indices, SEBI, Analysis of
    Stocks – How to check on what to buy? Trading Terms (Limit Order, Stop Loss, Put, Call,
    Booking Profit & Loss, Short & Long), Trading Options – Brokerage Houses etc.

    Primary Market
    • The primary market provides the channel for sale of new securities. Primary market
    provides opportunity to issuers of securities; Government as well as corporate to raise
    resources to meet their requirements of investment and/or discharge some obligation.
    • They may issue the securities at face value, or at a discount/premium and these securities
    may take a variety of forms such as equity, debt etc. They may issue the securities in
    domestic market and/or international market.
    Secondary Market
    • Secondary market refers to a market where securities are traded after being initially offered
    to the public in the primary market and/or listed on the Stock Exchange. Majority of the
    trading is done in the secondary market. Secondary market comprises of equity markets and
    the debt markets.

    • Difference between Primary and Secondary Market is:


    In Primary Market securities are offered to public for subscription for the purpose of raising
    capital or fund . Whereas, in Secondary Market is an equity trading venue in which already
    existing/pre-issued securities are traded among investors.

    Equity Investment
    • When you buy a share of a company you become a shareholder in that company. Shares are
    also known as Equities. Equities have the potential to increase in value over time. It also
    provides your portfolio with the growth necessary to reach your long term investment goals.
    Research studies have proved that the equities have outperformed most other forms of
    investments in the long term.
    • Equities are considered the most challenging and the rewarding, when compared to other
    investment options.
    • Research studies have proved that investments in some shares with a longer tenure of
    investment have yielded far superior returns than any other investment.
    • However, this does not mean all equity investments would guarantee similar high returns.
    Equities are high risk investments. One needs to study them carefully before investing.
    Types of Investors
    • Speculators - Speculators take on risk, especially with respect to anticipating future price
    movements, in the hope of making gains that are large enough to offset the risk. Speculators
    attempt to predict price changes and extract profit from the price moves in an asset. They
    may utilize leverage to magnify returns (and losses), although this is a personal choice of the
    individual.
     Speculators are sophisticated investors or traders who purchase assets for short
    periods of time and employ strategies in order to profit from changes in its price.
     Speculators are important to markets because they bring liquidity and assume market
    risk. Conversely, they can also have a negative impact on markets, when their trading
    actions result in a speculative bubble that drives up an asset's price to unsustainable
    levels.

    • Hedgers -
    • Arbitragers.

    Important Jargons:
    BSE Sensitive Index or SENSEX:
     Bull Market or Bullish.
     Bear Market or Bearish.
     Delivery.
     Intraday.
     Dematerialization.
     Long Buy.
     Short Selling.
     Stop Loss.
     Portfolio.
     Tick Size.
     Averaging.
     Booking Profit or Loss.
     Crash– Circuits.
     Right Issue.
     Stock bonus.
     Stock Split.

    NSE or NIFTY:
     SNP CNX NIFTY 50.
     Nifty CNX 100
     Nifty Junior
     Future Index
     Future Contract
     Margin
     Premium
     Discount
     Market lot
     Roll over
     Options
     Call
     Put
     Long Positions
     Short positions
     Expiry

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