Stock market terminology | शेयर बाजार सीखे

 Stocks market terminology

शेयर बाजार सीखे 

 Value Investing

Value investing : Value investing is a long-term investment strategy that focuses on buying stocks that appear to be undervalued by the market. The underlying principle is that, over time, the market will correct itself and the stock price will rise to reflect the company's true intrinsic value.

Value Investing Explained

Value investing is a long-term investment strategy that focuses on buying stocks that appear to be undervalued by the market. The underlying principle is that, over time, the market will correct itself and the stock price will rise to reflect the company’s true intrinsic value.

Key elements of value investing:

Fundamental analysis: Value investors rely heavily on fundamental analysis to identify undervalued stocks. This involves analyzing a company’s financial statements, business model, competitive landscape, and management team to assess its intrinsic value.

Margin of safety: Value investors aim to purchase stocks with a “margin of safety,” meaning they buy the stock at a significant discount to its intrinsic value. This buffer helps mitigate the risk of making investment mistakes and allows for potential upside if the market corrects.

Long-term perspective: Value investing is a long-term strategy. Investors are not looking for quick gains, but rather for stocks that they believe will outperform the market over many years.

Contrarian approach: Value investors often go against the market sentiment. They are willing to buy stocks that are out of favor with other investors, believing that the market is mispricing these stocks.

Value Investing Explained

Value investing is a long-term investment strategy that focuses on buying stocks that appear to be undervalued by the market. The underlying principle is that, over time, the market will correct itself and the stock price will rise to reflect the company’s true intrinsic value.

Key elements of value investing:

Fundamental analysis: Value investors rely heavily on fundamental analysis to identify undervalued stocks. This involves analyzing a company’s financial statements, business model, competitive landscape, and management team to assess its intrinsic value.

Margin of safety: Value investors aim to purchase stocks with a “margin of safety,” meaning they buy the stock at a significant discount to its intrinsic value. This buffer helps mitigate the risk of making investment mistakes and allows for potential upside if the market corrects.

Long-term perspective: Value investing is a long-term strategy. Investors are not looking for quick gains, but rather for stocks that they believe will outperform the market over many years.

Contrarian approach: Value investors often go against the market sentiment. They are willing to buy stocks that are out of favor with other investors, believing that the market is mispricing these stocks.

Benefits of value investing:

Potentially high returns: Value investing has the potential to generate high returns over the long term. By buying undervalued stocks, investors can benefit from both capital appreciation and dividend income.

Reduced risk: Value investing focuses on buying stocks with a strong financial foundation and a solid business model. This can help to reduce the risk of capital loss, even in volatile markets.

Investing discipline: Value investing requires a disciplined approach to investing. Investors need to be patient and resist the temptation to buy or sell based on short-term market fluctuations.

Famous value investors:

Warren Buffett

Benjamin Graham

Peter Lynch

John Neff

Resources for learning more about value investing:

The Intelligent Investor by Benjamin Graham

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

Value Investing: From Graham to Buffett and Beyond by Bruce Greenwald

Basics termology

What Is Arbitrage?

Arbitrage describes the act of buying security in one market and simultaneously selling it in another market at a higher price, thereby enabling investors to profit from the temporary difference in cost per share. The arbitrage strategy can be used in many markets, including those for trading stocks and those for currency trading

Asset Allocation

Asset allocation is an investment strategy that aims to balance risk and reward by dividing a certain percentage of investments—like stocks, bonds, real estate, cash, etc.—across different assets in an investment portfolio.

Averaging Down

Averaging down is an investing strategy that involves buying additional shares of an asset or stock after its price has fallen, resulting in a lower average purchase price.

Bear Market

An illustration of a bear accompanies the definition for ‘bear market,’ an essential stock market vocabulary word.

A bear market is a market condition in which prices are expected to fall. Typically, this entails major indexes or stocks decreasing by 20% or more compared to previous highs.

Bid

An illustration of a hand holding a stack of cash accompanies the definition for ‘bid,’ one of the most quintessential stock trade terms.

The price a trader is willing to pay for shares of a stock or other asset.

Bond

A bond is a type of security loaned by an investor to a borrower like a company or government used to fund its operations

Buyback

A buyback is when a company repurchases outstanding shares to reduce the number of shares on the market and return profits to their investors, resulting in an increased value of the remaining shares.

Capital Gains

Capital gains refers to the profit earned after selling an asset or investment for a higher price than you paid for it.

Current Ratio

The current ratio is a measure of a company’s ability to pay short-term debt. It’s determined by dividing current assets by current liabilities

Day Trading

Day trading is the practice of buying and selling shares of stock within a single day.

Debt-to-Equity Ratio

Debt-to-equity ratio represents a function of a company’s debt relative to its equity, or the value of its assets minus its liabilities. The ratio is found by dividing total liabilities by total shareholder equity.

Dividend

An illustration of a pie with a missing slice accompanies the definition for ‘dividend’.

“Dividend” is one of the most basic terms for the stock market. It’s simply a portion of a company’s earnings paid out to its shareholders.

Dividend Yield

A dividend yield is a dividend expressed as a percentage of its stock price.

Dow Jones Industrial Average (DJIA)

Also known as Dow 30, the Dow Jones Industrial Average is a stock market index consisting of the 30 most-traded blue-chip stocks on the New York Stock Exchange. It’s used to measure the performance of shares among the largest U.S. companies and gauge the overall direction of stock prices

Earnings per Share (EPS)

Earnings per share is a company’s profit divided by its number of outstanding shares, and is used to measure corporate profitability.

Equity Income

Equity income is used to describe any income received from stock dividends.

Exchange

An exchange, or stock exchange, is a marketplace where investors and traders buy and sell stocks. You’ve probably heard of the most well-known exchanges in the U.S.: the New York Stock Exchange (NYSE) and Nasdaq.

Exchange-Traded Funds (ETFs)

Commonly known as ETFs, exchange-traded funds are a collection of stocks or bonds combined in a single fund that can be purchased and traded on major stock exchanges. Similar to mutual funds, they’re a pooled investment fund, meaning a “pool” of money is aggregated from multiple investors.

Expense Ratio

An expense ratio measures the cost of owning a mutual fund, including expenses like the management of the fund, overhead fees, and any other costs associated with running the fund. It’s essentially an administrative fee paid to the company in return for owning the fund. The ratio is measured as a percentage of your total investment—for example, if you invest $20,000 in a fund with an expense ratio of .20%, you’ll pay $40 on top of your investment.

Futures

A future is a contract that requires a buyer to purchase a specific asset, and the seller to sell that asset at a certain future date at an agreed-upon price. Futures are a way for investors to hedge current investments—a risk management strategy intended to offset potential losses in other investments.

Going long

Going long refers to the act of buying stock shares with the expectation that the asset’s price will rise, resulting in a profit.

 Going Short

Going short—the opposite of going long—refers to the act of selling stock shares with the expectation that the asset’s price will fall. When an investor goes short on an asset, they borrow that asset, sell it, and hopefully purchase it later at a lower price if the price does decline, resulting in profit.