Share Market Glossary or Share Market Terms Guide : 

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Today 1st January 2025 and in this blog you are going to get information on Share Market Glossary. Or we can say it Share Market Terms Guide.

Normal Share Market words that you should know. 

Let’s start with Share Market Glossary or Terms Guide : 

1) Share or Stocks : 

As per Investopedia a “ Share “ is the portion of ownership that you can own in any particular company. 

Stock is called a financial instrument that any company would issue. 

1.1) Security or Financial Security :

The term “security” refers to a multitude of different investments, such as stocks, bonds, investment contracts, notes, and derivatives. For example, a security can represent ownership in a corporation in the form of stock

2) Equity : 

Equity can be thought of as the net value of a company or an asset. To break it down further:

Key Points About Equity:

1. Formula for Equity:
   
   Equity=Total Assets−Total Liabilities. This is why equity is often referred to as the “book value” of a company.
2. Residual Ownership:
   Equity represents what shareholders own in the company after all debts are cleared. If a company were to sell all its assets and pay off its liabilities, whatever remains would belong to the shareholders.
3. Types of Equity:
   • Shareholder Equity: This applies to companies and represents the ownership interest of shareholders.
   • Home Equity: For real estate, this represents the property value minus any outstanding mortgage or loans.
4. . Why It’s Important :
5. In stock market terms, equity gives shareholders ownership in the company and claims on future profits (like dividends).
6. It’s a key metric for assessing the financial health of a company.
   

3)  Stock Exchange:

A marketplace where stocks are bought and sold (e.g., NSE, BSE).

4)IPO (Initial Public Offering):

IPO is when a company offers its shares to the public for the first time.

Before an IPO, a company is considered private. I can say IPO is a process of going Public from private state. 

5) Portfolio: A collection of financial assets like stocks, bonds, etc., owned by an investor.

Market Movements

6. Bull Market: A market condition where prices are rising or are expected to rise.
7. Bear Market: A market condition where prices are falling or are expected to fall.
8. Volatility: The degree of variation in stock prices.

9. Index: A benchmark that measures the performance of a group of stocks (e.g., NIFTY50, SENSEX).

Types of Orders

10. Market Order: Buying or selling a stock at the current market price.
11. Limit Order: Buying or selling a stock at a specific price or better.
12. Stop-Loss Order: An order to sell a stock when it reaches a certain price to limit losses.

Performance Metrics

13. Market Capitalization: The total value of a company’s shares (calculated as share price × total shares).
14. EPS (Earnings Per Share): A company’s profit divided by the total number of outstanding shares.
15. P/E Ratio (Price-to-Earnings Ratio): A valuation ratio that compares the current stock price to its earnings per share.

Dividends & Returns

16. Dividend: A portion of a company’s profit distributed to shareholders.
17. Yield: The income generated by an investment, usually expressed as a percentage of the stock price.

Investment Strategies

18. Blue-Chip Stocks: Shares of large, reputable, and financially stable companies.
19. Growth Stocks: Stocks of companies expected to grow faster than the market.
20. Value Stocks: Stocks trading at a lower price relative to their fundamentals, considered undervalued.

Risk & Analysis

21. Risk Appetite: The level of risk an investor is willing to take.
22. Fundamental Analysis: Evaluating a company’s financial health, management, and market position.
23. Technical Analysis: Studying charts and patterns to predict stock movements.

Other Terms

24. Liquidity: How quickly an asset can be converted to cash.
25. Demat Account: An account to hold stocks in electronic form.
26. Brokerage: A fee charged by brokers for executing trades.
27. F&O (Futures & Options): Derivative instruments used for hedging or speculation.
28. Circuit Limit: The upper and lower price range set by stock exchanges to curb extreme volatility.

29) ETF : 

An exchange-traded fund (ETF) is a pooled investment security that can be bought and sold like an individual stock. 

An exchange-traded fund (ETF) is a basket of securities that trades on an exchange just like a stock does.

30) Security or Financial Security :

The term “security” refers to a multitude of different investments, such as stocks, bonds, investment contracts, notes, and derivatives. For example, a security can represent ownership in a corporation in the form of stock

31) Bonds : 

As per Wikipedia a bond is a fixed-income instrument and investment product where individuals lend money to a government or company at a certain interest rate for an amount of time. The entity repays individuals with interest in addition to the original face value of the bond.

Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations.

32) Yield : 

Yield is an important concept for understanding the returns on investments, whether in stocks, bonds, or other assets. Let me elaborate a bit more:

Key Aspects of Yield in Finance : 

1. Definition:
   Yield measures the income generated by an investment during a specific time period, typically expressed as a percentage of the investment’s cost or current market value.

2. Types of Yield : 

1. Dividend Yield (for stocks):
   Measures the annual dividends paid by a company relative to its share price.
   
2. Bond Yield:
   Refers to the income earned from a bond, typically expressed as a percentage of the bond’s face value or purchase price.
   • Coupon Yield: Based on the bond’s fixed interest payments.
   • Yield to Maturity (YTM): Considers total returns, including price changes, until the bond matures.

3. Earnings Yield (for stocks):
   Measures earnings relative to the stock price, often used in comparison with the P/E ratio:
   Earnings Yield
   = Earnings Per Share Stock Price × 100
   
   Earnings Yield=Stock PriceEarnings Per Share ×100
4. Yield on Cost (YOC):
   For long-term investors, this reflects the yield based on the original purchase price of the investment.

33) Return is a core concept in investing, reflecting the actual gain or loss on an investment over a specific period. 

What is Return?

1. Definition:
   Return is the total earnings or losses from an investment, typically expressed as:
   • A percentage of the initial investment (relative return).
   • An absolute monetary amount (absolute return).

Types of Returns:

1. Absolute Return:
   The raw increase or decrease in the value of an investment.
2. Annualized Return:
   Shows how much an investment grows yearly, accounting for the time frame.
3. Total Return:
   Includes both capital gains/losses (change in price) and income (dividends or interest).
4. Real Return:
   Adjusted for inflation to show the true purchasing power of your returns.
5. Risk-Adjusted Return:
   Considers how much risk was involved in earning the return (e.g., Sharpe Ratio).

Why Return is Crucial:

• Investment Performance: Helps assess how well an investment has performed over time.
• Comparison: Allows you to compare different investment options (e.g., stocks vs. bonds).
• Financial Goals: Determines whether you’re on track to meet your financial targets.

34) EPS : 

EPS (Earnings Per Share) is a key metric that indicates a company’s profitability per share of its stock. It’s widely used by investors to assess a company’s performance and is a critical factor in determining the value of a stock.

Definition:

EPS measures how much profit a company generates for each outstanding share of its stock. It reflects the company’s ability to generate earnings for its shareholders.

It’s calculated by dividing the company’s net income by the total number of outstanding shares.

35) ROCE : 

ROCE (Return on Capital Employed) is a key financial metric that measures a company’s profitability and efficiency in using its capital to generate returns. It’s often used by investors to evaluate how well a company is using its resources to create value.

Definition:

ROCE shows how much profit a company generates for every unit of capital employed. It’s particularly useful for comparing companies in capital-intensive industries, such as manufacturing or infrastructure.

Why ROCE is Important:

1. Profitability Measure:
   ROCE evaluates how effectively a company uses its capital to generate profits.
2. Comparability:
   It allows investors to compare companies across industries or within the same sector, especially for capital-intensive businesses.
3. Capital Efficiency:
   A high ROCE indicates that the company is generating good returns on the capital it has employed, making it a potentially better investment.

How ROCE Differs from Other Metrics:

• Unlike ROE (Return on Equity), ROCE considers both equity and debt, making it a broader measure.
• It focuses on operational efficiency rather than just net profit.

36) Debt : 

Debt refers to the amount of money a company, organization, or individual borrows from external sources and is obligated to repay in the future, usually with interest. It’s an essential part of financing for businesses, often used to fund growth, operations, or capital expenditures.

Key Aspects of Debt

1. Definition:
   Debt is a liability recorded on the company’s balance sheet, representing borrowed funds that must be repaid under agreed terms.
2. Common Forms of Debt:
   • Loans: Borrowed from banks or financial institutions.
   • Bonds: Issued to the public or investors, where the company promises to pay back the principal with interest.
   • Debentures: Unsecured loans typically backed by the general creditworthiness of the issuer.
   • Credit Lines: Short-term borrowing facilities.

Why Companies Take on Debt:

1. Funding Growth: To finance expansion projects or acquisitions.
2. Operating Leverage: To invest in new equipment, infrastructure, or operations.
3. Tax Benefits: Interest paid on debt is often tax-deductible.

Risks of Debt:

1. Interest Obligations: Debt requires fixed interest payments, even if profits are low.
2. Default Risk: Failure to repay debt can lead to insolvency or bankruptcy.
3. Leverage Risk: Too much debt increases financial risk, especially in volatile markets.

Stay connected, I will bring you more Share Market related Glossary and Vocabularies.

Happy Investing