Terms You Should Know Pt: 1
Updated: Jan 26
If you are new to the field of investing and finance, you may have been overwhelmed and intimidated by certain term and abbreviations which people use during shop talks. Fear not! Here’s a list of terms commonly used –
1) Common Stock:
A type of stock that represents a portion of a company's ownership. This stock class grants investors profits, which are typically distributed as dividends. Also known as ordinary shares, founders, and employees of a company are usually given its common stock. The board of directors of a corporation is elected by the common investors, who also vote on corporate policies. Holders of this class of stocks are entitled to a company's assets in the event of a liquidation.
2) Net worth:
The difference between your assets and liabilities determines your personal net worth.
In simple terms,
Net worth = What you own (Assets) – What you owe (Liabilities)
Assets: your bank balance, investments, home's worth, and the value of other assets.
Liabilities: credit card bills and outstanding sums on other loans.
Assessing your net worth can aid you in evaluating your present financial situation and making long term plans. It also helps you identify and reduce unnecessary costs and debts, resulting in the growth of wealth over time.
3) Mutual Funds:
A mutual fund can be described as an investment fund which pools money from various investors and purchases stocks or other assets. Mutual funds pave the way for small-scale investor to gain access to professionally managed funds. All participants of a fund take equal part in gains as well as loss.
Bonds is a form of loan given by the investor to a company or a government for a fixed period of time. The bond issuer, after the bond matures, returns the amount along with interest to the bond holder. Bonds are thus considered to be a safer form of investment, specially government bonds which are low risk which as a result make bonds an ideal component in a well-rounded investment portfolio.
RBI Bonds, which were introduced in the country in 2003, are issued by the Government of India and can be held by citizens of the country. Non-Resident Indians, or NRIs, are not permitted to invest. These are long-term investments, but the lock-in requirement is relaxed for senior citizens.
Foreign exchange (commonly known as forex or FX) is a market for currency trading. It’s where banks, funds, and traders can buy, sell or exchange currencies for both hedging and speculative purposes. INR, USD, YEN etc. are all included in forex. The Forex market sets the exchange rates for all currencies and covers all areas of trading international currencies at current or fixed prices. Due to the global reach of trade, commerce, and finance, forex markets are the world's largest and most liquid asset markets.
6) Bullish or Bearish
Bulls represent investors or traders who are confident about the stock market's future prospects. They expect that the market's rising trend will continue.
Bears are investors who are skeptical about the stock market's future prospects and anticipate a decline in the market.
Regardless of which team you like to be on for certain investments or stocks, market research and up-to-date information are essential for making well-informed investment decisions.