Hi, Famous investor Warren Buffett once said - "I never invest in anything that I don't understand".
That is, before investing in the stock market or any other investment option, we need to understand it properly and only then invest.
But when you start investing in the stock market for the first time, there are some terms that you may find difficult to understand
Especially if you are from a non-commerce background.
So in today's video, we will talk about 10 such terminologies with the help of which you can understand the stock market better.
So let's start.
You must have heard the names of BSE and NSE.
BSE stands for Bombay Stock Exchange NSE stands for National Stock Exchange.
Although there are many stock exchanges in the Indian stock market, the 2 most popular stock exchanges are the BSE and the NSE.
A stock exchange is a place where buyers and sellers meet each other to buy or sell a stock.
That is, to create a platform between stock exchange buyers and sellers.
On stock exchanges, you can buy and sell shares of companies that are listed on the stock exchange.
For example, more than 5,000 companies are listed on the Bombay Stock Exchange, the oldest stock exchange in India.
So investors can buy and sell shares of almost 5000 companies on the BSE.
Stock Broker.
As we have discussed in the earlier point, through the Stock Exchange you can buy and sell the stocks listed on the exchange.
You can not buy or sell any stock directly on the stock exchanges.
For this, you need a stockbroker who acts as a connection between you and the stock exchange.
The stockbroker also charges a fee from the investors for the service which is called brokerage.
Groww is also a stockbroker which provides you Demat and trading account services.
Demat and Trading Account.
In the starting 2 points, we told you where to buy stocks and how to do it.
But now a question must be coming to your mind that after buying any stock, where do we store them?
That's where we need a Demat account.
A Demat account is a digital wallet, just like your bank account, that stores your shares and other securities in an electronic format.
When you invest in the stock market via any broker, first a Demat account is opened in your name then you are given a Demat account number.
Now you must be thinking that a Demat account is useful for storing securities but then what is the role of a trading account?
Actually, your shares are stored in the Demat account but the trading account is used to sell or buy them.
When you want to buy a stock, you first transfer funds from your bank a/c to your trading a/c then place a buy order with the help of the trading a/c.
Similarly, to sell a stock, you need to place a sell order from your trading account.
Indices (Nifty and Sensex).
At this point, we understand how to buy and sell stocks, where they are stored, and what is the role of a broker in the process.
When you open a Demat a/c with any broker then log in to the broker's app or website, then you must have seen terms like Sensex and Nifty 50.
But what are Nifty 50 and Sensex? And what do they indicate?
Actually Nifty, Sensex, Bank Nifty, etc. are known as indices. We can think of an index as a basket of stocks.
The performance of an index also depends on the performance of all those stocks.
For example, Nifty is an index in which the top 50 stocks of our country have been placed.
In the same way, the top 30 stocks of our country are in the Sensex.
So Nifty shows the overall performance of the top 50 stocks on NSE while Sensex represents the top 30 stocks on BSE.
Moreover, Nifty is the benchmark index of NSE and Sensex is the benchmark index of BSE.
Holding Period.
So in the last point, we understood what an index is. Now we will understand the concept of the holding period.
As the name suggests, the holding period is the amount of time you hold any stock.
That is, if you buy a stock today and sell it after 2 years from today, then in this case your holding period will be 2 years.
Delivery and Intraday.
In the last point, we understood the concept of holding period.
But there are times when you buy a stock and sell it on the same day.
So in this case your holding period can range from a few seconds to a few hours.
This process is known as intraday trading and we call these orders intraday orders. Such stocks are not delivered to your Demat account.
But if you buy a particular stock and don't sell it on the same day, such orders are called delivery orders.
So here we understood the concept of intraday and delivery.
Bull and Bear.
When you read news or articles related to the stock market, you must have noticed that words like bull and bear are used in it.
You must have heard that 'bull market is going on right now or 'bear market is going on right now. Let's settle on what these terms indicate.
When the term bull is used for a stock or security, it means that the value of the security is increasing or is going to increase in the future.
Hence, a bull market indicates an upward trend i.e. stock prices are rising or are expected to rise.
Conversely, the word bear indicates a fall in the price of securities.
Actually, the word bull and bear have been taken considering the way both of these animals attack their opponents.
Like a bull attacks its opponent from the top. Therefore, in the stock market, the word 'bull' indicates an increase in the price of securities.
Whereas a bear attacks its opponent from the bottom. Therefore, the word 'bear' in the stock market indicates a fall in the price of the security.
SEBI.
As you would know that daily lakhs or crores of rupees of business is done in the stock market. Therefore its monitoring is also very important.
So the whole Eco-System is regulated by SEBI i.e. 'Securities and Exchange Board of India'.
SEBI ensures that all activities are done with complete transparency and no fraudulent activities are being carried out.
Hence, SEBI protects the interest of investors and traders.
Liquidity.
Liquidity in the stock market refers to the ease with which you can buy and sell a stock.
There are times when you want to buy a stock but there is no seller available in the market for it.
On the contrary, you want to sell your stock but there are not enough buyers available for that. Such shares are said to have low liquidity.
On the other hand, if it is very easy to buy or sell a particular stock, it means that the liquidity of that stock is high.
Dividend.
As you must be aware that every single stock in the stock market has a company behind it and each company of course has a business.
The companies that generate good profits in their business, distribute a part of it as profit among their shareholders is called dividends.
If a company regularly pays dividends then it indicates that it cares about its shareholders which in turn increases investors’ trust in the company.
So these were the top 10 stock market terminologies that will help you understand the stock market in a much better way.
If you have any doubt about any of them or if you have any questions, then definitely tell us in the comments.
Apart from this, if you want a second part of the video, then definitely tell us by commenting.
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