What is Stock Market
Stock Market is a marketplace where stocks of various companies are traded (bought and sold) on the exchange. Just like you are the buyer and the vegetable seller is the seller at the vegetable market, similarly stock market is a place of buying and selling of shares/stocks of companies
What is a stock or share
Stock refers to the amount of your holding in the company. If you have 100 shares of Reliance and there are 100000 shares traded in the market, it means you are the owner of Reliance Industries by 0.1% (100/100000)
What is Sensex and Nifty
Everyday on business channels, you come across these words Sensex and Nifty. What is Sensex. Sensex is a benchmark index for Indian equity markets which represents how prices of a bunch of stocks are moving at a particular point of time. There are 30 stocks in Sensex at the moment. Nifty is an another benchmark index. Nifty comprises of 50 stocks
What is mutual fund
If someone is looking to invest in stock markets and want to have a portfolio of 30-50 stocks from various sectors and want it to be managed by a professional fund manager, then mutual funds would be the right option for you as it provides all these features. There are different categories of mutual funds namely diversified equity funds, sectoral funds, debt funds, gilt funds and liquid funds
What is NFO
NFO if expanded stands for “New Fund Offer” Just like a IPO, when a fund house introduces a new mutual fund, it is known as NFO. Generally one is recommended to stay away from NFO as you can’t assess the past performance of fund manager and his fund management style
What is Systematic Investment Plan (SIP)
A lot of investors confuse this term with a type of mutual fund. SIP is a mode to invest in mutual funds. Either you can put your lump sum money in mutual funds at one go or you can opt to invest money on a monthly or daily basis by SIP.
Example: To show the past performance of SIP investments, a SIP of Rs 5000 per month in Reliance Vision Fund from 1st Jan 2001 to 31st Dec 2010 (a complete decade), you would have invested a total of Rs 600000 and you would have got Rs 34,17,948 at the end of 2010, a whooping annualised return of 33.11%
What is Net Asset Value (NAV)
Net asset value signifies the current price of the mutual fund unit. When the mutual fund stocks will rise, NAV would increase and vice versa. If the NAV of mutual fund is 20 on 1st Jan 2011 and if the mutual fund gave 20% returns in 2011, then mutual fund NAV on 2011 year end would be 24
What is PE Ratio
PE Ratio stands for Price earnings ratio. It plays an important role when it comes to studying the stock markets fundamentally. It helps in understanding the fair value of the market or a particular stock. PE Ratio calculation is done by dividing current market price of stock price (MPS) by earnings per share (EPS). PE Ratio varies across various sectors of the economy. You can also calculate the EPS and PE Ratio of Sensex. Generally in the past history, India trades at 15-18 times PE multiple. India has never gone below 9.5 times PE multiple.
What are Nifty Futures
Nifty futures is a derivative contract where a buyer and seller agree to buy or sell at a agreed price in the future on a predetermined date. Generally Nifty futures trade at a higher price as compared to spot rate of Nifty. The difference between the two is called premium. The buyer and the seller has the obligation to settle their contract on the expiry date. Nifty Futures are generally used to hedge your positions of your stock portfolio but now many people use Nifty futures to trade.
What are Stock Options
Stock Options gives the right, not the obligation to execute the contract on the given date and to enjoy such option, the buyer has to pay a premium to the seller of the option. Options can be in the form of Call and Put. When you get a right not the obligation to buy an underlying asset at a certain price, it is known as call option. When you get the right, not the obligation to sell the stock or the underlying asset at a specified price, it is known as put option. Now you can buy a call option and sell a call option and sell a call and put option.