If you are new to investing and have a tough time figuring out stock market terms, we have got you covered. Hindustan Times explains five major stock market terms that every beginner should know.
A stock portfolio is a person’s or an institution’s collection of investments. These include stocks, bonds, mutual funds, and other financial assets. But even though a portfolio means all of your investments, they might not be held in just one single account. Building a stock portfolio is pertinent as it can help you diversify your assets and spread your risk across stocks, bonds, and other types of investments that you wish to make.
Bear market and bull market
When prices are expected to fall, the market condition is referred to as a bear market. This means major indexes or stocks decrease by 20% or more compared to previous highs. On the other hand, a bull market is a market condition in which prices are expected to rise which is characterized by gains of 20% or more.
When a company repurchases its outstanding shares to reduce the number of shares on the market, the process is called buyback. In this, the company also returns profits to their investors which results in an increased value of the remaining shares.
When shares of stocks are bought and sold within a single day, it is called day trading.
A function of a company’s debt relative to its equity is called debt-to-equity ration. This means it is the value of its assets minus its liabilities and is calculated by dividing a company’s total debt by total shareholder equity. A higher debt-to-equity ratio states the company may have a more difficult time covering its liabilities.