What is Stock Market?
A stock market, equity market, or share market is a platform where investors buy and sell shares of companies.
Shares are units, also known as stocks or equities, represents ownership in a company. The capital of a company is divided into shares.
Primary market is a market where new shares offered to the public for the first time via an initial public offering (IPO).
Secondary market refers to exchanges such as BSE or NSE where stocks are traded.
Benefits of Stocks over Mutual Funds:
| Stocks | Mutual Funds |
| No Restrictions | Invests in certain set of stocks |
| Concentrated portfolio possible | Risk of over diversification |
| More control over stocks | Less control over stocks |
| Less transaction fees | Expense ratio |
| Active Investment – Better learning | Passive Investment – Less learning |
| More liquid | Less liquid |
Common Terms in Stock Market:
| Index (Sensex – Nifty) | Fundamental Analysis | Annual Report | Volatility |
| Sector or Industry | Technical Analysis | Stock operators | Upper circuit vs Lower Circuit |
| Investment | Blue Chip Stocks | SEBI | 52 Week High or Low / ATH |
| Trading | Retail Investors | Capital Gain or Loss | Buy back |
| Positional trading | FII and DII | Compounding | Split and Bonus |
| Intraday | Market Capitalization | Portfolio | Dividend |
| Future & Options | Sales and Profit | Diversification | Volume |
| Bear Market vs Bull Market | Quarterly Results | Liquidity | Averaging Down |
- Index (Sensex – Nifty): Represents a group of stocks reflecting the market’s overall performance.
- Fundamental Analysis: Evaluating a company’s financials, business model, and future growth prospects.
- Annual Report: A yearly document detailing a company’s financial health and operations.
- Volatility: The degree of variation in a stock’s price over time, indicating risk.
- Sector or Industry: A specific part of the economy in which companies operate, like IT or finance.
- Technical Analysis: Analyzing price charts and patterns to forecast future stock movements.
- Stock Operators: Traders or firms who influence stock prices, sometimes through large trades.
- Upper Circuit vs Lower Circuit: Price limits to control extreme stock movements in a single day.
- Investment: Putting money in assets for long-term growth and returns.
- Blue Chip Stocks: Shares of large, reputable, financially stable companies.
- SEBI: Securities and Exchange Board of India; regulates Indian financial markets.
- 52 Week High or Low / ATH: The highest or lowest price a stock has reached in a year; ATH is “all-time high.”
- Trading: The buying and selling of stocks for short-term profits.
- Retail Investors: Individual investors who buy and sell stocks personally, not professionally.
- Capital Gain or Loss: Profit or loss from selling an asset, like stocks.
- Buyback: When a company repurchases its own shares from the market.
- Positional Trading: Holding stocks for weeks to months based on expected trends.
- FII and DII: Foreign Institutional Investors and Domestic Institutional Investors who invest in Indian markets.
- Compounding: In the stock market, compounding is reinvesting returns to generate additional earnings, allowing wealth to grow faster over time by earning returns on both the original investment and accumulated gains.
- Split and Bonus: A split reduces share price by increasing the share count, while a bonus issues free shares to existing shareholders.
- Intraday: Buying and selling stocks within the same trading day.
- Market Capitalization: Total market value of a company’s shares; indicates its size.
- Portfolio: A collection of investments like stocks, bonds, etc., held by an investor.
- Dividend: A share of a company’s profits distributed to its shareholders.
- Future & Options: Derivatives allowing investors to buy/sell stocks at a predetermined price in the future.
- Sales and Profit: Sales are total revenue; profit is what remains after expenses.
- Diversification: Spreading investments across assets to minimize risk.
- Volume: The number of shares traded in a stock during a specific period.
- Bear Market vs Bull Market: A bear market is declining prices; a bull market is rising prices.
- Quarterly Results: Financial performance updates issued every three months.
- Liquidity: How easily an asset can be converted to cash without affecting its price.
- Averaging Down: Buying more shares of a stock when its price falls to lower the average purchase price.
Who should invest in Stock Market?
- If you have knowledge / time to learn about stock market
- If you have invested enough in other instruments such as FDs, PPF, MFs etc
Who should not invest in Stock Market?
- If you are not willing to take risk or not emotionally capable to see your stocks ~40-50% down
- If your investment decision is only influenced by someone (Friends, YouTubers)
How to start investing in Stocks?
- Via Discount brokers (such as Groww, Zerodha, Angel One, Upstox etc)
- Via Full-Service Brokers in India (ICICIdirect, HDFC Securities, Kotak Securities)
10 Important Tips for Stocks Investment:
- Build Long Term investment mindset
- Set right expectation
- Research before investment, not after investment
- Start with small investment if you are beginner
- Avoid lumpsum investment when market is all time high or overvalued
- Avoid time to market
- Avoid too many recommendations
- Diversification, not over diversification or too concentrated portfolio
- Do not blindly follow top performers
- Avoid checking daily performance
Important Links and Tools:
- Trendlyne (Sectors & Industries)
- Stock Market Terms (bajajfinserv)
- Groww
- Money Control
- Stock Market Analysis and Chart
Best YouTube Videos on Similar Topics:
- Basics of Stock Market For Beginners by CA Rachana Phadke Ranade
- Mistakes for Guaranteed Losses in Stock Market by Vivek Bajaj
- The Ultimate Stock Market Video by pranjal kamra
Financial Planning and Investment Series (FPIS) Playlist:
Disclaimer:
We are not Sebi Registered. Investing and trading in stock market, future and options, mutual funds, cryptocurrency, involve substantial risk of loss. Any such discussion or information provided here is for educational purposes only and before making any investment decisions, please consult with a financial advisor.
