FUNDAMENTALS OF STOCK MARKET PDF
The sooner one starts investing the better. By investing early you allow your investments more time to grow, increases your income, by accumulating the. What is a market index? • An index is a weighted and summed list of stocks that is meant to indicate a measure of performance for a certain. 5) Stocks Basics: What Causes Stock Prices To Change? 6) Stocks Basics: Over the last few decades, the average person's interest in the stock market has.
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trading Basics understanding the Different Ways to Buy and sell stock. The seC's office of Market Order. A market order is an order to buy or sell a stock at the. Overview of Fundamental & Explore ways to use fundamental and technical analysis to help make Price/Book ratio compares the market's valuation of a. represents the basic unit of ownership of the corporation. shares of the corporation's stock rather than cash. traded on stock exchanges, it must meet some.
Diversification: Reducing the investment risk by purchasing shares of different companies operating in different sectors. It is usually declared as a percentage of current share price or some specified INR value, usually decided by the board of directors of the company. Equity: Common and preferred stocks, which represents shares in the ownership of a company. Face value: It is the cash denomination or the amount of money the holder of the individual security going to earn from the issuer of the security at the time of maturity.
It is also known as par value. Hedge: A strategy or an attempt in reducing the risk of adverse price movements of assets. Income Stock: A security which has a solid record of dividend payments and offers the dividend higher than the common stocks. Index: A statistical measurement of change in the economy or security market.
Fundamental analysis focuses on the intrinsic value of the market
Indices have their own calculation methodology and are usually measured as a percentage change in the base value over the time. IPOs are issued by smaller, younger companies seeking funds for expansion and growth, but large companies also practice this to become publicly traded companies. Internet Trading: Internet Trading is a platform with Internet as a medium.
Internet trading execution takes place through order routing system, which will rout traders order to exchange trading system. Thus traders sitting in any part of the world can be able to trade using their brokers Internet Trading System.
Limit Order: An order to buy or sell a share at a specified price. The order will be executed only at the specified limit price or even better. A limit order sets a minimum price the seller is willing to accept and maximum price the buyer is willing to pay for it.
Listed Stocks: The shares of an issuer that are traded on the stock exchange. The issuer has to pay fees to be listed in the stock exchange and abide by the regulations of the stock exchange to maintain listing privilege. It is calculated by multiplying all the outstanding shares with the current market price of one share.
Mutual Fund: A pool of money managed by experts by investing in stocks, bonds and other securities with the objective of improving their savings. These experts will create a diversified portfolio from these funds.
Odd Lot: A number of shares which are less than or greater than but not equal to the board lot size. For example, if the board lot size is shares, an odd lot would be 95 or shares.
Usually odd lots are difficult for trading and it is not accepted easily in the market. One-sided Market: A market that has only potential sellers or only potential buyers but not both.
For put options, this means the stock price is above the strike price. Portfolio: Holding of any individual or institution. A portfolio may include various type of securities of different companies operating in different sectors. It seems to be human nature to constantly search for a hidden key or some esoteric bit of knowledge that suddenly leads to the end of the rainbow or a winning lottery ticket.
What are equity shares?
While some people do buy winning tickets or a common stock that quadruples or more in a year, it is extremely unlikely, since relying upon luck is an investment strategy that only the foolish or most desperate would choose to follow. In our quest for success, we often overlook the most powerful tools available to us: Investing regularly, avoiding unnecessary financial risk, and letting your money work for you over a period of years and decades is a certain way to amass significant assets.
Why are you considering investing in the stock market? Will you need your cash back in six months, a year, five years or longer?
Are you saving for retirement , for future college expenses, to purchase a home, or to build an estate to leave to your beneficiaries? Before investing, you should know your purpose and the likely time in the future you may have need of the funds. If you are likely to need your investment returned within a few years, consider another investment; the stock market with its volatility provides no certainty that all of your capital will be available when you need it.
By knowing how much capital you will need and the future point in time when you will need it, you can calculate how much you should invest and what kind of return on your investment will be needed to produce the desired result. To estimate how much capital you are likely to need for retirement or future college expenses, use one of the free financial calculators available over the Internet.
Retirement calculators, ranging from the simple to the more complex including integration with future Social Security benefits, are available at Kiplinger , Bankrate , and MSN Money.
Many stock brokerage firms offer similar calculators.
10 Best Stock Market Books for Beginners
Ideally, you should start saving as soon as possible, save as much as you can, and receive the highest return possible consistent with your risk philosophy. Risk tolerance is a psychological trait that is genetically based, but positively influenced by education, income, and wealth as these increase, risk tolerance appears to increase slightly and negatively by age as one gets older, risk tolerance decreases.
Your risk tolerance is how you feel about risk and the degree of anxiety you feel when risk is present. For example, flying in an airplane or riding in a car would have been perceived as very risky in the early s, but less so today as flight and automobile travel are common occurrences.
Conversely, most people today would feel that riding a horse might be dangerous with a good chance of falling or being bucked off because few people are around horses. The idea of perception is important, especially in investing. As you gain more knowledge about investments — for example, how stocks are bought and sold, how much volatility price change is usually present, and the difficulty or ease of liquidating an investment — you are likely to consider stock investments to have less risk than you thought before making your first purchase.
As a consequence, your anxiety when investing is less intense, even though your risk tolerance remains unchanged because your perception of the risk has evolved. By understanding your risk tolerance , you can avoid those investments which are likely to make you anxious. Generally speaking, you should never own an asset which keeps you from sleeping in the night.
Anxiety stimulates fear which triggers emotional responses rather than logical responses to the stressor.
During periods of financial uncertainty, the investor who can retain a cool head and follows an analytical decision process invariably comes out ahead. In the short-term, the prices of companies reflect the combined emotions of the entire investment community.
Stock prices moving contrary to our expectations create tension and insecurity. Should I sell my position and avoid a loss? Should I keep the stock, hoping that the price will rebound? Should I buy more? Even when the stock price has performed as expected, there are questions: Should I take a profit now before the price falls?
Should I keep my position since the price is likely to go higher? Since emotions are the primary driver of your action, it will probably be wrong.
How to do Fundamental Analysis on Stocks?
When you buy a stock, you should have a good reason for doing so and an expectation of what the price will do if the reason is valid. In other words, have an exit strategy before you buy the security and execute that strategy unemotionally.
In other words, have an exit strategy before you buy the security and execute that strategy unemotionally. Handle Basics First Before making your first investment, take the time to learn the basics about the stock market and the individual securities composing the market. There is an old adage: It is not a stock market, but a market of stocks. Unless you are purchasing an exchange traded fund ETF , your focus will be upon individual securities, rather than the market as a whole.
There are few times when every stock moves in the same direction; even when the averages fall by points or more, the securities of some companies will go higher in price. The areas with which you should be familiar before making your first purchase include: Financial Metrics and Definitions. Knowing how they are calculated and having the ability to compare different companies using these metrics and others is critical.
Popular Methods of Stock Selection and Timing.
Am I required to sign any agreement with the broker or sub-broker?
Stock Market Order Types. Know the difference between market orders, limit order, stop market orders, stop limit orders, trailing stop loss orders, and other types commonly used by investors. Different Types of Investment Accounts. While cash accounts are the most common, margin accounts are required by regulations for certain kinds of trades.
You should understand how margin is calculated and the difference between initial and maintenance margin requirements.
Knowledge and risk tolerance are linked. Diversify Your Investments Experienced investors such as Buffett eschew stock diversification in the confidence that they have performed all of the necessary research to identify and quantify their risk. They are also comfortable that they can identify any potential perils that will endanger their position, and will be able to liquidate their investments before taking a catastrophic loss. The popular way to manage risk is to diversify your exposure.
Prudent investors own stocks of different companies in different industries, sometimes in different countries, with the expectation that a single bad event will not affect all of their holdings or will otherwise affect them to different degrees. Imagine owning stocks in five different companies, each of which you expect to continually grow profits.
Unfortunately, circumstances change. Betterment , as well other many other robo-advisors, will make sure your investment portfolio stays diversified and balanced over time. When it starts to get out of balance, it will make the necessary adjustments for you. Avoid Leverage Leverage simply means the use of borrowed money to execute your stock market strategy.While some people do buy winning tickets or a common stock that quadruples or more in a year, it is extremely unlikely, since relying upon luck is an investment strategy that only the foolish or most desperate would choose to follow.
A portfolio may include various type of securities of different companies operating in different sectors. Should I buy more? Face value: It is the cash denomination or the amount of money the holder of the individual security going to earn from the issuer of the security at the time of maturity.
Forex market, forex currency trading, analysis, psychology.