CHAPTER 5 : Get Familiar with “Stock Market jargon”
Wisdom is a weapon with which a man may ward off destruction;
It is an inner fortress which no enemy can assail.
Thirukkural - Verse 421
The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders.
Shares:
The stock of a business is divided into shares, the total of which must be stated at the time of business formation. Given the total amount of money invested in the business, a share has a certain declared face value, commonly known as the par value of a share.
Stock Market:
A stock market or equity market is a public entity (a loose network of Economic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price. There are securities listed on a stock exchange as well as those only traded privately.
Stock Exchange:
The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization, specialized in the business of bringing together buyers and sellers of different organizations, to a listing of stocks and securities together.
NSE:
The National Stock Exchange of India Limited (NSE) was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.
NIFTY:
The S&P CNX Nifty (Nifty 50 or simply Nifty) is a composite of the top 5 stocks listed on the National Stock Exchange (NSE), representing 24 different sectors of the economy. It is a simplified tool that helps investors and ordinary people alike, to understand what is happening in the stock market and by extension, the economy. If the Nifty Index performs well, it is a signal that companies in India are performing well and consequently that the country is doing well. Nifty is the flagship index of NSE, the 3rd largest stock exchange in the world in terms of number of transactions (Stock Futures).
It is calculated as a weighted average, so changes in the share price of larger companies have more effect. The base is defined as 1000 at the price level of November 3, 1995.
BSE:
Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform.
Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010.
Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010.
SENSEX:
The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong. Futures and options on the index are also traded at BSE. SENSEX, first compiled in 1986, was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing large, well - established and financially sound companies across key sectors. The base year of SENSEX was taken as 1978-79. Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology. The "free-float market capitalization-weighted" methodology is a widely followed index construction methodology on which majority of global equity indices are based; all major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones uses the free-float methodology. One can identify the booms and busts of the Indian equity market through SENSEX. As the oldest index in the country, it provides the time series data over a fairly long period of time (from 1979 onwards).
DR.KPS
Your blog is just superb. It looks like you have spent a lot of time designing it. The sun rising background is pleasant and it conveys a lot of meaning. It is just wonderful and teaches us the basics.Mr. RN
Very interesting to go through your blog.
1. As suggested in the blog, PPF is the best investment option today. That should be the first option for everyone. On should complete every year the Rs 70000 quota.
2. Second best option is increasing Provident fund contribution to the maximum eligibility limit, if one is employed.
3. Third best will be the MIS of post office. The interest will work out to 8.5% approximately (considering the bonus). The maximum limit is Rs 4.5 lacs per individual (9.0 lacs if it is a joint account with one's spouse)
4.Fourth could be the banks as suggested in the blog
5.Deposits of AAA and AA companies
6.Debentures
7. MF of good track record in the SIP route (Do not fall for fresh IPOs
Gold is not an investment at all. The liquidity, when one needs the money is nonexistent. Most of the jewelers do not purchase Gold from us and give us money. They will only exchange old Gold for new Gold.
Banks do not purchase Gold and give us money.
Gold is a non performing dead asset.
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With this, the first part of the teaching module “The Art Of Money Management for a Novice” is getting over. From next week onwards the second part “Asset Building through Equity” starts. I will try to make it as simple as possible. At the same time I would like to make it more informative. It demands great alertness to pick up the trading concepts and then applying it in the actual market. Hope you enjoy the forthcoming lessons. Happy Learning First and then Investing.
Dr.Felisleo
21.11.2010
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