The return that an asset achieves over a period of time. This measure simply looks at the appreciation or depreciation (expressed as a percentage) that an asset – usually a stock or a mutual fund – faces over a period of time. Absolute return differs from relative return because it is concerned with the return of the asset being looked at and does not compare it to any other measure.
the actual gain or loss of an investor.
When one company purchases a majority interest in the acquired.
The number of shares allotted to a partcipant in IPO against the actual number of securities he had applied for.
American Depository Receipt (ADR)
A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas.
American Depository Share (ADS)
A share issued under deposit agreement that represents an underlying security in the issuer’s home country. The terms American depositary receipt (ADR) and American depositary share (ADS) are often thought to mean the same thing. However, an ADS is the actual share trading, while an ADR represents a bundle of ADSs.
A financial professional who has expertise in evaluating investments and puts together buy, sell and hold recommendations on securities. Also known as a “financial analyst” or a “security analyst”.
Annual General Meeting (AGM)
A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with company decisions and workings.
A company’s annual statement of financial operations. Annual reports include a balance sheet, income statement, auditor’s report, and a description of the company’s operations.
A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.
The difference between price of a security in two different exchanges. The difference can be used to make profits by persons holding a security to sell the same at an exchange where its price is high and buy it at an exchange where it is available at a lower price.
Read More: Definition of arbitrage and its types
The price a seller is willing to accept for a share, also known as the offer price.
The number of shares a seller is selling at a quoted ask price.
The process of dividing a portfolio among major asset categories such as bonds, stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio.
Asset Allocation Fund
A mutual fund that splits its investment assets among stocks, bonds and other investment vehicles in an attempt to provide a consistent return for the investor.
Average Annual Growth Rate
The average increase in the value of a portfolio over the period of a year.
Average Annual Return
The historical return of a mutual fund.
The simple average of a series of returns generated over a period of time.
Back door listing
A strategy of going public used by a company that fails to meet the criteria for listing on a stock exchange. To get onto the exchange, the company desiring to go public acquires an already listed company.
A debt that is not collectible and therefore worthless to the creditor. This debt, once considered to be bad, will be written off by the company as an expense.
A financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.
A mutual fund that invests its assets into the money market, bonds, preferred stock, and common stock with the intention to provide both growth and income.
The state of a person or firm unable to repay debts.
A style of chart used by some technical analysts, the top of the vertical line indicates the highest price a security traded at during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar, and the opening price is shown on the left side of the bar. A single bar like the one below represents one day of trading.
A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.
A market condition in which the prices of shares are falling or are expected to fall.
The lowest quoted ask price for a particular share among those offered from competing market makers.
The highest quoted bid for a particular share among all those offered by competing market makers.
A nationally recognized, well-established and financially sound company.
A debt investment with which the investor loans money to an entity (company or government) that borrows the funds for a defined period of time at a specified interest rate
The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors.
A company’s announcement of a dividend or bonus to investors.
The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.
A period of time during which sales or business activity increases rapidly.
The lowest point or price reached by a financial security, commodity, index or economic cycle in a given time period, which is followed by a steady increase.
An investor who looks for bargains among stocks whose prices have recently dropped dramatically. The investor believes that the recent price drop is temporary and a recovery is soon to follow.
Refers to a company’s net earnings.
A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support.
An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
An arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor’s behalf.
A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive selloff occurs.
A financial market of a certain group of shares in which prices are rising or are expected to rise.
Gold and silver that is officially recognized as high quality (at least 99.5% pure), and is in the form of bars rather than coins.
A recommendation to purchase a specific security.
Buy and Hold
A passive investment strategy in which an investor buys stocks and holds them for a long period of time, regardless of fluctuations in the market.
The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.
The year-over-year growth rate of an investment over a specified period of time. It’s an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate
An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold.
Capital Gains Tax
A type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price.
Cash Flow Statement
This document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.
A stock market condition whereby prices swing up and down considerably but with no resulting overall price movement in either direction.
Closely Held Shares
The shares held by individuals closely related to a company.
The final price at which a security is traded on a given trading day.
A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services.
An index that tracks a basket of commodities to measure their performance.
An individual, business or institution that holds common shares in a company, giving the holder an ownership stake in the company. This will also give the holder the right to vote on corporate issues such as board elections and corporate policy, along with the right to any common dividend payments.
A figure based on the combined estimates of the analysts covering a public company. Generally, analysts give a consensus for a company’s earnings per share and revenue; these figures are most often made for the quarter, fiscal year and next fiscal year.
Corrections are generally temporary price declines, interrupting an uptrend in the market or asset.
A major decline in a financial market.
Demat – Dematerialization
The move from physical certificates to electronic book keeping.
Read More: The Concept of Dematerialisation of Securities
A term that refers to the Bombay Stock Exchange, the major stock exchange in India. The street is home not only the Bombay Stock Exchange but also a large number of other financial institutions.
A stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. Most trades are entered and closed out within the same day.
A corporate strategy to sell off subsidiaries or divisions of a company.
A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital.
An amount of money borrowed and owed by one party to another.
An investment pool, such as a mutual fund or ETF, in which core holdings are fixed income investments.The fee ratios on debt funds are lower, on average, than equity funds because the overall management costs are lower.
A general decline in prices, often caused by a reduction in the supply of money or credit. It is the opposite of inflation.
The removal of a listed security from the exchange on which it trades.
A security whose price is dependent upon or derived from one or more underlying assets. The derivative is a contract between two or more parties. Its value is determined by fluctuations in the underlying asset like commodities, bonds, stocks, etc
- Emergence/History of Derivatives
- Financial derivative types: Forward Contracts
- Financial derivative types: Futures
- Financial derivative types: Swaps
- Financial derivative types: Options
The action of an organization or government selling or liquidating an asset or subsidiary.
A risk-management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.
Read More: Diversification of securities in portfolio investments
Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders.
A negative change in the rating of a security.
Due Diligence – DD
An investigation or audit of a potential investment.
Read More: What is Due Diligence?
EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA is a good metric to evaluate profitability
EPS – Earnings Per Share
EPS is the earning on each share of a company
ESOP – Employee Stock Ownership Plan
A qualified, defined contribution, employee benefit plan designed to invest primarily in the stock of the sponsoring employer.
An analyst’s estimate for a company’s future quarterly or annual earnings.
When the earnings reported in a company’s quarterly or annual report are above or below analysts’ earnings estimates.
A mutual fund that invests in a broad, well-diversified group of stocks.
The trading of shares when a declared dividend belongs to the seller rather than the buyer.
Exponential Moving Average – EMA
A type of moving average that is similar to a simple moving average, except that more weight is given to the latest data.
FCCB – Foreign Currency Convertible Bond
A type of convertible bond issued in a currency different than the issuer’s domestic currency.
FDI – Foreign Direct Investment
An investment abroad, usually where the company being invested in is controlled by the foreign corporation.
Read More: An overview of Foreign Direct Investment (FDI)
FII – Foreign Institutional Investor
An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing.
- Foriegn Institutional Investors (FII’s) and Indian economy
- Advantages and disadvantages of FII flows into a country
- Entities which can register as FII’s in India
- Regulations for investment’s by FII’s in India
The nominal value of a security stated by the issuer. For shares, it is the original cost of the share shown on the certificate.
A slang term used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to investors’ financial health.
Any 12-month period that a company uses for accounting purposes.
Fully Paid Shares
Shares issued in which no more money is required to be paid to the company by shareholders on the value of the shares.
Fund Of Funds
A mutual fund that invests in other mutual funds.
Fundamental analysis is to produce a value that an investor can compare with the security’s current price in hopes of figuring out what sort of position to take on that stock.
A financial contract obligating the buyer to purchase an asset (or a seller to sell an asset) at a predetermined date and price.
Read More: The Basics on Futures Trading
GAAP – Generally Accepted Accounting Principles
The common set of accounting principles, standards and procedures that companies use to compile their financial statements.
The forfeited output of a country’s economy.
GDR – Global Depositary Receipt
A bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank.
A mutual fund that invests in several different types of medium and long-term government securities in addition to top quality corporate debt.
The process of selling shares that were formerly privately held to new investors for the first time. Also known as Initial public offering (IPO).
Green Field Investment
A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer.
A diversified portfolio of stocks that has capital appreciation as its primary goal, and thereby invests in companies that reinvest their earnings into expansion, acquisitions, and/or research and development.
Information that a company provides as an indication or estimate of their future earnings.
The difference between prices at which a market maker can buy and sell a security.
The rapid and concentrated sale of a stock thought to be overvalued by the market.
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.
An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns.
In a long position, holding period refers to the time between an asset’s purchase and its sale. In a short sale, the length of time for which the short position is held.
Initial Public Offering – IPO
The first sale of stock by a private company to the public.
A large single order that has been divided into smaller lots, usually by the use of an automated program, for the purpose of hiding the actual order quantity.
In And Out
The purchase and sale of a security within a short period of time, usually on the same day.
A mutual fund that seeks to provide stable current income by investing in securities that pay interest or dividends.
A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is essentially an imaginary portfolio of securities representing a particular market or a portion of it.
A portfolio of investments that is weighted the same as a stock-exchange index in order to mirror its performance.
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
A growth in the operations of a business that arises from mergers or takeovers, rather than an increase in the companies own business activity.
Material information about a company’s activities that has not been disclosed to the public.
The buying or selling of a security by someone who has access to material, nonpublic information about the security. Insider trading can be illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still nonpublic.
Read More: SEBI(Prohibition of Insider Trading) Regulations, 1992
A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions.
A dividend payment made before a company’s AGM and final financial statements.
A contractual caveat referring to a period of time after a company has initially gone public, usually between 90 to 180 days. During these initial days of trading, company insiders or those holding majority stakes in the company are forbidden to sell any of their shares.
Two companies joining together to start a new entity, keeping the current entities untouched to start a business.
Key Performance Indicators – KPI
A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals.
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price.
Holding an asset for an extended period of time. Depending on the type of security, a long-term asset can be held for as little as one year or for as long as 15 years or more.
Losing Your Shirt
In the investment world, this expression is used to describe a very bad investment that causes an investor to lose everything he or she has invested.
M&A – Mergers And Acquisitions
A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another with no new company being formed.
Read More: Mergers and Acquisitions — Synergies through Consolidation
Borrowed money that is used to purchase securities.
A broker’s demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin.
An order to buy or sell a stock immediately at the best available current price.
Market perform is a neutral assessment of a stock and is neither strongly positive or negative.
The act of attempting to predict the future direction of the market, typically through the use of technical indicators or economic data.
The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. Also known as “market price”.
The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop.
An intermediate period of time to hold an asset.
Companies having a market capitalization between Rs 500 crore and Rs 1,000 crore
The actions of a reserve bank of india, that determine the size and rate of growth of the money supply, which in turn affects interest rates.
The securities market dealing in short-term debt and monetary instruments.
- Features and objectives of money market
- Composition and importance of Money Market
- Difference between money market and capital market
A security that gives small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed.
- Introduction to mutual funds
- Types of Mutual Fund Schemes: By Investment Objective
- Types of Mutual Fund Schemes: By Structure
- Benefits of investing in mutual funds
NAV – Net Asset Value
The total value of the fund’s portfolio less liabilities.
The price at which publicly issued securities are made available for purchase.
One Night Stand Investment
Buying a security with the intention of holding it for the long term, but subsequently panicking and selling it the following day.
The act of placing buy/sell orders for financial securities and/or currencies with the use of a brokerage’s internet-based proprietary trading platforms.
Open End Fund
A type of mutual fund where there are no restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish to sell.
A secondary market offering that is similar to a rights issue in which a shareholder is given the opportunity to purchase stock at a price that is lower than the current market price.
The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers.
A situation in which the demand for an initial public offering of securities exceeds the number of shares issued.
P/E Ratio – Price-Earnings Ratio
PE ratio or PE multiples is the ratio arrived by dividing Current market Price by Earnings per share of that stock.
The face value of a bond.
A fund established by an employer to facilitate and organize the investment of employees’ retirement funds contributed by the employer and employees.
Poop And Scoop
A highly illegal practice occurring mainly on the Internet. A small group of informed people attempt to push down a stock by spreading false information and rumors. If they are successful, they can purchase the stock at bargain prices.
The group of assets – such as stocks, bonds and mutuals – held by an investor.
Read More: Portfolio investment process
A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock.
The difference between the higher price paid for a fixed-income security and the security’s face amount at issue.
A projected price level as stated by an investment analyst or advisor.
A company whose ownership is private.
Used to describe a proportionate allocation.
The action of selling stock to cash in on a sharp rise. This action pushes prices down temporarily.
A company that has issued securities through an initial public offering and which are traded on at least one stock exchange.
The sale of equity shares or other financial instruments by an organization to the public in order to raise funds for business expansion and investment.
Pump And Dump
A scheme attempting to boost the price of a stock through recommendations based on false, misleading, or greatly exaggerated statements.
QOQ – Quarter on Quarter
A measuring technique that calculates the change between one financial quarter and the previous financial quarter. This is similar to the year over year measure, which compares the quarter of one year (Q1 2007) to the same quarter of the previous year (Q1 2006).
Quarterly Earnings Report
A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net income, earnings per share, earnings from continuing operations and net sales.
A period of sustained increases in the prices of stocks or indexes.
The date established by an issuer of a security for the purpose of determining the holders who are entitled to receive a dividend, rights or bonus.
The return of an investor’s principal in a security, such as a stock, bond, or mutual fund.
An institution or organization that is responsible for keeping records of bondholders and shareholders.
The price at which a stock or market can trade, but which it cannot exceed, for a certain period of time.
Rights Offering (Issue)
Issuing rights to a company’s existing shareholders to buy a proportional number of additional securities at a given price (usually at a discount) within a fixed period.
SEBI – Securities And Exchange Board Of India
The regulatory body for the investment market in India.
Saturday Night Special
A slang term used to refer to a surprise takeover attempt.
An investment fund that makes investments solely in businesses that operate in a particular industry or sector of the economy.
An abbreviation of the Bombay Exchange Sensitive Index (Sensex) – the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE.
The date by which an executed security trade must be settled. That is, the date by which a buyer must pay for the securities delivered by the seller.
Funds raised by issuing shares in return for cash or other considerations.
Any person, company, or other institution that owns at least 1 share in a company.
A unit of ownership interest in a corporation or financial asset. The two main types of shares are common shares and preferred shares.
A market transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal amount of shares at some point in the future.
Holding an asset for short period of time.
Simple Moving Average – SMA
A simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods.
Refers to stocks with a relatively small market capitalization. It is a company with a market capitalization less than Rs 500 crore.
The creation of an independent company through the sale or distribution of new shares of an existing business/division of a parent company.
An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached.
An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor’s loss on a security position.
The price level which, historically, a stock has had difficulty falling below.
A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
An upward movement in a security’s price following a declining trend. The movement is caused by technical as opposed to fundamental factors affecting sentiment.
The minimum upward or downward movement in the price of a security.
A reference to the gross sales or revenues of a company.
The sum of a company’s earnings per share for the previous four quarters.
An analyst recommendation that means a stock is expected to do slightly worse than the market return.
A situation in which the demand for an initial public offering of securities is less than the number of shares issued.
A positive change in the rating of a security.
The process of determining the current worth of an asset or company.
A financial or personal stake one entity has in an asset, security, or transaction.
Volatility refers to the amount of uncertainty or risk about the size of changes in a security’s value.
A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame.
A reduction in the value of an asset or earnings by the amount of an expense or loss.
XD – Ex- Dividend
Buying the shares trading in XD will not entitle you for the dividend which is already declared but not yet been issued.
YOY – Year Over Year
A method of evaluating two or more measured events that compares the results of measurement at one time period with those from another time period, on an annualized basis.
Yield is the annual rate of return for any investment and is expressed as a percentage.
Zero Dividend Preferences
Zero dividend preference shares are Preference shares which receive no dividends throughout their lives.