STOCK MARKET DICTIONARY

Stock Market Glossary: 130+ Terms Explained

Every stock market term you need to know — defined simply with Indian market examples. Bookmark this page as your go-to reference.

Jump to: A · B · C · D · E · F · G · H · I · J · K · L · M · N · O · P · Q · R · S · T · U · V · W · Y · Z

A

Alpha

The excess return of an investment relative to its benchmark index. If a fund returns 18% while the Nifty 50 returns 15%, the alpha is 3%. Positive alpha means the fund manager outperformed the market. Related: Beta, Benchmark

Arbitrage

The practice of buying and selling the same asset in different markets simultaneously to profit from price differences. For example, buying a stock on BSE at ₹500 and selling on NSE at ₹502. True arbitrage is risk-free profit, though in practice, transaction costs and timing reduce gains. Related: BSE, NSE

Ask Price

The lowest price at which a seller is willing to sell a stock. When you place a market buy order, you typically pay the ask price. The difference between the bid price and ask price is called the spread. Related: Bid Price, Spread

Asset Allocation

The strategy of dividing your investments across different asset classes — equity, debt, gold, real estate — based on your goals, risk tolerance, and time horizon. A common rule of thumb: equity allocation = 100 minus your age (so a 30-year-old might hold 70% in equity). Related: Diversification, Portfolio

Annual Report

A comprehensive document published yearly by every listed company, containing financial statements, management commentary, business strategy, and risk factors. Reading annual reports is fundamental to fundamental analysis. In India, these are filed with both SEBI and the stock exchanges. Related: Balance Sheet, Income Statement


B

Balance Sheet

A financial statement showing what a company owns (assets), what it owes (liabilities), and shareholders’ equity at a specific point in time. The fundamental equation: Assets = Liabilities + Shareholders’ Equity. A strong balance sheet has growing assets, manageable debt, and increasing equity. Related: Income Statement, Cash Flow Statement

Bear Market

A sustained decline of 20% or more in stock prices from recent highs. Bear markets are driven by economic slowdowns, rising interest rates, or financial crises. India experienced major bear markets in 2008 (Sensex fell from 21,000 to 8,000) and March 2020 (COVID crash). Every bear market in Indian history has been followed by recovery to new highs. Related: Bull Market, Correction

Beta

A measure of a stock’s volatility relative to the overall market. A beta of 1 means the stock moves in line with the market. Beta above 1 means more volatile (a stock with beta 1.5 tends to rise 15% when the market rises 10%). Beta below 1 means less volatile. Banking stocks typically have higher beta; FMCG stocks lower beta. Related: Alpha, Volatility

Bid Price

The highest price a buyer is willing to pay for a stock. When you sell at market price, you receive the bid price. Related: Ask Price, Spread

Blue Chip Stock

Shares of large, well-established, financially stable companies with a track record of consistent performance. In India, stocks like TCS, HDFC Bank, Reliance Industries, Infosys, and Hindustan Unilever are considered blue chips. They offer stability but typically lower growth compared to mid/small caps. Related: Large Cap, Market Capitalisation

Book Value

The net asset value of a company on its balance sheet — total assets minus total liabilities, divided by the number of shares. If a company has ₹1,000 crore in assets, ₹400 crore in liabilities, and 10 crore shares, the book value per share is ₹60. Comparing market price to book value (P/B ratio) helps assess valuation. Related: P/B Ratio, Net Asset Value

Broker

A SEBI-registered intermediary who executes buy and sell orders on behalf of investors. Discount brokers (Zerodha, Groww) charge low fees for execution only. Full-service brokers (ICICI Direct, Motilal Oswal) also offer research and advisory. Related: Demat Account, Trading Account

Bull Market

A sustained period of rising stock prices, typically 20% or more from recent lows. Bull markets are fuelled by economic growth, corporate earnings growth, low interest rates, and investor optimism. India’s major bull runs include 2003-2008, 2009-2015, and 2020-2024. Related: Bear Market, Market Cycle

Buyback

When a company repurchases its own shares from the market, reducing the total number of outstanding shares. This increases earnings per share and often signals management confidence. TCS and Infosys have conducted several large buybacks. Related: EPS, Share Capital


C

CAGR (Compound Annual Growth Rate)

The average annual growth rate of an investment over a specified period, accounting for compounding. If ₹1 lakh grows to ₹3 lakh in 10 years, the CAGR is approximately 11.6%. CAGR smooths out volatility and gives a clear picture of long-term returns. Related: Returns, Compounding

Candlestick Chart

A type of price chart used in technical analysis that shows four data points for each period: open, high, low, and close. Green/white candles indicate the close was higher than the open (bullish). Red/black candles indicate the close was lower (bearish). Originated in 18th-century Japan and now the most popular chart type globally. Related: Technical Analysis, Support, Resistance

Capital Gain

Profit earned when you sell a stock for more than you paid. In India, Short-Term Capital Gains (STCG) on equity — held less than 12 months — are taxed at 15%. Long-Term Capital Gains (LTCG) — held over 12 months — above ₹1 lakh are taxed at 10% without indexation. Related: Capital Loss, Tax

Cash Flow Statement

A financial statement showing actual cash inflows and outflows, divided into operating activities (core business), investing activities (buying/selling assets), and financing activities (debt, equity, dividends). Strong operating cash flow is often more reliable than reported profits, as it’s harder to manipulate. Related: Balance Sheet, Income Statement, Free Cash Flow

Circuit Breaker

A mechanism that halts trading when a stock or index moves beyond a predetermined limit. Individual stocks have daily circuit limits (5%, 10%, or 20%). Market-wide circuit breakers trigger at 10%, 15%, and 20% moves on Sensex/Nifty. Designed by SEBI to prevent panic-driven crashes. Related: Volatility, SEBI

Compounding

Earning returns on your returns — the “eighth wonder of the world” according to Einstein. If you invest ₹1 lakh at 15% annual return, you have ₹1.15 lakh after year 1. In year 2, you earn 15% on ₹1.15 lakh (not just the original ₹1 lakh). Over 20 years, ₹1 lakh becomes ₹16.4 lakh. Time is the most powerful variable in compounding. Related: CAGR, SIP

Correction

A decline of 10-20% from recent highs. Corrections are normal and healthy — the Nifty typically experiences 2-3 corrections per year. They differ from bear markets (20%+ decline) and are often buying opportunities for long-term investors. Related: Bear Market, Bull Market


D

Day Trading

Buying and selling stocks within the same trading day, closing all positions before market close. Day traders profit from intraday price movements. Studies consistently show 80-90% of day traders lose money. Requires significant knowledge, discipline, and emotional control. Not recommended for beginners. Related: Intraday, Swing Trading

Debt-to-Equity Ratio

Total debt divided by shareholders’ equity. Measures how leveraged a company is. A ratio of 0.5 means the company has ₹50 of debt for every ₹100 of equity. Lower is generally safer. Acceptable levels vary by industry — banks naturally have higher ratios. Companies with D/E above 2 carry significant financial risk. Related: Balance Sheet, Leverage

Demat Account

A dematerialised account that holds your shares in electronic form. Maintained by NSDL or CDSL (India’s two depositories). Required for buying and selling stocks in India. Opening is free with most brokers and takes 15-20 minutes online. You need PAN and Aadhaar for KYC verification. Related: Trading Account, NSDL, CDSL, Broker

Derivative

A financial contract whose value is derived from an underlying asset (stock, index, commodity, currency). Common derivatives include futures and options. In India, Nifty 50 and Bank Nifty options are the most actively traded derivatives. Derivatives can be used for hedging (reducing risk) or speculation (amplifying returns). Related: Futures, Options, Hedging

Diversification

Spreading investments across different stocks, sectors, and asset classes to reduce risk. The core principle: don’t put all your eggs in one basket. A diversified portfolio might include 15-20 stocks across 8-10 sectors, plus some debt and gold allocation. Diversification reduces company-specific risk but cannot eliminate market-wide risk. Related: Asset Allocation, Portfolio, Risk Management

Dividend

A portion of company profits distributed to shareholders, usually as cash per share. If a company declares a ₹10 dividend and you own 500 shares, you receive ₹5,000. Companies like ITC, Coal India, and Power Grid are known for consistent dividends. Dividends are taxed as income in the hands of shareholders in India. Related: Dividend Yield, Payout Ratio

Dividend Yield

Annual dividend per share divided by the stock price, expressed as a percentage. A stock priced at ₹200 paying ₹10 annual dividend has a 5% dividend yield. Higher yield means more cash return on investment. Compare yields within the same sector, as different industries have different norms. Related: Dividend, Payout Ratio

DCF (Discounted Cash Flow)

A valuation method that estimates a company’s intrinsic value by projecting future cash flows and discounting them to present value. If a company will generate ₹100 crore in free cash flow next year, its present value (at 12% discount rate) is approximately ₹89 crore. DCF is the gold standard of intrinsic valuation but highly sensitive to assumptions. Related: Intrinsic Value, Free Cash Flow, Valuation


E

EPS (Earnings Per Share)

Net profit divided by total outstanding shares. If a company earns ₹500 crore profit with 10 crore shares, EPS is ₹50. Growing EPS is one of the most important indicators of a healthy business. Compare EPS growth over 5-10 years to assess consistency. Related: P/E Ratio, Net Profit

Equity

Ownership stake in a company, represented by shares. Also refers to shareholders’ equity on the balance sheet (assets minus liabilities). “Investing in equity” means investing in stocks. Equity offers the highest long-term return potential among major asset classes but also carries the most short-term volatility. Related: Share, Debt, Asset Class

ETF (Exchange-Traded Fund)

A fund that trades on the stock exchange like a regular stock but holds a basket of securities (stocks, bonds, gold). A Nifty 50 ETF holds all 50 Nifty stocks in proportion. ETFs offer diversification at very low cost (expense ratios of 0.05-0.2%). You can buy/sell ETFs throughout the trading day, unlike mutual funds which are priced once daily. Related: Index Fund, Mutual Fund, Diversification

Ex-Dividend Date

The date on which a stock starts trading without the right to the upcoming dividend. If you buy the stock on or after the ex-dividend date, you won’t receive the dividend. The stock price typically drops by approximately the dividend amount on this date. Related: Dividend, Record Date


F

Face Value

The nominal value assigned to a share when a company is formed — typically ₹1, ₹2, ₹5, or ₹10 in India. Face value is an accounting concept and doesn’t change. It’s different from market value (the trading price). Dividends and stock splits are based on face value. Related: Market Value, Stock Split

FII (Foreign Institutional Investor)

Foreign entities that invest in Indian securities — pension funds, mutual funds, hedge funds from abroad. FII flows significantly impact Indian stock prices. Net FII buying typically pushes markets up; net selling pushes markets down. SEBI regulates FII participation in Indian markets. Now officially called FPIs (Foreign Portfolio Investors). Related: DII, SEBI

Free Cash Flow

Operating cash flow minus capital expenditure. Represents the cash a company generates after maintaining/expanding its asset base. Free cash flow is available for dividends, buybacks, debt repayment, or acquisitions. Consistently positive and growing free cash flow is a strong indicator of business quality. Related: Cash Flow Statement, Operating Cash Flow

Fundamental Analysis

The study of a company’s financial health, business model, competitive position, and growth prospects to determine its intrinsic value. Involves analysing financial statements, ratios, management quality, and industry dynamics. Pioneered by Benjamin Graham and popularised by Warren Buffett. See our complete Fundamental Analysis Guide. Related: Technical Analysis, Intrinsic Value

Futures Contract

A standardised agreement to buy or sell an asset at a predetermined price on a future date. In India, stock and index futures are traded on NSE. Futures require a margin deposit (typically 15-20% of contract value), providing leverage. Nifty futures and Bank Nifty futures are the most traded contracts. Related: Options, Derivative, Margin


G

Gap Up / Gap Down

When a stock opens significantly higher (gap up) or lower (gap down) than the previous day’s close, leaving a visible gap on the price chart. Gaps are caused by overnight news, earnings surprises, or global market moves. A Nifty gap up of 100+ points often signals strong bullish sentiment. Related: Candlestick Chart, Technical Analysis

Growth Investing

An investment strategy focused on companies growing revenue and earnings faster than the market average. Growth investors willingly pay premium valuations for superior growth prospects. Indian growth stories include IT, specialty chemicals, and digital businesses. Related: Value Investing, P/E Ratio


H

Hedge

A strategy to reduce investment risk by taking an offsetting position. For example, holding gold as a hedge against equity market falls, or buying put options to protect a stock portfolio during uncertain times. Hedging reduces risk but also limits potential gains. Related: Options, Diversification, Risk Management


I

Income Statement

A financial statement showing revenue, expenses, and profit over a period (quarter or year). Also called the Profit & Loss (P&L) statement. Key metrics: revenue growth, operating margin, and net profit margin. Consistent growth in all three is a positive signal. Related: Balance Sheet, Cash Flow Statement

Index Fund

A mutual fund that replicates a market index by holding the same stocks in the same proportion. A Nifty 50 index fund holds all 50 Nifty stocks. Benefits: ultra-low costs (0.1-0.2% expense ratio), automatic diversification, and historically beats most active fund managers over 10+ years. Ideal for beginners and passive investors. Related: ETF, Mutual Fund, Nifty 50

Insider Trading

Illegal buying or selling of stocks based on material non-public information. For example, a company executive buying shares before announcing strong quarterly results. SEBI strictly monitors and penalises insider trading in India with fines and imprisonment. Related: SEBI, Corporate Governance

Intrinsic Value

The “true” or “fair” value of a stock based on fundamental analysis — independent of its current market price. Calculated through methods like DCF analysis or relative valuation. If intrinsic value exceeds market price, the stock may be undervalued (a potential buying opportunity). The margin of safety is the gap between intrinsic value and market price. Related: DCF, Margin of Safety, Value Investing

IPO (Initial Public Offering)

The first time a private company sells shares to the public on a stock exchange. Companies go public to raise capital, provide exits for early investors, and increase visibility. In India, IPO applications are made through your broker using UPI/ASBA. See our complete IPO guide. Related: Listing, DRHP, Price Band


J-K

KYC (Know Your Customer)

A mandatory identity verification process required to open a demat/trading account in India. Requires PAN card and Aadhaar. E-KYC using Aadhaar OTP makes the process instant and paperless. KYC is a one-time process — once completed with one intermediary, it’s valid across the financial system. Related: Demat Account, SEBI, PAN


L

Large Cap

Top 100 companies by market capitalisation, with market caps above ₹20,000 crore. Includes blue-chip names like Reliance, TCS, HDFC Bank, Infosys. Large caps offer stability, lower volatility, and steady returns (10-15% CAGR historically). Best for conservative investors and portfolio core holdings. Related: Mid Cap, Small Cap, Market Capitalisation

Leverage

Using borrowed money to amplify investment returns (and losses). A company with high debt-to-equity is “highly leveraged.” In trading, margin provides leverage — putting up ₹1 lakh to control ₹5 lakh worth of stocks. Leverage magnifies both gains and losses, making it risky for inexperienced investors. Related: Margin, Debt-to-Equity

Limit Order

An order to buy or sell at a specific price or better. A limit buy at ₹500 only executes at ₹500 or below. Gives price control but no guarantee of execution — the stock may never reach your price. Recommended over market orders for most situations. Related: Market Order, Stop-Loss Order

Liquidity

How easily a stock can be bought or sold without significantly affecting its price. High-liquidity stocks (Reliance, TCS) can be traded in large volumes instantly. Low-liquidity stocks (some small caps) may have wide bid-ask spreads and difficulty executing large orders. Always check daily trading volume before investing. Related: Volume, Bid-Ask Spread


M

MACD

Moving Average Convergence Divergence — a momentum indicator in technical analysis that shows the relationship between two moving averages. Buy signals occur when the MACD line crosses above the signal line; sell signals when it crosses below. Useful for identifying trend direction and momentum shifts. Related: Moving Average, RSI, Technical Analysis

Margin of Safety

The difference between a stock’s intrinsic value and its market price. Buying with a margin of safety means purchasing at a significant discount to estimated value, providing a buffer against errors in analysis. A 25-30% margin of safety is commonly targeted by value investors. Concept introduced by Benjamin Graham. Related: Intrinsic Value, Value Investing

Market Capitalisation

The total market value of a company’s outstanding shares: Share Price × Total Shares. A company with 10 crore shares at ₹500 has a market cap of ₹5,000 crore. Used to classify stocks as large-cap (top 100), mid-cap (101-250), or small-cap (251+) as defined by SEBI. Related: Large Cap, Mid Cap, Small Cap

Market Order

An order to buy or sell immediately at the best available price. Guarantees execution but not price — you may pay slightly more (buy) or receive slightly less (sell) than expected, especially in volatile or illiquid stocks. Use for highly liquid stocks when speed matters more than price. Related: Limit Order, Stop-Loss Order

Moat

A sustainable competitive advantage that protects a company from competitors — like a moat around a castle. Types: brand power (Asian Paints), network effects (exchanges), switching costs (banking relationships), cost advantages (scale), patents/regulatory licenses. Companies with wide moats can sustain high returns on capital for decades. Term popularised by Warren Buffett. Related: Competitive Advantage, ROE, Fundamental Analysis

Moving Average

The average closing price over a specified period, plotted on a chart to smooth out price noise and reveal trends. The 50-day and 200-day moving averages are most widely watched. When the 50-day MA crosses above the 200-day (Golden Cross), it’s a bullish signal. When it crosses below (Death Cross), it’s bearish. Related: Technical Analysis, Support, Resistance

Mutual Fund

A professionally managed investment fund that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities. Types include equity funds, debt funds, hybrid funds, and index funds. Regulated by SEBI and managed by Asset Management Companies (AMCs) like HDFC, ICICI Prudential, SBI. Ideal for investors who prefer professional management. Related: Index Fund, ETF, SIP, AMC


N

Nifty 50

The benchmark index of NSE, tracking 50 large-cap companies across 13 sectors. Base value of 1,000 (1995). The most widely tracked index in India, used as a benchmark by fund managers and a basis for index funds, ETFs, and derivatives. Accounts for about 60% of NSE’s total market cap. Related: Sensex, NSE, Index

NSE (National Stock Exchange)

India’s largest stock exchange by trading volume, established in 1992. First fully electronic exchange in India. Handles approximately 90% of equity trading and dominates derivatives trading. Headquarters in Mumbai. Benchmark index: Nifty 50. Related: BSE, Nifty 50, SEBI


O

Options

Contracts giving the right (but not obligation) to buy (call option) or sell (put option) an asset at a specific price before a certain date. A Nifty call option at 18,000 gives you the right to buy Nifty at 18,000. Options are powerful for hedging and speculation but complex for beginners. Related: Futures, Derivative, Premium


P

P/E Ratio (Price-to-Earnings)

Market price per share divided by earnings per share. A P/E of 25 means investors pay ₹25 for every ₹1 of profit. Lower P/E may indicate undervaluation; higher P/E may indicate growth expectations or overvaluation. Always compare P/E within the same sector — IT companies typically have higher P/E than banks. Related: EPS, P/B Ratio, Valuation

P/B Ratio (Price-to-Book)

Market price divided by book value per share. A P/B of 1 means the stock trades at its book value. Below 1 may indicate undervaluation (or underlying problems). Useful for valuing asset-heavy companies like banks and real estate firms. Related: Book Value, P/E Ratio

Portfolio

Your total collection of investments across all assets — stocks, bonds, mutual funds, gold, real estate. A well-constructed portfolio is diversified across sectors and asset classes, aligned with your risk tolerance and goals. Regular portfolio review and rebalancing keeps allocations on track. Related: Diversification, Asset Allocation, Rebalancing

Promoter

The founder(s) or controlling shareholder(s) of a company. Promoter holding indicates how much ownership the founders retain. High promoter holding (60%+) usually signals confidence. Declining promoter holding or pledging of promoter shares can be red flags. SEBI requires companies to disclose promoter shareholding quarterly. Related: Shareholding Pattern, Corporate Governance


Q-R

ROE (Return on Equity)

Net profit divided by shareholders’ equity, expressed as a percentage. Measures how efficiently a company generates profit from shareholders’ money. ROE of 20% means the company generates ₹20 profit for every ₹100 of equity. Consistently above 15% is considered strong. Warren Buffett’s favourite metric. Related: ROCE, Net Profit, Equity

RSI (Relative Strength Index)

A momentum oscillator (0-100) in technical analysis. RSI above 70 suggests overbought (potential pullback). RSI below 30 suggests oversold (potential bounce). Best used in range-bound markets. In strong trends, RSI can stay overbought/oversold for extended periods. Related: MACD, Technical Analysis, Overbought


S

SEBI

Securities and Exchange Board of India — the market regulator established in 1992. SEBI protects investor interests, regulates market intermediaries, prevents manipulation, and ensures fair and transparent markets. All brokers, mutual funds, and exchanges must be SEBI-registered. Related: NSE, BSE, Regulation

Sensex

The Sensitive Index — BSE’s benchmark, tracking 30 of the largest companies. First compiled in 1986 with base value 100. Now above 70,000, reflecting massive Indian wealth creation. Uses free-float market cap weighting. Major constituents include Reliance, TCS, HDFC Bank. Related: Nifty 50, BSE, Index

SIP (Systematic Investment Plan)

Investing a fixed amount at regular intervals (usually monthly) into mutual funds or stocks. SIP benefits from rupee cost averaging — buying more units when prices are low and fewer when high. A ₹10,000 monthly SIP in a Nifty index fund at 15% CAGR grows to approximately ₹1.5 crore in 20 years. The most powerful wealth-building habit for salaried investors. Related: Rupee Cost Averaging, Compounding, Mutual Fund

Small Cap

Companies ranked 251 and below by market cap (below ₹5,000 crore). Small caps offer highest growth potential but also highest volatility and risk. Many can multiply 5-10x but some can also lose 80%+ of value. Require thorough research. Allocate 10-20% of portfolio maximum. Related: Large Cap, Mid Cap, Market Capitalisation

Stop-Loss Order

An order to automatically sell a stock if it drops to a specified price, limiting your loss. If you bought at ₹200 and set stop-loss at ₹180, the stock sells automatically at ₹180, capping your loss at 10%. Essential risk management tool every investor should use. Related: Risk Management, Limit Order

Stock Split

When a company divides its existing shares into multiple shares, reducing the per-share price while increasing the number of shares. A 1:2 split means each ₹1,000 share becomes two ₹500 shares. Your total investment value stays the same. Splits improve liquidity and make shares more affordable for retail investors. Related: Face Value, Bonus Shares

Support and Resistance

Key price levels in technical analysis. Support is a level where buying interest prevents further decline (a floor). Resistance is where selling pressure prevents further rise (a ceiling). When support breaks, it becomes new resistance and vice versa. Among the most practical tools in technical analysis. Related: Trendline, Breakout, Technical Analysis


T

Technical Analysis

The study of price charts, patterns, and indicators to predict future price movements. Based on the premise that all information is reflected in price. Uses tools like moving averages, RSI, MACD, and chart patterns. Best for timing entry/exit points. See our complete Technical Analysis Guide. Related: Fundamental Analysis, Candlestick, Support/Resistance

Trading Volume

The number of shares traded in a stock during a given period. High volume confirms the strength of a price move. A breakout on high volume is more reliable than on low volume. Volume spikes often signal important turning points. Related: Liquidity, Technical Analysis


U-V

Undervalued

A stock trading below its estimated intrinsic value. Value investors specifically seek undervalued stocks, buying them with a margin of safety and waiting for the market to recognise their true worth. A stock can be undervalued due to market overreaction, sector neglect, or temporary bad news. Related: Intrinsic Value, Value Investing, Margin of Safety

Value Investing

An investment strategy of buying stocks trading below their intrinsic value. Pioneered by Benjamin Graham and perfected by Warren Buffett. Core principle: buy great businesses at fair prices (or fair businesses at great prices) with a margin of safety. Requires patience, discipline, and thorough fundamental analysis. Related: Growth Investing, Intrinsic Value, Margin of Safety

Volatility

The degree of variation in a stock’s price over time. High volatility means large price swings (small caps). Low volatility means stable prices (large cap FMCG stocks). Measured by standard deviation or beta. Volatility is not the same as risk — for long-term investors, volatility creates buying opportunities. India VIX measures expected market volatility. Related: Beta, Risk, India VIX


W-Z

Working Capital

Current assets minus current liabilities. Positive working capital means a company can meet its short-term obligations. Negative working capital may indicate cash flow problems. Some capital-light businesses (like IT services) operate efficiently with minimal working capital. Related: Balance Sheet, Current Ratio

Yield

The income return on an investment, expressed as a percentage. Dividend yield is the most common for stocks. Bond yield is the interest earned. Higher yield generally means higher income but may also signal higher risk. Compare yields within the same asset class. Related: Dividend Yield, Returns

Zero-Sum Game

A situation where one participant’s gain equals another’s loss. Short-term trading is largely zero-sum — for every profitable trade, someone else loses. Long-term investing, however, is NOT zero-sum — as companies grow earnings and create value, all shareholders benefit. This is why investing beats trading for most people. Related: Trading, Investing


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More Essential Terms

ROE (Return on Equity)

Measures how efficiently a company uses shareholder money to generate profits. ROE above 15% is generally considered good.

NAV (Net Asset Value)

The per-unit price of a mutual fund calculated daily. NAV = (Total Assets – Liabilities) / Total Units.

SIP (Systematic Investment Plan)

A method of investing a fixed amount regularly in mutual funds. SIPs provide rupee cost averaging and disciplined investing.

CAGR (Compound Annual Growth Rate)

The mean annual growth rate of an investment over a period. The standard metric for comparing investment returns.

Stop Loss

An order that automatically sells your stock when it falls to a specified price. Essential risk management tool for traders.

Debt-to-Equity Ratio

Compares a company’s total debt to shareholders’ equity. Measures financial leverage and risk. Below 1.0 is generally safe.

Market Order vs Limit Order

Market orders execute instantly at current price. Limit orders execute only at your specified price or better.

NPS (National Pension System)

Government retirement scheme with market-linked returns and additional ₹50,000 tax benefit under Section 80CCD(1B).

Blue Chip Stocks

Shares of large, established companies with proven track records. Examples: Reliance, TCS, HDFC Bank, Infosys.

Index Fund

A mutual fund that mirrors a stock market index (like Nifty 50). Offers market returns at very low cost (0.1-0.3% expense ratio).