Navigating the world of trading and investment can be daunting, especially for those new to the market. At GapUp, we understand the importance of being aware of complex trading and investment terms to empower traders. If you’ve been following our previous blogs on essential investment and trading terms, you’re on the right track. If you haven’t, check them out here:
Top Investment and Trading Terms You Must Know- Part 1 ,
Trading Terms You Should Know- Part 2 and
Trading Terms You Should Know – Part 3
In this edition, we continue our journey into the big landscape of trading, shedding light on more terms crucial for decoding the nuances of the ever-changing markets. Let’s enhance your comprehension of the dynamic financial realm!
Trading and Investment Terms
- Bombay Stock Exchange (BSE): The Bombay Stock Exchange (BSE) is a significant stock exchange in India, providing a platform for buying and selling various financial instruments such as stocks, bonds, and commodities. It is one of the oldest stock exchanges in Asia and plays a crucial role in the Indian financial market. The BSE Sensex, its vital index, tracks the performance of a select group of stocks, offering insights into the overall trends and movements in the Indian stock market. Traders often reference the BSE for market analysis and trading and investment decisions.
- Employee Provident Fund (EPF): The Employee Provident Fund (EPF) is a mandatory savings scheme for employees in India. A portion of an employee’s salary is contributed to the EPF account, along with a matching contribution from the employer. The accumulated funds provide financial security to employees during their retirement. EPF not only acts as a retirement corpus but also offers benefits like tax exemptions, making it a crucial component of long-term financial planning for individuals in the workforce.
- PPF(Public Provident Fund): The Public Provident Fund (PPF) is a long-term savings and investment scheme in India designed to encourage systematic savings for retirement. Individuals can open a PPF account with a financial institution or a post office, contributing a fixed amount annually. The contributions, along with compound interest, create a substantial corpus over time. PPF offers tax benefits, making it an attractive avenue for risk-averse investors seeking stable, tax-efficient returns.
- Real Estate Investment Trusts (REITs): Real Estate Investment Trusts (REITs) are a relatively new investment option in India. REITs are financial vehicles that allow investors to pool their funds to invest in income-generating real estate properties. REITs can own, operate, or finance real estate across various sectors. Investors buy shares in the REIT, which provides them with a portion of the income generated by the real estate holdings. REITs offer a way for individuals to invest in real estate without directly owning or managing properties.
- Basis Point: A basis point is a unit of measurement commonly used in finance to express small percentage changes in interest rates, bond yields, or other financial instruments. One basis point is equivalent to 0.01%, or one-hundredth of a percentage point. It provides a precise way to describe incremental shifts in financial metrics, particularly in fixed-income markets and interest rate discussions.
- Rule of 72: The ‘Rule of 72’ is a simple formula used in finance to estimate the time it takes for an investment to double in value based on a fixed annual rate of return. By dividing 72 by the annual rate of return, you get an approximate number of years for doubling the investment. It’s a quick and handy tool for making rough calculations on the potential growth of an investment over time.
- Rollover: In trading, a rollover refers to moving funds from one investment to another, often involving the expiration of a futures or options contract. It’s like upgrading your trading and investment strategy. It allows you to seamlessly transition from one position to another, adapting to changing market conditions or seizing new opportunities. Rollovers can involve shifting from one financial instrument to another maintaining a flexible and dynamic approach in response to evolving market trends and your investment goals.
- Inflation: Inflation is the rate at which the general level of prices for goods and services rises, eroding the purchasing power of a currency. When inflation is high, each unit of currency buys fewer goods and services, leading to a decrease in real value. It’s a crucial economic indicator impacting investment decisions and financial planning. Investors need to consider inflation to ensure their returns outpace the rising cost of living.
- Deflation: Deflation is the opposite of inflation and refers to a sustained decrease in the general price level of goods and services. During deflation, the purchasing power of a currency increases as prices fall. While this may sound positive, deflation can lead to reduced spending and economic downturns as consumers delay purchases in anticipation of lower prices. Deflationary periods can pose challenges for investors, businesses, and policymakers.
- Mutual Funds: Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They offer individual investors access to professionally managed and diversified trading and investment portfolios. Mutual funds are a popular choice for novice traders due to their ease of entry, diversification benefits, and professional management. Investors buy shares in the fund, and the value of these shares fluctuates based on the fund’s performance.
These trading and investment terms serve as the building blocks for making informed decisions in the ever-changing financial landscape. There’s always more to learn, but Rome’s not built in a day. We’ll take it slow and continue this series. After all, we at GapUp strive to simplify complex trading and investment terms and make sure that you have a smooth trading experience. Stay tuned for more insights as we continue unraveling the mysteries of the market, guiding you toward a more confident and successful investment journey.
You can always join various SEBI-registered Telegram Channels, which help to provide daily updates, personalized recommendations and many other services to the trading community. You can check out a list of Trustworthy Indian Telegram Channels here.
FAQ’s about Trading and Investment Terms:
- Why do investors prefer mutual funds?
Investors favor mutual funds for their simplicity and diversification. These funds pool money from multiple investors to create a diversified portfolio of stocks, bonds, or other securities managed by financial experts. Additionally, the ease of entry and the fluctuation of mutual fund shares based on the fund’s performance make them an accessible and attractive option for those seeking a balanced and professionally managed investment strategy.
- Is it okay to trust financial experts in the market?
While we all know that not everyone is trustworthy on the internet, it is also important to know whom to trust. At GapUp, we make sure that all the insights and updates are provided on SEBI-registered Telegram Channels, which are in turn operated by SEBI-Registered Research Analysts and Investment Advisors
- What does SEBI do to help the trading community?
SEBI(Securities and Exchange Board of India) meticulously oversees diverse market entities, safeguarding investor interests, maintaining market integrity, and ensuring equitable practices. It is the principal regulatory authority for financial markets in India, inaugurated in 1988. Additionally, there are many other functions and duties of SEBI, which you can check out here: Functions of SEBI – What is SEBI?
- How can beginners stay informed in the trading and investment realm?
Beginners can stay informed by following reputable sources, joining relevant communities, and considering expert insights for a well-rounded understanding of the market. Make sure to follow SEBI-Registered Research Analysts and SEBI-Registered Telegram Channels, which strive to provide daily updates and recommendations and teach in-depth about various concepts regarding trading and investment, like option scalping, swing trading, etc.
