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Glossary - B
Sales charge paid when selling a mutual fund - also known as deferred load. (For instance, alimony can be said to be a back-end load)
A financial statement listing a company's assets (what it owns) and liabilities (what it owes) as of a specific date, usually the last day of a company's fiscal quarter. The difference between a company's assets and liabilities is termed its net worth or shareholder's equity.
One basis point is 0.01 per cent. Usually used to describe changes in bond yields. For instance, a ten basis point increase means the interest rate went up 0.10 percent. A basis point change is 1 per cent.
An operator who expects the share price to fall.
A weak and falling market where buyers are absent (Usually because they burnt their fingers when they held on too long to their shares when the market was rising.) Generally correlates with recession. An opportunity to buy at low prices, in hope (usually) fulfilled if you wait long enough) of an upturn. Low capital investors may have a problem in holding on to stocks for a long period. This is the reverse of the bull market. Hence, the strategy would also be reversed but be cautious. It is more difficult to tell when a falling stock is going to reverse direction than to predict when a rising is likely to fall.
Shares of well-established and financially strong corporations, with little investment risk and a history of earnings and dividend payments. These stocks usually form the base of a portfolio and allow for higher gain (and higher risk) speculation in other stocks. Investment in such stocks is more for capital appreciation than for return on investment since most blue chips trade at high market prices. Best to allocate a portion of your annual income for the purchase of investment stocks over the long term.
A bond is a debt instrument issued by an entity for the purpose of raising capital. A long term promissory note issued by a corporation. A bond can be issued by a corporation or other entity such as state or municipal governments or the Central Bank of the country. Bonds normally have a set maturity (term) and interest (coupon) rate associated with them. In simpler word, you are in effect lending money to the entity which issues the bonds for a specified period in return for a fixed rate of return till the bonds mature, at which point you get back your principal investment.
A grade evaluating the quality of a bond.
Shares allotted to the existing shareholders by capitalizing the reserves into additional capital. When the market expects a company to come out with a Bonus Issue, the price of the shares normally goes up. Following a bonus issue, though the number of total shares increase, the proportional ownership of shareholders does not change.
A company closes its register of members for updating the records to facilitate payment of dividends or issue of tights of bonus shares. Book closure is the period during which this process is done and deliveries are not affected in the clearing house.
Total shareholder equity from the balance sheet divided by the number of shares outstanding.
The last line of a company's profit and loss ledger sheet. The bottom line usually refers to the net profit or loss of a company at any given time.
A stock exchange
A technical analysis term meaning a stock price has moved above or below a previous trading range.
Financing for a company expecting to go public within 6-12 months; usually so structured as to be repaid from proceeds of a public offering, or to establish a floor price for public offer.
A fund which has a minimum of 20 shareholders without any single investor holding more than 10 percent of the shares and units of the fund is known as broad Based Fund.
An agent who handles the public's orders to buy and sell stocks, commodities or other property. Full service brokers are those that provide a wide range of investment services, research and advice. A full service account representative usually works on a commission basis, thereby generating income on the number of his clients' trades. Discount brokers are not in the business of giving investment advice they usually work on salary, limit their services to trade executions and collect substantially lower fees.
A stock index (one of many) commonly used as an indicator of changes in the general level of the stock prices in India . In this index, there are 30 diversified stocks traded on the Mumbai Stock Exchange which are thought to be representative of the market in general.
An operator who expects the share price to rise and takes a position in the market to sell at a later date.
A rising market where buyers far outnumber the sellers. Rising stock prices (generally occur during boom years). Amateur investors could lose a lot of money in this phase of the market. They hold back money in this phase of the market. They hold back selling in expectation of still higher gains and sometimes are left high and dry when the market crashes. Anything that goes up has to come down is a law of physics that holds well in the stock market, too. Long term investors are usually less harmed since their perspective is 3 to 5 years or even more and the market tends to level out over a period of time. A critical decision is when to sell on a bull market. the best procedure is to decide within yourself that you will satisfied by a specified margin eg profit on your investment (say, 10, 15, 20 percent or wherever) and then sell at that point, regardless of every one predicting that share prices are sure to go up still further and you would be a fool to sell at this point. Ignore them. Book your specified profit, that is, sell your shares and put the money in your bank. If the Bull Run still continues, invest a lesser sum, decide your margin of profit, and repeat the procedure. There will come a time when the Bull Run stops, that is the share prices reverse direction. Sell immediately and rest content that you have been wise enough to book profits at different points of the Bull Run . Your losses are thus restricted to the period after your last profit taking. You then offer your sympathy to investors who did not disinvest and had to bear heavy loses. Duck if they take a swing at you.
When you place an order for stock, it can be executed depending on which type of exchange the stock is listed. There are two methods of execution (i) the online exchange which is connected via satellite, or (ii) the outcry method, which is executed on the floor of the exchange. The first method is instantaneous, whereas the second can be a little time consuming. It takes time for a stock order to be sent by the broker to the stock exchange floor. A person on the stock market floor bids to find a buyer for the stock. The stock is then purchased or sold and the broker finally notified of the price and how much money to deduct from the customer's account plus his broker fee. The total time is an estimated 20 minutes.
Funds provided to enable a corporation to acquire another enterprise or product line or business. In the corporate world all major deals are leveraged, that is, funded by someone else. Try doing this in your personal life and you will probably go to jail.