Archive for the ‘Definitions’

Advance Decline Index04.14.08

Advance Decline Index is a Index which helps one find out bull or bear trends of the share market at a single glance. It is calculated by dividing the number of shares risen in prices with those which have fallen. Numbers more than 1 indicate a bullish market and less than one show a bearish market.

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Trading Versus Investing04.14.08

Trading and Investing are two different things and should never be confused even though they are used interchangeable in the share market world. One notable and perhaps the most important is the time each hold on to a stock.

While the investor is more interested in the appreciation of the company stocks over a relatively long periods of time. He is not very concerned with the changes in daily market as he knows that these will be overridden as time passes by. They carefully rely on the analyze a companies’ long term prospectives and follow a ‘buy and hold’ call on most stocks.

Whereas the trader is more concerned about the rising/diping of the market prices on a daily basis or even on a hourly prices. These traders tend to make money on the short term fluctuations of the market. They make use of the market outlook, industry news and general rumours to make capital gains on their money.

In todays market scenario, investors are few and traders are many since the market is unpredictable as the weatherman. :) Also, as a market watcher, my analysis is to be a investor, but hold on to a stock only if you are sure about its appreciation over the time. Otherwise, book your profits/losses and enter the market at a lower price point.

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Aging Schedule04.14.08

Aging Schedule is a report generated by the company auditor who lists the amounts receivable by the company sorted by maturity as current, or in various states of default. This is very important to the companies’ creditors, sales team and industry analysts. It also helps analyze the financial situation of the company.

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AGM: Annual General Meeting04.14.08

Annual General Meeting(AGM) is a annual meeting of the directors of a listed company and the shareholders where the companies’ annual performance are reported to the investors. Any vacancies in the board is filled at this meeting along with the shareholders approval. Also it is necessary for the company to send out a Annual Report to every investor who may or may not attend the Annual General Meeting. Here the auditors reports are filed and new auditors are appointed as deemed necessary and their remuneration fixed.

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IPO: Initial Public Offering04.14.08

Initial Public Offerings are a way by which the company raises capital for its operations. This is the only stage in which the company gets money in return for giving a part of its ownership to the public. The issuer who wants to offer an IPO first files detailed information as per SEBI rules and gives out a subscription offer.

Initial Public Offering (IPO) happens when a fresh unlisted company offers its share to the public. This is guided and monitored by Securities Exchange Board of India (SEBI). Most companies filing for a IPO are fresh companies looking for capital to expand its operations. Investors in these companies generally take a large risk in investing in these companies since there is a mighty chance that the IPO might fail and investors loose a lot of money in the process.

The process of applying for a IPO is very easy these days with the advent of DEMAT accounts and online trading options. Legally an IPO is open for minimum of 3 days upto 21 days except for those which are underwritten by India financial institutions which is open for 10 days. Usually we have to file an application for the IPO and send is along with the payment usually in Demand Drafts, Online Fund Transfer or Cheques. With an online trading account with ICICI or others, its easy to apply for one and have the funds transfered directly from your ICICI bank account linked to your DEMAT account.

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Fundamental Analysis04.03.08

Unlike the Technical Analysis, the fundamental analysis deals with the price of a particular company stock with respect to its financial status and numbers in the balance sheets. It is a analysis based on the company as a business which may make profit or has the strong potential to make profits in foreseeable future. This does not make predictions based wholly on the numbers of a company, but based on the market, the economy and other realistic statistical data like

  • Daily share trade volume
  • Stock Pricing

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Technical Analysis04.03.08

Evaluation of the market by careful analysis of trends and stats like prices, trading volumes and industry news to identify stock movement patterns is usually called Technical Analysis. Unlike other analysis, this type of analysis does not take the financial part of a company a a metric.

We all know the stock market is a collection of numbers and graphs, Technical Analysis identifies patterns in these numerics. In the past these technical analysts held a tight hold over the market prices that they were able to control prices with their predictions. These days with the advent of online stock accounts called DEMAT Accounts and other services which allow easy entry to the market, these analysts have lost a lot of their shine.

Complex softwares are also being used to interpret numbers better by the analysts. The major area of study includes:

  • Price movements
  • Trading Volumes

and the patterns formed with these analysis include:

  • Head and Shoulder Formations
  • W Formations
  • Resistance levels and
  • Moving Averages

This is done by the careful analysis by the experts with a lot of experience in the market trands and they use their capabilities to predict possible upward price changes in particular stocks or other financial instruments. This prediction might be a short term trend or a seasonal movement of the stock.

These days with a lot of data available online for access by everyone, market technical analysis is gaining popularity with individual investors, who rightly think that the past performance of a stock tells a lot about its future promise. These days there are many a investor who do their successful trading based purely on analysis of numbers than know about the company.

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The Bear and Bull Market03.26.08

The sentiments in the Stock Market is  broadly classified into two types:

  • Bear Market
  • Bull Market

Bull Market sentiments are when everyone is feeling good and share prices, indexes keep going up north as a result of strong economic fundamentals. It is a time when investor is happy with investing in companies, when the trading volumes are high.

Bear Markets are the opposite where everything is in the red.  Investors sell their stocks and book profits, no one buys anything and prices tumble. This is accompanied with poor faith of investors on different issues.

Formula for getting the most of this market trends is get into the market when the prices are at a reasonable low,  holding them as they rise in value and sell when the profit price is right. Said easy, but it involves a good and solid guess as no one can time the market ever. But most investors do the mistake of buying stocks when the price is going high and selling when it starts a downward bearish trend.

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When a company makes profit in its operations annually or in a quarter, it pays dividend to the investors who hold stocks in the company. The amount of dividend you get on a company stock will depend on a lot of factors like how much money is being set aside for dividend payments, how many stock investors the company has and how much stock you own. If a large number of investors are there, the dividend paid per share will be very less and those with a higher number of stocks get higher dividends, but the payout per share is usually equal.

The frequency of dividend payouts differ from company to company. While theoretically they can pay dividends every quarter since thats the time they file their profit and loss reports. While most companies pay annually, the time gap between two dividends show the profiability of the companies business and financial strength.

A company pays dividends to usually to thank its investors and to incite others to invest in it since paying dividends is closely associated with the financial well being of the company. This will bring in more investors and hence drive the share value of the company stocks.

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Companies sells a part its ownership to the public in the form of shares. Each unit of share entitles you to a part ownership in the company. Higher the number of shares you own, higher your percentage ownership in the company. The company can also issue a lot of different types of shares which have changes in the type of privileges they carry with them.

The company can issue as many number of shares as they fancy as long as there are buyers for the shares in the company. If the company makes a profit in the future, it has a choice of putting the money back into the business or reward its investors with dividends.

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