Some Basic Term Should know by every investors.

It's impossible to start reading sentences without first being familiar with alphabets and words, it will be difficult to follow topicsand discussion on investment without first understanding basic investment terms and concepts. Every industry has its own set of unique terms, whether it's engineering, design, performing arts ,etc. You should familiar with at least the commonly used terms and concepts in investing to understand Investing better.

                    I recommend that you read this blog completely before you investing, I am sure it will help to give you the confidence to learn about and discuss investments with others. So, let's start

ASSET

An "asset" is something of value. In the world of finance, an asset is anything that has monetary value which can be converted into money is called liquidity. From an investment point of view, asset are usually divided into two category: liquid and non-liquid. 

Liquid asset include stocks, mutual fund, fixed deposit, gold, etc.as they can be easily sold and converted into money at their prevailing market price.

Non-liquid assets are investments that can not be easily converted to cash e.g. real estate ,Life Insurance return, provident fund etc. In case you wish to converted them into money at short notice, you made it at a loss or at a lower price than the current market price.

BSE

The Bombay stock exchange (BSE) and the National stock exchange (NSE) are tu India's premier stock exchange

established in 1857, BSE is Asia's oldest stock exchange. Stock exchange provides facility for broker and traders to trade stocks. Any company that issue shares and wants them trade has to list with the stock exchange.

BULLS AND BEARS

Bulls and bears are terms used in the stock market. In a Bull market, the prices of stocks continuously move up and there is confidence amongst investor to keep buying. 

In a bear market, the exact opposite happens. Prices keep falling and investor confidence reduce.

CAPITAL GAINS

Capital gain is the profit you make from selling assets like stocks, mutual fund, bond, real estate and gold.

CAPITAL GAINS TAX

 Capital gains tax is the tax you pay on the capital gains you earn. There are two types of capital gains tax:- short term and long term,depending on how long you held the assets before selling them. This holding period varies from different assets. Also,you may have to pay short term as well as long term capital gains tax on some assets (depending on holding period), for certain assets you only need to pay short term capital gains tax.

COMPOUND INTEREST

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.

COST OF LIVING

'Cost of living' means the amount of money needed to maintain a certain standard of living. This is measured by calculating the average cost of buying a certain goods and services like food, clothing, fuel, medicines, transportation etc. If inflation rises the cost of living increases.

DIVIDEND

A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders.

FINANCIAL YEAR AND ASSESSMENT YEAR

These terms that have the potential to confuse many.An Financial year starts on 1 April and ends on 31 March. So, if you have worked and earned income in 2020-21, it will be considered the financial year. Assessment year: On the other hand, assessment year (AY) is the year following the financial year, in which your income is assessed.

IFSC CODE

IFSC Code refers to Indian Financial System Code, which is an eleven-character code assigned by RBI to identify every bank branches uniquely, that are participating in NEFT system in India. This code is used by electronic payment system applications such as RTGS, NEFT and CFMS.

RTGS

The term real-time gross settlement (RTGS) refers to a funds transfer system that allows for the instantaneous transfer of money and/or securities. RGTS is the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank.

NEFT

NEFT, also known as National Electronic Funds Transfer is an electronic payment system which facilitates one-to-one funds transfer. It helps in the transfer of money from one bank to another or one branch to another.

INDEXATION

Indexation is a technique to adjust income payments by means of a price index, in order to maintain the purchasing power of the public after inflation, while deindexation is the unwinding of indexation.

Indexation refers to recalculating the purchase price, after adjusting for inflation index, as published by the Income Tax authorities. Since the purchase price is adjusted for inflation, the capital gain gets reduced. In case of LTCG for non-equity funds, investors can avail the indexation benefit.

INCOME

Income is the money you received by way of salary, student or sale of property, profit and gains through business, capital gains and interest earned from other sources.

INCOME TAX

Is the tax charged by the government on the income earned in a financial year.if you total income from all sources is more than the minimum exemption limit specified by the government, you need to pay income tax act on excess amount.

LIQUIDITY

The ease with which an asset can be converted to cash at short notice without losing its value is called liquidity.

LOCK-IN PERIOD

it is the time period during which an investor can not sell either part or off the investment.

LONG TERM CAPITAL GAINS TAX

LTCG Tax is the tax levied on the profit generated by an asset such as real estate and shares, which is held for a long time period. The period of holding to be defined as “long term” or “short term” varies from asset to asset, as per the government rules. One should note that there are different types of capital gains. For example, while in the case of property, the asset may be deemed as “long term” only if held for three years* or more, in case of stocks, the limit may be set at one year*. The gain or profit from selling the asset is classified as capital gain, and hence, one needs to pay tax on it in the year that the asset transfer takes place.

MATURITY DATE

The maturity date is the date on which an investment becomes due and the investor get to paid the principal along with any applicable interest.

NAV

NAV stands for 'Net Asset Value. ' NAV represents the price at which a mutual fund may be bought by an investor or sold back to a fund house. A mutual fund's NAV is an indicator of its market value. Therefore, NAV can be viewed to assess the current performance of a mutual fund.

NEFT AND RTGS

If you are a net banking user, you can use National electronic fund transfer (NEFT) or real time gross settlement (RTGS) totransfer money from your bank account to any other bank account in India.You could send this money to yourself as well as to anyone else who has a bank account.

Both NEFT and RTGS can be used to transfer money. There are a few subtle differences between the two. NEFT happens in hourly batches from Monday to Saturday while in RTGS the transfer happens immediately. Transfer fees are minimal.RTGS is meant for transferring large amount and the minimum amount you could transfer using the method is rupees 2 lakh.NEFT has no such limit so you could transfer smaller amount using this service.

NSE

Established in 1993, the National stock exchange or NSE is a prima stock exchange in the country. Stock exchange provides facilities for brokers and traders to trade stocks.any compny that issues shares and want its shares to be traded has to list them with a stock exchange.

NIFTY

The NSE index, most popular known as the Nifty 50 or Nifty, is 2 a National stock exchange (NSE) what the sensex is to the Bombay stock exchange (BSE).the Nifty index is a collection of 50 stock from various industries.

OVERDRAFT

An overdraft is an extension of credit from a lending institution that is granted when an account reaches zero. The overdraft allows the account holder to continue withdrawing money even when the account has no funds in it or has insufficient funds to cover the amount of the withdrawal.

PORTFOLIO

A portfolio is a collection of all the investments owned by an investors.

PREMIUM

 Premium is an amount paid periodically to the insurer by the insured for covering his risk.

SIMPLE INTEREST

The interest calculated only on the principal amount is called simple interest. For example, if you invest 5000 at 8% interest for 5 years at the inn of five years you will get:

Simple interest= principal * interest *period/100

                       =5000*8*5/100

                       = 2000

the amount you get at the end of 5 years is principal +interest= 5000+2000= 7000.

These are some basic terms that every investors needs to know before investing.The  knowledge you gain will not only enable you to manage your investment better as well as it will also give you the confidence to explore the world of investing on your own.

Thanks and regards

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