Terminology of Stock Market

A stock market is a place where you can buy and sell equity shares of companies. You can participate as an investor or trader who seeks profits over a short time or in the long run. Investors mainly have a long-term horizon and want to benefit from capital appreciation over time. While Traders, on the other hand, seek quick profits and focus on the small price changes in equity shares.

Bull and bear markets are two of the basic concepts of stock market trading, where the term bull market refers to a stock market in which the price of stocks is generally rising. Most investors see bull markets as a great opportunity to excel. It is because, in a bull market, the majority of stock investors are buyers instead of short-sellers of stocks.

A bear market exists when we have stock prices declining in price. Investors can benefit from bear markets, too. They can do it via short selling, a practice of borrowing stock that the investor does not hold from a brokerage firm that owns shares of the stock. Investors can sell the borrowed stock shares in the secondary market and receive money from the sale of that stock.

Income Stocks :-

An income stock is a type of equity security that offers you a high yield. This yield may generate from the majority of security’s overall returns. Income stock is a very popular type of stock among investors since it is the least volatile among all and offers a higher-than-market dividend yield to its investors.

Penny Stocks :-

Mostly, small companies issue penny stocks, especially start-ups, to raise funds from investors. These stocks are usually illiquid that are traded at a very low price. Companies issue penny stocks with a very low market capitalization.

Speculative Stocks :-

Speculative stocks usually come from companies that are looking to tap unexplored territory, developing new products, or the ones that have done major changes to their management or financial level. These stocks carry high risk since the company, product, and management are often untested. However, it gives a promise of a high return, but the risk is also high.

Growth Stocks :-

In this type of stock, whenever an organization earns any profit, the money gained via profit gets reinvested into the company itself to help it boost its innovation and business expansion. In this type of stock, investors do not get any dividends, but they receive capital gain whenever they sell their stocks.

Cyclical Stocks

These stocks are issued by the companies that offer luxury and discretionary goods and services. For instance, stocks of airlines, restaurants, vehicle manufactures, hotels, and clothing. The performance of cyclical stocks is interlinked with the health of the economy, i.e., if the economy does well, prices remain high, and when it performs ill, stocks lose a substantial value.

Value Stocks :-

A stock is considered a value stock when a company has assets worth more than its stock price. These stocks are often undervalued by the investors since their value increases gradually, i.e., it takes a lot of time. If the company does perform well, the losses will be severe.

Defensive Stocks :-

Every human has some basic needs, such as food, fuel, healthcare services, etc. No one stops eating food, refilling empty tanks, or avoid going to hospitals. Stocks related to such vital services are defensive stocks. Defensive stocks are immune to any economic downturn or profits.