What is Stock Market for Beginners? The Basic Terminology
There are many ways one investor can invest in many equities. Here, let us seen what the various ways we can invest in the assets are.
- Individual Stock
The individual stock represents the stock purchased by an investor from the primary market of from the stock exchange. So, you can buy the individual stock that you get from the primary stockholder. When you purchase the stock from the primary investor, it becomes the secondary market.
- FPO or IPO
Otherwise, you can invest in IPO or Initial Public Offering from the company directly. This is initially done at the time of the initial period of the commencement of the enterprise.
- Mutual Fund
There is still another option of investing in the mutual fund.
ETF or Exchange Traded Funds are another way to invest in the equities.
What is Mutual Fund?
A mutual fund is a pool of investment that is managed by the stock professionals. You can buy the stock or bonds or commodities. Each of them needs to be purchased individually, any combination of them also can be purchased.
What is ETF?
ETF or Exchange Traded Funds. ETF has some characteristics with both the mutual funds and individual stock. When the ETF is considered it is created just for the stock on the exchange. So, you can invest and trade on the same, just like the stock. So, when you buy the ETF, you should track the index just like the index fund. However, the trading is done just like the stock. So, it is quite similar to buying and trading the index fund. It is buying a single fund that stands for the underlying stock.
What is an Order?
You can make the orders to buy your stock or sell a new stock. Orders are many kinds. Usually, market order and the limit order.
What is market order?
A market order is an order that is executed directly on the stock exchange. You can take the broker to run the market order or can do yourself directly. The effects of the order are done immediately, based on the market rate for the stock at the point of transaction. The best current price is what you get when you make the market order. This is an instant go through, and the investor cannot mention an accurate price to buy or sell the stock. Eventually, the market orders are risky as the investor or trader does not know, the exact price of the stock in the market. So, it can be gain or loss.
What is Limit Order?
A limit order is the limit of the order that you put for any of the order that you make in the stock. So, when you buy or sell the order, either through directly or through the broker, the trade and execution of the process are done conditionally if the current price is within the specified limit. For example, you want to buy or sell the stock, only if it within the range of INR 1500 to 1600, the order will be executed only when the current price is within this limit.
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