If you’re new to the stock market, the number of confusing terms can feel overwhelming. But don’t worry — you don’t need an MBA or finance degree to get started!
Here’s a simple, easy-to-understand list of 25 essential stock market terms every beginner should know.
1. Stock
A stock represents a share in the ownership of a company. When you buy a stock, you become a partial owner of that business.
2. Share
A share is a single unit of stock. If you buy 10 shares of Reliance, you own 10 tiny parts of Reliance Industries.
3. Equity
Equity means ownership in a company. Stocks and shares are types of equity investments.
4. Stock Exchange
A Stock Exchange is a marketplace where stocks are bought and sold. In India, the major exchanges are BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).
5. Sensex
Sensex is the benchmark index of the Bombay Stock Exchange (BSE). It represents the top 30 companies listed on BSE.
6. Nifty
Nifty is the benchmark index of the National Stock Exchange (NSE), consisting of the top 50 companies.
7. Bull Market
A Bull Market means stock prices are rising. It shows optimism, growth, and investor confidence.
8. Bear Market
A Bear Market is when stock prices are falling consistently, indicating pessimism or economic slowdown.
9. IPO (Initial Public Offering)
An IPO is when a private company offers its shares to the public for the first time.
10. Demat Account
A Demat (Dematerialized) Account is used to store your shares electronically in India. You cannot buy or sell shares without this account.
11. Trading Account
A Trading Account is needed to place buy/sell orders in the stock market.
12. Dividend
A dividend is a part of the company’s profit shared with shareholders as a reward.
13. Market Capitalization (Market Cap)
Market Cap is the total value of a company’s shares in the stock market.
Types: Large Cap, Mid Cap, Small Cap.
14. Blue-Chip Stocks
Blue-Chip Stocks are shares of top-quality, large companies with stable performance, like TCS or Reliance.
15. Portfolio
Your portfolio is your collection of different investments like stocks, bonds, and mutual funds.
16. Diversification
Diversification means investing in different types of assets to reduce risk.
17. Risk
In the stock market, risk means the chance of losing money. Higher returns often come with higher risk.
18. Return on Investment (ROI)
ROI measures how much profit or loss you’ve made on your investment compared to its cost.
19. Volatility
Volatility refers to how much and how quickly stock prices move. High volatility means sharp ups and downs.
20. Stop Loss
A Stop Loss is an automatic instruction to sell a stock when its price drops to a certain level to prevent more loss.
21. P/E Ratio (Price to Earnings Ratio)
The P/E Ratio shows how much investors are willing to pay for ₹1 of the company’s earnings. A high P/E may mean the stock is expensive.
22. Intraday Trading
Intraday Trading involves buying and selling stocks within the same trading day.
23. Delivery Trading
Delivery Trading means you buy stocks and hold them for more than one day — suitable for long-term investment.
24. Bonus Share
A Bonus Share is a free additional share given to shareholders, based on the number of shares they already own.
25. Rights Issue
A Rights Issue gives existing shareholders the chance to buy more shares at a discounted price before the company offers them to the public.
Final Thoughts
Learning these 25 basic stock market terms is the first step to becoming a confident investor.
Don’t worry if it feels like a lot — with practice, these words will become familiar.
Remember:
✔️ Start small
✔️ Keep learning
✔️ Stay patient
The stock market may seem complex, but breaking it into simple terms makes it easier and enjoyable.