What are the Basic investing terms a beginning investors should know before investing ? How can I learn long term investing ? What are Short selling, Bluechip companies, PE Ratio, Book Value, ROE etc... ?

I am asked some common questions by the very new comers in the stock market, which I am going to share with you in a simplest and easiest way:

Some of them important questions are as follow :

The very first common question i am asked is ,

What is Short-selling, or short-sale ?

And this is the most interesting one which they want to know about.

Short-selling allows you to bet against a stock, such that if its price goes down you make money, while if it rises you lose money. In this case we sell first then buy back the same number of shares again after making some profit. This sale and the proceeds are credited to your account until you buy back the same number of shares (which is known as a "buy to cover" trade) to close the position.

Next one is : What are the Bluechip companies ?

These are the large, industry leading companies. They offer a stable record of significant dividend payments and have a reputation of sound fiscal management. The expression is thought to have been derived from blue gambling chips, which is the highest denomination of chips used in casinos.

Then , What is PE Ratio ?

A valuation of companies last traded share price to its latest reported 12 months earnings per share. For example, if the last traded share price of any X company is Rs 40 and earnings over a last 12 months per share is Rs 2, then the P/E ratio of that X company is Rs 20 (40/2)

Another one , What is Book value ?

The book value of a company is calculated by estimating the total amount a company is worth if all the assets are sold and the liabilities are paid back.

• The book value of a stock = book value of total assets – total liabilities.
• Book Value per Share = Book Value / Shares Outstanding

Next important one is , What is Return on Equity (ROE) ?

Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Return on Equity = (Net Income/Shareholder's Equity) %

Click here: open your online Trading & Demat account to invest in stock and Mutual Fund with India’s largest broking company and enjoy free delivery brokerage charge.

Hope this helps you. Best of luck.

With Best Regards,

Debjani Biswas.