Investment education: These are important stock market terms that investors should know

The number of investors entering Nepal's stock market is increasing day by day. But investments made without a deep understanding of the technical terms used in the market may not yield the expected results. Just knowing the name is not enough for making the right decisions, it is also necessary to understand its uses, impacts, risks and opportunities. So here the major stock market related terms used in Nepal are explained in a more detailed and practical manner.

1. IPO An IPO is when a company sells its shares to the public for the first time. Before this the company is privately owned and after the IPO it becomes a public company. IPOs in Nepal are usually issued only after regulatory approval, examination of financial statements and credit assessment. While investing in an IPO, one should study the company's business, earning potential, management credibility, and sector potential. In most cases, since IPOs are issued at a low price, there is a possibility that the price will increase after listing, but this is not always certain.

2. FPO An FPO is a resale of shares to the public by an already listed company to raise additional capital. A company brings in an FPO to plan expansion, reduce debt, or invest in new projects. FPOs can often be issued close to market value or at a premium, so investors should make a decision by assessing the company's current financial position and future plans. 3. Right Share Right Share is an opportunity for existing shareholders to purchase additional shares by giving them priority rights. This helps the company raise capital while giving older investors a chance not to dilute their ownership ratio. If the investor does not buy the right shares, his ownership percentage may decrease. So it is important to compare the performance and value of the company when it comes to right.

4. Bonus Share A bonus share is a reward from the company's accumulated profits in the form of shares without cash distribution. This increases the investor's share count but not an immediate increase in total assets, as the market price often adjusts. A bonus announcement is often considered a sign of a company's stable earnings and sound financial condition. 5. dividend Dividends are returns that are distributed to shareholders from the profits earned by the company. This can be in the form of cash, bonus or both. Companies that pay regular and stable dividends are considered suitable for long-term investments. But a balance is necessary as excessive dividend distribution can reduce the company's reinvestment capacity.

6. Debenture A debenture is a bond issued by a company at a fixed rate of interest. The investor lends money to the company and receives a fixed interest for a fixed period. Debentures are less risky than shares, as they have fixed income. But if the company's financial condition is weak, there may be risk, so credit rating is important. 7. Bond Bonds are usually debt instruments issued by governments or large corporations. An investor invests money for a fixed period and earns interest. Government bonds are considered the safest, but their returns are generally lower than stocks. Suitable for investors who want long-term stable income.

8. Secondary Market Shares issued through IPO or other means are bought and sold in the secondary market. Daily business in Nepal is done in this market. Here prices are determined based on supply and demand. Investor psychology, economic conditions, company performance, and news have a direct impact on prices. 9. NEPSE Index The NEPSE indicator shows overall market conditions. When it increases, it is considered a sign that the market is moving in a positive direction, while when it decreases, it indicates a negative sign. Investors should not make decisions based on the indicator alone, but it helps to understand the overall trend of the market.

10. Trading Trading is the process of buying and selling shares. In Nepal, transactions are done through an online system with the help of a broker. Active trading for short-term profits and long-term investing are two different strategies. Both involve risk and experience. 11. broker A broker is a licensed intermediary organization that helps investors buy and sell shares. Choosing a broker should consider service quality, online system, commission rate, and reliability. Transactions are possible only through brokers.

12. portfolio A portfolio is an investor's collection of all their investments. It may include shares, debentures, bonds etc. of various companies. A diversified portfolio reduces risk. Investing in only one sector can increase risk. 13. Market Capitalization The value obtained by multiplying the total number of shares and market value of a company is called market capitalization. Companies with larger capitalizations are generally more stable, while smaller companies may be more volatile.

14. Bull Market Stock prices tend to rise continuously in the bullish market. Investor confidence rises and buying pressure increases. In this situation many investors take the risk of buying at high prices, so caution is required. 15. Bear Market In a bear market, prices tend to fall. Fear and uncertainty increase among investors. But for long-term investors, this is also the time to buy a good company at a bargain price.

16. Liquidity Liquidity refers to the ease with which shares can be bought and sold. Stocks with high liquidity can be traded quickly. There is a risk of getting stuck in stocks with low liquidity, as it may be difficult to sell at the right time. 17. Volatility Volatility is a sharp fluctuation in price. Stocks with high volatility have the potential to make quick profits, but so do risks. Inexperienced investors may experience huge losses when investing in highly volatile stocks.

18. EPS (earnings per share) Earnings per share is the value obtained by dividing a company's net profit by the total number of outstanding shares. It shows how much the company is earning from each share. Companies with high earnings per share are often considered strong, but it is not appropriate to make decisions based on this alone. It should be compared with other indicators. 19. P/E Ratio (Price Earnings Ratio) This ratio shows the relationship between the share price in the market and the earnings per share of the company. A high ratio may indicate that the stock is expensive, while a low ratio may indicate that it is cheap. But its value may vary by industry, so caution should be exercised when making direct comparisons.

20. Net Worth The amount left after subtracting the total liabilities from the total assets of the company is called net assets. It is important to understand the actual financial position of the company. If the net worth is strong, the company is more likely to be stable in the long run. 21. Book Value Book value per share is the net worth of a company divided by the total number of shares. A stock may be considered expensive if the market value is significantly above the book value, and may appear cheap if it is below.

22. Paid-up Capital The actual capital collected by the company from the shareholders is called paid up capital. This is an indication of the company's size and financial base. Companies with large paid-up capital are often considered stable. 23. Authorized Capital Authorized capital is the maximum amount of shares a company can issue in the future. This shows the expansion potential of the company. 24. Issued Capital The amount of shares actually issued by the company in the market out of the authorized capital is called issued capital. This is an indication of how much capital the company has raised so far.

25. Reserve and Surplus The undistributed amount from the profits earned by the company is called reserve fund. This affects the company's future expansion, risk management and bonus distribution capabilities. 26. Circuit Breaker (Business Limit) A circuit breaker is a system that does not allow the share price to rise or fall too much in a single day. In Nepal, trading is temporarily halted if the price changes by more than a certain percentage, which protects the market from abnormal fluctuations.

27. Floor Price The floor price is the lowest price limit that a stock can fall in a day. It helps control excessive shedding. 28. Ceiling Price The maximum price a share can reach in a day is called ceiling price. It controls excessive price rise. 29. Insider Trading The act of buying and selling shares using confidential information within the company is called insider trading. This is considered illegal and spoils the transparency of the market.

30. Margin Trading The process of buying shares with a loan from a broker is called margin trading. This can increase profits but losses can also be high, so the risk is high. 31. Stop Loss A stop loss is an arrangement that automatically sells shares when a certain price is reached. This helps to avoid huge losses. 32. Take Profit The strategy of selling shares after a certain profit is reached is called take profit. It helps to control greed and secure profits.

33. Support Level A certain level at which the share price does not fall repeatedly is called a support level. Buying pressure often increases at this level. 34. Resistance Level A level at which the share price does not rise repeatedly is called a resistance level. Selling pressure is likely to increase at this point. 35. Fundamental Analysis The analysis done by studying the company's financial condition, earnings, management and future prospects is called fundamental analysis. This is very important for long-term investors.

36. Technical Analysis The method of predicting the future price of a stock by studying the past price and trading data is called technical analysis. It uses charts, indicators and trends. 37. Blue Chip Company Companies with stable earnings, good reputation and long-term reliability are called blue chip companies. These companies have low risk but moderate return potential.

38. Penny Stock Stocks that trade at extremely low prices are called penny stocks. These carry a lot of risk, as prices can fluctuate greatly.