The notion that most people are aware of the various terms surrounding the stock market is a safe assumption. It’s also safe to assume that most people don’t know the first thing about stocks or the market, given the confusing nature of the subject.
It’s never too late to learn however. The absolute best thing about getting into the game at this point is the sheer number of opportunities available to you. People used to only speak about the U.S. and the stock opportunities over there. But now, it’s such a diverse market that you have a shot at success all over the globe, including markets like India and its National Stock Exchange.
This article will run through a basic guide to various stock jargon terms. If you’re thinking about investing some cash, or are just interested in learning more, the following information may be useful to you.
Stock market jargon
You may have seen the terms ‘futures’ and ‘shares’ in conjunction with many stock market articles. While there is a lot to take in, most of it is a really simple process that just appears complex from the outside. Most stock processes come down to the purchasing of shares or products.
Trading or buying stocks is done in order to ‘own’ a small portion of that particular company. You can do this through an online broker, over the phone, or in person. Your purchase is then ran through a ‘stock exchange,’ such as the New York Exchange or the aforementioned Indian NSE. You won’t have any particular say in the running of that company, you’ll just own a small part of it. If that company becomes more and more valuable, the value of your shares will increase.
Futures are similar, but just a little different. They’re similar in the respect that you can buy them over the phone or online, buying or selling ‘futures contracts’ with a broker. This order is then ran through a different exchange, called a commodity exchange. It’s almost identical to how the stock purchase is facilitated through a stock exchange.
That’s where the similarities end. While buying a stock will give you part ownership in a company, buying a futures contract will not. For example, buying a Dow Jones futures contract is a lot different than buying stock in that company. The contract simply means that you are obligated to purchase a particular commodity at a future date. All the details are outlined in the futures contract, making it simply that; a contract.
This commodity could be anything. Milk, crops, selfie sticks, it’s all relative. It depends on the particular company with which you entered into the contract. Commodity exchange is quite risky, as the price of that commodity could rise and fall at a later date.
Stock exchange vs. stock market
This one can be a little confusing, but it’s misinterpreted confusion. A stock market is typically defined as ‘where you buy or sell stocks’. A stock exchange usually refers to the organisation that offers the trading opportunity. Many people, however, would consider the two terms synonymous, and there really isn’t much of a difference between them.
Stocks are a complex subject, but they’re quite easy to get involved with. As previously mentioned, you can trade online, meaning that everyone can jump in with some cash. Don’t be frivolous, though. Carefully look at what you’re spending that cash on and what the ramifications will be.