Plain Language
Investing Glossary
Every piece of jargon, explained the way you'd tell a curious friend.
P/E Ratio
Price ÷ Earnings per share. How many rupees you pay for every ₹1 of annual profit. A P/E of 25 means you pay ₹25 for ₹1 of yearly earnings.
P/B Ratio
Price ÷ Book value. Compares the share price to the company's net assets on paper.
EPS
Earnings Per Share — the company's annual profit divided by its number of shares. The profit your single share 'earned'.
ROE
Return on Equity — profit as a % of shareholders' money. ROE 18% means the company earned ₹18 on every ₹100 of owners' capital.
ROCE
Return on Capital Employed — profit as a % of ALL money in the business (owners' + borrowed). The cleanest test of how well a business uses money.
OPM
Operating Profit Margin — how many paise of every rupee of sales survive as operating profit, before interest and tax.
EBITDA
Profit before interest, tax, depreciation and amortisation — a rough measure of the cash the core business generates.
D/E Ratio
Debt ÷ Equity. How much the company has borrowed for every rupee of its own. Below 1 is generally comfortable.
Interest Coverage
Operating profit ÷ interest cost. How many times over the company can pay its loan interest. Higher is safer.
Free Cash Flow
Cash from operations minus money spent on equipment/expansion. The cash truly left over — the hardest number to fake.
CFO/PAT
Operating cash flow ÷ reported profit. Near 1 means profits arrive as real cash; far below 1 is a red flag.
Market Cap
Share price × total shares — the price tag of the whole company on the market today.
Dividend Yield
Annual dividend as a % of the share price — the cash payout you receive just for holding.
Book Value
What the company would be worth on paper if it sold everything and paid all debts, per share.
EMA
Exponential Moving Average — an average price line that reacts faster to recent prices. Crossovers of short and long EMAs signal trend changes.
RSI
Relative Strength Index (0–100) — momentum gauge. Above 70 often means overbought, below 30 oversold.
Support
A price level where a falling stock has repeatedly found buyers and bounced.
Resistance
A price level where a rising stock has repeatedly met sellers and stalled.
Futures
A contract to buy/sell at a fixed price on a future date. Leveraged — gains AND losses multiply. Hedging tool first.
Options
The RIGHT (not obligation) to buy (call) or sell (put) at a set price before expiry. Premium is the price of that right.
Call Option
The right to BUY at a fixed price. Gains value when the underlying rises.
Put Option
The right to SELL at a fixed price. Gains value when the underlying falls — portfolio insurance.
Theta
How much an option loses in value every day just from time passing. Option buyers fight theta; sellers earn it.
Hedging
Taking an opposite position (often via options) to limit losses if the market moves against you — insurance, not speculation.
NAV
Net Asset Value — the per-unit price of a mutual fund, calculated daily from the value of everything it holds.
SIP
Systematic Investment Plan — investing a fixed amount every month, which averages your buying price across market ups and downs.
Expense Ratio
The annual fee a mutual fund charges, as a % of your money. Lower means more of the return stays yours.
Stop Loss
A pre-decided exit price that caps your loss on a position. Discipline written down before emotion takes over.
LTP
Last Traded Price — the price at which the most recent trade in the stock happened.
F&O
Futures & Options — the derivatives segment. SEBI's study found ~91% of individual F&O traders lose money; experience first.
EV/EBITDA
Enterprise value ÷ EBITDA. Values the whole business including its debt, so it compares a debt-heavy company with a debt-free one fairly — which P/E cannot.
PEG Ratio
P/E ÷ the earnings growth rate. A P/E of 30 on 40% growth is cheaper than a P/E of 15 on 5% growth, and PEG is what says so.
Face Value
The nominal value printed on a share, often ₹1, ₹2 or ₹10. It is an accounting figure only and has nothing to do with what the share is worth.
Working Capital
Current assets minus current liabilities — the money tied up in running the business day to day. Rising faster than sales is a warning.
Net Debt
Total borrowings minus cash in hand. A company with ₹100 Cr debt and ₹120 Cr cash is net debt-free.
Beta
How much a stock moves for every 1% the market moves. Beta 1.5 means it typically swings half again as hard — in both directions.
Volatility
How widely a price swings around its own average. High volatility is not the same as high risk of loss, but it is the risk you will feel.
Breakout
A move above a resistance level (or below support) on rising volume. Without the volume it is usually noise.
Volume
The number of shares traded in a period. It is the conviction behind a price move — a rise on thin volume convinces nobody.
Delivery Percentage
The share of the day's volume actually taken into demat accounts rather than squared off intraday. High delivery suggests real buyers, not traders.
Open Interest
The number of derivative contracts still outstanding. Rising open interest with a rising price means new money is backing the move.
Implied Volatility
The volatility the option's own price implies the market expects. Buying when IV is high means paying for movement that may never arrive.
Lot Size
The fixed number of units in one derivatives contract. You cannot buy half a lot, which is why F&O has a much higher minimum ticket than shares.
Margin
The deposit the exchange requires to hold a leveraged position. If the position moves against you, you must add more or it is closed out.
AUM
Assets Under Management — the total money a fund or manager looks after. Size brings lower costs, and sometimes less room to move in small-caps.
Exit Load
A fee the fund charges if you redeem before a stated period, usually 1% within a year. It is deducted from your redemption, not billed.
Direct Plan
The same scheme bought without a distributor, so no commission is built into the expense ratio. Usually 0.5–1% cheaper every year, forever.
Index Fund
A fund that simply holds an index in its exact proportions. No stock selection, so no manager risk — and a very low expense ratio.
Rupee Cost Averaging
The arithmetic behind a SIP: a fixed amount buys more units when prices fall and fewer when they rise, so your average cost sits below the average price.
SWP
Systematic Withdrawal Plan — a fixed amount taken out of a fund every month. The retirement-side mirror of a SIP.
Asset Allocation
How your money is split between equity, debt, gold and cash. Research consistently finds this decision matters more than which stocks you pick.
Rebalancing
Selling what has grown past its target share and buying what has lagged, to restore your allocation. It is how you sell high without predicting anything.
Diversification
Spreading money so no single company, sector or asset can sink the whole portfolio. It lowers the damage one mistake can do, not the chance of making one.
Emergency Fund
Six to twelve months of expenses kept in cash or liquid funds. Its job is to stop you selling long-term investments at the worst possible moment.
Position Sizing
Deciding how much to put into one idea before you place the order. The commonest cause of a ruined portfolio is a correct call sized far too large.
Bull Market
A sustained period of rising prices and improving sentiment. Easy to recognise afterwards, hard to distinguish from a rally while inside one.
Bear Market
A fall of roughly 20% or more from the peak, usually with worsening sentiment. Historically every one of them has ended.
Circuit Limit
The maximum a stock may move in a session before trading halts. It caps a panic, it does not cap a loss.
Stock Split
One share becomes several, and the price divides to match. Your holding is worth exactly the same the moment after as the moment before.
Bonus Issue
Free additional shares issued from reserves, with the price adjusting down. It changes the share count, not the value of what you own.
Buyback
A company buying its own shares back and extinguishing them, so each remaining share owns a larger slice of the same profits.
Record Date
The date on which the register decides who receives a dividend, bonus or split. You must already hold the share — buying on the day is too late.
LTCG
Long Term Capital Gains tax — on listed equity held beyond 12 months, charged at 12.5% on gains above the ₹1.25 lakh yearly exemption.
STCG
Short Term Capital Gains tax — on listed equity sold within 12 months, charged at 20% with no exemption slab.
STT
Securities Transaction Tax — a small levy on every exchange trade, collected by the broker. It is why frequent trading costs more than it appears to.
Demat Account
The account that holds your shares electronically with a depository. Separate from the trading account that places the orders.
Research Analyst
A SEBI-registered entity permitted to issue research reports and recommendations. An RA may not handle your money or place your trades.
SCORES
SEBI's online complaint redressal system. Any grievance against a registered intermediary can be filed there and is tracked to closure.
Now put a term to work
Educational only — not investment advice. · Trade Encore · SEBI RA INH000009269