We often hear people say fancy quotes and phrases while talking about the stock market. Here is a list of those popular phrases and what they mean exactly:
1. Date your stocks, don’t marry them:
This is a popular term when it comes to stock market trading. This means when you buy a stock you cannot commit to them forever. There will be a time when you need to sell it and detach yourself from it. This tip holds true for hot stocks particularly.
Whats a hot stock ? A newly issued stock that rapidly rises in price due to high demand. “Google’s stock was a hot stock when it was first available to the public, due to the success of the company and its potential for future growth.”
2. Don’t put all your eggs in one basket:
When it comes to investment decisions or any other decisions it is wise not to put all efforts and resources in one place. You should diversify them. This means when you invest, spread your investments in different places. For e.g. Do not put all money in the stock markets. Invest in the real estate, bonds, gold etc. Tomorrow if your stock market investments fail then your other investments say in gold or real estate might be doing good. Secondly even within an industry you must diversify. For e.g. buy shares of different sectors like shares in real estate sector, banking sector, agriculture sector etc. So if the banking sector is down then your other sectors might save you from losses.
3. Buy it, hold it, forget it:
This is warren buffet’s strategy. It means to buy shares of a good company and keep them with you forever, to make profits when the company grows extensively. Experts believe a buy-and-hold strategy is possible if one identifies companies that are fundamentally strong, with a potential for steady growth. Look for a good business, the presence of a great management and buy when valuations are reasonable. And, remember, you might find such good ideas only once a year or even once in two years. Read more about it here: Buy it, hold it, forget it?
4. We buy when market falls:
This means buying shares when the market is low which means prices are low. However you cannot just buy any shares when the markets are low you must check the company basics before buying shares. For e.g. If the airline market is performing badly due to political reasons then the shares of airline companies will fall. But that doesn’t mean you can buy shares of any airline company. If you would buy shares of Kingfisher airlines at such a time, it will be risky because this company isn’t performing well individually also.
5. I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful:
Warren Buffet quoted this and it means that you must be prepared to invest when markets are down and get out when they are high.
6. The individual investor should act consistently as an investor and not as a speculator:
This talks about how an an investor should base his investment decisions on real facts and analysis rather than risky, speculative forecasts because he cannot predict the future.
7. Know what you own, and know why you own it:
As an investor you must first do your homework before making a decision. And once you’ve made a decision, make sure you re-evaluate your portfolio on a timely basis. A wise holding today may not be a wise holding in the future.
Use your social stalking skills to find the best shares out there!
8. The fund took a haircut:
When the borrower of a bond – Financial instrument representing a loan taken by a company/government/ individual from the public promising to repay it back in the future with interest defaults then the value of mutual fund made up of that bond reduces. This reduction is called as a haircut.
It is expressed as a percentage. For example, if a mutual fund holding a particular government bond – is worth €1 million but is given a haircut of 20%, it means it is treated as though it has a value of only €0.8 million.
If you know any such phrases in finance and don’t understand them comment and let us know.