FINANCE

FAQs On Financial Market

FAQs on Stock Market, investing and trading
What is paper trading?
  1. Trading stocks with a fake account or with fake money.
  2. A way to practice before doing live trading.

Another form of paper trading is virtual trading in which the investor's portfolio is monitored by computer software.

What is a dividend?

A Dividend is a portion of a company's profits paid out to the company's shareholders. Not every company pays a dividend, but those that do often have slow, reliable growth Further readings...

How & why do companies pay dividends?
  • A dividend is a portion of a company's profit paid out to the company's shareholders.
  • The dividend is not guaranteed. They're at the discretion of the board of directors (except to preference shareholders).
  • The dividend received by a shareholder is an income of the shareholder and is taxable.
WHY DO COMPANIES PAY DIVIDENDS?
  • Maintain long-term trust within investors.
  • Reward to the investors.
  • Indication of the company's financial well-being.
Read more
What is a Stock Buyback?

When a company purchases its own share on the secondary market, is called a Stock Buyback.

Is The Cryptocurrency Open On Weekends?

Yes, cryptocurrencies are trading 24/7. Cryptocurrency and virtual currency both are different entities. It should not be confused with virtual money.

What kinds of stocks should I stay away from?

Investing in companies with low liquidity is a bad idea. What do you do if the price of your stock is continuously falling and you want to sell your stock, but can't find any buyers due to its low liquidity.
Moreover, for beginners - you should avoid trading in penny stock as their price can be easily manipulated.

What are the different sectors of the financial market?
  • Healthcare Sector
  • Materials Sector
  • Real Estate Sector
  • Consumer Staples Sector
  • Consumer Discretionary Sector
  • Utilities Sector
  • Energy Sector
  • Industrials Sector
  • Consumer Services Sector
  • Financials Sector
  • Technology Sector
Saving vs Demat vs Trading account

Saving account: The purpose of a Saving account is to store the money.

Demat account: The purpose of the Demat account is to store the shares or other assets.

Trading account: The trading account is the account through which shares or other assets are bought and sold.

What is the fundamental concept of an index?

Every stock price fluctuates due to one of two factors: company news ( e.g merger, P/L report) or country news (e.g budget announcement, inflation). An index can act as a "mirror image" for the second part (i.e country news).
An index can help to interpret the overall sentiment of an economy.

Is it possible to short penny stocks?

Yes, penny stocks can be traded short, but not all brokerage firms allow short trading on stocks with a market value of less than $5 per share.

What is a Power of Attorney (PoA)?

A power of attorney is a legal document that allows you to act on behalf of another person.

Is PoA compulsory to participate in the stock market/ derivatives?

Not required. It is not a mandatory document.

Can you cancel the PoA given?

Whenever you want. Please double-check if your right to cancel is included in the POA.

World's first electronic stock exchange?

NASDAQ

What is your beta?

By calculating beta, you can determine the stock's volatility and systematic risk. High beta stocks are riskier but have a greater return, and low beta stocks have a lower risk but lower return. Let's assume a company's beta is three. This indicates that it is three times more volatile than the broader market.
So respond to the question based on how "risky" you believe you are!

What exactly is insider trading, and why is it prohibited?

Insider trading is the buying or selling of a company's stock by someone who has material information of the stock that is not public information.

This information can be anything like a quarterly result, a project failure, etc. You cannot take any trades based on information that hasn't been released to the public yet.

An insider is a director , senior officers , promoters of the company or anyone owing more than 10% of the voting shares of a company.
Every country has there regulatory authority to prevent insiders from engaging in insider trading.

Every country has there regularty authority to prevent insiders from engaging in insider trading.

Who enforces insider trading rules in :
  • USA - Securities and Exchange Commission (SEC)
  • JAPAN - Securities and Exchange Surveillance Commission (SESC)
  • INDIA - Securities Exchange Board of India (SEBI)
  • CHINA - China Securities Regulatory Commission (CSRC)
  • Australia - Australian Securities and Investments Commission (ASIC)