Fear Financial Jargon?

Fear not.

Regardless of your profession, whether you’re a doctor, chef, engineer, programmer, or shopkeeper, a basic understanding of finances is essential. This knowledge helps you become more aware, ask the right questions, and avoid falling into traps or getting carried away by advertisements. Unfortunately, many of us tend to put off or skip financial education, thinking it’s too vague or complex. But finance can also be enjoyable, and prioritizing financial literacy today can lead to a stress-free and harmonious future.

For example, most of us have invested in stocks, but how often have we taken the time to understand the information provided when placing an order? We typically focus on just a few fields: price, quantity to order, select market, and hit submit. However, there’s a lot more to stocks. Your broker or trading platform offers a wealth of information, including trends, high and low prices, trading circuits, and company-specific data. Then there’s the financial jargon.

In this article, we’ll demystify some of the jargon you often find under the fundamentals section of your trading platform. Here are some common terms:

• 52W High: The highest share price in the past year.
• 52W Low: The lowest share price in the past year.
• 1M and 1Y Return: These percentages indicate how much the share price has risen or fallen in the past month and year. It gives you insight into the direction the stock is heading.
• Market Capitalization: This measure helps assess the company’s size. It’s the total value of the company’s outstanding shares, calculated by multiplying the total number of shares outstanding by the current share price.

Now, let’s delve into a common stock analysis ratio:

• The PE (Price-to-Earnings) ratio
  This ratio tells you the price you would pay for each dollar or rupee of earnings. To calculate it, simply divide the current share price by earnings per share (EPS).You might be wondering, what exactly constitutes a good PE ratio? Well, it’s a bit tricky, as it depends on factors like the current market condition, industry average, and industry performance. There’s more to the PE ratio, but I don’t want to overload you with information just yet.

So here’s a task for you: open your trading or brokerage platforms and take a look at the terms you may have ignored in the past. You’ll find that a couple of them are no longer jargon, right? Happy investing, and always make sure you understand what you’re getting into, especially the less-talked-about aspect – the risk.

-by Jayapratha Kannan.