Investing is the proper allocation of ...............................................saving. Saving is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal amount(the amount you start out with) and less concerned with return.

Where as in investing your focus is on return and can run the spectrum from conservative to very aggressive in terms of risk. Here you measure the results by the expected return weighed against the anticipated risks.

Risk is part of investing. It is the price you pay for a potential reward. The greater the risk, the greater will be your potential reward. This land will allow you to face both the risks and gain. Both risk and gain will go hand in hand. In case if investor thinks gain is a good thing and risk is a bad thing he is not a right person in staying in this field. Every investor needs to find the level of risk that is comfortable, but is enough of a reach to achieve their goals. Investors need to correctly identify the risk of a particular stock so they can determine if the potential reward is worth the chance of loss. Without any risk, investments often return very little. So the trade off is safety and low return or risk and potentially higher returns.

A stock represents a unit of ownership in a company. There are two types of stocks. The stock bought on the open market is "common" stock and carries the right to vote on important matters of the company, including who serves on the board of directors. The other is preferred stocks where you have no voting right but preferential right to dividend over common stock holders.

The two types of stock are:

# Common

# Preferred

Common stock has voting rights (one per share) on important company issues and may receive dividends.

Preferred stock usually has no voting rights, but is first in line for dividends and first call on assets if the company is dissolved. Investors buy preferred stock for the dividend income.

Stock Index indicates the change in the value of a set of stocks, over a base year; which constitute the index.

Any Index is an average of its constituents. For example, the BSE Sensex is a weighted average of prices of 30 selected stocks and S&P CNX Nifty of 50 selected stocks, where the weight is the market capitalization of their individual stocks.

The day-to-day maintenance of the index is done by the exchange and special care is taken to include only those scrips which pass through several filters. In April 1998, the Governing Board of the Exchange has set up an Index Committee. The present index committee has 17 experts which includes representatives from members of the Exchange, FIIs, FIs, academicians, financial analysts and representatives of user-groups.

Stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used to benchmark the performance of portfolios. Broad based index is geared to provide overall picture of stock market movements. Examples of these indexes are S&P 500, BSE sensex etc

In addition, specialized Indexes, like sector specific ones, track the performance of individual sectors. Similarly different types of Indexes can be created depending on the companies included in the set.

For actively traded stocks, the price is set by supply and demand. If there are more buyers than sellers for a particular stock, the price will rise. If there are more sellers than buyers, the price will fall.

Economic, political, or natural disaster events may influence whether there will be more buyers or sellers for a particular stock. If the events are significant, they may affect the entire market and move it up or down.

Technical Analysis is the science of recording, in geographical form, the actual history of trading in a certain stock or in the averages and then deducing from that pictured history the probable future trend.

Simply, Technical Analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future trends. It is an art of identifying trend changes at an early stage and to maintain an investment posture until the weight of evidence indicates that trend has reversed.

A derivative is an instrument whose value is derived from the value of one or more underlying, which can be commodities, precious metals, currency, bonds, stocks, stocks indices, etc. Four most common examples of derivative instruments are Forwards, Futures, Options and Swaps.