RSPH Blogs - Finances!

  What Are Penny Stocks? What Are Penny Stocks? Penny Stocks are shares priced significantly lower than the average stock. The exact threshold varies by market: In India , stocks priced below roughly ₹100 are commonly referred to as penny stocks, though this isn't a strict official regulatory cutoff — more a widely used market convention. In the U.S. , the SEC's actual regulatory definition (under Exchange Act Rule 3a51-1) classifies any stock trading below $5 per share as a penny stock. The name comes from the idea that these shares are cheap enough to feel like they're priced in loose change — even though the actual dollar thresholds today are well above literal pennies. Should You Invest in Penny Stocks? Here's the key thing to understand: penny stocks being cheap doesn't automatically make them a good buy, and it doesn't automatically make them bad either. Both extremes are common misconceptions. Why are established companies' shares often more expe...

  What Is Short Selling? Explained in Simple Words Short selling has a reputation for sounding complicated — but the core concept is genuinely simple once you see it in action. By the end of this article, it should click. What Is Short Selling? The basic investing principle is: buy low, sell high. Short selling flips the order — you sell high first, and buy low later. Same underlying goal (profit from a price difference), just executed in reverse order. How Does Short Selling Work? When you invest through a broker (your Depository Participant , or DP), that broker holds shares of many different companies. Short selling lets you borrow shares from your broker, sell them, and buy them back later to return — profiting if the price falls in between. → Related: What Is the Share Market? (#2) — for more on DPs and how they work. A worked example: say a company's share is trading at $1,000, and you believe the price is about to fall. You don't own the share yourself, but your broke...

  How Does Rising Inflation Affect the Share Market? The share market fluctuates constantly, shaped by both economic factors and investor behavior. Today, let's dig into one specific economic factor: inflation , and how it tends to ripple through the market. A Quick Recap: What Is Inflation? Inflation refers to a general rise in the cost of goods and services over time, as the purchasing power of money declines. → Related: What Is Inflation? What Causes It? (#28) Inflation's impact on the share market flows through two main channels: companies and investors . How Inflation Affects Companies Not every company is affected equally — it largely comes down to the sector. Sectors that tend to struggle: businesses selling non-essential, higher-ticket goods — like automobiles — often see demand soften as prices rise. When a car's price climbs due to inflation, buyers are more likely to delay or skip the purchase altogether, since it's a discretionary expense rather than a ne...

  What Is Dividend Yield? What Is Dividend Yield? Dividend Yield is the percentage of a company's share price that it pays out in dividends. → Related: What Are Dividends? (#31) How Is Dividend Yield Calculated? Take the annual dividend paid per share (typically based on the past year) and divide it by the current share price. Multiply the result by 100 to express it as a percentage. Formula: Dividend Yield = (Annual Dividend Per Share ÷ Current Share Price) × 100 A Worked Example Say a company paid an annual dividend of $10 per share last year, and its current share price is $100. (10 ÷ 100) × 100 = 10% Dividend Yield = 10% That's the full calculation. In practice, real companies rarely land on such clean, round numbers — these are simplified figures purely to make the math easy to follow. That covers how dividend yield works and how to calculate it. Thanks for reading.

  What Is a Stock Split? What Are Bonus Shares? Today, let's cover three things: What is a stock split? Why do companies split their shares? What are bonus shares — and how are they actually different from a stock split? What Is a Stock Split? A stock split is exactly what it sounds like: splitting a company's share price into smaller units. Splitting the price doesn't affect the company's overall market capitalization or any other underlying fundamental — it only changes the share price and the number of outstanding shares. → Related: What Is Market Capitalization? (#43) Example: Say company ABC is worth $100,000, with 10,000 shares outstanding, each priced at $10. After six months, the share price rises to $20 — meaning the company is now worth $200,000 — while the share count is still 10,000. If ABC's board decides to split the stock 2-for-1, each existing $20 share becomes two $10 shares. The company now has 20,000 shares outstanding, each worth $10 — but...

  What Is an Economic Bubble? The 4 Stages of a Bubble We've all heard of a "bubble" in the share market — the dot-com bubble burst of 2000–2001, for instance, or the housing bubble whose collapse triggered the 2008 financial crisis, the worst since the Great Depression. → Related: The Dot Com Bubble Boom/Burst Case Study (#47) , What Is a Market Crash, a Recession & a Financial Crisis? (#19)** But what actually is a bubble, and how does it form, grow, and eventually burst? Let's walk through it. What Is a Bubble? A bubble is a condition where the prices of certain assets get pushed dramatically higher than their actual underlying value — driven by investors' overly optimistic expectations and, often, genuinely irrational behavior. The 4 Stages of a Bubble Stage 1: Excitement This is where the bubble begins to form. Investors get overly optimistic or excited about a new innovation or trend gaining rapid popularity, and start piling money into it — pushing pri...

  What Is Market Capitalization (Market Cap)? Why Is It Important? What Is Market Capitalization? Market Capitalization is, in simple terms, the total value of a company on the stock market. To calculate it, multiply the total number of outstanding shares by the current share price: Market Cap = Outstanding Shares × Current Share Price Example: if a company has 100,000 outstanding shares priced at $10 each, its market cap is: 100,000 × $10 = $1,000,000 If the share price then rises by $1 (to $11), the market cap increases accordingly: 100,000 × $11 = $1,100,000 — a $100,000 gain, matching the $1 per-share increase across all 100,000 shares. (Note: these are simplified, small numbers to keep the example clear. In reality, many companies' market caps run into the billions — even trillions — of dollars.) → Related: Who Decides the Price/Value of Shares in the Share Market? (#4) Market Cap Categories Market cap is also used to sort companies into broad size categories, w...

  What Are Bear 🐻 and Bull 🐂 Markets? What Does Bearish or Bullish Mean? You've probably heard phrases like "the market is on a bull run" or "the market is bearish today." Here's what they actually mean. The Basics Bear and Bull describe the share market's overall behavior — which, in reality, is really just describing collective investor behavior, since the market itself doesn't act on its own. Bear/Bearish = the market is down. Bull/Bullish = the market is up. → Related: What Is the Share Market? (#2) Where Do These Terms Actually Come From? This is where it gets interesting — and where the popular explanation and the actual documented history diverge. The most commonly repeated explanation is that it's about how each animal attacks: a bull lowers its head and thrusts its horns upward , while a bear swipes its paws downward . It's a memorable visual, and a lot of people (myself included, before digging into this) assume it's th...

  What Are Dividends? What Are Dividends? A Dividend is a portion of a company's profit that it shares with its shareholders. Do All Companies Pay Dividends? No — paying dividends is entirely optional for a company. And even if a company is currently paying dividends, there's no guarantee it will continue doing so indefinitely. It's a discretionary decision, not a fixed obligation. What Kind of Companies Tend to Pay Dividends? Generally, larger, more established companies pay dividends. Smaller companies and startups rarely do, since they typically prioritize reinvesting profit back into growing the business rather than distributing it to shareholders — which makes sense, given where they are in their growth stage. That's not to say large companies stop growing or expanding — they do — but they've generally already reached a scale where consistent profit-sharing with shareholders becomes a realistic option alongside continued growth. Who Decides Whether a C...

  Is Investing in the Share Market Gambling? Almost everyone has come across someone who considers investing in the share market to be no different from gambling. So let's get to the root of that claim and figure out whether it actually holds up. A Quick Recap: What Is the Share Market? The share market is where companies get listed to raise funds for expanding their business — funded by investors who buy shares of that company. → Related: What Is the Share Market? (#2) — for the full breakdown of how this works. Not every company performs equally well — some thrive, some don't; some are large, some are small. Because of that, picking which company to invest in actually matters, and that's where research comes in: looking at a company's past income reports to understand its historical performance, getting a sense of what returns might reasonably look like, and checking its debt levels. Golden Rule: Never invest in a heavily debt-driven company. The Tools Availab...

  Do You Require a Stock Broker to Invest in the Share Market? This article isn't about a DP (Depository Participant) — that's a separate topic covering banks and trading apps. → Related: What Is the Share Market? (#2) — for more on DPs and how they differ from what we're covering here. Here, "stock broker" refers specifically to a person — someone who advises investors on which stocks to pick, in exchange for a fee. This article covers the pros and cons of using one. Do You Need a Stock Broker to Start Investing? Short answer: not necessarily — it depends on your situation. If you have the time to research companies yourself and would rather not rely on someone else's judgment, you're free to invest entirely on your own — no broker required. But if you don't have the time to properly research companies and pick stocks, and you still want exposure to the share market, a broker can be a reasonable option — provided you choose someone genuinely experie...

  What Is a Market Crash, a Recession & a Financial Crisis? Understanding the Difference Crash, recession, crisis — three terms you've probably heard often, without ever getting a clear explanation of what actually separates them. Let's fix that. How a Healthy Economy Works Before understanding what goes wrong, it helps to see what "normal" looks like. In a healthy economy: Companies produce goods and services; people buy them. Companies pay employees, who spend on necessities and save/invest the rest. Businesses raise funds through the share market or bank loans to grow. Banks lend money (home loans, business loans) and earn interest — a healthy, ongoing cycle. Real estate performs steadily, and GDP grows accordingly. All of these pieces are interconnected — when they're functioning well together, that's a stable, healthy economy. A crash, recession, or crisis represents a breakdown in one or more of these connections. The Three Terms, Defined...

  How Do DPs & Stock Exchanges Earn Money? Sources of Income of These Major Financial Bodies Everyone in the share market shows up with the same basic motive: earning a profit. And that applies to the institutions running the show too — nothing operates for free. It always costs something, whether that's money or time. Depository Participants (DPs) and Stock Exchanges both play a central role in how the share market functions. Ever wondered how they themselves make money? Let's break it down. → Related: What Is the Share Market? (#2) — for more on how DPs and exchanges fit into the bigger picture. How Do DPs Make Money? If you're not familiar with the term: a Depository Participant is what you use to open a trading account — a bank, a broker, or (most commonly today) a trading app. DPs charge brokerage fees on every trade, with different rates for Intraday versus Delivery transactions. Different DPs set different pricing structures, and this fee is their primary in...

  Warren E. Buffett's Best Pieces of Advice for Investors Warren Buffett is best known for the consistently strong returns he's generated as an investor over more than seven decades. As of early 2026, his net worth sits at roughly $145–149 billion , making him one of the wealthiest people in the world — and he remains widely regarded as the most successful long-term investor of all time. Worth noting: Buffett retired as CEO of Berkshire Hathaway on December 31, 2025, handing the role to Greg Abel — a transition he'd flagged well in advance at Berkshire's 2025 shareholder meeting. He started investing at age 11, and filed his first tax return at 13. "I made my first investment at the age of eleven. I was wasting my life up until then." That quote captures how central investing has been to Buffett's entire outlook. "The most important investment you can make is in yourself." "The more you learn, the more you earn." These two,...

  How to Find the Intrinsic Value of a Share/Stock You can't really do Value Investing without calculating a share's intrinsic value — so today, let's walk through exactly how that's done. → Related: What Is Value Investing? (#13) If you've come across the formula before and found it confusing — you're not alone. I found it genuinely difficult to make sense of at first too, but it clicked once I actually walked through a real example. By the end of this article, it should click for you too. Note: the information here is based on independent research and may not be 100% accurate. Nothing here is a recommendation — anyone using this formula to make an investment decision is responsible for their own outcome. Benjamin Graham, author of The Intelligent Investor , is credited with this particular formula for estimating a share's intrinsic value. One important caveat before we start: finding a share's intrinsic value is just one part of value investin...

What Is Value Investing? Value Investing is an investment strategy that has consistently delivered strong returns for disciplined investors over the long run. It was developed by Benjamin Graham , who began shaping the philosophy through his investing career and teaching at Columbia in the 1920s, before formally codifying it in his 1934 book Security Analysis (co-written with David Dodd) — later popularized further through his 1949 book The Intelligent Investor . → Related: Warren E. Buffett's Best Pieces of Advice for Investors (#15) — Buffett studied directly under Graham and remains value investing's most famous practitioner. Think of it like a sale at a mall — when something you want goes on discount, you're inclined to grab it. Value Investing applies the same logic to stocks: it encourages buying shares that are trading at a discount to what they're actually worth. These are known as undervalued stocks . Some Key Concepts Before You Start Price vs. Value — thes...

What Are Derivatives? Know All About the 4 Types of Derivatives A Derivative is a contract typically used to limit, reduce, or avoid the risk of loss caused by market fluctuations. Definition of a Derivative A Derivative is a financial instrument that derives its value from an underlying asset. Here's a simple way to picture it: imagine an empty treasure box. The key to that box, on its own, is worth nothing. But if the box holds a million dollars in cash, the key suddenly has real value — a million dollars' worth. The key is the financial instrument; the treasure box (and what's inside) is the underlying asset. That's the essence of a derivative. There are four types of derivatives: Forwards Futures Options Swaps Forwards and Swaps are privately negotiated contracts — traded over-the-counter, directly between two parties, rather than on a public exchange. Futures and Options, by contrast, are traded on regulated exchanges. This article covers the basics of...

  What Are Options (In Derivatives)? What Is Option Trading? Basics Beyond Futures, Forex, Stocks, and Commodities, there's one more major instrument worth understanding: Options . You've likely come across the term through the common shorthand "F&O" (Futures & Options). Options have become one of the most heavily traded derivatives in the world today. Definition of a Derivative A Derivative is a financial instrument that derives its value from an underlying asset. Here's a simple way to picture it: imagine an empty treasure box. The key to that box, on its own, is worth nothing. But if that box holds a million dollars in cash, the key suddenly has real value — a million dollars' worth. The key is the financial instrument. The treasure box (and what's inside it) is the underlying asset. That's the essence of a derivative. There are four types of derivatives: Forwards Futures Options Swaps An Option derives its value from the shares of a s...

  What Are Commodity Investments? Introduction to the Commodities Market There's a lot more to trade in the markets today beyond company shares — F&O (Futures & Options) , Currencies , Bonds , and Commodities are all traded too. Today, we're covering the basics of Commodity investments. Table of Contents What Are Commodities? Definition Types of Commodities Available to Trade Commodity Exchanges How Are Commodities Actually Traded? Risk Why Invest, Despite the Risks? Have I Ever Invested in Commodities Myself? What Are Commodities? Definition Commodities are things that originate from nature — crude oil, gold, and silver, for example. They aren't artificial or man-made, and most are non-renewable resources: things that, in theory, could eventually run out or become harder to obtain. Most non-renewable resources are mined, like gold and silver. Others, like coal and petroleum, are fossil fuels — also exhaustible over time. Commodity prices fluctuate ...

  What Are Futures (In Derivatives)? Basics of Futures There's a lot more you can trade in the share market beyond just company shares — F&O (Futures & Options) , Commodities , and Currencies are all traded too. Today, we're focusing on the basics of Futures. What Is a Derivative? A Future is, at its core, a type of Derivative — so it helps to understand that term first. A Derivative is a financial instrument that derives its value from an underlying asset. Here's a simple way to picture it: imagine an empty treasure box. The key to that box, on its own, is worth nothing. But if that same box now holds a million dollars in cash, the key to it suddenly has real value — a million dollars' worth, in fact. The key is the financial instrument. The cash inside the box is the underlying asset. The key's value comes entirely from what it unlocks — that's the essence of a derivative. There are four types of derivatives: Forwards Futures Options Sw...