Basics Of Share Market
We often come across terms like shares. Stock market and phrases like ‘the stock market is up and ‘investment in stocks’.
But how many of us know what these really mean. Sure, you’re likely to be bombarded with these terms if you turn on a business channel.
But many continue to have either little or no certain knowledge about them. Or even worse, sometimes it’s false and misleading information.
Our schools and colleges don’t teach us about investment and financial planning.
First Adviser is the Best SEBI Registered Stock Advisory Company in India. We have an expert team who provides basics of share market to our clients.
Basics Of Share Market
But this is what really matters once you’re out there in the dog-eat-dog world. The share market is a platform where shares/stocks are sold or traded.
However it’s not just shared, but even bonds. Mutual funds and derivative contracts that will be trading in this market.
Again, it is classified into two types – the Primary and Secondary stock market. When a company registers itself for the first time to sell its shares and raise funds.
It enters the primary market. This is called the Initial Public Offering or IPO. After which the company becomes public and trades in public.
The secondary market is the market where already listed companies trade/sells stocks. An investor buys shares in the secondary market at its current price.
It also offers the investor an opportunity to sell all its shares and exit the market.
Types of Shares And Its Illegibility
Shares can be classified into Equity and Preference shares. These differ in terms of power given to shareholders:
- Equity shares give the shareholders the power to share the profit in the company as well as a vote in the Annual General Meetings’ of the company.
- Such a holder has to share the profits of the company or inversely bear any losses incurred by the company.
- Preference shares only give a fixed amount – dividends, from the earnings of the company and usually gives no voting power to holders.
There are several ambiguities to the terms shares, stocks and equities and what they do.
There isn’t much difference between these terms other than the context in which it is used.
When someone says “stocks” it is to denote the ownership certificate of any company.
In general and if they say “share” it denotes the same to a particular company.
Equity, on the other hand, refers to the stock/shares held in a company in its various forms like private equity and so on.
What is a Share Market
The stocks will be issues can trade by the investors in the secondary market. This is where most of the trading happens.
In this market, buyers and sellers gather to conduct transactions to make profits or cut losses.
However, there are thousands of investors and in order to extend its coverage. We have stock brokers who act as intermediaries. They send the order to the exchange.
The exchange finds a seller. After which the confirmation is sent back to the broker and the broker finally debits/credits your accounts. As and when trades will be conducts, shares prices change.
This is because prices of shares – like any other goods – are dependent on the perceived value.
This shows is the rise or fall of demand for the stock. As demand for the stock increases, there are more buy orders.
How Does the Stock Market Work
To many people, the stock market sounds like a scary. This entity cannot understand.
But here’s some basic knowledge that might change that perception. Companies list themselves either in the primary or secondary market to raise funds or capital.
The company will give details about its business, financial status and the issue stocks (IPO).
This almost seems like placing an order in Flipkart and Myntra. Well, that’s the basic process for you.
The stock market might seem like a complicated avenue at first. However, it is necessary to know what it is and how it works.
As all of us have a common goal of successful financial planning. Investing in the share market might seem less of a risk when you understand what it is all about.
When you trade in a stock market the prices of the stock changes. As the stock prices are dependent on the perceived value of the stock i.e. company.
What is an Equity investment
So when you see the stock price of a company rise, it indicates someone. Or many investors, are placing buy orders for that stock.
However, there are many market forces at play that impact the movement of a stock.
This is just one of the ways in which you make money investing in stocks. The percentage increase in the stock price after you bought.
It will reflect the same percentage of increase in your capital invested and vice-versa.
Another way in which you can make money through the stock market is when the company. In which you bought stocks, issues bonus shares or dividends.
A bonus issue is usually based upon the number of shares that shareholders already own.
Equity in general terms is the degree to which you own an asset. After all the debts with that particular asset are always pay off.
So when you buy shares of a company, you are doing an equity investment in that company. In this section, we will go into the details of equity.
Equity investment, advantages of equity investment and, how to invest in equities.