Share Market Explained For Beginners
In this Article, we will explain what stock is and what stock market is.
First, we will cite one example.
We will talk about 2 friends, Suresh and Mukesh. Both are employed in an office and both enjoy a salary of Rs. 50,000 per month.
Suresh purchased a house, a car, and other luxuries on loan and he does not have any cash to save at the end of the month.
On the other hand, Mukesh goes to office by bus instead of car and he also has spent less money for getting loans for his house.
He is able to save Rs. 25,000 every month.
Mukesh has invested the money in different places like FD, mutual funds, and stocks.
After working for 10 years, Suresh is not able to save much money, and the investments of Mukesh has multiplied on the contrary.
With this money, he has opened a business, has bought a vehicle, and so forth.
Today, we will tell you how to grow your money just like Mukesh and that will be through stock market or share market.
Some people like become confused after listening the term “stock market” and some might think whether they should go for it in case they suffer some loss.
But, if you comprehend the terms properly, there is no reason for you to be confused.
After the formation of the Security Exchange Board of India in the year 1992, lots of positive changes have been implemented. Let us make an attempt to comprehend this concept properly.
A company needs capital if it wants to expand.
It can be done in various ways, and one of these will be to obtain money from the public.
In return, it will provide the public with some shares. For this, the company has offered IPO (Initial Public Offering) to the public.
In case you have purchased some shares from the company by spending some cash, you will become the company’s shareholder.
Let us cite one example right here. Suppose a pharma company wants Rs. 10,00,000. It has issued 10,000 shares on the market of Rs. 100 each.
Suppose, you have bought 10 shares of Rs. 100 each. In this way, you have become a shareholder of that company.
When the company will grow, your share of Rs. 100 has become Rs. 150. Now, if you want to have some cash, you can sell the shares and that can be done in the share market or stock market or stock exchange.
In India, there are 2 stack exchanges, namely, Bombay Stock Exchange and National Stock Exchange.
Suppose, there is a possibility of decent rainfall during the monsoon season which will be beneficial for the fertilizer companies.
You can purchase fertilizer company shares from the stock exchange and become a shareholder.
It is a fact that when the demand of shares increases, then the rate of shares also becomes high.
On the other hand, in case the supply of shares becomes more and the demand decreases, then the price of shares will begin to fall.
Table of Contents
What is a dividend?
In case you have bought shares from a company and the company has got some additional profit, then this extra profit will be available for the shareholders which is known as dividend.
How to invest in stocks?
For this, you need not have any degrees, and this can be done through mobile apps. Demat and Trading Account is very essential if you like to buy shares.
It gets linked to your savings account and also to the 2 stock exchanges of India.
You will be able to open a Demat and Trading Account as well.
Following this, you need to choose which share to invest in.
before buying the share, make sure to verify the past performance of the company.
Try to find out what the future of the company is and also how the sales is going on right now.
When you purchase shares from a company and sell the shares within 24 hours, it is known as intraday investment.
If you keep the shares in unsold condition for a few days or a few months, we call it a short term investment.
On the other hand, if you have not sold the shares on at least 6 months, it is called long term investment.
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What not to do?
Now, we will discuss what we should not do while buying shares.
First, we like to mention that you should that amount of money in the share market that you can afford to take risk.
If you don’t want to take risks, then it will be advisable to invest your money in FD or mutual funds.
While investing in stocks, proceed slowly step by step so as to avoid huge losses.
Keep learning and training yourself all the while.
Learn how to take risks only after studying the stock market and don’t follow what other are doing blindly.
It will be a good idea to open a demat and trading account through some banks or brokers. Moreover, learn how to invest in stocks in different places which will help to minimize your risks in the long run.