New in the stock market? I will take you through the world of the stock market in this article. First of all, let’s know what is the stock market? The stock market is where the stock is bought and sold. The stock represents a unit of ownership of the company from which you bought it. For example, you have Rs. Have bought 10 shares of. 200 of ABC Company, then you become ABC shareholder. With this, you can sell ABC shares at any time. By investing in stocks, you can fulfill your dreams like high education, buying a car, building a home, etc. If you start investing in an early age and stay invested for a long time, the rate of return will be high. Depending on the time you need money, you can plan your investment strategy.
By purchasing shares you are investing in the company. As the company grows, your share price will also increase. You can get benefits by selling shares in the market. There are various factors that affect the price of a stock. Sometimes the price may increase and sometimes it may fall. Long-term investment will reduce the price drop.
Why does a company sell shares to the public? A company requires capital or money for its expansion, development etc. and for this reason it raises money from the public. The process by which the company issues the shares is called an Initial Public Offer (IPO). We will read more about the IPO under the primary market.
You’ve always heard people talk about bull market and bear market. What are they The bull market is where the prices of shares continue to grow and the bear market is where the prices fall. Where is the purchase-sale of all these? NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). These are the two major stock exchanges in India and regulated by SEBI (Securities and Exchange Board of India). Brokers act as an intermediary between stock exchanges and investors. Therefore, to start an investment or business, you have to open a demat account and trading account with a broker. You can easily open demat account online through simple process. After connecting your bank account with these accounts, you can start your investment journey.
Types Of Shear Market
A company or government raises money by issuing shares in the primary market through the process of IPO.
The issue can be through public or private placement.
Issue is public when shares are allocated to more than 200 persons; The issue is private when the allocation is made to less than 200 people.
The price of a stock can be based on fixed price or book building issue; The fixed price is fixed by the issuer and the proposal is mentioned in the document; Book building is where the cost of any issue is ascertained based on the demand of investors.
Shares purchased in the primary market can be sold in the secondary market. Running through secondary market counter (OTC) and exchange traded market. OTC markets are informal markets in which two parties agree on special transactions to be decided in the future.
Exchange traded markets are highly regulated. Also called as auction market, in which all transactions are made through exchange.
Why is Share Market important?
The stock market plays an important role in assisting the companies to raise capital for expansion and development. Through the IPO, companies issue shares to the public and in turn receive such funds which are used for various purposes. The company is listed on the stock exchange after the IPO and it gives the common man an opportunity to invest in the company. The company’s visibility increases as well.
You can be a trader or investor in the stock market. Traders hold stocks for a short time, while investors keep stocks for a long time. According to your financial needs, you can select the investment product.
Investors of the company can use this investment to meet their life goals. It is one of the major platforms for investment because it provides liquidity. For example, you can buy or sell shares at anytime based on need. That is, financial assets can ever be converted into cash. It provides ample opportunity to create wealth.
You know well that you can earn money by investing in stocks. The following are the ways through which your money increases.
- Capital Growth
Dividend: These are the benefits the company earns and it is distributed among the shareholders in the form of cash. It is distributed according to the number of shares you have shared.
Investment in equity / equity is appreciated by the capital. The longer the period of investment, the higher the returns. Investment in shares is also associated with risk. The appetite of your risk is based on your age, dependents and needs. If you are young and you do not have any dependents, you can invest more in equity to get more yield. But if you have dependents and commitments, you can allocate more of the money to bonds and lower equity.
The company buys back its share from investors by paying more than the market value. When stocks have huge cash or buys this stock to strengthen their ownership.