If you do not even know the ABCD of the stock market, also known as share market and you are completely new to this field, then you have come to the right article. This article will serve as a guide for you, whether you are looking to trade or invest. In this article, we will cover everything that a beginner should know.
From basic information about the share market to advanced concepts, you will find everything you need in this article. If you are ready to begin your stock market journey, let’s get started.
Table of Contents
What is a share?
First of all, let us understand what a share is. Share means a part. Let us illustrate this with an example. Suppose you go out to eat pizza with your friends, a total of four people, and you all decide to order one pizza together. How much pizza will you get to eat? You will have to divide the pizza into four parts, and each person will get to eat one part of the pizza. We can say that you got one share out of four shares of the pizza. And you will also pay the bill accordingly (if you had thought of ordering for the entire group).
When you buy a share, you are purchasing a small part of that company, essentially acquiring a small ownership interest. Suppose a company issues 100,000 shares, and if you have 1,000 shares of that company, then you have a 1% stake in that company. But what’s the hope behind this investment? It’s the expectation that the company will grow in the future and will also distribute a portion of its profits to shareholders, known as dividends. Additionally, as the company grows, its valuation increases, leading to a rise in the share price. This allows you to sell your shares at a higher price and make a profit.
What is Stock Market?
The stock market is a marketplace where shares of companies are bought and sold. Just like everyday goods such as wheat, rice, flour, pulses, and sugar are traded in traditional markets, shares are exchanged in the stock market. This buying and selling process occurs through the assistance of a stock exchange. In simple terms, a stock exchange facilitates transactions between buyers and sellers, connecting them in the share market.
The stock market serves as a means for companies to raise money. Investors acquire a stake in the company by purchasing shares.
ALSO READ – What is the true purpose of the stock market?
Who are the members of the share market?
To fully understand the share market, it’s important to know who is involved in it. Many people play significant roles in this market.
- Investors: These individuals buy and sell shares of companies. Their reasons and goals for investing money may vary. They can be categorized into long-term investors, who hold shares for 4-5 years or more, and traders, who buy and sell shares for short periods.
- Stock Exchange: This is where shares are bought and sold, such as NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Stock exchanges provide the necessary infrastructure for trading or buying and selling stocks.
- Brokers: Brokers act as intermediaries between investors or traders and the stock exchange. They transmit orders from investors or traders to the exchange and provide necessary market information and services to their clients (investors).
- Regulatory Body: To protect the stock market from frauds and scams, as well as for the financial security of investors, the government establishes a regulatory body that creates rules and regulations for the market and enforces them. In India, this task is undertaken by SEBI (Securities and Exchange Board of India).
How does the stock market work?
Do you ever wonder how the process of buying and selling shares is accomplished? When you want to buy shares of a company, you place your order with a broker, who then sends your order to the exchange. The exchange matches your order with another party. This means that if you wanted to buy a stock at a particular price, the exchange would find you a deal with a seller offering it at that price, and the stock would become yours.
The price of the stock fluctuates according to the supply and demand of the shares.
Conclusion
If anyone wants to invest their money, then the share market can be a good option. However, without knowledge, anything can be dangerous and lead to significant losses. Therefore, it is crucial to have knowledge of the share market. You have come to the right website for this purpose. Stay with our website and continue to increase your knowledge.
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