What is Stock Market or Share Market | Basics of Share Market
In this article, I will explain to you the Basics of Share Market let’s start with What is Stock Market or Share Market
Every adult life is about two things,
Dreams like buy your house, studying abroad, traveling the world, starting off a business, etc. and
Responsibilities like paying monthly expenses, medical bills, marriage, kids, inflation, etc..and a 9 to 7 job will barely meet your responsibilities forget about your dreams and
The problem is your landlord wants a raise, your maid wants a raise and what’s your favorite influencer what you do buy the T-Shirts but your salary is only not increasing.
No matter how hard you work, so now the only option you have left is to become not a robber but investing smartly.
If you invest in an FD how much returns do you get 5 to 7% max but if you invest in a good company then stock markets will give you return 14 to 20% and this percentage is the difference between a comfortable life and a life where you struggle to make ends meet.
Now the reason why the stock market gives such high returns is because it takes your money and it creates more money.
Here I tell you how but before that you should know
What is Stock Market or Share Market
Definition: The Stock Market is a place where you can buy, sell, and trade stocks any weekdays. It’s also called a stock exchange.
Let me quickly explain to you a few concepts that you need to know before you understand what a stock market.
Basics of Share Market #1.Share
A Share is a unit that represents part ownership of a company.
When you buy shares of companies like Reliance, Asian Paints, Infosys then you are becoming a part owner of that company
It might be 0.00001% ownership but still, you become a part owner, this a good thing and a bad thing. Good thing because tomorrow if the company performs well and it’s stock prices increase then the price of your stocks will also go up.
Let me explain
Let’s assume that the price of 1 share of Infosys is 1000 rupees
Suppose you want to buy 10 shares of Infosys, so you pay 10 x 1000 = 10000 rupees from your pocket and in return, you get 10 shares of Infosys in your account, very good.
Now suppose after few months because of some profits Infosys made or some news in the economy the share price of Infosys goes up from 1000 to 1500, which means that even though you invested 10000 rupees now you are 10 shares are worth 10 x 1500 = 15000, which is great because even though the companies working you are getting paid.
It is a bad thing also because suppose if tomorrow Infosys does not do that well and its share price decreases from 1000 rupees to 900 rupees then your shares are now worth 10 x 900 = 9000 rupees.
So when you are buying the shares of a company not only are you sharing the Goodwill but you are also sharing with risk with that company.
Hence proved If you want to make money in the stock market we should not make any rash decision you should learn how to
- Identify good company
- Reduce your risk and
- Invest long term
Basics of Share Market #2.NSE & BSE
National Stock Exchange & Bombay Stock Exchange
The stock market is just like your provision store where you buy your monthly ration
People, who want to buy and sell stocks of companies go to a stock market get it?
In India the National Stock Exchange which has around 1600 company listed and the Bombay Stock Exchange which has around 5,000 company listed form the stock market but remember you cannot physically go to a stock market you can only access it electronically through your computer, laptop and phone with the help of registered Intermediary called the stockbroker.
Basics of Share Market #3.SEBI
Securities & Exchange Board of India
See where ever there is money they will be thieves, so the job of SEBI is to make sure the people like you and me are not cheated in the market.
If anybody does not follow these rules or is involved in some mall practice activity the SEBI flags them down.
Basics of Share Market #4.Demat & Trading Account
To do a transaction in the stock market you need two types of accounts,
- Trading Account
- Demat Account
Trading Account is used to place buy and sell orders in the stock market.
Whenever you want to buy some stocks then that amount is debited from your Trading Account
Similarly when you have to sell shares then that amount is also transferred back to your Trading Account.
After you buy your shares where are they kept, for that, we need a Demat Account which acts as a digital wallet where your shares are stored
So Trading Account is for money and Demat Account is for shares, understood?
Basics of Share Market #5.Stock Market Broker
As I discussed earlier, if you want to do any transaction in the stock market you need to do it through a stockbroker.
Stockbrokers are like your stock market best friends because
- They help you set up your Trading & Demat Account
- They will provide you with the trading terminal either through a website or an app that will help you to see what’s happening in the market.
- They will give you tips or tools to help you decide which shares to buy and when to sell and for doing all this they charge some fees from you call the brokerage.
Now all the stockbrokers operate under the SEBI guidelines
You need to pick the best stock broker depending on how many people use it how popular that stockbroker is, who provides the best tools, who charges the least fees.
In the next article, I will give a brief idea on How Stock Market Works.