Today we will talk about what is a stock market and how does it work and how can we use it to stay tuned for yourself with this post as we are going to talk about all the things related to the stock market in this post.
What is the Stock Market?
Stock Market also known as equity market or stock exchange. It is market place where people buy and sell stocks or shares of publicly listed companies. It works as a financial system or platform for companies to raise working capital by selling their stakes in the company to the investors.
Stocks are purchased and sold through the Stock Exchange and BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) are India’s two major stock exchanges.
Key terms related to Stock Market:
- Stocks
- Bonds
- Debentures
- Investment Funds
- Futures
- Capital Market
What is Stock?
We can call stock a part or share of the company. When you purchase or invest in a stock you become shareholder of the company.
For example, if a company issues a total of one million shares, and you buy 1,00,000 of these shares, you become a shareholder in the company, owning 10 percent of it. If you want, you can sell these shares on the stock exchange.
How Stock market works?
How a stock market works depends on how the stock market works. We will learn about all things one by one. Below are listed few things that everyone should keep in mind:
- Listed Companies
- Shareholder
- Demand and supply
- Market situation
We will understand things related to this in very simple language.
How do companies issue shares?
First of all, companies get their shares listed on the stock exchange. IPO means (Initial Public Offering) and brings their shares in the market for the customer according to their value.
Once the IPO is completed, the brokers contact the companies to buy the shares and sell and buy the shares in the market.
How the share price increasing and decreasing?
First of all, companies get their shares listed on the stock exchange. IPO means (Initial Public Offering) and brings their shares in the market for the customer according to their value.
Shares are decided by the company at the time of IPO, but once the IPO is completed, the value of the shares becomes dependent on the market and is in the market like losses and profits accordingly.
I tell you like
- If the number of people selling shares is more than those who buy, then the share price will be lower.
- If the number of people selling shares is less than the number of buyers, then the share price will be higher.
I hope you understand what we are trying to convey
What is Sensex?
The SENSEX is the index of the Bombay Stock Exchange and the SENSEX is selected based on the market capitalization (full value of the companies) of the top 30 companies in the BSE.
If the Sensex increases, then it means that all the companies that are holding in the BSE mean that they are good performers in the market.
If the value of the Sensex is low, then whatever company is registered in the BSE, they have made a poor assessment.
What is Nifty?
Nifty is an index of a National Stock Exchange and it is determined on the basis of market capitalization of the top 50 companies in the NSE.
If the Nifty increases, then it means that all the companies that are holding in the BSE mean that they are good performers in the market.
If the value of the Nifty is low, then whatever company is registered in the BSE, they have made a poor assessment.
Different Types of Securities
Most people think that only the shares are bought and sold in the stock market, but this is not the case. There are many other securities like shares that are traded in the stock market.
What are Bonds/Debentures?
In a way, we can call things like bonds and debentures as loans.
In a way we can call things like bonds and debentures as When any company needs money for a project, they can apply for the loan from the bank or they take a loan from the public and give bonds/debentures company to the public for proof that the public money in the company Invest them, they get these bonds / Debentures. The company has to pay money to the invested public on time.
Companies pay interest at a fixed rate on bonds/debentures and when the bond expires, the investor pays back the money in exchange for bonds.
Bonds / Debentures is a much safer investment compared to shares. Because the time of interest is fixed by the company and the investor gets interest from the time. When the time of the bonds/debentures is completed, the company has to return their money to the investor.
What is Mutual Funds?
Mutual funds means an indirect investment in shares and bonds. Mutual funds are a type of organization or membership that issues its units in the Shares market, which is bought and used in the mutual fund.
The invested funds are invested in a variety of stocks and other securities via the expert managers of mutual funds based totally on their knowledge, experience, expertise, and analysis.
The Benefit of Investment in Mutual Funds is that Professional Fund Manager tries to invest all the accrued funds in the best manner based totally on their knowledge, in return, they price a few fees.
What is SIP?
SIP stands for – Systematic Investment Plan. SIPs are the only manner to put money into mutual funds.
In this, an explicit quantity is invested with an investment firm monthly rather than payment investment.
The investor’s bank account is connected to the SIP system, meaning that a certain sum is transferred from the bank account to the mutual fund each month and the mutual fund units equivalent to that sum are credited to the investor’s account.
Today, SIP is really common because it is easy and magical.
What are derivatives?
Derivatives today requires predicting potential trades.
Those executed via Options and Futures within the Stock Market.
Under futures commercialism, you’ll execute future transactions these days at a set worth.
The most vital factor during this is that Actual Delivery isn’t given and Settlement is completed on the premise of worth distinction.
How to invest in Share market?
Keeping of these rules in mind, after you arrange to invest within the stock exchange, then your next step is also to start out the investment method within the stock exchange.
For this, initial you have got to open a commerce and Demat Account with a Stock Broker.
What is the Demat Account?
Just as banks will deposit cash in an account, equally all securities associated with your investment in Demat Account like Share, Bonds, Government Securities, Mutual Funds, etc. are kept in electronic kind.
What is the Trading Account?
Trading Account is employed to create Share Sell and get in your share business.
You can open this account with a decent broker and thanks to the web facility, you’ll be able to purchase and sell shares anytime with the assistance of this account.
How to open a Demat account?
To open a commercialism and Demat account, it’s necessary that you simply open your account within the Best Demat Account.
For this, you need to get KYC completed from your bank.
In a way, this account manages your funds, which contains all the knowledge associated with the acquisition of shares and fund units, etc.
You can open this account from the bank within the same means as you open a standard account from a bank.
Documents to access your Demat and Trade Account
- Pan card
- Passport Size Photo
- Address Proof
- Income Proof
- Cancel Cheque
When presenting all of these forms, bear in mind that in both of these qualifications the name will be written properly and simply and in the same way.
After this, you placed a backup of all these records in a photostat before you open the account.
But hold your initial copy with them, which can be reviewed at any time.
Once you open a Demat Account or Trading Account, you will read closely the rules and directions that are printed on the documents you sign.
You can Try Groww for trading and investing in share market.
Conclusion
I hope you know all the things relevant to what Share Market is, and how it operates. If you have any concerns about this, then we may ask you in the Comment Section.
