Today’s money is more important than earning and saving where you invest it. What is stock market? A Detailed Summary For 2020
Because if you do not know where your money is going, then it can prove to be the biggest mistake for you.
Talking about investment, Share Market or Stock Market is considered to be the biggest way of investment in the world.
So today we will know that –
What is Share Market?
How does the stock market work? And
How to Invest in Stock Market?
What is stock market?
What is Share Market
Stock Market or Share Market is where Shares, Debentures, Mutual Funds, Derivatives and other types of Securities are bought and sold.
Stocks are bought and sold through the Stock Exchange and BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) are the two main stock exchanges in India.
What are shares?
Share means “share” and in the language of the stock market, “share” means “share in companies”. When you buy shares of a company, you become a shareholder of the company.
For example, if a company has issue a total of 1 lakh shares and you have bought 10 thousand shares out of that, then you become a 10% shareholder of that company. You can sell these shares in the stock market whenever you want.
How does stock market work?
How Share Market Works
See it depends on many things, such as –
Demand and supply
Market conditions etc.
Let’s understand it simple one by one >>>
How do companies issue shares?
First of all, companies get IPO (Initial Public Offering) by listing their shares on the stock exchange and issue their shares to the public at the price fixed by them.
Once the IPO is completed, Shares enter the market and are bought and sold by investors through stock exchanges and brokers.
How do prices of shares change?
The company decides the price of shares at the time of bringing the IPO, but once the IPO is completed, the price of the shares varies depending on the Demand and Supply of the market.
This change happens on the basis of important information given by the demand and supply companies from time to time.
You can understand it like this –
If the number of people buying shares will be less than the number of people selling, then the price of shares will increase –
Buyers ^ Sellers
And if the opposite happens, that is, the number of people selling is more than those who buy, then the price will be less –
Sellers ^ Buyers
What is Sensex?
Sensex is the index of the Bombay Stock Exchange and Sensex is determined based on the market capitalization (total value of companies) of the top 30 companies listed in the BSE.
If the Sensex increases, it means that most of the companies registered in the BSE have performed well.
And similarly if the Sensex falls, it means that the performance of most companies is deteriorating.
What are nifty?
Nifty is an index of the National Stock Exchange and is determined on the basis of market capitalization of the top 50 companies listed on the NSE.
If Nifty increases then it means that companies registered in NSE have performed well and if Nifty decreases then it means that companies of NSE have performed poorly.
Other types of securities
Most people think that only the shares are bought and sold in the stock market, but this is not the case.
Like shares, there are many other securities which are traded in the stock market.
Bond | What are Debentures?
Bond / Debenture is similar to a loan.
When the company needs money for a project, either they can take a loan from the bank or they take a loan from the investors and issue bonds / debentures to the public.
Whose repayment they have to do in the given time.
Companies pay interest at the rate fixed on Bonds / Debentures and after the completion of the bond period they repay the bonds in return.
Bonds / Debenture is a Secure Investment Option for any investor compared to Shares.
Because in this interest is paid from time to time at the rate fixed by the company and repayment is done on maturity (completion of bond period).
What is Mutual Funds?
Mutual Funds are Indirect Investment in one type of Shares and Bonds.
Mutual funds are a type of institution or trust that issues its own shares (shares), which people buy and invest in mutual funds.
The invested funds are invested in a wide range of shares and other securities by the professional managers of mutual funds based on their knowledge, experience, understanding and analysis.
The Benefit of Investment in Mutual Funds is that Professional Fund Manager tries to invest all the collected funds in the best way based on their knowledge, in return they charge some fees.
What is a SIP?
SIP stands for – Systematic Investment Plan. SIPs are the only way to invest in mutual funds.
In this, a certain amount is invested in Mutual Fund every month instead of Lump Sum investment.
The bank account of the investor is linked to the SIP Scheme, so that a certain amount is transferred from the bank account to the mutual fund every month and the mutual fund units equal to that amount get into the account of the investor.
Being simple and automatic, SIPs are very popular nowadays.
What is derivatives?
Derivatives means to determine future transactions today.
Those done by Options and Futures in the Stock Market.
Under futures trading, you can execute future transactions today at a fixed price.
And the most important thing in this is that Actual Delivery is not given and Settlement is done on the basis of price difference.
How to invest in shares market?
How To Invest In Share Market
Keeping all these rules in mind, when you decide to invest in the stock market, then your next step can be to start the investment process in the stock market.
For this, first you have to open a Trading and Demat Account with a Stock Broker.
What is Demat Account?
Just as banks can deposit money in an account, similarly all securities related to your investment in Demat Account like Share, Bonds, Government Securities, Mutual Funds etc. are stored in electronic form.
What is a Trading Account?
Trading Account is used to make Share Sell and Purchase in your share business.
You can open this account with a good broker and due to the online facility, you can buy and sell shares anytime with the help of this account.
How to open a demat account?
To open a trading and demat account, it is necessary that you open your account in the Best Demat Account.
For this you need to get KYC done from your bank.
In a way, this account manages your funds, which contains all the information related to the purchase of shares and fund units etc.
You can open this account from the bank in the same way as you open a normal account from a bank.
Documents you will need to open a Demat and Trading Account >>>
- PAN Card
- Address Proof
- Income proof
- Cancel check
- 2 Passport Size Photo
While submitting all these documents, keep in mind that your name should be correctly and clearly written in all these certificates and written in the same manner.
Apart from this, while opening the account, you put a photostat copy of all these documents.
But keep your original copy with them, which can be sought for verification at any time.
While opening a Demat Account or Trading Account, you must carefully read the rules and instructions written on the papers you sign.
I hope that you have got knowledge of all the things related to what is Share Market and how it works.
If you have any questions related to this, then we can ask in the Comment Box.