Stock Market, Share Market or Equity Market all these are same in markets where you can buy or sell a company’s shares, buying shares of a company means buying some percentage of ownership of that company, you become the holder of a percentage of that company, If that company makes a profit, some percentage of that profit would also be given to you If that company incurs a loss a percentage of that the loss would also be borne by you.
For example, you have 20,000 rupees, but that’s not enough So, you go to your friend and tell him to invest another 20,000 rupees and offer him a 50-50 partnership whatever your company profits in the future, 50% of it would be yours and 50% of your friend’s In this case, you have given 50% of the shares to your friend in this company. The same thing happens in the stock market but on a large scale The only difference being instead of going to your friend, you go to the entire world and invite them to buy shares in your company.
The origin of share markets dates to around 400 years ago Around the 1600s, there was a British East India Company, known as the Dutch East India company In those times, people used to indulge in a lot of explorations using ships, and The entire world map had not yet been discovered So the companies used to send their ships to discover new lands and trade with faraway places, The journey used to be of over thousands of kilometers aboard a ship, There was a huge amount of money required for this is not one person possessed such amounts of money individually in those times So, they publicly invited people to invest money in their ships when these ships would travel long distances to go to other lands, and come back with treasures from there they were promised a share of these treasures/money eventually, but this was a very risky affair because during those times more than half of the ships failed to come to back they got lost or broke down or got looted. Anything could happen to them So, investors realized the risky nature then instead of investing in a single ship, they preferred to invest in different 3-4 ships thereafter at least one of them had chances of coming back one ship used to approach multiple investors for money this created somewhat of a share market.
Learn How to Start SHARE MARKET and How does it work?
Each country has its stock exchange and every country has become greatly dependent upon the stock market, Every big country has its stock exchange. There are two popular stock exchanges in India one is the Bombay Stock Exchange (BSE) which has around 5400, registered companies and the other is the National Stock Exchange (NSE) that has 1700 registered companies with so many countries registered in the stock exchange.
Share Market can be divided into two types
The primary market is where the companies sell their shares the companies to decide what exactly would be their share prices while there are some regulations the companies cannot change too much because a lot of it depends upon the demand how much price is the people are putting to pay for the company’s shares. If the value of the company is one lakh rupees, it sells one lakh of its shares and offers shares at one rupee per share or if its demand is high and a lot of people want to buy its shares, the company would obviously be able to sell its shares for a higher price what the companies do nowadays is decided upon a range.
There is a minimum price, and a maximum price they decide to sell their shares that range that every share of the company has equal value it is upon the company to decide how many of its shares. If the total value of the company is One lakh, then it may make One lakh shares of One Rupee each, or it may make Two lakh shares of 50 paise each. When companies sell their shares in the share market, it never sells 100% of them the owner always retains the majority of the shares to keep possession of his decision-making power. If you sell all the shares, then all the buyers of the shares would become owners of the company, Since they all become owners, they all can make decisions regarding that company an individual who has more than 50% of the shares would be able to make decisions regarding the company, therefore, the founders of the company prefer to retain more than 50% of the shares.
For example, 60% of the shares of Facebook are retained by Mark Zuckerberg The people who have bought shares of the company can sell it to other people, and this is called the Secondary Market where people buy and sell shares amongst themselves and trade in shares the Primary Market, the companies set the prices of their shares. The companies cannot control the prices of their shares in the secondary market and the prices of the shares fluctuate depending upon the demand and supply.
SHARE MARKET? It’s Easy If You Do It Smart
To measure this, some measurements have been put in place Sensex and Nifty Sensex shows the average the trend of the top thirty companies of the Bombay Stock Exchange (BSE) averaging out, whether the shares of the companies are moving up or down the full form of Sensex is the Sensitivity Index, displays the same The number of Sensex, that it has reached 40,000, marks The number itself means not a lot the value of this number can be understood only upon comparison with the past numbers. Because this number has been randomly decided and they decided at the start that the values of the shares of the thirty companies would be this. There is another similar index NIFTY– National + Fifty Nifty shows the price fluctuations of the shares of top 50 companies listed on the National Stock Exchange (NSE), If a company wants to sell its shares on the stock exchange, then this is termed as “Public Listing” If a company is selling its shares for the first time, then it is called IPO Initial Public Offering means offering the shares to the public for the first time.
This procedure is very long and complicated. Because think about it, how easy it is to scam the people anyone could get listed on the stock exchange with a fake company, and exaggerate the value and achievements of its company. They could lie to the people, and the people would foolishly invest in his company and then could abscond with the money So, it has become straight forward to scam somebody. In India in its history, it has been a witness to a lot of scams like Harshad Mehta scam Satyam scam, they were all the same fooling the people and getting themselves listed on the stock exchange. Collecting the money and then absconding, so as and when these scams happened, the stock exchanges realized that they need to make their procedures stronger and scam proof.
For this, the resolutions rules were made stronger due to which there are very complicated rules today SEBI- Security And Exchange Board of India is a regulatory body that looks into issues like which companies should be listed on the stock exchange and whether it is being done in the proper manner or not If you want to do this then you would have to fulfill the norms of SEBI. Their norms are very strict, for example, there need to be a lot of checks and balances on the accounting of your company at least two auditors must have had checked your company’s accounting this entire process may take around three years. More than 50 shareholders should be represented in the company if you want a company to be publicly listed when you go to sell their shares, but there’s no demand for it amongst people then SEBI can remove your company from the stock market list.
Tips for SHARE MARKET Success and How can you invest money in the stock markets?
Before the dawn of the internet, one had to physically go to the Bombay Stock Exchange building to do this, however now for Share market investment you need following things
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A bank account because you would need your money and trading account to allow you to trade, and invest money in a company A DEMAT account to store the stocks that you buy in a digital form Most of the banks today have started offering a 3 in 1 account with all three accounts encompassed within your bank account. People like us would be called retail investors, that is, common people who want to invest in the stock market, A retail investor always requires a broker is someone who brings together the buyer and seller for us, our brokers could be our banks, a third-party app or even a platform When we invest money through brokers in the stock market, a broker retains some money as his commission. This is called “brokerage rate” Banks mostly charge a brokerage rate of around 1% but it’s a little high. That’s not how much it should be if you look properly, you would discover platforms that charge a brokerage rate of around 0. 05% or 0. 1%. This brokerage rate is a disadvantage for those who want to indulge in a lot of tradings of stocks. If a lot of stocks are bought and sold in a day, a lot of money would be siphoned off as brokerage fee but if you want to invest for the long-term, then a high brokerage rate wouldn’t make a lot of differences because you pay it only once, So, investing and trading are two different things Investing means putting in some amounts of money in the stock market and letting it stay there for some time.
Trading means quickly putting in money at different places and withdrawing from some places. This all happens in quick succession In fact trading of shares is a job in itself there are a lot of people in our country who are traders and do this job all day long taking out money from one share and putting it in another taking out from one place, putting it in another and earning profit in the process.
Avoid these mistakes while investing in SHARE MARKET
An important question that arises is whether you should invest money in the share markets? A lot of people compare it with gambling because of risks is involved in it, because if you are not aware of the type of the company and its performance, the parameters of the company and its financial record if you don’t observe its history and accounting information then, in a way, this is like to gambling because you would have no idea of how the company would perform in the future you just listen to people saying that the company is doing well, and we should invest in it in the share market, so that’s why you invest in it you should never do this because it is extremely risky and obviously, when there are people that do this job day in and day out, for examples the traders, who are experts in this field and have more knowledge about the stock market they obviously would outperform the others because they have an idea of how this all works, So you should never directly invest in the share market.
A very competent form of it is mutual funds because in Mutual Funds you don’t directly decide which companies you would invest in mutual funds, you place your trust in experts and let the experts decide which companies to invest in fact a lot of mutual funds invest in many companies to minimize the chances of loss. Read More about Mutual Funds