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Basics of Stock Market

Photo by Anna Nekrashevich from Pexels

Photo by Anna Nekrashevich from Pexels

Making money through stock market fascinates so many people and most of us want to try it at once in our life. But as we all know earning money is one of the most difficult task in the world and in lack of knowledge it's more hard to earn from stock exchange and people from middle class family can't take risk to invest in stock market. However some people have been earning from stocks, so it is also possible to you but you have to know some basics of share market.

I will share some basics that will help you to understand market. But here i want to clear one thing that it is not about making money from stocks but to understand the market so you can understand the market and with the help of good understanding of stock exchange can be able to earn profit.

Share market returns are higher than other investment methods like fixed deposit, gold, etc. But still only 4% of population in India invest in stocks. So what is the reason behind this?

The answer is...

Less risk taking ability, less knowledge and the fear of frauds.

The Share Market

To know about how it works consider the supermarket. Where many companies sell their products and people go there to buy their necessary things. Share market works the same way where you can buy and sell share.

Now we can say share market is a place where companies sell their shares and investors buy it.

Stock Market Index

Index is a representative of some major companies of stock exchange. It shows the performance of these companies. In short it is a report card of major companies listed in stock exchange. Suppose you want to know many companies behaviour in recent days but don't have time to check all companies data sheet, index overcome this problem and you can guess the behaviour of all companies.

India has two main market NSE and BSE.

NSE India has its index called nifty in which 50 companies are listed.

BSE India has index called sensex in which 30 companies are listed.

Trading In Stock Market

To trade in stock market you need to open Demat and trading account. You can't buy the shares by alone, there are stock brokers who do this work. Stock broker works as a mediator between companies and buyers.

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  1. Demat Account - it works as a store room for shares where shares are transferred.
  2. Trading Account - without trading account you can't make transactions of shares.

Considerable Points To Select Stock Broker

  1. Stock Broker should possess a good image in stock market.
  2. Stock Broker office should be near by your home.
  3. The Broker should be registered with NSE and BSE.
  4. Brokerage should be well known.
  5. Online and phone trading options will be good to possess.

Benefits After Buying Shares

The important question that many people want to know that how does investor earn money through buying shares?

Investors can make money by two ways.

  1. Price Appreciation - Suppose you buy a share at 10₹. After 5 months the share price become 20₹ now if you sell the share at 20₹ you will get 10₹ profit this is called price appreciation.
  2. Dividend - It is the profit a company makes, and distribute to its shareholders. Dividend is always sent to the bank account of shareholders.

Here I want to suggest you, before going to invest in stock market understand some basic terminology that are generally used in stock exchange, like bull and bear market, dividend, etc. and understand the different types of Ratio Analysis this will help you in investing.

Some Tips

  1. Investment needs strategy.
  2. Read before investing.
  3. Decide your target and invest accordingly.
  4. Don't go for quick rich.
  5. Investigate your shares before investing.
  6. No one can buy shares at minimum price similarly no one can sell shares at maximum price.
  7. Don't put your all money in one company.
  8. Emotions are useless here in market.
  9. Buy shares for life time.
  10. You can't book profit always, accept this truth.

Here I tried to discuss some basic things of stock market that beginners need to know about. I hope this will help you to understand the Stock Market investment. I wish you luck for your new journey to make passive income. Be knowledgeable and have some faith on yourself.

© 2021 Aman prakash

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