What is share market / stock market ? Share market kya hai ! learn more about share market?

Introduction 

New to the stock market? In this article i  will take you through the world of share market.So let’s start through,what is Share Market?

What is the Share Market? 

Types of Share Market?

  • There are two types of Share Market these are following:  
  1. Primary Market 
  2. Secondary Market
  1. Primary Market:

A primary share market is a place where a company first gets registered with the goal of raising money and issues a certain amount of shares.

 The goal of being publicly listed on a primary stock exchange is to raise money. 

Issue is public when the allotment of shares is made to more than 200 persons; Issue is private when the allotment is made to less than 200 persons.

The issue can be either through public or private placement.

This is where a company gets registered to issue a certain amount of shares and raise money. If the company decides to sell its shares for the first time, this is known as an initial public offering(IPO).

     2.Secondary Market:

The shares bought in the primary market can be sold in the secondary market. Secondary market operates through over the counter (OTC) and exchange traded market.

OTC markets are informal markets wherein two parties agree on a particular transaction to be settled in future.

Exchange traded markets are highly regulated. Also called as auction market wherein all transactions happen via the.  

exchange.

    3.Why invest in the Share    Market? Or Why Share Market is Important?

We invest in shares or share market  to build our wealth and fulfill dreams or make extra profit money in the long run. But sometimes it is risky if you will not invest in the right shares, but many studies have proved that putting your money in the right shares for a long period of time (five to 10 years) can provide inflation-beating returns — and be a better investment option than real estate and gold.

People also have short-term investing in share markets. While shares can be volatile over a short period of time, investing in the right shares can help traders make quick profits,and this is very profitable.For instance, you can buy or sell share anytime based on the need.

You all know well that you can earn money by investing in shares. The following are the ways through which your money grows: 

  • 1. Dividends
  • 2. Capital Growth
  • 3. Buyback
  • Dividends:

These are the profits the company earns and it is distributed as cash among the shareholders.

It is distributed according to the number of shares you own.

  • Capital Growth:

Investment in equities/ shares leads to capital appreciation. The longer is the duration of investment, the higher the returns. Investment in stocks is associated with risks as well. Your risk appetite is based on your age, dependents and needs. If you are young and don’t have any dependants, you can invest more in equities to get more yield. But if you have dependents and commitments, you can allocate more portion of money to bonds and less to equity.

  • Buyback:

The company buys back its share from the investors by paying a higher value than the market value. It buys back shares when it has a huge cash pile or to consolidate its ownership.So always try to buy shares at low price and sell it at higher price than selling price.

  • What are Financial Instruments traded in the Stock Market?
  • There are four categories of financial instruments traded on the stock exchange,these are follows:
  • Shares 
  • Bonds
  • Mutual Funds 
  • Derivatives
  • Shares:

A share is a unit denoting equity ownership in a corporation that exists as a financial asset providing equitable distribution for any profits earned. Hence, when you buy shares, you buy a stake in the company whose shares you have bought. This means that if the company becomes profitable over time, shareholders are rewarded with dividends. Traders often choose to sell shares at a price higher than when they purchased them.

Consider from a example; your company is successful and so, you want to expand it.

Now, you sell half of your company to your brother for Rs 50,000. You put this transaction in writing – ‘my new company will issue 100 shares of stock. My brother will buy 50 shares for Rs 50,000.’ Thus, your brother has just bought 50% of the shares of stock of your company. He is now a shareholder. Suppose your brother immediately needs Rs 50,000. He can sell the share in the secondary market and get the money. This may be more or less than Rs 50,000. For this reason, it is considered a riskier instrument.

  • Bonds:

A company requires money so they can undertake projects. They pay their investors dividends from the revenue earned on their projects. One way of raising the capital for operations and other company procedures is via bonds. When a company chooses to borrow money from a bank, they take a loan which they repay through periodic interest payments. Similarly, when a company borrows from multiple investors in exchange for timely payments of interest, it is called a bond. Take the following example as an explanation of how bonds work.

For example, imagine you want to start a project that will start earning money in two years. To undertake the project, you will need an initial amount to get started. So, you acquire the requisite funds from a friend and write down a receipt of this loan saying ‘I owe you Rs 1 lakh and will repay you the principal loan amount by five years, and will pay a 5% interest every year until then’. When your friend holds this receipt, it means he has just bought a bond by lending money to your company. You promise to make the 5% interest payment at the end of every year, and pay the principal amount of Rs 1 lakh at the end of the fifth year.

So, a bond is a means of investing money by lending to others. This is why it is called a debt instrument. When you invest in bonds, it will show the face value – the amount of money being borrowed, the coupon rate or yield – the interest rate that the borrower has to pay, the coupon or interest payments, and the deadline for paying the money back called as the maturity dadate

  • Mutual Funds

Mutual funds are investments that allow you to indirectly invest in the share market. You can find mutual funds for a variety of financial instruments like equity, debt, or hybrid funds, to name a few. Mutual funds work by pooling money from all the investors that fund them. This aggregate amount is then invested in financial instruments. Mutual funds are handled professionally by a fund manager.

Thus, Each mutual fund scheme issues units, which have a certain value just like a share. When you invest, you thus become a unit-holder. When the instruments that the MF scheme invests in make money, as a unit-holder, you get money.This is either through a rise in the value of the units or through the distribution of dividends – money to all unit-holders.

  • Derivatives:

The value of financial instruments like shares keeps fluctuating. So, it is difficult to fix a particular price. Derivatives instruments come handy here.This is where derivatives enter the picture.

Derivatives are instruments that allow you to trade at a price that has been fixed by you today. To put it simply, you enter into an agreement where you choose to either sell or buy a share or any other instrument at a certain fixed price.

  • Conclusion:

Basically ,Stock Market includes two types of market :Primary market and Secondary Market as well financial instruments traded on it.

So if you want to try your hand  investing in Share Market Invest through a helpful guide and a deep knowledge about Shares.

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