Today in this article we will discuss Stock Market Basics knowledge. If you want to invest in the Share Market but due to lack of knowledge about the stock market, you are not able to invest in the Share Market or are losing your money. So stay on this post, today we will share the stock market basic knowledge. So that you can invest your money in the right way.
So let’s start Stock Market Basics tutorial……
Stock Market Basics knowledge and How does the Stock Market work
In Stock Market Basics knowledge at first, we will learn What is Stock Market? In simple word, Share means “Partner of the company” in Stock Market. When you buy shares of a company, become a shareholder (partner) of the company.
If a company issues 1 lakh shares and you have purchased 20 thousand shares, you become 20% shareholder of that company. You can sell these shares in the stock market whenever you want.
How do companies issue shares
First of all, companies bring the IPO (Initial Public Offering) by listing their shares in the stock exchanges market. Once IPO is completed, the shares come into the market and are bought and sold by investors through stock exchanges and brokers.
How Stock Prices are Set
At the time of taking the IPO, the price of the shares decides company, but after the completion of the IPO, there is no role of the company in determining the value of shares. The price of shares is determined by the Stock Exchange on the basis of their Demand and Supply.
If you are buying shares and its number is declining very fast, then the price of shares will increase means number of selling shares is less than buying shares, then prices of Shares will increase and if the number of buying shares is less than the selling Shares, then the share price will be reduced.
What are Sensex and Nifty
Sensex is the index of the Bombay Stock Exchange and is determined on the basis of market capitalization of the top 30 companies listed in BSE. Sensex displays the performance of top 30 companies of BSE, if the Sensex increases, then this means Most companies registered in BSE have performed well and likewise if the Sensex falls, it means the performance of most companies is bad.
Nifty is the index of the National Stock Exchange and is determined on the market capitalization basis of the top 50 companies listed in the NSE. If Nifty grows, then registered companies in the NSE have performed well and if Nifty decreases, the performance of most companies is bad.
Other Securities to Trade in Stock Market
Most people think that only the shares are bought and sold in the stock market, but it’s not like that there are many other securities which are bought and sold in the stock market.
Bond/Debenture is like a loan. When the company requires money for a project, they can take a loan from the bank or the investors then issue Bonds/Debentures to the investors, which have to be repayment timely. Companies pay interest from fixed rates on Bonds/Debentures. After completion of the term of the bond, repayment instead of Bonds.
Bonds/Debenture is a Secure Investment option than share because it gives interest rate from time to time determined by the company and repayment is done after completing the bond period.
Mutual funds are a kind of stock which is the indirect investment in bonds. It is a type of institution or trust which releases its units (like Shares), by which people buy it and invest in mutual funds. The investor of mutual funds invested in the various type of shares and other securities based on their knowledge, experience, and analysis.
The benefit to investing in Mutual Funds is that the Professional Fund Manager tries to invest all the collected funds in the best way on the basis of their knowledge, In return, they charge some fees.
Investments in the Mutual Fund are beneficial for those who do not understand share market or they do not have much time to analysis before investing in the share market. So they invest in mutual funds. Mutual Funds invest in stock market and other securities according to their efficiency. Any dividend received by the Mutual Fund is distributed to the investors based on the bought units.
SIP (Systematic Investment Plan)
SIP is a way to invest in mutual funds. Instead of investing a lump sum, every month a fixed amount is invested in the Mutual Fund. The investor’s bank account is linked to the SIP, which transfers a fixed amount from the bank account to the mutual fund every month and the equal amount of mutual fund units come into the investor’s account. Due to being simple and automatic, SIP is very popular nowadays.
How to Buy Shares Stock Market
Keeping these Stock Market Basics rules in mind, when you decide to invest in the Stock Market, your next step may be to start the investment process in the stock market. For this, first of all, you have to open a trading and Demat account with a stockbroker.
What is a Demat account
you deposit the money in the bank account, Like this all the securities like Share, Bonds, Government Securities, Mutual Funds etc. are stored in an electronic form in your Demat Account.
What is Trading account
Trading Account is used to sell and buy shares in the stock market. You can open this account with a good broker and because of the online facility you can buy and sell shares with the help of this account.
How to Open Demat Account and Trading Account in Stock Market
To open Demat Account and Trading Account, you need to link KYC to your bank. You can open a Demat account from the bank in the same way as you open a normal account in a bank. List of documents to open Demat account & Trading Account.
- Pan Card
- Aadhar Card
- Address proof
- Cancel Check
- Income certificate
Keep in mind that while submitting these documents, in all these certificates, your name is correct and clearly written. Apart from this, when you open the account, you can put Photostat Copy of all these documents, but you also have the original copy of it which can be required at any time for Verification. When you open a Demat Account or Trading Account, must read carefully the rules and instructions written on the documents you sign.
Once the Demat Account is open, you are ready for trading in the stock market.
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