A Comprehensive Guide to Stock Market: Find Everything Here
When people think of investing, stock market immediately comes to their mind. However, many people get scared merely by the thought of investing in the stock market. There is nothing to be scaredof the stock market. For a newbie the financial news can be difficult to understand and confusing, but understanding the stock market and its various terms is not rocket science.
To help you get acquainted with this one of the most popular investment options, here we will be discussing about it in detail.
What is the stock market?
In simple terms we can define stock market as a market where shares are traded. Like, supermarket is a place to buy and sell groceries, a stock market is a place to buy and sell stock.
The share market is the term used for the collection of markets and exchanges where equities, bonds and other types of securities are issued and traded either over-the-counter markets or through formal exchanges.
Equity market is another term used for the stock market and is one of most important elements of a free-market economy, as it gives companies access to funds in exchange for giving investors a part of ownership.
What is a Stock Exchange?
Stock Exchange is another term for the stock market. Stock Exchange is organized and regulated financial market for buying and selling of industrial and financial security.Here, securities are bought and sold according to some well-defined set of rules. It gives a secured and convenient platform or mechanism for transactions in different securities. Such securities include debentures and shares issued by public companies which are properly listed at the stock exchange and debentures and bonds issued by port trust bodies, public and municipal corporations and government bodies.
Bombay stock exchange (BSE) is the oldest in India established on 09 July, 1985. While London stock exchange (LSE) is the oldest stock exchange in the world. India also have National Stock Exchange which was established in 1992.
How does share market work?
There are sellers and buyers in the market. When you want to invest in stock market, you buy on the secondary market. In most cases, you are buying stocks from someone who already owns the shares and is interesting in selling them.
The basic process of a stock trade is:
- An investor instructs his broker to buy a particular number of shares of a particular stock.
- The broker then sends an order to the exchange floor representative.
- The floor trader searches for a trader who is willing to sell the stock you want to buy.
- Both traders decide a price and the exchange is done.
Definitely, when using an online broker, all this is done in seconds. No one in an e-transaction has to physically meet and agree on a price. A computer takes care of everything.
Surprisingly, the New York Stock Exchange still completes a huge number of transactions physically. On the other hand, the NASDAQ manages all of its trades electronically.
Buyers and sellers bid on shares of stocks. These are a small slice of ownership of a public corporation. Stock prices generally indicate towards the opinion of the investor of what will be the earnings of the company.
Traders who feel the company will perform better in the future bid the price up, while investors who feel it won’t, bid the price down.Sellers aim on getting as much as possible for every share, in order to make a lot more than what they paid for the same. Buyers, on the other hand, get the lowest price so they can sell at higher price to earn the profit later.
How to buy stocks?
Investors generally use services of brokers to buy and trade stock. In order to set up an account you have to deposit cash or stocks in a brokerage account. If you prefer buying and selling stocks online, you can do that too through electronic brokerages.
Once you open an account you will tell your broker what types of and how many stocks you would like to buy. The broker completes the trade on your behalf. In turn, he or she earns a commission.
After selecting the stocks that you want to buy, you can either make a “limit order” or a “market order”. A limit order is when you ask to buy a stock at a limited price. A market order is one in which you ask a stock purchase at the prevailing market price.
How to invest in shares?
The share market has probably the most amazing investment opportunities for the investors. Simultaneously, it could be scary and frightening. In fact, equity investment has been a huge challenge, not just for beginners but experienced investors too. There are many investors who enter the market at high levels and quickly exit the market when market sees a correction. Sadly, such investors hardly think of investing in stocks again. Therefore, they ignore an exciting opportunity to earn more than average returns.
In short,investing in share can be a challenging task for new investor. However, equity must be a part of every investor’s portfolio. The proportion could differ according to the age, risk taking capability and monetary requirements.
The best way to cope with volatility is to have a systematic and disciplined approach to share market investment. Create your own rules and more importantly follow themunfailingly. Without a doubt, the key to successful market investment is a well-planned and disciplined investment strategy.
Decisions based on company fundamentals, adherence to discipline in investment and a long-term monetary commitment are important factors for successful share market investment.
What are different types of stocks?
Different types of stocks and stock classifications
- On the basis of ownership rights
Investors can own two different types of stocks. They have different ownership rights and different privileges.
- On the basis of company specifics
This stock classification shows every company’s unique plan for growth and dividend distributions.
- On the basis of size
Market capitalization is just a technique of referring to the size of a company in a way that lets you to compare companies in different industries.
Mega-cap: Over $200 billion
Large-cap: Over $10 billion
Mid-cap: $2 billion–$10 billion
Small-cap: $250 million–$2 billion
Micro-cap: Below $250 million
Nano-cap: Below $50 million
What instruments are traded in the stock markets?
Traders generally choose instruments that trade with nice price and under good liquidity to allow profits. You may have to do your research to find an instrument that matches your style. Below are some of the popular instruments.
- Exchange Traded Funds
We hope you found this article helpful and now you know a lot about Share Market and certainly not scared to invest your hard money in it.