Basics of Stock Marketing. Investing is the most ideal way to grow your money. Do you want to save for your retirement? “INVEST“
You want to achieve financial freedom? “INVEST“
You want to become rich? “INVEST“
In spite of knowledge all of this, people don’t really invest.
India has a population of around 1.3 billion. But, only 2% of this magnanimous population invests in shares or mutual funds.
Having said that, there are a lot of people, who are interested and are willing to invest, but they don’t.
It’s because they find it very hard to understand the mechanics of Stock Market.
So, through this post, we have tried to cover the Basics of Stock Marketing in the best way possible.
What is a Stock Market?
Stock Market is a general term which is related to a place where stocks are traded.
Now we know, your next question would be,
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What is a stock?
A stock (also known as equity) is a security that represents the ownership of a fraction of a company.
Let’s proceed further and understand, why does a company has to issue its shares to the public and how they do it?
So, in order to understand it, let’s take an example of a Shoe Company “Knicks“.
Knicks was started by a young couple who were passionate about shoes. Their business was doing well.
They were making good revenue and were profitable as well. After a few years, they decided to expand their business to other cities.
But they needed a lot of money for that.
They had two major options to generate money:
- Loan from Banks
- Sell their stocks
Not wanting to borrow money and make debt and interest payments, they decided to raise funds by offering equity to potential shareholders.
So, they decided to sell stocks of their company.
Now, let’s understand some stock market terms
- Going Public: Slang for when a company plans to offer its share to the public also known as an initial public offering (IPO).
- Earnings per Share: Earnings per share or EPS can be defined as the share of a company’s profit that is distributed to each share of stocks.
- Market Cap: Short for Market Capitalization, is the total market value of a company’s outstanding shares. Market capitalization is equal to the share price multiplied by the number of shares outstanding.
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What is Sensex and Nifty ?
Nifty and Sensex are two of the major stock market indicators in India. Both Nifty and Sensex have many similarities in them and they play a vital role in depicting the strength of the stock market.
However, the main difference between Sensex and Nifty is that Nifty describes the performance of the top 50 companies, while Sensex describes the performance of 30 well-established companies in India.
Nifty is managed by National Stock Exchange (NSE) whereas Sensex is managed by the Bombay Stock Exchange (BSE).
What Financial Instruments are traded in a Stock Market?
- Mutual Fund: A mutual fund is a kind of investment that uses money from investors to invest in stocks, bonds, etc. A fund manager (or “portfolio manager”) decides how to invest the money, and for this, he is paid a fee.
- Shares: Shares represent ownership of a company. When an individual buys shares of a company, they become one of its owners.
- Bond: A bond is a loan to a company or government that pays investors a fixed rate of return over a specific time frame.
Now that you have understood the basics of stock marketing, let’s see how can you start investing in a stock market?
Here are the few things that you will need to invest in share market:
- Savings account
- Trading and Demat account
- Internet Connection
For opening a Demat account, the following documents are required:
- PAN Card
- Aadhar Card (for address proof)
- Canceled cheque/Bank Statement
- Passport size photos
Don’t listen to what people say while investing in Stock Market. With proper knowledge and patience, you can make a lot of money through Stock Market.
If you would have invested Rs. 1 Lakh in Adani Green in 2018, it would have given you more than Rs. 21 Lakh in 2020. That is the power of investing in right companies.
If you would have invested Rs. 1 Lakh in Vodafone Idea Stocks in January 2018, you would have Rs. 6700 only. That’s why you need to learn first and then execute.
So after reading this post, Where do you think people should invest in?
Stock Market/Fixed Depost?