Basics of Stock Market in Short

Do you think your salaried job can make your big dreams come true?

Do you want to sit at your work desk and have that first mansion, fancy car and vacation in exotic places as seen in Bollywood movies?

And if I give you one way through which all your dreams can come true, then will you believe me?

And that one way is Stock Market. In this blog, I will cover the basis of short market in short, so if you don’t have enough time, read this post and get the basics knowledge of Share market.

Yes, if you can get the right knowledge of Stock Market, this can make you rich. Warren Buffet is one of the most famous investor in the world.

So, you should start investing your money from today, don’t delay.

But before you start investing your money, you have to know the following terms.

Bonus: If you want to become financially freedom and want to know the secrets of rich people, read this.

#1. Shares

Let’s understand what a ‘share’ is.

Share is a part of the company, a unit of ownership. 

Let’s take an example.

Assume five people want to buy a cake. And in this case, they want to invest in the cake.

So, the cake will be divided among the five people, meaning it will be shared through which they’ll become the shareholders of the cake.

#2. IPO

Whenever a company wants to expand and grow their business, they need capital or funds.

And to raise this capital, companies offer their shares or equity to the public.

And this is called The company becomes a Publicly Traded Company from a Private Company after it lists its shares on platforms like National Stock Exchange or Bombay Stock Exchange.

Let’s take the example of Burger King. In December 2020, Burger King made an Initial Public Offering of its shares.

People bought its shares at Rs. 60 And depending upon the number of shares they bought, they held equity in the firm.

After this IPO, Burger had enough capital to expand its business.

So the question is, that this initial share price was Rs. 60 in Burger King’s case, how is this decided?

It’s determined by the earnings of the company and the capital required for the company through the IPO. 

#3. Capital Gains

Suppose if today you buy a company’s share for Rs. 100, and after a while, that company’s share price becomes Rs. 150.

If you sell those shares, then you get a profit of Rs. 50 And this price difference is called ‘Capital gains’.

Generally, people trade by keeping in mind the fundamentals and technicals.

Any company fundamental is its qualitative and quantitative information that determines its financial well-being.

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The quantitative information would include things like

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In technical analysis, investors see the charts and identify different patterns and indicators, analyse them through which they can nearly predict the future prices of the stocks.

#4. Index

NSE and BSE are India’s two major stock exchanges.

The buying and selling of shares is done here.

NSE1600, Listed companies
BSE5000, Listed Company

Sensex and Nifty are their Indices. But, what are these?

If we want to analyse the overall market performance, then it’s not possible that explore all the stocks of all the listed companies of NSE and BSE.

And to avoid this same problem, we take samples of some companies which represent the entire market, And this sample is called ‘Index’.

The index of BSE is called Sensex, and the index of NSE is called Nifty.

Sensex is also known as BSE30 because out of 5000 companies; only the top 30 are selected.

And similarly, in NSE, the top 50 companies are selected, known as Nifty50.

#5. Dividends

Whenever a company makes profits, they either re-invest those profits in their company or distribute them to their shareholders.

The fraction of the profits they distribute to their shareholders is known as ‘Dividends’. 

A company doesn’t need to give out dividends, but many companies regularly give dividends to their shareholders, which becomes a kind of passive income for them.

#6. Risk VS Reward

Many people find it risky to invest in Stock Market, and many also compare this to gambling.

But, let me tell you this.

The stock market is not gambling; it’s a calculated risk.

If you analyse things clearly and invest in equity, you can even earn a lot of money.

But before investing in an instrument like equity, you have to keep the risk level in mind.

It is commonly said that the higher the risk and higher the reward

So basically, you have to be as comfortable with your losses as you are with your profits.

Now, you have understood the basics of the Stock Market. So, why wait?

You can talk with your bank and set up a Demat account or start a Demat account on online platforms. So, start your trading journey right away.

Other Life Changing Posts:

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  3. How to become a millionaire form NFTs.

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