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Saturday, October 23, 2021

What is a stock market? How does it earn?

 

In today’s competitive world, everyone wants to be rich. People also work hard day and night for this. People also save some part of their earnings. But it is not enough just to become rich. If we want to secure our future, then we also have to invest in some place. Such as stock market, share marketing, mutual fund etc. In this post we will go, What is a stock market and how does it earn? What is Stock Market?

If you invest money properly in the stock market then you can benefit greatly. But at the same time, if you invest money in the market without thinking, then a loss deal can also be made for you.

That is why it is important that you know these markets properly. Today in this article, we will give you information about the stock market, so that you can understand it better.

What is the stock market? (What is Stock Market)

Share market, the stock market or equity market is all the same, so do not get confused. This is the market where you can buy or sell the shares of a company.

Buying shares means that you are buying some percentage of that company’s honours. Meaning that after buying the shares you become a certain percentage owner of the company.

Now if the company will profit then you will also and if that company is lost, then you too will have to bear the loss. A very easy to understand example.

Suppose you are planning to open a startup, you have 10,000 rupees but in that 10,000 rupees, you will not work. So you asked a friend to invest Rs 10,000 in your startup.

That is 10,000 your share and 10,000 your friend’s share. Now both of you friends have become the honours of 50-50 company. Any benefit or disadvantage in future will be equal share in both of your friends.

This happens on a large scale in the stock market. Where a company can sell its shares to anyone all over the world.

Stock market history

This market was started about 400 years ago. Dutch East India Company of Netherlands launched the concept of share market for the first time. Actually, at that time trading was done through ships.

Also, not all countries were discovered. In such a situation, the company used to send its ships for trading through the seas. There was no money of any one person in these ships.

So the Dutch East India Company had appealed to the people to invest money in these ships and told the people that when there will be profit in trading through these ships, then you will also share the profit according to your money.

However, it was risky to do so at that time as most of the ships did not return. That is why these fixed people now make multiple investments.

That is, a person invests money in 5-6 ships not in a ship so that one ship is expected to make a profit. In this way, stock markets started to form and people started investing their money in many places.

The bidding system started from the place where the ships used to leave for trading. Gradually, the need for ships’ money started getting fulfilled and people started getting profit.

This concept of the stock market started from there, became quite popular. Today every country is dependent on the stock market. Each company has its own stock exchange. Let’s understand the stock exchange.

Stock exchange

The stock exchange is where people buy and sell shares of the company. The market is divided into two parts.

  • Primary Market
  • Secondary market

Companies sell their shares in the primary market. The value of their shares depends on demand. That is if the demand for the products of a company is high and if that company sells to its shares, then their value will be higher.

How many shares can a company have?

The thing to keep in mind is that the value of every share of the company is equal. A company can distribute any number of its shares to people, but the value of all of them will be equal.

Suppose a company is worth 1 lakh rupees and wants to sell its 1 lakh shares and the company can also keep the price of 1 rupee per share or can make 2 lakh shares for 50 paise.

Apart from this, it should also be noted that no company ever sells its entire shares. The company always keeps more shares and sells only a few shares to protect its honours.

The one who has more shares decides the company. For example, Facebook company founder Mark Zuckerberg holds 60 per cent shares of the company and 40 per cent shares with others. In such a situation, Mark Zuckerberg can take all the decisions.

Let us now understand the secondary market

In the secondary market, people who have bought shares of a company can go out and sell the shares. Like you bought 10 percent shares of a company.

You can go out and sell five percent of your shares. This market is the secondary market. Now it is up to you whether you are selling those shares in more money or less money according to the demand.

Stock exchange of India

There are two large stock exchange companies in India.

  • Bombay Stock Exchange – There are about 5400 registered companies here.
  • National Stock Exchange – There are about 1700 registered companies.
  • Companies have nifty and Sensex to measure their price.

How do companies sell their shares?

If a company wants to sell its shares through the stock exchange, it is called public listing. For this, SEBI i.e. SECURITIES AND EXCHANGE BOARD OF INDIA was formed.

This organization decides whether your company should have a public listing or not. Only after all its norms are completed can a company sell its shares to the public.

If a company is not in demand in the market, SEBI removes it from the public listing list.

How to buy shares?

Earlier the process of buying shares was a bit different, but nowadays, in the era of the internet, you need three accounts.

  • Bank account
  • Trading account
  • Demat account

Stocks purchased in a Demat account are stored in digital form. That is why Demat account shares are very important in the market. Those who buy shares in the market are called RETAIL INVESTOR.

Retail investors always need a broker.

What is a Broker?

The broker combines both buyers and sellers. Just like you resort to a broker while taking property. Nowadays many apps are built as brokers.

Even your bank can play the role of a broker. When you invest money in the market through a broker, some amount of that amount has to be paid as the brokerage fee.

This amount varies from 0.5 to 1%. In such a situation, when you invest money in the long term, you get reduced brokerage fees.

Is the stock market a loss deal?

No, it is not necessary that you will have a loss in the stock market. If you buy the shares of a company thoughtfully, then you can also benefit greatly.

For example, suppose you bought 1,000 shares of a company for Rs. 1. Now the price of those shares has increased according to demand and if you sold this share for 2 rupees, then you got a profit of Rs 1,000.

How to earn from the Stock Market?

How to make money from the stock market? This is an important topic. To make money in the stock market, discretion, understanding and strategy are very important. Apart from this, you should also have patience.

Let us tell you some fundamentals of being successful in the stock market so that you can earn big profits.

1. Complete your homework

This means that whenever you plan to invest in a company, first study the company thoroughly. See the demand in that company’s market.

Suppose now that summer season is coming, then cooler and AC are in great demand. So invest in a company that sells these products and whose products are in demand. Then you can be profitable.

2. Share in business

Never invest in shares but invest in the business. The best example of this is that Warren Buffett invested $ 1 billion in Coca-Cola in 1988. In return, the company earned a 10% return for 10 years.

3. Do not get into the words of others

By this, I mean to stay away from sheep. Do not invest in anyone’s words. Study well first. You can consult an expert.

4. Always invest extra money

This is the best rule to earn profits in the stock market. Always invest your extra funds, ie money you do not need in a short period. Sometimes the value decreases and due to need of money, we sell our shares in less money. Never do this.

5. Keep an eye on the market

Just waiting for profit by investing is not the right step. It is important that you keep your eye on the market. Notice when the shares are falling, when they are bouncing. Read newspapers, watch TV channels so that you can take care of your shares.

Conclusion

Friends, through my article, I have tried to convince you all about the stock market is a very easy language. So that you avoid investing in the wrong place.

This article covers all topics like what is the stock market, history, how to do the investment. In addition, we have also given some market terms in it so that you can have more ease in understanding.

Also Read: In detail about what is Fixed Deposit

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