What Are Shares All About and How to Invest in The Share Market?
What are shares and the stock market all about? All business enterprises need funds to meet their short term and long term business goals.
Such capital (big amounts) can only be raised when large number of investors are available and interested to invest in business.
Institutions like BSE (Stock Exchange) give a common platform to a "Business Man" and an "Investor" where a business man can sell its stock and an investor can but the same stock.
Institutions like BSE give the flexibility of buying and selling of stock as and when required.
Stock (shares) are nothing but 'ownership of business broken-up into a large number of small units.
Each unit of stock can be easily bought and sold independently.
And this buying and selling of stock takes place in stock exchanges like BSE and NSE.
There are 23 recognized stock exchanges in India.
Out of these, 4 stock exchanges are national and 19 are regional stock exchanges.
The 4 national stock exchanges are BSE (Bombay Stock Exchange), NSE (National Stock Exchange), and OTCEI (Over the Counter Exchange of India).
In a stock exchange like BSE, shares are traded (bought and sold in daily basis).
Securities are a very broad term which can be defined as an "investment instrument issued by government or a company indicating the evidence of either ownership (shares) or creditor ship (bonds, debentures).
The securities can be bought and sold from one party to another.
If in a trade, the ownership cannot be transferred then it cannot be classified as securities".
Securities include stock, mutual fund, bonds, and debentures etc.
Security market can be classified into capital market and money market.
In capital market long term investment options are traded like stock, bonds, mutual funds, debentures etc.
Money market makes it possible for companies to generate funds to meet its short term demands (working capital).
Examples of money market securities are T-Bills issued by government for its own borrowings.
A Primary market (BSE) is where a company in search of capital makes its first contact with general public.
In other words IPO's are bought and sold in Primary market (BSE).
The secondary market comprises of buyers and sellers of stock and debentures subsequent to original issue (IPO).
Primary and secondary (BSE) market is not physically segregated from each other.
Both IPO's and subsequent buying and selling of stock take place in instructions like BSE.
How to buy and sell shares in stock market? When we are talking about buying and selling of shares, there are mainly two type of shares we can trade.
First is the IPO's and second is the regular shares daily traded in the stock market.
Both IPO and regular shares can be traded through online trading.
Online trading is the most convenient way of buying and selling of shares from the comfort of your house or office.
You are not authorized to buy or sell shares directly from the stock exchange.
Only brokers can trade shares on your behalf.
There are quite a few brokers available in India who provides online share trading facility.
Like HDFC Bank, ICICI Bank, Axis Bank, SBI etc.
To know more about opening an online trading account please visit the link Is investing in shares really risky? When you are thinking to buy shares and you are a 'first timer', think like a business man instead of a trader.
This type of thought process will drastically reduce the risk involvement in share trading.
FOCUS ON COMPANIES FUNDAMENTALS.
Step-1) List down 5 companies that you remember by its brand name.
e.
g infosys, Tata Steel, SAIL, Reliance, L&T, Tata Motors, ICICI...
Step-2) List down 5 companies that you think has a stable product.
e.
g.
Tata Steel, Tata Motors, Hindalco, infosys, ICICI.
Step-3) List down 5 companies that has made reasonable business in last 3 years.
e.
g.
Tata Steel, Infosys, ICICI etc.
Objective is to know one name that has a strong fundamentals.
If you do one hour research in the internet you will get your answer.
FOCUS ON LONG TERM INVESTMENT.
When you are thinking of investing in shares, think to keep your money invested for at least 8/10 years.
In other words if you buy a share now, you shall hold it for at least 8/10 years.
When you have this kind of time in your hand you can take bigger risks.
When I say risk, the fear is not to loose money but how much one can gain.
If you invest in Insurance Policies, your money is safe.
You will never loose.
But you will gain not more than 4%-5%.
Means @ 5% interest your invested money will take 15 years to get doubled.
If you invest in Fixed Deposit, your money is safe.
You will again not loose.
But you will gain not more than 6%-7%.
Means @ 7% interest your money will take 10 years to get doubled.
If you invest is Debt Linked Mutual Fund, your money is comparatively safe.
The chance of losing money is very less.
But when we are talking about investment time span of 8/10 years, losing money in debt schemes is negligible.
You can expect average returns of 8%.
Means your money will take 9 years to get doubled.
If you invest is Equity Linked Mutual Fund, your money is at risk.
The chance of losing money is very high.
But when we are talking about investment time span of 8/10 years, losing money in equity mutual fund is very less.
You can expect average returns of 12%.
Means your money will take 6 years to get doubles.
If you invest is Equity/Shares directly your money is at high risk.
The chance of losing money is very high.
But when we are talking about investment time span of 8/10 years, losing money in shares is very low.
Only care you have to take is to invest in companies with very strong fundamentals.
In layman's term select a company which is not going to close in next 8/10 years, which is only going to grow in next years.
When I talk about companies with strong fundamentals I am talking about Infosys, Tata Steel, Reliance, Tata Motors etc.
You can expect average returns of 16-18%.
Means your money will take only 4 years to get doubled.
Important is to understand, if you have less time in hand invest in less risky investments.
But if you have good time in hand (5-10 years or more), you can invest in share market / Equity linked mutual funds and feel safe.
Such capital (big amounts) can only be raised when large number of investors are available and interested to invest in business.
Institutions like BSE (Stock Exchange) give a common platform to a "Business Man" and an "Investor" where a business man can sell its stock and an investor can but the same stock.
Institutions like BSE give the flexibility of buying and selling of stock as and when required.
Stock (shares) are nothing but 'ownership of business broken-up into a large number of small units.
Each unit of stock can be easily bought and sold independently.
And this buying and selling of stock takes place in stock exchanges like BSE and NSE.
There are 23 recognized stock exchanges in India.
Out of these, 4 stock exchanges are national and 19 are regional stock exchanges.
The 4 national stock exchanges are BSE (Bombay Stock Exchange), NSE (National Stock Exchange), and OTCEI (Over the Counter Exchange of India).
In a stock exchange like BSE, shares are traded (bought and sold in daily basis).
Securities are a very broad term which can be defined as an "investment instrument issued by government or a company indicating the evidence of either ownership (shares) or creditor ship (bonds, debentures).
The securities can be bought and sold from one party to another.
If in a trade, the ownership cannot be transferred then it cannot be classified as securities".
Securities include stock, mutual fund, bonds, and debentures etc.
Security market can be classified into capital market and money market.
In capital market long term investment options are traded like stock, bonds, mutual funds, debentures etc.
Money market makes it possible for companies to generate funds to meet its short term demands (working capital).
Examples of money market securities are T-Bills issued by government for its own borrowings.
A Primary market (BSE) is where a company in search of capital makes its first contact with general public.
In other words IPO's are bought and sold in Primary market (BSE).
The secondary market comprises of buyers and sellers of stock and debentures subsequent to original issue (IPO).
Primary and secondary (BSE) market is not physically segregated from each other.
Both IPO's and subsequent buying and selling of stock take place in instructions like BSE.
How to buy and sell shares in stock market? When we are talking about buying and selling of shares, there are mainly two type of shares we can trade.
First is the IPO's and second is the regular shares daily traded in the stock market.
Both IPO and regular shares can be traded through online trading.
Online trading is the most convenient way of buying and selling of shares from the comfort of your house or office.
You are not authorized to buy or sell shares directly from the stock exchange.
Only brokers can trade shares on your behalf.
There are quite a few brokers available in India who provides online share trading facility.
Like HDFC Bank, ICICI Bank, Axis Bank, SBI etc.
To know more about opening an online trading account please visit the link Is investing in shares really risky? When you are thinking to buy shares and you are a 'first timer', think like a business man instead of a trader.
This type of thought process will drastically reduce the risk involvement in share trading.
FOCUS ON COMPANIES FUNDAMENTALS.
Step-1) List down 5 companies that you remember by its brand name.
e.
g infosys, Tata Steel, SAIL, Reliance, L&T, Tata Motors, ICICI...
Step-2) List down 5 companies that you think has a stable product.
e.
g.
Tata Steel, Tata Motors, Hindalco, infosys, ICICI.
Step-3) List down 5 companies that has made reasonable business in last 3 years.
e.
g.
Tata Steel, Infosys, ICICI etc.
Objective is to know one name that has a strong fundamentals.
If you do one hour research in the internet you will get your answer.
FOCUS ON LONG TERM INVESTMENT.
When you are thinking of investing in shares, think to keep your money invested for at least 8/10 years.
In other words if you buy a share now, you shall hold it for at least 8/10 years.
When you have this kind of time in your hand you can take bigger risks.
When I say risk, the fear is not to loose money but how much one can gain.
If you invest in Insurance Policies, your money is safe.
You will never loose.
But you will gain not more than 4%-5%.
Means @ 5% interest your invested money will take 15 years to get doubled.
If you invest in Fixed Deposit, your money is safe.
You will again not loose.
But you will gain not more than 6%-7%.
Means @ 7% interest your money will take 10 years to get doubled.
If you invest is Debt Linked Mutual Fund, your money is comparatively safe.
The chance of losing money is very less.
But when we are talking about investment time span of 8/10 years, losing money in debt schemes is negligible.
You can expect average returns of 8%.
Means your money will take 9 years to get doubled.
If you invest is Equity Linked Mutual Fund, your money is at risk.
The chance of losing money is very high.
But when we are talking about investment time span of 8/10 years, losing money in equity mutual fund is very less.
You can expect average returns of 12%.
Means your money will take 6 years to get doubles.
If you invest is Equity/Shares directly your money is at high risk.
The chance of losing money is very high.
But when we are talking about investment time span of 8/10 years, losing money in shares is very low.
Only care you have to take is to invest in companies with very strong fundamentals.
In layman's term select a company which is not going to close in next 8/10 years, which is only going to grow in next years.
When I talk about companies with strong fundamentals I am talking about Infosys, Tata Steel, Reliance, Tata Motors etc.
You can expect average returns of 16-18%.
Means your money will take only 4 years to get doubled.
Important is to understand, if you have less time in hand invest in less risky investments.
But if you have good time in hand (5-10 years or more), you can invest in share market / Equity linked mutual funds and feel safe.
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