What is share market and how does it work?

 In today's date, it is more important than earning and saving money, where do you invest it because if you do not know where your money is going then it can prove to be the biggest mistake for you.

Talking about investment, the largest way of investment in the world is considered to be Share Market or Stock Market.

What are stock markets?

Stock Market or Share Market is the place where Shares, Debentures, Mutual Funds, Derivatives and other types of Securities are bought and sold.

Shares are bought and sold through stock exchanges and BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) are the two main stock exchanges in India.

What are shares?

Share means - "Part" and in the language of stock market "Share" means - "Part in companies". When you buy shares of a company, you become a shareholder of the company.

For example, if a company has issued a total of 1 lakh shares and you have bought 10 thousand shares out of it, then you become a 10% shareholder of that company. You can sell these shares in the stock market whenever you want.

How does stock market work?

See, it depends on many things, like –

listed companies
share holder
demand and supply
Market conditions etc.
Lets understand it one by one in a simple way

How do companies issue shares?

First of all, companies get their shares listed on the stock exchange and bring IPO (Initial Public Offering) and issue their shares to the public at a price set by themselves.

Once the IPO is completed, the shares come in the market and are bought and sold by the investors among themselves through stock exchanges and brokers.

How do share prices change?

The company decides the price of the shares while bringing the IPO, but once the IPO is completed, the value of the shares varies depending on the demand and supply of the market.

This demand and supply keeps on changing on the basis of important information given by the companies from time to time.

You can understand it like this-

If the number of people who buy shares is more than those who sell, then the price of shares will increase -

What is Sensex?

Sensex is an index of Bombay Stock Exchange and Sensex is determined on the basis of market capitalization (total value of companies) of top 30 companies listed on BSE.

If the Sensex rises then it means that most of the companies registered in BSE have performed well.

What are Nifty?

Nifty is an index of the National Stock Exchange and is determined on the basis of the market capitalization of the top 50 companies listed on the NSE.

If Nifty increases then it means that companies registered in NSE have performed well and if Nifty decreases then it means that companies of NSE have performed poorly.

Bond | What are Debentures?
Bond / Debenture is like a loan in a way.

When the company needs money for a project, either they can take loan from the bank or they take loan from the public and issue Bonds/Debentures to the public.

Whose repayment they have to do in the stipulated time.

Companies pay interest on the Bonds / Debentures at a fixed rate and after the maturity of the bond, they make repayment in exchange for the bonds.

Bonds/Debenture are a safer investment option for any investor than Shares.

What is Mutual Funds?

Mutual Funds are a type of Indirect Investment in Shares and Bonds.

Mutual funds are a type of institution or trust that issues its own shares, which people buy and invest in mutual funds.

On the basis of their knowledge, experience, understanding and analysis, professional managers of mutual funds invest the invested amount in a variety of shares and other securities.

The benefit of investing in mutual funds is that professional fund managers try to invest all the collected money in the best way based on their knowledge, in return for which they charge some fees.

What is SIP?

SIP means – Systematic Investment Plan. SIP is one way to invest in Mutual Funds.

In this instead of lump sum investment, a fixed amount is invested in Mutual Fund every month.
The investor's bank account is linked to the SIP scheme, so that every month a certain amount is transferred from the bank account to the mutual fund and the mutual fund units equal to that amount come to the investor's account.

Being simple and automatic, SIPs are very popular nowadays.

What are Derivatives?

Derivatives means to determine the future transactions today.
Which are executed through Options and Futures in the stock market.
Under futures trading, you can execute future transactions at a set price today.
In this Actual Delivery is not given and settlement is done on the basis of difference in price.

Keeping all these rules in mind, when you have decided to invest in the stock market, then your next step can be to start the investment process in the stock market.

For this, first you have to open Trading and Demat Account with any Stock Broker.

What are Demat Accounts?

Just as you can deposit money in a bank account, in the same way all securities related to your investment in Demat Account like Shares, Bonds, Government Securities, Mutual Funds etc. are stored in Electronic Form.

What are Trading Accounts?

The use of Trading Account is used for Share Sell and Purchase in your share business.

You can open this account with any good broker and due to online facility, you can buy and sell shares anytime with the help of this account.

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