Share market, also known as the stock market, is a platform where buyers and sellers come together to trade publicly listed shares during the market hours. Such types of transactions are conducted through exchanges and over the counter(OTC) marketplaces which work under specific rules and regulations.
The primary stock exchanges in India are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
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What is Traded in Share Market?
There are four types of instruments that are traded on the stock exchange:-
- Shares- It represents the unit of equity ownership in a company. Shares which have been held by the public are known as shareholders.
- Bonds- In order to start long term and profitable projects companies issue bonds to the investors. These bonds represent ‘loan’ taken by the company. The bondholders become the creditors of the company and are entitled to timely interest payments. Invested amount is also paid back by the company at the end of the prescribed time period.
- Mutual Funds- Mutual funds are the companies that pool the money from multiple investors and invest that money into various securities like shares,bonds and short term debts.
- Derivatives- Derivatives are the contract that derives from an underlying asset like shares,commodities and currencies. Futures and options are common examples of derivatives.
How Stock Market Works?
A company divides itself into small shares and sells these shares to the public in order to raise capital. This is done by a process called initial public offering(IPO). This initial public offering is a part of the primary market.
A Primary market is a place where a company registers itself for the first time to sell its share to the public.
Over time investors expect that their value of securities will rise or they will receive dividend payments or both.Using stock exchanges investors can buy and sell their securities in the secondary market.
Secondary market is a place where securities are bought and sold. These transactions are done between investors.
Stock exchanges maintain various market levels and sector specific indicators like Nifty 50 and Nifty Bank.
How are Shares Priced in the Market and Who Determines the Price?
After a company’s shares start to trade publicly on a stock exchange, the prices of these shares are factored by the demand and supply of its share in the market. If the demand is more than the supply then the value of the stock will increase and if the supply is more than the demand then the value of the stock will decrease.
How to Make Money in Stock market?
If you are a beginner in stock market trading,then making money from it can be a bit challenging but can be achievable. Following proper risk management will help you to survive in the market in the long run. Consistency will help to develop and polish the skills that you will develop over the time. You need to understand the different professional terminologies and how to apply those in the real market. Following these things and being disciplined will help you to be a profitable trader or an investor in the stock market.
Conclusion
Today, investing in the stock market is one of the best ways to generate long term wealth. Using systematic planning any investor can make money from the share market and achieve its long term financial goals.