New to the stock market but must have heard that you can invest and earn money through the stock market.
However, if you are still not fully aware of what is the stock market and how it does operates.
Then keep reading this article till the end to know about the world of the stock market.
A stock represents the ownership of the company and the stock market is where you (known as traders or investors) can buy, sell and trade stocks, bonds, and derivatives.
Simply saying, a stock market is a place where investors can buy and sell shares of stocks. Buying a share of the company means you are now a part of the ownership of the company.
For example, you bought 20 shares of Rs. 300 of SS Company, and then you have become the shareholder of the SS. Now, you can sell them anytime at a higher price to earn a profit.
Therefore, the stock market offers an opportunity for investors to increase their income without high risk.
Types of Financial Market
There are mainly two types of financial market
The market mechanism for the buying and selling of newly issued securities is known as the primary market. In the primary market, new issues of securities are sold by the issuing companies direct to the investor.
The secondary market deals with securities that have already been issued and owned by investors both individual and institutional. These may be traded between investors
The buying and selling of securities already issued takes place in the stock exchanges. Hence Stock exchange constitutes the secondary market in securities.
How does the Stock Market work?
Its very simple how the stock market works. It is Operate much like an auction house, the stock market enables investors to negotiate prices and make trades.
The stock market works through a network of stock exchanges you may have heard of the NSE (National Stock Exchange) and BSE ( Bombay Stock Exchange).
Companies list their shares on an exchange through a process called an initial public offering or IPO. Investors buy those shares, which allows the company to raise money to grow their business.
Investors can then buy and sell these shares among themselves, and the exchange tracks the supply and demand of each listed shares.
You must have seen that the stock market has moved up or down, or the stock market is closed up or down for the day. These all up and downs in the stock prices usually happen due to the earnings and reputation of the company.
What happens that if the company is performing well and earning good profits, then the stock price of the company increases and once you sell the share in the market, you get profit.
Therefore, sellers try to get as much as possible to earn a good amount of profit and the buyers try to buy at the lowest price so that they can sell it later at a high price.
Other factors like dividend payment, growth and economy also play a crucial role in deciding the stock price of the company.
Reasons to invest in the Stock Market
There are various benefits of investing in the stock market, primary benefits are as follows:-
- It is very easy to buy and sell shares online.
- No Minimum Investment you can starts with whatever amount you have.
- The stock market is the best way to earn money and beat inflation over time.
- Appreciation in the capital with the growing economy.
- It gives a good option to get a steady income in the form of a dividend.