Thursday, 28 July 2016

Stock Market – Basics one should know !!!

Vitamin M….!! Yes its money, the most essential nutrient for a happy living. We all work hard to earn and make a living. Money earned with absolutely no hard work is like a dream come true. Isn’t it?

For a secure future make sure that you save! What we save is what we earn! We can make short term investments like savings bank account, fixed deposits with banks or stock market as well as long term investments like provident funds, bonds and mutual funds. Sooner one starts investing the better it would be.It is always wise to learn basics before investing. After all money matters!!

Why should one trade in a stock market? The advantage here is that you do not need a lot of money to start making money, unlike buying property and paying a monthly mortgage. It isn’t like a conventional business. It’s fast cash and allows a quick liquidation. One can easily learn how to earn profit from the stock market. This sounds interesting. Isn’t it? You need to have your basics clear. Unless you do, you will be losing time and money. Every aspect of investment, stock options, stock trading, company, shares dividend, types of shares, debentures, securities, mutual funds, IPO, indices, SEBI, analysis of stocks- how to check on what to buy? Trading terms (limit orders, stop loss, call, and booking profit and loss, short and long), trading options- Brokerage houses etc. are important to be known.
Stock market comprises of four entities: Primary market, stock market (secondary market), trade stock for listed corporations and progressive development of stock market. What makes primary market different from secondary? Well, primary market provides a channel for the sale of new securities whereas secondary market refers to the securities traded after being initially offered to the public/ investors in the primary on the stock exchange. But why does a company issue shares to the public? Most companies are started privately by their promoters, companies invite the public through a ‘public issue’ to contribute towards the equity and issue shares to the individual investors this in turn helps the company in case of insufficient funds for setting up or running the business over a long term. A public issue is an offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the rules and regulations laid by SEBI. Shareholders enjoy the privilege of casting their votes in the corporate decisions and a portion of dividend the company declares.

Shares also known as equities have the potential to increase in value over time. But this does not mean all investments would guarantee high returns. Equities are high risk investments. One needs to be really careful.

Stocks are measured by the stock index, which is a mathematical tool used by investors and financial managers to describe the market and compare the returns on a particular investment.  BSE, NIFTY, MCX-SX, Amex-CITUS are some of the market indices.

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