Introduction to the World of Stock Markets

by Pankhudi Dave Head Finance Manager

In a sane world, you go to a shop to buy any product of your choice. For example, if you wish to purchase a wall clock, you will visit the relevant shop that sells wall clocks, pick one of your options and pay for it in exchange for the same. This way, you become the owner of the wall clock. Now, replace the shop with a stock market and replace the wall clock with shares/stocks of a company – this is the basic premise of how a stock market works. Of course, over here you don’t buy all the shares of the company or the company itself, and the price of the shares is not constant, and you don’t buy just from the shopkeeper.

Additionally, you can sell your product in the stock market as well, and not just buy them. Let us further understand the share market basics for beginners in this article.

What is Share Market?

A stock market is a place that comprises of buyers and sellers of shares of companies – every share corresponds to a minor portion of ownership in the same company to which it belongs. It is possible to trade in these company shares that are listed on the relevant exchanges - National Stock Exchange (NSE) or Bombay Stock Exchange (BSE). You can trade not just company stocks, but also derivatives in a share market with the help of online trading platforms as well as stock brokerages.

How to Invest in the Stock Market?

Some of the basic pointers you need to follow to be able to start investing in the share market are discussed below:

 You need to have a Demat account where you can hold/store your shares. A brokerage firm can help you with the opening of a Demat account as well as a trading account, where you can start buying and selling of equities, mutual funds, bonds, and more.

 Once you have both the accounts opened and linked to your savings account, you can keep aside some funds that you plan to invest in the stock market. Your idea should be to diversify and allocate a small percentage of your overall planned investments for investing in the share market.

 You can identify a company in which you can invest, with the likelihood of its share price increase in the medium to long term. You can either study the stock research report of that company as provided by your broking firm or by some other expert stock market analyst. You need to even do your basic analysis by considering the performance of that company in the last two to three years, dividend announcements, market news, and so on.

 Once you shortlist the company, you can buy all the shares that can be purchased from the amount you intend to invest in that company at once, or you can purchase those shares at regular intervals to average out your buy price.

 After the shares are purchased, you can keep a watch on the share price as well as the company’s performance, announcements, management vision as declared in public, and so on. Once the share price reaches a level near to your target price, you can sell all the shares or a significant portion of the shares to remove your investment amount, gain some profits, and maybe give yourself a chance to earn more profits.

Final Word
The key factor in the stock market is to be able to enter into a stock at the right time and exit it at the appropriate time. It is not possible to be correct at all times, and hence, it would be logical to refer to information shared by expert stock analysts or your stockbroking firm. As a beginner, you can upgrade your knowledge by starting with online courses like how to invest in share market, how to diversify your stock portfolio, and so on.