Share market basics you need to know

If you wish to create a corpus systematically and steadily over a specific period of time, you need to have knowledge about share market basics. Investing in stocks and shares proves to be the better alternative as opposed to investing in traditional investment instruments like fixed deposits, recurring deposits and other low-interest yielding investments. This is attributed to the fact that investors have a better chance to build their wealth, at an effectively faster rate with share market investments. More and more investors are relying on the share market to build their corpus, which is why we decided to highlight some basics of share market, including how to invest in stock market in this article.

Let’s begin with understanding what is share market?

The share market is simply a term used to refer to the public market on which investors can purchase and sell shares of a company on a particular exchange. There are two primary stock exchanges in India on which shares are traded – the NSE (National Stock Exchange) and the BSE (Bombay Stock Exchange).

In the share market, a company listed on the stock exchange sells a part of its ownership to investors, as shares or stocks. The price of the share depends upon the performance of the company and the rate prevailing on the exchange and the investor can purchase as many units as he pleases. The idea is to purchase shares when the prices fall and sell them upon booking profits. As such, the share market serves as an interface between a company and interested investors and enables companies to raise capital to expand their business.

What is primary and secondary stock market?

While learning share market basics, it is important to understand that there are two types of markets; the primary market and the secondary market. Here’s how they are defined:

Primary Market – For a private company to be able to raise funds, it must be listed on the stock exchange. In order to be listed on the exchange, a company must offer an initial public offering (IPO) and start trading publicly. The IPO route is taken on the primary market.

Secondary Market – Once the company is listed on the exchange and the IPO is offered, the company can start raising funds by issuing shares for purchase and sale. It then becomes officially a public company, listed on the secondary market. The secondary market is where the day to day purchase and sale of share units happens. Investors can purchase shares, hold them and sell them at current market prices upon booking profits, in the secondary market.

How to invest in share market?

Investing in the share market is quite easy. You need to follow some basic steps to invest in the share market. They are as under

1.      Determine your investment strategy and financial goals

2.      Research the stocks you intend to invest in

3.      Enter at the right time when stock prices are low to gain maximum profits

4.      Execute the sale of stocks when you have booked your profit

5.      Keep monitoring your investment portfolio

Final thoughts: Now that you know what is share market, you make informed investment decisions. While investing in the share market may be one of the most effective ways to create a corpus, it is important to remember that every market investment comes with an element of risk. As such, it is necessary that you do your research before you invest. You can take help from investment companies like Angel Broking Limited who can help you with your investments based on your financial goals and risk appetite.