What Is The Share Market? 7 Reasons To Invest In Them

Being financially secure is a major life-goal for most of us. We tend to find ways in which we can combat inflation and the soaring prices of products and services. But keeping pace with inflation is not easy. So, it is important that your investments deliver good returns. Equities (or shares or the stock market) have been one of the best performing assets over the long-term. As long as you invest your funds prudently, after conducting due diligence and research, you can minimize your risk and maximize your returns.

So what are shares and what exactly is the share market?

A share market is a place where shares or units of publicly listed companies are traded in return for a price that may keep fluctuating every day. The idea is to purchase these stocks when their prices fall and sell them when their prices rise and book a profit. This profit can be booked in a few days, months or even years, depending upon how long you wish to stay invested and the performance of the share. Let’s demonstrate it with an example:

Let’s say you purchase 300 units of a stock priced at ₹20/. In other words, you have invested ₹6000/- in a particular stock. Now, let’s say the price of the stock rises to ₹35/- in a few days. In this scenario, you could sell your shares for a profit ₹4500. If, on the other hand, the price of the stock falls, you may want to hold off selling the shares, until it rises and becomes profitable.

The Indian share market includes two major stock exchanges: National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The major chunk of share trading takes place through these two entities.

Types of share markets in India

There are 2 types of share markets in India which are

Primary market: Every company looking to trade on the Indian Share market must enter through the primary market. Privately held companies can raise funds and start trading publicly after launching an initial public offering or IPO.

Secondary market: This is the market where investors purchase and sell securities that they already own. Transactions on the secondary market are typically conducted through brokers.

Reasons to invest in the stock market

Here are a few reasons to invest in the stock market

1. It helps you earn returns that beat the rate of inflation
2. Investing in the right stocks can help you reach your financial goals
3. Investing in the right stocks can help you can earn good returns
4. You can earn additional income
5. There is no specific lock-in period
6. You can earn from bonus shares and dividends
7. You can invest with very little funds

While there are many reasons to invest in the stock market, one must note that it is important to be aware of the stocks you are investing in. One must do their due diligence and research before investing in the share market. Remember that a series of prudent investments can help you build your wealth.

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Created on Oct 17th 2019 23:44. Viewed 265 times.

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