You must have watched news timelines of BSE and NSE, you would have also heard your friends or colleagues saying that they have invested in so and so company's stocks and would have always wondered what stock market is and how it works. Well, here is a small guide for all the beginners like you out there who may also become potential investors.
What is the Stock Market?
We can track back the origin of the stock market or share market to the period of the industrial revolution. During the Industrial Revolution, new industries were established with heavy machinery and large labour forces, this gave rise to the need for large working capital for the industries. That is when industrial firms started inviting the general public to invest money in their company for which they were offered ownership shares of the company in return. In this way, the companies pooled the required capital and were obliged to pay returns on the investment they received. In later days a systematic and well-governed market was introduced where stocks of the company were listed and investors could trade (buy and sell) stocks. Today's stock market is a very developed version of the ancient ones.
Important Terminologies of the Stock Market.
Here are few of the must know jargon of stock market
Share and Stock:
Small minimal parts of a company's total capital is known as shares of the company. A set of shares is called a stock of the company.
Stock brokers are agents who trade in the stock market on behalf of their clients.
Dividend is a part of the company's profit which is paid to shareholders as a return on their investment.
When the prices of shares are expected to rise it is known as a bull market.
When the prices of shares are expected to fall it is known as the bear market.
Face value of share:
Face value is the actual value of the share which is stated in the share certificate.
Dematerialized account is an account to hold financial securities in electronic form.
The highest price an investor is willing to pay for a stock.
The final price of the stocks when the stock market is closed on a particular trading day.
How does the Stock Market Works?
There are two types of share markets namely the Primary Share Market and the Secondary Stock Market. Listing of the company stocks on the stock market is done in the primary share market through an Initial Public Offer (IPO). Once the shares are listed in the primary stock market they can be traded in the secondary stock market. With the help of stockbrokers, investors can sell and buy shares in the secondary market. Stock markets are regulated by SEBI (Securities and Exchange Board of India). Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the two most important stock exchanges of India.
How to Invest in the Stock Market?
The very first step to becoming an investor is to get on a trading platform to buy or sell shares. There are various stockbroking and trading apps which you can trust and use to trade in shares. Zerodha Kite mobile app, Upstox Pro, Kotak Stock trader, Angel Broking app, Groww app are a few of the most trusted trading apps in India.
Documents Required to Open a Demat and Trading Account:
Bank Account details such as account number and IFSC code
Income Proof (Optional)
Trading platforms charge a nominal amount for opening a trading account. The whole process for opening a trading account takes hardly 15 to 20 minutes and it’s an online process which requires you to E-sign your application form to complete the process. Once your application is accepted you will receive your user Id and password and you can access your account. Trading apps are pretty self explanatory which makes it easy for you to operate your account. By connecting your bank account to the trading account you can easily liquidate your shares. You may also open an account offline by visiting the Stock broker. Offline method takes around 6-7 days to open a trading account.
Stock market is the best investment option for people who invest for a long term basis. An amount which may seem small today might double itself 10 times with proper monitoring and that is the power of the stock market. Go ahead and become an investor today!