Basics of Stock Market



When you go to the market to purchase vegetables or fruits you analyze the market first and then purchase accordingly, right? The same is to be done for the stock market investment or trading.

There are many misconceptions about the stock market mainly because it’s a risky area, one needs to have strong knowledge about finance, and lots of money is required to invest in the stock market. These myths about the market can be busted once you understand the basics of stock markets. So let’s understand the basics of the stock market.

A stock market is a place where buyers and sellers trade or invest in shares or other financial instruments. Basically, there are two types of market –Primary market and secondary market.

Primary market means the market where the 1st time the share is being Listed and sold to investors [IPO/fresh issue], whereas secondary market means the market where shares are being purchased and sold frequently after being listed.

Listing means the company now has the right to issue shares in the stock market and raise capital from the same. The listing can take place in two stock exchanges – Bombay Stock Exchange [BSe] and National Stock Exchange [NSe].

To invest in shares one must have a DEMAT account opened with a broker. Now you must be thinking what is a DEMAT account right? So a DEMAT account is an account opened with a broker to trade in the market and have the shares stored electronically there.

Physical certificates are only valid for transmission or transposition of shares but to sell and transfer you require to convert the certificate in DEMAT holding. Thus DEMAT accounts are necessary nowadays.

To invest in a stock one must do the fundamental analysis of the same. Fundamental analysis not only means checking the past trends but also seeing its future goals and present business earnings. If you know the basics about finances you are good to invest in the stock market. Different expert opinions can also be seen while investing. However, the best example to bust the misconception about strong finance knowledge is Mr. Radhakishan Damani who is an undergraduate and is an Indian billionaire investor and founder of DMart.

The market is risky but the risk can be divided or hedged by investing in different sectors i.e. diversifying your portfolio.

A portfolio means different types of shares held by a person. One can invest in the oil sector, gold, hospitality sector, steel sector, REITS, etc. The more diversified the portfolio is, the lesser the risk. Risk also depends upon your holding term. Thus the myth of being a risky area is busted.

Lastly would say that you can start investing with whatever savings you have. No requirement for heavy funding. There is a saying for the market, “The earlier you start investing, the better are the returns”, as the value gets compounded. The best example for the same is Mr. WARREN BUFFET who started his investment journey at the age of 11.

You can start your Financial journey with as low as Rs.500 per month. Contact your Financial Wingman today at Equiseed Wealth and we will handhold you through your complete financial journey.