Everyone is confused about where to invest money and how to get profit from investments. One of the best options to invest money nowadays is to invest in the share market. Most of the people don’t know what is share market and how it works. In the following article, we are going to provide you with complete information on what is share market and how it works.
What is share market?
The Share market is nothing but a place where buying and selling of shares are done. A share is described as the unit of possession of the company from where you purchased it. For example, you purchased 20 shares of Rs. 400 each of ABC company, then you will become a shareholder of ABC company. This allows you to sell ABC shares anytime you want.
- By investing in shares with proper guidance and good knowledge, you might be able fulfil your dreams, such as buying a car, buying a big house, go for higher education, etc. can be achieved.
- If you want the rate of return to be high, then you will need to start investing in shares from the young age itself for a long time.
- When you buy shares of any company, it means that you are investing in that company. If that company grows, the prices of your stocks eventually will increase and indirectly you will be profited.
- Once you have a good value of shares, you can sell the shares in the market at your price to gain profit.
But one fact that you have to keep in mind is that the shares will always not rise and there will be times when shares might fall too. Everything depends on the market value and price. It is a great side business idea who want to start a part time business. There are two types of share markets which you should know about.
The two types of share markets are
- Primary Market
- Secondary Market
How share market works
We have a rough idea of what is share market? Now let’s see how share market works. The concept behind how share market works is quite easy and straightforward. The stock market operates much like an auction house where buyers and sellers can negotiate prices and can make trades. You may have heard about the NYSE and Nasdaq which are the two largest exchanges in the world, which are based on the listing of the world company’s.
The share market works on the principle of exchange of stocks in the market. There is one process called an initial public offering, or IPO where all companies list shares of their stock on the exchange information. From here then the investors purchase those shares which help the company to grow there business and to raise money. Then the investors can also sell or buy the stocks within themselves. Also, they can exchange the stock with each other to gain profit.
After that, buyers come in the picture. The buyers are offered with “bid” that is nothing but the highest amount of value that they want to pay. This amount is less than the seller’s amount of share which they have asked for an exchange. Whatever the difference will be there, it is called the bid-ask spread. In simple words, for any trade to happen, the buyer has to increase there price whereas the seller will need to decrease there price. This is how share market works.
It all might be very confusing but don’t worry all the calculations are done through the computer which makes the chances of incorrect calculations close to nil. This is all about how share market works.
So now we have seen what is share market and how it works. Let us see now how to invest in shares.
How to invest in shares
To invest in shares, we need to provide the following things
- A PAN or Aadhar card
- A broker
- A Demat account
- Start Buying and Selling shares
Once you have these things, you can continue to know how to start investing in share market. Following are the points with the help of which you would know how to start investing in share market/ how to invest in shares.
- The investment goals should be clearly defined.
- You will need to choose the correct financial assets based on your goals and timelines
- You need to start investing from a young age and invest regularly.
- Identify your investments into different assets; this you can do based on your risk-taking nature.
- Always do complete research on the company in which you are planning to invest.
- Never depend on the rumours.
- The most important thing is to have patience, and you should not be greedy.
- It is always better to take help from experts before going forward with the decisions of investments.
The above points must have clarified the question of how to invest in shares/how to start investing in share market.
How to pick good stocks in Indian market
The following points will help you to understand how to pick good stocks in Indian market.
- You should screen and filter the stocks in which you want to invest on a financial basis.
- Select one company that you have to understand and knows the in and out of it.
- Always look for the company which is having a competitive advantage and willing to earn the profit.
- To know how to pick good stocks in Indian market always try to go for the companies having low-level debit.
- To identify the right stock, always try to use financial ratios such as RoE and RoCE.
- You should be Honest, Transparent, and Competent Management.
- Always find the right price to buy the stocks.
With the help of these points, you would know how to pick good stocks in Indian market and make a career in share market. I hope we were able to explain what is share market and how it works.