You might have heard that investing in stocks is a good way to build wealth over time. And that’s true. Stocks have historically outperformed most other major asset classes over the long run.
But do you understand how the stock market operates? Do you know the process of buying and selling stocks? Or even what a stock represents?
If you answered “no” to any of these, you’re not alone. The stock market can seem confusing and complex to many. Unfortunately, most schools barely touch on the topic at all.
Luckily, the fundamentals of the stock market are simpler than they seem. With that said, let’s go through the basics of stock markets.
This guide will help you learn everything about what the stock market is and how it functions.
What is the Stock Market?
The share market, or stock market, is where people and businesses come together to trade shares of companies that are listed publicly. It’s like a marketplace where you can buy or sell a small piece of ownership in a company, letting you share in their growth and profits.
In India, platforms like the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) make this process smooth and efficient. For companies, the share market is a way to gather funds for expanding their business. For investors, it’s an opportunity to earn a return on their money. It’s a key part of the financial system and reflects how the economy is doing and what investors are feeling.
What are Stocks?
Stocks are ownership stakes in a company. By investing in a stock, you gain a small share of that company, called a share. Stocks are bought and sold on stock exchanges, and their prices change according to the company’s performance and overall market trends. Owning stocks offers investors the opportunity for returns through both price increases and dividends. Dividends are payments distributed to shareholders from the company’s earnings. Stocks play a vital role in the stock market. It enables individuals to invest in companies and share in their financial growth.With the HDFC Sky Stocks App, you can easily track and manage your stock investments.
Types of Stock Markets
The stock market can be divided into two main categories: primary markets and secondary markets.
Primary Markets
When a company decides to raise funds by selling shares for the first time, it enters the primary market. This process is known as an Initial Public Offering (IPO). After the IPO, the company becomes publicly registered, allowing its shares to be traded among market participants.
Secondary Markets
After the initial sale of a company’s new securities in the primary market, these securities are traded in the secondary market. In this market, investors have the chance to buy and sell shares with one another at current market prices. Typically, these transactions are facilitated by brokers or other intermediaries who help with the process.
How Does the Stock Market Work for Beginners?
Below are the few steps that would help you learn how to invest in the stock market as a beginner:
Learn the Basics: Before you start, it’s important to know the basics of the stock market like, what stocks or shares are, stock exchanges, dividends, etc. Stocks are the shares you buy of the company, while dividends are payments made by a company to its shareholders from its profits.
Understand Stock Exchanges: The National Stock Exchange (NSE) and Bombay Stock Exchange are two popular stock exchanges in India. They are platforms where stocks are bought and sold. They ensure that the process of the buying and selling of stocks is fair. When you place a trade through your brokerage, it is executed on one of these exchanges.
Choose a Brokerage: To buy shares, you’ll need to set up a demat account with a brokerage firm. These companies act as intermediaries to help you buy and sell stocks. Many brokerages offer online platforms that make stock market trading easy.
Fund Your Account: After setting up your account, you’ll need to deposit money. This money will be used to buy stocks of the company.
Research Companies: Look for companies you believe would grow over time. You can start with companies you know and use regularly. Check their performance, news, and financial reports to make accurate decisions.
Buy Stocks: Once you’ve done your research, you can place an order to buy shares. You can choose to buy at the current market price or set a specific price you’re willing to pay.
Monitor Your Investments: After buying shares, keep an eye on their performance. The stock market can be volatile, which means prices can go up and down quickly. It’s normal for the value of your investments to fluctuate. You can use HDFC SKy, one of the best trading app to track your investments.
Consider Long-Term Investing: Many successful investors hold onto their stocks for years, allowing them to grow in value over time. Do not panic if prices drop temporarily; think of it as a long-term strategy.
Conclusion
Investing in the stock market can be a rewarding way to grow your money. Start small, do your research, and be patient. With time, you’ll learn more about how the stock market works and how to make the best investment choices for your future.
You can invest in the stock market through one of the best trading apps in India like HDFC Sky, which makes opening a Demat account simple. It helps you invest in the stock market with ease, and you can invest in stocks of different companies and other financial instruments like mutual funds, ETFs, etc.
Frequently Asked Questions (FAQs)
How to start trading as a beginner?
An easy method to buy stocks is by opening an online broking account. If you do not know much about it, you can seek the help of a professional for the same. Investing in stocks can be done in various cost-effective ways.
How to earn money from the share market?
You can earn money from the share market by buying stocks at a low price and selling them at a higher price. This is called capital gains. You can also make money through dividends, which are payments companies give to their shareholders from their profits. Investing wisely and holding onto your shares for the long term can help you grow your money.
