Stock market, share market or equity market-all three mean the same. These are markets where you can buy or sell a company's shares, Buying shares of a company means buying some percentage of ownership of that company that is, you become the holder of a percentage of that company. if that company makes a profit, some percentage of that profit would also be given to you and if that company incurs a loss, a percentage of that loss would also be borne by you.
HISTORY & PURPOSE OF SHARES
The origin of share markets dates to around 400 year ago, around the 1600s, there was a Dutch East India Company, like the British East India company, There was a similar company in the country of Netherland today,known as Dutch East India company. In those times, people used to indulge in a lot of exploration using ships the entire world map had yet been discovered so the companies used to send their ships to discover new lands and trade with far away places and the journey used to be of over thousands of kilometers aboard a ship, there was a huge amount of money required for this. Not one person possessed such amount of money individually in those times so, they publicly invited people to invest money in their ships and when these ships would travel long distance to go to other lands and come back with treasure from there, they were promised a share of these treasures/money eventually but this was a very risky affair because during those time, more than half of the ships failed to come back. they got lost, or broke down or got looted. anything could happen to them so investor realized the risky nature of this enterprise So, instead of investing in a single ship, they preferred to invest in 5-6 of them and so that least one of them had chance of coming back. One ship used to approach multiple investors for money so, this created somewhat of a share market. There were open biddings of the ships on their docks. Docks are the places where the ships come out from gradually, this system became successful because the money crunch faced by the companies was supplemented by the common people. and the common people got a chance to earn more money you must have read in the history books about how rich the english east India company and the Dutch East India company became during those times and Today, each country has its own stock exchange and every country has become greatly dependent upon the stock market.
WHAT IS STOCK EXCHANGE?
Stock exchange is that place, that building where people buy and sell shares of the companies. The market can be divided into two types-The primary market and the secondary market.
Primary company is where the companies sell their shares, the companies decide what exactly would be their share prices Although there are some regulation in this too. The companies cannot manoeuvre too much because a lot of it depend upon the demand that how much price are the people willing to pay for the company's shares , if the value of the company is 1 lakh rupees, it sells 1 lakh shares and offers shares at 1 rupees per share if its demand is high and a lot of people want to buy its shares, the company would obviously be able to sell its shares for a higher price. what the companies do nowadays is decide upon a range. There's minimum price and a maximum price and they decide to sell their shares within that range.
HOW MANY SHARES CAN A COMPANY HAVE?
A point to be noticed here is that every share of the company has equal value, it is upon the company to decide how many of its shares it want to make if the total value of the company is 1 lakh, then it may make 1 lakh shares of 1 rupees each, Or it may make 2 lakh shares of 50 paise each when companies sell their shares in the share market, it never sells 100 percent of them, The owner always retains majority of the shares to keep possession of his decision making power and if you sell all the shares, then all the buyers of the shares would become owners of the company since they all become owners, they all can take decision regarding that company, The individual who has more than 50 percent of the shares would be able to make decisions regarding the company therefore the founders of the company prefer to retain more than 50 percent of the shares for example , 60 percent of the shares of Facebook are retained by Mark Zuckerberg, the people who have bought shares of the company can sell it to the other people, This is called the Secondary Market where people buy and sell shares amongst themselves and trade in shares and In the primary market, the companies set the price of their shares. The companies cannot control the prices of their shares in the secondary market and the share prices fluctuate depending upon the demand and supply of the shares.
INDIA'S STOCK EXCHANGE
Almost every big country has its own stock exchange.There are two popular stock exchanges in India-one is the Bombay stock exchange which has around 5400 registered companies and the other is the National Stock Exchange that has 1700 registered companies. With so many companies registered in the stock exchange, if we want to observe, overall, whether the prices of the shares of the companies are moving up or down, To measure this, some measurement have been put in place-sensex and Nifty.
WHAT IS SENSEX?
Sensex shows the average trend of the top thirty companies of the Bombay stock exchange averaging out, whether the shares of the companies are moving up or down. The full form of Sensex, the sensitivity index, displays the same. The number of sensex, that it has reached 40,000 marks, So this shows how far up have the share prices of these 30 companies gone in these past 50 years.
There is another similar index-NIFTY- National+Fifty. Nifty shows the price fluctuations of the shares of top 50 companies listed on the National Stock exchange
An important question that arises is whether you should invest money in the share market? A lot of people compare it with gambling because a lot of risk is involved in it and In my opinion it is correct to say so because this is indeed some sort of gambling. if you are not aware of the type of the company and its performance,the parameter of the company and its financial record. If you don't observe its history and accounting information then, In a way, this is said to be gambling because you would have no idea of how the company would perform in the future, You merely listen to people saying that the company is doing well and we should invest in it in the share market, so that's why you invest in it, you should never do this because it is extremely risky and obviously, when there are people that do this job day in and day out, for examples the traders, who are experts in this field and have more knowledge about the stock market they obviously would outperform the others because they have an idea of how this all works So, in my opinion, you should never directly invest in the share market and instead rely on the experts. A very competent form of it is mutual funds because in mutual funds you don't directly decide which companies you would invest in, In mutual funds, you place your trust in experts and let the experts decide which companies to invest in. In fact a lot of mutual funds invest in many different companies to minimise the chance of loss,
MUTUAL FUNDS > SHARE MARKET
For instance I've given the example of the East India Company. Investors had quickly realised that should not invest their money in one single ship, Investing money in 5-6 of them would ensure that atleast one of them came back. Mutual funds work the same way, investing money in many different places. There's a fine app called "kuvera" for investing in Mutual funds, It is an app that charges zero percent brokerage fees So, if you invest in mutual funds through this app, then it would retain zero percent commission for itself No matter how much money you invest.
0 Comments
Please do not enter any spam link in the comment box