Basics of Stock Market for Beginners

1. Basics Basics of of Stock Mar Stock Market ket for Beginners for Beginners A stock market is a highway for superlative investment returns. It beats the effects of inflation and diversification. It is simple and flexible. Here are some stock marketing basics to learn before investing. What kind of investor you are? Before committing the money, one should learn what kind of investor he is. Some prefer to take risks. Some seek the help of traditional online brokers. Some invest in stocks, bonds and some others in mutual funds, exchange traded funds and index funds. Sounds Greek and Latin? The first and foremost step is to learn about these terms. Self-analyze what suits you the best. In order to understand the working of these terms, it is essential to learn the basics of stock market. What is stock exchange? Ever seen the stock prices running on news channel. Like Amazon: Rs 1,300, Google Rs 1,400. These are the stock prices. When the person buys stocks in the stock exchange, he is given a receipt. This receipt of purchasing the stock is called “security”. The securities are bought and sold in stock exchange. Therefore, stock exchange can be defined as the market where the securities are bought and sold. How share market works? A stock represents ownership. It is a portion of the company. This portion is available to the public for purchase. Take an example of Company X to understand the working of stock market and learn how to invest in stocks. The worth of company X is Rs 100. The company says it is opening 50 rupees of its company in the share market. This, 50 rupees is divided into 10 stocks (or 20 stocks as per the will of the company). Thus, stock price of Company X in the share market is (50/10) Rs 5. Customer A buys 2 stocks of company X. Customer B buys 3 stocks. Customer A will pay 20 rupees and customer B will pay 30 rupees. In return they get securities from company X.

2. Now, fifty rupees is available with the company. From this, suppose company uses 10 rupees in construction business, Rs 20 in textiles business and Rs 10 in steel business. After six months, the profit of these businesses increased to Rs 20, Rs 40 and Rs 50 respectively. Now the value of the company increases in the share market. The share prices keep increasing as the profit of the company increases. Its share price, which was Rs 5, now starts increasing to Rs 6, Rs 12 and so on gradually. Now the user should wait and sell when the stock prices reach a maximum price, say Rs 10 or more. How to buy stock? Always buy when the stock market is shrinking. And sell when the stock market is blooming. This is the main principle of trading. To understand this principle, first learn what is Stock market index. It is a number that measures the stock market. If these numbers increase, the stock market is blooming (or expanding or increasing). In simple terms, 90% of the stock prices increase. If the index decreases, then the stock market is shrinking. 90% of stock prices will decrease. This guide on stock market for beginners helps users only to understand the basics. One cannot start earning thousands on stock market with this knowledge. It comes with experience. Observe the market regularly. Keep watching its fluctuations. Try to figure out why the fluctuation occurred? This will develop the habit of predicting the market.