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STOCK MARKET FOR BEGINEERS – A to Z OF STOCK MARKET


“Price is what you pay. Value is what you get.”

                          -Warren Buffett

In spite of its huge popularity and the ability of never failing to make its mark in the headlines, the stock market is just one of the many potential places to invest your money into. Investing in stock market is often risky, which draws attention to the huge gains and losses of some investors. But, if you master to manage the risks, you can take advantage of the stock market to secure your financial position and earn money.

WHAT IS A STOCK MARKET? HOW DOES IT FUNCTION?

A stock market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately. In simpler words, the stock market is where investors connect to buy and sell investments; most commonly, stocks, which are shares of ownership in a public company. You must have seen some news headlines saying that the stock market has gone down, or that stock market closed up or down for the day. Most often, this means stock market indexes have moved up or down, meaning the stocks within the index have either gained or lost value as a whole. Investors who buy and sell stocks wish to turn a profit through this fluctuation in stock prices.

Let us take it with the help of an example:

There is a young couple (probably in their 30s), who have their own company, must decide how much of the company they are willing to sell. Right now, they own 100 percent of the business. But, the more company shares they sell, the more cash they will be raising. Having said that, they must keep in mind that by selling more, they will be giving a huge part of their ownership. There are always some amount of risks of company going up or down but that’s what it is meant to be. You have to be upfront with however pages turns.

After contemplating much, the couple decides to keep 60 percent of the company and sell the other 40 percent to the public as stock. Since, they will be keeping 60 percent of the company (7.8 million worth of the business), and the majority of the stock, they will still be in control of the store. The other 40 percent of the stock that they sold to the public has a value of 5.2 million. The underwriter finds investors who want to buy the stock and gives a cheque for 5.2 million to the couple.

Although they own less of the company, the owners' stake will hopefully grow faster now that they have the means to expand rapidly. Using the money from their public offering, XYZ Textiles successfully opens the two new stores and has 1.2 million in cash left over, since they raised 5.2 million but only used Rs. 4 million.

Their business started performing even better in the new branches. The two new stores made around 800,000 a year in profit each, while the old store still makes the same 500,000. Between the three stores, XYZ Textiles now makes an annual profit of 2.1 million. The couple’s 60 percent stake now has a total worth of Rs. 30.6 million.

With this example, we got to understand how easy it is to see small businesses seem to explode in value when they go public. The original owners of the company, in a sense, become wealthier overnight. Before, the amount they could take out of the business was limited to the profit that was generated. Now, the owners can sell their shares in the company at any time, raising cash quickly. Because of human nature and the emotions of fear and greed, a company can sell for far more or for far less than its intrinsic value. A good investor learns to identify those companies currently selling below their true worth so that they can buy as many shares as possible.

How does the stock market work?

Understanding stock market can be as easy as a piece of cake and as difficult as flying a jet. It totally depends on how willingly you want to learn stock market. It is much like an auction house, the stock market enables buyers and sellers to negotiate prices and make trades.

The stock market works through a network of exchanges. Companies list shares of their stock on an exchange through a process called an Initial Public Offering, or IPO. Investors buy those shares, which allows the company to raise money to grow its business. Investors can then buy and sell these stocks among themselves, and this exchange, hence, tracks the supply and demand of each stock listed.

Buyers offer a “bid,” or the highest amount they’re willing to pay, which is usually lower than the amount sellers “ask” for in exchange. For a trade to occur, a buyer needs to increase his price or a seller needs to decrease hers.

Earlier, stock exchange used to happen in a physical marketplace but these days, it has all taken over the online medium. Now, you do not have to go anywhere in order to make a deal.

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HOW TO INVEST IN STOCK MARKET?

Amongst all the ways of investing your hard earned money, investing in stocks is the most fun and interesting way of doing that. Why? Because, you get to learn a lot about the market and once you become a master, there is no looking back and also who doesn’t like money being multiplied without even moving a muscle. If that intrigues you enough, then you must be wondering as to how would I do that? It is just so simple, follow the steps below to learn how to invest in stock market.

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1.How you want to invest in stocks: There are several ways as to how you can invest in stocks. Know that how you would want to invest and then go for it. Two most prominent ways of investing in stock market are:

  • Choose which stocks you want to invest in and do that all by yourself. This is primarily for those people who knows every bit of investing and has become a master in the game.
  • Stocks can be a great investment for which you would want someone to manage the process for you. There are a lot of services that provide low cost investment management.

2.Open a DEMAT account: Opening a Demat account is necessary for investing in the stock market. These accounts are quite easy to open. Just with basic minimal documentation, you can avail this facility.

Now this facility, can be attained by the Stock Brokerage Firms. These firms are seen as the mediators through which one can buy and sell the shares. But in return you are required to pay them with certain charges.

By using a Demat account, one can buy or sell their shares easily through different ways. Firstly, through the stock brokerage app or through the stock exchange website; secondly, through stock brokerage firm’s website or by using the software; and lastly, one can also call up the broker, and place their status of buying and selling through calling only. 

Basic documents required to open a DEMAT/trading account includes PAN CARD, Voter ID or Aadhar Card for Address proof and Bank passbook copy or Cancelled cheque for Bank proof.

CLICK HERE to open a DEMAT account within a second.

3.Start investing: Remember that you must understand any business in which you consider investing. This includes knowing its true value as well as less tangible aspects, such as its durability over time and the integrity of its CEO. After assessing these elements, simply choose a brokerage account that is affordable and aligns with your needs. Once you've done that, it's time to buy your first stock and get started in the wonderful world of investing.

CAN I INVEST IF I DON’T HAVE MUCH MONEY?

There is no hard and fast rule of making big investments when it comes to stock market. You can start investing with as high as ₹50,000 or as low as ₹500. There are two challenges to investing small amounts of money. The good news? They’re both easily conquered.

The first challenge is that many investments require a minimum amount of money and the second is that it’s hard to diversify small amounts of money. Diversification, by nature, involves spreading your money around. The less money you have, the harder it is to spread. The solution to both is investing in stock index funds and ETFs. The last thing we’ll say on this: Investing is a long-term game, so you shouldn’t invest money you might need in the short term. And as they say, “Earn as much as you can, save as much as you can, invest as much as you can, give as much as you can”.

ARE STOCKS A GOOD INVESTMENT FOR BEGINEERS?

Yes. In fact, everyone, including beginners should be investing in stocks, as long as you’re comfortable leaving your money invested for at least five years. Why five years? That’s because it is relatively rare for the stock market to experience a downturn that lasts longer than that. But rather than trading individual stocks, focus on stock mutual funds. With mutual funds, you can purchase a large selection of stocks within one fund.

Is it possible to build a diversified portfolio out of individual stocks instead? Sure. But doing so would be time-consuming, it takes a lot of research and know how to manage a portfolio. Stock mutual funds includes index funds and ETFs do that work for you.

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”, says Warren Buffet. In other words, don't hesitate when you see a great opportunity. In the repercussion of the financial crisis, Buffett didn't solely glide into bank stocks. Rather, he made multibillion-dollar investments in Bank of America and Goldman Sachs that have paid him off massively.

HOW TO LEARN STOCK MARKET INVESTING IN INDIA?

There are a number of ways how you can learn about stock market. Practical knowledge is always the best way to learn anything, not just stock market. You will try, you will fail, you will learn. Keep trying until you succeed. In spite of that, there still are 2 important ways to learn about the program such as:

1.Take an Online Course

A supervisory guidance is always one of the best ways to learn anything. Subscribe to the STOCK MARKET COURSE FOR BEGINNERS to learn even the tiniest of the details about stock market. Through the stock market course, you will be getting all the small details about the stock market. This course will answer questions like how the stock market works & its function, how you can benefit from the India growth story by investing in the stock market, the basics of investing & the importance of passive income.

Not only that, once you have bought your subscription, the course is valid for a period of one year from the date of purchase. After a year, if you wish to keep your access to the material, you can renew your subscription without any hustle.

The subscription to this course includes a number of knowledgeable and interactive videos. Currently, the number of videos in the stock market course is between 15 and 20.

The advantage of this course is that it explains even the basic concepts of the stock market to you in a way that requires no prior knowledge of finance or investing. This course will provide you with the opportunity to create a strong fundamental base. Henceforth, any other information you acquire will be easily absorbed. You can also undertake your own stock investments with ease.

Also, once you complete the course, you open the possibility of obtaining two certificates.

The first is the Certificate of Completion. This certificate is provided to everyone who completes the entire course successfully. Once you finish watching all the videos included in the course content, you will obtain this certificate.

The second is the Certificate of Accomplishment. As the name suggests, this certificate requires some effort in order to accomplish it. This certificate is more special and is only provided to those candidates who pass the test of 50 marks. The questions in this test will be based on the content of the course.

2.Watch Videos

Who doesn’t like watching videos? And, on top of that, if you get to learn something from them, what could be even better than that. The first option is clearly and the most effectively the best one, which is subscribing to the STOCK MARKET COURSE FOR BEGINNERS because there you can get 15-20 the most knowledgeable videos of all times. And, if not that, then YouTube is always an option. But, giving all the time in the world to watch gazillion of videos and still not getting what you want is not the option you must be looking for, right! Wait, I have got you covered. How about sparing just 12 minutes of your day and getting all the required information as to how you can learn about stock market. Sounds fun, right? Go over to our YouTube channel and watch the Stock Market for Beginners video and you will get what you are looking for in just 12 minutes. Don’t believe me? I would say, give it a watch, then.

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SOME BASIC FEATURES OF STOCK MARKET

  • Stock market is a place where the securities issued by the company, governments and other authorities are sold.
  • Stock market is considered as an organized market.
  • It is great source of market for the long term investment purpose.
  • It helps in the capital formation, globally.
  • The main feature which stock market provides is that, anyone can buy or sell shares in the market.
  • But, a catch is that they must have the Demat account, as it is a necessity.

CAREER OPPORTUNITIES IN STOCK MARKET

Stock market has many career opportunities with it. Following is the list of few opportunities:

  • You can work as an Equity Research Analyst.
  • You can work in Stock Brokerage firms, like ICICI Direct, Share Khan, and HDFC Securities etc.
  • You can work in Mutual funds firms, like Axis Blue-chip funds, ICICI Prudential Equity and Debt Fund etc.
  • You can work as a Sales Representative.
  • Merger and Acquisition.
  • Financial advisor.

Just like these, there are many other options as well, which you have achieve. 

So, to conclude everything, we hope that this beginner stock market investing guide sets you on a good path towards further research and learning, investment success and profits. It really is possible to be a successful investor if you want to be, but it will take time, effort, dedication and patience. If you can find those within yourself and treat investing as a journey that will take years, you can do it too.

Happy Investing!

By Garima