Hello friends ! Let’s talk about the stock market, what is the stock market? Why is it in place? how does it work? What are its advantages and disadvantages? and how you can invest money in it.
What is the stock market?
What does it mean to buy company shares
What does it mean to buy shares of a company? Buying shares of a company means buying some percentage of ownership of that company, which you become. Holders of a percentage of that company If that company makes profit, then some percentage of that profit will also be given to you. If that company incurs a loss, then a percentage of that loss will also be borne by you, of which I am giving you an example.
On the smallest scale, let’s say you have to set up a start-up, you have Rs 10,000, but it is not enough, so you go to your friend and ask him to invest Rs 10,000 and give him Rs 50- Offer a partnership of 50, which will benefit your company.
In the future, 50% of this will be yours. 50% of it will belong to your friend. In this case, you have given 50% shares in this company to your friend.
The same thing happens in the stock market at large, the only difference is that instead of going to your friend, you go all over the world and invite them to buy shares in your company.
When has the stock market started
When did the stock market start? The origins of the stock exchanges date back to about 400 years ago. In the approximately 1600s, there was a Dutch East India Company, a similar company, like the British East India Company.
In the country of the Netherlands, today known as the Dutch East India Company, at that time, people were involved in much exploration using ships. The map of the whole world had not yet been discovered, so companies would send their ships to explore new lands and trade with far-flung places that traveled more than thousands of kilometers in a single ship.
A huge amount of money was required for this. A person personally did not have that much amount in such a time, so he used to invite people in public. Invest money in your ships when these ships will travel long distances to go to other lands and come back with treasure from there.
They were eventually promised a portion of these treasures/money but this was a very risky affair because during those times, more than half of the ships failed to return, they were lost, broken or robbed.
Anything can happen to them so the investors realized the risky nature of this venture. Hence, instead of investing in a single ship, they preferred to invest in 5-6 of them, so that at least one of them was on the ship. likely to return.
Contact multiple investors for money. This led to a decline in the stock market to some extent. There was an open bidding of ships at their docks. The docks are the places from which ships slowly depart, this system became successful as the money crunch faced by the companies was met. by common people. And common people got a chance to earn more money.
You must have read in the history books that how prosperous the English East India Company and Dutch East India Company were, in today’s time, each country has its own stock exchange and every country has become heavily dependent on the stock market.
A stock exchange is a place where people buy and sell shares of companies. Market can be divided into two types- primary market and secondary market.
Where companies sell their shares. Companies decide what their share prices will actually be. However there are some rules in this as well.
Companies cannot maneuver too much, because a lot of it depends on the demand, how much price people are willing to pay for the company’s shares, if its value is Rs 1 lakh, the company sells 1 lakh of its shares. and offers shares at 1 per share. If its demand is high and many people want to buy its shares, the company will obviously be able to sell its shares for a higher price.
Do companies nowadays set a limit?
Do companies set a limit nowadays? There is a minimum price and a maximum price they decide to sell their shares within that range. The point to note here is that each share of the company has equal value.
The company has to decide how many shares it wants to make. If the total value of the company is 1 lakh, it can make 1 lakh shares of Re 1 each, or it can make 2 lakh shares of 50 paise each.
When companies sell their shares in the stock market, it never sells 100% of the shares. The owner always holds the majority of the shares to retain his decision-making power.
If you sell all the shares, the buyer of all the shares is the owner of the company. will become the owner as they all become the owner, they all can take the decision about that company. The person who has more than 50% of the shares will be able to take the decision regarding the company so the founder of the company is more than 50% Prefers to hold more shares.
For example, 60% of Facebook shares are maintained by Mark. Zuckerberg T. People who have bought shares of the company can sell it to other people. This is called the secondary market, where people buy and sell shares among themselves and trade.
In the primary market, companies cannot set the prices of their shares. Control the prices of their shares in the secondary market Share prices fluctuate depending on the demand and supply of the stock so the prices of shares fluctuate based on the demand and supply.
Almost every major country has its own stock exchange, there are two popular stocks. The exchange in India is the Bombay Stock Exchange, which has about 5400 registered companies. The second is the National Stock Exchange, which has 1700 registered companies, with many countries registered on the stock exchange, if we want to observe, in total, what are the prices.
How do we see if the stocks of companies are going up or down? To measure this, some measurements have been taken- Sensex and Nifty. Sensex shows the average trend of top thirty companies of Bombay Stock Exchange, whether the shares of companies are moving up or down, full form of Sensex, Sensitivity Index, displayed the same. The Sensex numbers have reached the 40,000 mark. The number doesn’t mean much.
The value of this number can only be understood in comparison with the previous numbers because this number is decided at random, they decided, initially that the value of thirty companies’ shares would be this so we compile all the numbers and Then say it is 500, so, gradually, the Sensex is rising and in the last 50 years it has reached the level of 40,000.
So this shows how much the share price of these 30 companies has increased in the last 50 years. Here is another similar index – NIFTY – National + Fifty Nifty, which shows the price volatility of top 50 companies’ stocks.
Steed on the National Stock Exchange If a company wants to sell its shares on the stock exchange, it is called “public listing”. If a company is selling its shares for the first time, it is called an IPO- Initial Public Offering. Offering shares to the public for the first time, during the days of the East India Company, was very easy to accomplish.
Anyone could sell their company’s shares to the public but today, this process is very long and complicated, and so it should be because,
How easy it is to scam people
Think about it, how easy it is to scam people. Anyone can get listed on the stock exchange with a fake company, and exaggerate the value and achievements of their company.
People will foolishly invest in his company. He can abscond with money so it has become very easy for anyone to scam in the history of India, having witnessed many scams like these.
for example, Harshad Mehta did the Satyam scam, they were all the same- fooling people and listing himself on the stock exchange. hoarding money and then absconding and when these scams happened, stock exchanges realized that they need to strengthen their process and provide proof of scam. For this, the proposals and rules were further strengthened.
Roles of share market
Due to which there are very complex rules today SEBI- Security and the Exchange Board of India is a regulatory body that looks into issues like which companies should be listed on the stock exchange and whether it is being done properly or not.
if you want to do so (i.e. get listed), you have to meet SEBI’s norms. Their norms are very strict, for example, your company account needs to have a lot of checks and balances at least two Auditors will check your company’s account This whole process probably takes about 3 years.
More than 50 shareholders must be already present in the company, if you want a company to be publicly listed when you go to sell their shares, but there is no demand for the same from the public, SEBI will ask your company to be listed on the stock exchange. can remove from its let’s know.
How can you invest in stock markets now?
Now how can I invest money in the stock markets? Do you invest money in stock markets? During the time of the East India Company, one could go to the dock from where ships departed and before the dawn of the Internet to bid and buy and sell stocks, one could physically visit the Bombay Stock Exchange building However, with the internet in place, you only need three things- a bank account, a trading account and a demat account. A bank account. Because you will need your money in a trading account, you will need to have a company demat account.
To allow money to be invested and invested. To store the shares that you buy in digital form, most banks today started offering 3 in 1 accounts with all three accounts included in their bank account, for people like us who would be called retail investors, who are common. People want to invest in the stock market.
A retail investor always needs a broker. A broker is someone who brings buyers and sellers together. For us, our brokers can be our bank, a third party app or even a platform. When we invest money gh brokers in the stock market, a broker maintains some money as his commission. This is called the “brokerage rate”.
Banks mostly keep the brokerage rate around 1% but 1% is slightly higher. It’s not how much it should be. If you look properly, you will find platforms that charge a brokerage rate of around 0.05% or 0.1%. This brokerage rate is a disadvantage for those who want to indulge in trading a lot of stocks.
If a lot of shares are bought and sold in a day, a lot of money is withdrawn as brokerage charges. High brokerage rate won’t make much difference as you will pay, it happens only once,
So investing and trading are two different things. Investing means putting some amount in the stock market and letting it stay there for some time. Business means quickly investing money in different places and withdrawing money from some places. Quick succession really trading stocks is a job in itself.
There are many people in our country who are businessmen and do this work throughout the day and take money out of one part and put it by moving it from one place to another. Secondly, making profit in this process is an important question that arises whether you should invest money in stock markets?
Should you invest in stock markets?
Should you invest money in the stock markets? A lot of people compare it to gambling because it involves a lot of risk. In my opinion it is correct to say so because it is actually some sort of gambling if you are not aware of the type of company and its performance, parameters of the company and its financial records.
If you do not observe its history and accounting information, then In a way, it is like gambling because you will have no idea how the company will perform in future, you only listen to people saying that the company is doing well and we should invest it in the stock market. So you invest in it.
You should never do this because it is very risky and obviously, when there are people who do this job day in and day out, for example, traders who are experts in this field and know more about the stock market have, they will clearly outperform others because they have an idea of how it all works,
Conclusion
So, in my opinion, you should never invest directly in the stock market and trust the experts instead. A very efficient form of this is mutual funds because in mutual funds you do not directly decide which companies you will invest in.
In mutual funds, you put your trust in the experts and let the experts decide which companies to invest in infect. Many mutual funds invest in several different companies to reduce the potential for losses.
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