What is a Stock or Share Market? Is There any difference?

What is a Share Market?

Individuals have many options to increase their wealth and save money by investing in the Share market. This is where shares of companies can be bought and sold. The company is trying to raise funds to support its business by issuing shares to investors. Investors who purchase these shares become part-owners and can often receive dividends.

This is just a brief summary. You need to understand how the share market works if you want to trade or invest in it. Continue reading to learn more about how and why share markets work. Find out how to trade and invest in the share market.

HOW SHARE MARKETS DO WORK?

There are two types of share market: primary and secondary. Let's have a look at their operation:

Primary Sharemarket

An initial public offering (IPO) is when a company goes public and lists on the stock exchange. This IPO is done in the so-called primary market. These newly issued shares can be applied for by investors through their trading account, or via their bank accounts. The company will allot the shares to subscribers once the subscription period has ended. The company is soon listed on the stock exchange. Shareholders can then sell their shares on the secondary market. India's two major stock exchanges are the Bombay Stock Exchange, (BSE), and the National Stock Exchange, (NSE).

Secondary Market

Stocks that are listed on an exchange can be traded in the secondary market. The prices of listed shares fluctuate based on changes in supply and demand. The share price will rise if there is more demand than supply. The stock price may fall if there are many sellers trying to sell their shares and few buyers. It can be difficult to find the best trades because there are so many traders on the market at once. The broker is a key player in helping sellers find buyers and buyers find sellers.

When trading on the sharemarket, you should be aware of these key terms:

• The bid price is the amount that buyers are willing to pay. This is the maximum price they will pay to buy the stock.
• The asking price is what the market sellers mention. This is the price they are willing to sell their securities.
• Spread is the difference in the ask and bid prices.

SHARE MARKET: Importance

Businesses have the opportunity to raise capital through the share market. Shareholders can purchase shares to be a part the company's growth story. Shareholders who purchase shares in short-term could make profits from market fluctuations. The share market plays a role in creating wealth at different levels of society.

Investors and traders also enjoy the high liquidity offered by share investments. Shareholdings can be liquidated at any time. Shareholders who need funds immediately have the option of selling their shares during market hours. The holdings can then be converted to cash at any moment.

Let's now look at the benefits that shareholders get from investing in the stock market.

• Dividend IncomeDividend is the amount of profits that a company shares among its shareholders. It is determined by the number of shares each investor holds. Although dividends are not always paid by all companies, they can be a significant attraction for long-term investors.
• Capital Growth
  Investors want to build long-term wealth. Investors invest in stocks to increase their capital appreciation, which is a rise of the share price over time. Before you invest, ensure that the company's fundamentals are strong if capital growth is your goal.
• Share Purchaseback
  Sometimes, the company might repurchase (buy back its shares) from shareholders. This may be done at a slightly higher price than the market value. Shares are bought back by companies when they have cash on hand or to consolidate their ownership.

TRADING ACCOUNTS AND DEMAT

You will need a Demat account in order to invest in shares. A trading account is required to buy or sell shares. When you buy stocks, the purchase will debit your trading account balance. The purchased stocks will then be credited to the demat account. If you sell stocks, the reverse happens. Your demat account will debit stocks and your trading account will receive any money earned from the sale.

It is easy to open trading and demat accounts. Many brokers will simultaneously open both your trading and demat accounts. These are the steps to keep in mind

• Fill out the application form by visiting the broker.
• Send the documents you need:
  • PAN card
  • Aadhaar card
  • Address and identity proofs
  • Income proof
  • Bank account proof: Cancelled cheque leaves
  • Photographs in passport-sized sizes
• Please read the Terms and Conditions.
• The in-person verification is required. A representative will be sent to your home by the broker.
• After all formalities have been completed, you will be sent your client ID, password and account details.
• These details will allow you to log in to an account.

PLACING SHARE MARKET ORDERS

You can trade and invest in India as a share trader or investor on the Bombay Stock Exchange, MSE (Metropolitan Stock Exchange), and the National Stock Exchange. Your broker will act as a mediator between you and the exchange. Here are the steps involved in placing an order.

You have two options to place orders for share trades: online or offline.

Online order placing

It is easy and safe to use the online mode. Log in to your Trading account to place the order. The order details will include the name of the scrip, price, number, and other details. Your order will be executed by the broker. The shares will then be credited to or debited automatically from your Demat account.

Offline Order Placement

You can either call or visit the office to instruct the broker in offline mode. The online mode has the same steps. All credit and debit transactions will be made automatically.

TIPS TO INVEST IN SHARE MARKET

• Only invest after conducting thorough research and analysis. Do not rely on friends, family, or acquaintances for advice.
• You should invest in sectors and companies that you are familiar with. This will allow you to assess their future growth and prospects.
• Do not try to time the market. It is impossible to invest at the bottom and then sell at the top.
• Be disciplined as an investor. Wait patiently for stock prices to rise over time if necessary
• Do not be influenced by emotions. Emotional decisions can cause losses in the share market.
• Diversify your portfolio and invest in different companies and sectors. This reduces risk and provides good long-term returns.
• Be realistic about the returns you expect from the market.

To Summarize

Once you have an idea of what investing in the share market entails for you, it is time to move on to the next step. Register with a reliable broker to open an account. Once that's done you can narrow down the companies and sectors you want to concentrate on and then shortlist the scrips you like. Before you invest in any shares, make sure to study the basics of each. Before you invest, make sure to study price charts, stock recommendations and research reports. You should be able find a trading or investment strategy that works with a little practice.