SHARE MARKET: A POOL OF MONEY | ILLUMINATE MAIMS

Share market as the heading describes is a pool of money. Taking the example of our BSE, it has a total market capitalization of $2 trillion. Shocked, well the world’s biggest stock exchange NYSE has a $26.2 trillion market cap, enough for the entire African continent. But still, only 4% of Indians invest in the Share market, on the other hand, more than 50% of Americans invest in the share market.

That’s why NYSE is so mightier than BSE. If you look at the common investment segment like FD which gives 7% returns, debt fund 6%, Real state 5%, Gold 5% but in share market you get a 12% to 15% of returns. Before we lost in the pool of money let us understand some of the key points about the share market.

“An investment in knowledge pays the best interest.“
Benjamin Franklin

What is a share?

A Share is a portion of ownership in a company. The percentage of shares you have is equal to the percentage of ownership you have on the company. The shares represent the owner’s rights to the company’s profits, A claim over the company’s net worth, and provide the authority to make decisions concerning the company.

For example: Suppose there is a Textile company XYZ, they wanted to expand their businesses, and for that, they gonna need capital and for that, they don’t wanna go to banks due to high interest rates. So in that situation, they issue shares to the public and if the general public buys it they become part owners of the company. And they are known as the shareholder.

Type of shares

There are two types of share:

Common shares
Preferred shares

Most companies issue common shares. These provide shareholders with a residual claim on the company and its profits, providing potential investment growth through both capital gains and dividends. Common shares also come with voting rights, giving shareholders more control over the business.
Preferred shares typically do not offer much market appreciation in value or voting rights in the corporation. However, this type of stock typically has set payment criteria, a dividend that is paid out regularly, making the stock less risky than common stock.

What is the share market?

Just like your local market, where farmers sell their vegetables and as a customer you buy them. In the same way, the share market is the place where Companies or Organization sells and investors buy the shares. By buying a share, we are investing money in the company. As the company grows, the price of your share too will increase.

You can get profit by selling the shares in the market. Various factors affect the price of a share. Sometimes the price can rise and sometimes it can fall. Long-term investment will nullify the fall in price.

How does the share market work?

In our journey to know about the shares market, we have now arrived at a station on how does the share market work. If I put it in simple words, companies first offer the shares in the primary market through Initial Public Offering. Through an IPO a company sells its shares for the very first time to the public. Investors can bid for the shares and buy them at the issued price announced by the company.

After the IPO shares are traded in the secondary market. The more people invest the higher the price of the shares but if they start to sells the share price will fall, just the basic concept of demand and supply.

But that’s not the whole story, there are many players involved in it like Investors, Shares issuing companies, Regulators & Appellate Tribunals. Let us look at all these players who run, control, govern and regulate.

Investors in the share market

An investor is an individual or group of individuals who put money into an entity such as a business for a financial return. The main goal of any investor is to minimize risk and maximize return.

Shares issuing companies

These are the companies who register themselves in the share market to offer their shares in the market.

Regulators & Appellate Tribunals

As the name its reflect, these are the bodies who govern and make rules and regulation for the share market or to be specific for all business-related bodies. For example, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Securities Appellate Tribunals (SAT), National Company’s Law Appellate Tribunal.

Conclusion

Share market is like a roller coaster ride, sometimes it’s high and sometimes low, with a rush of adrenaline when it goes up and a shadow of sadness when goes down. If you have a risk appetite, knowledge, and understanding of market trends and can predict the ups and downs then the Share market is a piece of cake for you.

It will help you to develop a habit of investment in the long run, especially for a college student. If invested wisely they will be financially independent of the beginning of their life.

Do check out our other blogs.

By Ankit Kumar