STOCK MARKET FOR BEGINNERS

If you are like me, you have stayed away from The Stock Market for most of your life, thinking, "What if I lose all of my Money? I am not a CA. Right !!! I don't do Gambling." And you are right.

Some people have lost everything in the Stock Market, but it has also made some people very rich. For example, Rakesh Jhunjhunwala, who started with 5000 rs. in the Stock Market and now has a portfolio worth around 20,000 Crores.

Most people who lose money in the Stock Market don't have the proper knowledge. It's like an untrained driver driving a car. So in this case, what will happen? You guessed it right. Accident!!! Yes, accidents will occur due to improper training. The same goes for the Stock Market. If you don't have the proper knowledge, you will definitely lose your money.

People who want quick money from the Share Market and think that their investments will grow in no time, then my friend, you are totally wrong. The share market is not for you. But if you learn how the Stock Market works, then it is a great opportunity for you to grow your money.

If you want to make money in the Stock Market, you need a strong armor of knowledge. The most important thing in the Stock Market is patience. An impatient person can't stay in the Stock Market for a long time.

If you are an impatient person, then please close this blog because I can't save you from the Stock Market. But if you want to invest in the Stock Market and you think that you have that patience, then you are on the right blog. So it doesn't matter that you don't have any financial background or you have never invested in stocks. I'm here to tell you everything about it.

So in this article, I'm going to discuss the following questions that you have in your mind.

1. Why Invest In The Stock Market?

2. What Is The Stock Market?

3. How does The Stock Market work?

So let's begin,

1. WHY INVEST IN STOCK MARKET?

We all know that adult life is about two things. First is responsibility like paying bills, medical expenses, monthly light bills, and other things, marriage, kids, their education, and many more. You know very well about your responsibilities.

The second one is your dreams. Am I right? Yes, dreams like buying a new house, buying a dream car, traveling the world with your loved ones, etc., etc.

The 9-5 job will barely meet your responsibilities. And I'm hoping that you are not one of those who eat away their parent's savings to fulfill your dreams. You are working so hard, but your salary is not increasing. So now the only option that you have left is investing smart. Not robbery, ha!!!!

If you invest in FD, how much return will you get? 5% - 7% maximum. But if you invest in stocks of a good company, then the Stock Market will give you a return of 14% - 20%. What? Yes, that's right.

Now the reason why the Stock Market gives us so many high returns is that it takes your money and multiplies it to create more money. But remember one thing which I mentioned earlier, that is, yes, you guessed it right!!! That is patience.

But before I tell you further, I want you to comment below and tell me why do you want to invest in The Stock Market. Comment below and let me know, and I'll be waiting to read your comments.

2. WHAT IS THE STOCK MARKET?

Before explaining to you what the Stock Market is, let me explain to you some basic concepts that you need to know before you understand what is the Stock Market.

1. SHARES:

A share is a unit. It represents a part of the ownership of a company. You are becoming part of the owner of that company. It sounds good, right!!!

Becoming a part owner is a good thing and a bad thing also. 

Good thing because if the company performs well and its stock price increases after buying that share in the future, then you will earn a profit. Just look at this chart below. There is one company called "X." The price of one share of that company is 10 rs. You bought 10 shares, and your investment is 100 rs. After some time, the company performs well, and the share price goes up. And you earned 50 rs profit as shown below.

Bad thing because suppose shares of "X" company fall down. Then the worth of your shares decreases and hence your investment. For a better understanding, just look at the chart shown below. In this, the share price of the company "X" goes down. Hence your investment also goes down. And your loss is 10 rs. I just took this example for your better understanding.

When you are buying a share of a company, not only are you sharing goodwill but also sharing risk with the company.

Hence, it is clearly proved that if you want to make money in The Stock Market, you MUST have the proper knowledge.

2. NSE & BSE: 

It is known as National Stock Exchange & Bombay Stock Exchange. In India, the NSE has around 1600 companies listed and the BSE has around 5000 companies forming The Stock Market.

People who want to buy & sell stocks of companies go to a stock market. Get it!!!

You can’t physically go to the Stock Market. You can only access it electronically through your computer or mobile with the help of a registered medium called Stockbroker.

3. SEBI:

The full form of SEBI is the Security & Exchange Board of India. The job of SEBI is to make sure that people like you and me are not cheated in the stock market.

SEBI has rules & regulations, a legal framework set up, so that if anybody does not follow these rules or regulations, then SEBI will take action.

4. DEMAT & TRADING ACCOUNT:

To do the transaction in the share market, you need two types of accounts, i.e., a Demat account & Trading account.

The Trading Account is used to place the order, buy & sell orders in the stock market. When you buy some stocks, then that amount needed to buy that share is debited from your trading account.

Similarly, when you have to sell shares, then that amount is also transferred back to your trading account. For keeping those shares along with you for a single day or year, you need a Demat Account.

So basically, the Demat account is used to store the shares that you have bought from the Stock Market. In simple words, a trading account is for money, and a Demat account is for shares.

5. STOCKBROKER:

As I mentioned earlier, if you want to do any transaction in the stock market, you need to do it through a stockbroker.

Stockbrokers give you a platform to buy & sell the shares in the stock market. They are like your friends because they provide you with a good service like -

- Helps you to set up your trading & demat account.

- They will provide you with a trading terminal either through their website or an app, that will help you to see what's happening in the stock market.

- They will give you tips or tools that will help you to decide which share to buy & when to sell.

And for doing all of this, they charge the same fees called brokerage. All the stockbrokers operate under SEBI guidelines.

3. HOW DOES THE STOCK MARKET WORK?

When any company that wants to raise capital and decides to go public offers a few of its shares to the stock exchange.

When the company is listed on the stock exchange, i.e., NSE or BSE, people start buying & selling companies' shares regularly. People are buying & selling shares regularly to earn money.

The price of the shares goes up & down due to the following things.

1. SUPPLY & DEMAND:

The main factors that determine whether a share price moves up or down are supply & demand. Essentially, if more people want to buy a share than sell it, the price of the share will rise. On the other hand, if supply is greater than demand, then the price will go down.

2. NEWS:

If there is positive news about the company, like the company has made a profit in the last year, or the company plans to expand its business, then the share prices can also go up. And if there's some negative news about the company, about its future, then the share prices can go down.

3. ECONOMIC FACTORS:

The economic factors including rate changes, inflation, and financial outlook all affect the share price. If the inflation rate goes up and the economic outlook is poor, demand will decrease, and the share price will go down.

Above, I have explained the main factors that affect the share price. Along with these, there are some other factors which also cause more share price up & down.

Now let's talk about what will happen to your shares after you buy them. Simple, they will sit in your demand account. Then what…?

Holding period or share is defined as the period during which you intend to hold the stock with you. It can be as short as a few days to as long as a few years.

There are two types of people in the stock market, i.e., trader & investor. The trader is one who buys the shares & sells them on the same day or after a few days. The investor is the one who buys the shares of a good company & holds them for a long period to gain more profit with patience.

Now that you have a brief idea of how the stock market works.

One last thing that I wanted to tell you guys.

It's all about staying in the game for the long term. The stock market will make you money if you first survive in it & long enough to learn it.

And the last thing,

Go Slow, Take Proper Knowledge, And Start Investing For Your Better Future.