Hello friend’s In this blog post, we will discuss the Share Market: what it is, why it is important, how it works, its advantages and disadvantages, how you can invest in it, and most importantly, how to make money from it. Let’s dive in and explore it in detail.
What is the Share Market?
The Share Market, also known as the Stock Market or Equity Market, is a platform where you can buy shares of companies. Purchasing a company’s shares means owning a small percentage of that company. This ownership makes you a participant in the company’s profits or losses.
For example:
If you want to start a business and you have ₹10,000 but need more funds, you approach a friend for an additional ₹10,000 and offer a 50-50 partnership. Any profit or loss will be shared equally. This means you have given 50% ownership (or shares) of your business to your friend. This is a simplified version of how the Share Market works.
History of the Share Market
The origins of the Share Market trace back around 400 years ago to the Dutch East India Company in the 1600s. Back then, long and expensive voyages required large investments. To fund these, individuals pooled money with the promise of sharing profits if the ship returned successfully.
Over time, instead of investing in one ship, people diversified their investments across multiple ships, reducing risks. This gave birth to the concept of the Share Market, where bidding and trading began.
Today’s Share Market
Today, every country has its own stock exchanges where people can trade shares. The market operates in two types:
Primary Market:
- Companies sell their shares directly to the public for the first time (IPO – Initial Public Offering).
- The company sets the price of its shares, often based on demand.
Secondary Market:
- Investors trade shares among themselves.
- Prices are determined by demand and supply, and companies have no direct control over these prices.
India’s Stock Exchanges
India has two major stock exchanges:
- Bombay Stock Exchange (BSE): Over 5,400 companies are listed.
- National Stock Exchange (NSE): Around 1,700 companies are listed.
Sensex and Nifty
- Sensex: Represents the top 30 companies on the BSE.
- Nifty: Represents the top 50 companies on the NSE.
These indices indicate whether stock prices are rising or falling.
How to Invest in the Share Market?
To invest in the Share Market, you need:
- Bank Account: To fund your investments.
- Trading Account: For buying and selling shares.
- Demat Account: To store your shares digitally.
Many banks offer a 3-in-1 account that includes all these services. You’ll also need a broker to facilitate your transactions. Brokers can be banks, third-party apps, or platforms that charge a commission (brokerage fee).
Investing vs. Trading
- Investing: Involves holding shares for a long-term period, letting your money grow over time.
- Trading: Involves frequent buying and selling of shares to make quick profits.
Trading can be time-intensive and is often considered a full-time job.
Is Investing in the Share Market Safe?
Some people compare the Share Market to gambling because of the risks involved. However, if you thoroughly research the companies you invest in, it is a calculated decision, not gambling.
Tips for beginners
- Avoid following others blindly.
- Always seek advice from experts.
- Consider safer options like Mutual Funds.
What are Mutual Funds?
In Mutual Funds, your money is managed by professionals who invest in stocks, bonds, or other financial assets on your behalf.
Advantages
- Diversifies risk across multiple companies.
- Suitable for beginners.
- You can start with as little as ₹500 per month.
Mutual Fund managers research the market, invest wisely, and charge a small commission for their services. They provide regular returns, often ranging from 25% to 30%.
Final Words
In this post, I’ve tried to cover all the basics of the Share Market, which are essential for beginners. If you’re planning to start investing, I hope this post has given you valuable insights.
If you still have questions or suggestions, feel free to share them in the comment section.