What is Share Market? A stock market is a platform where buyers and sellers come together to trade listed shares at certain times of the day. The terms “stock market” and “stock exchange” are often used interchangeably. However, the main difference between the two is that the former is only used for trading stocks while the latter can trade various financial instruments such as bonds, derivatives, and forex.
Table of Contents
- Basics of Share Market:
- What are the Types of Share Markets?
- Trade in a Share Market
- What is Share Market and how it works?
- Final Remarks:
- FAQs
Basics of Share Market:
There are two types of people in the share market: investors and traders. Investors hold stocks for the long term, while traders hold them for short periods. Therefore, those interested should consider their preferences and stay up to date with live share market news. This is a great way to learn the basics, even for beginners.
Organizations that need money to grow and expand receive money from people by issuing shares. An initial public offering (IPO) helps a company get listed on a stock exchange to raise funds for further development. As long as you follow the news, investing in the share market is one of the best-planned ways for long-term wealth creation.
When many buyers want to buy a share, they bid and the highest price is called the bid price. When various sellers start selling shares, they also demand a certain price, and the lowest price is called the asking price. Moreover, a transaction occurs when both prices match.
Investing in the share market can be a risky option as stocks fluctuate in the short term. However, paying close attention to living stock market updates, news, and intelligent investment plans can have a de-inflationary effect. In addition, share buybacks and dividends contribute to capital growth.
What are the Types of Share Markets?
Share markets are categorized into two parts:
- Primary Share Market
- Secondary Share Market
Primary Share Market
When a company first registers on the stock exchange to raise funds through shares, it enters the primary market. This is known as an initial public offering (IPO). The company is then publicly registered and its shares become available for trading among market participants.
Secondary Share Market
When a company’s new securities are sold on the primary market, they are traded on the secondary market. Investors are given the opportunity to buy and sell shares to each other at the current market price. Investors typically make these transactions through a broker or other intermediary who can facilitate this process.
Trade in a Share Market
Following are the financial instruments traded in a Share Market:
Shares
A share is an ownership interest in a company that provides income in the form of dividends. This is definitely a key component of share market fundamentals for beginners. Furthermore, the holders of shares are called shareholders and there are two important categories: equity and preferred shares.
Bonds
Companies need significant capital to be able to carry out long-term and profitable projects. One of the ways of raising capital is by issuing bonds. These bonds represent “loans” made by the company, and the bondholders become creditors of the company and receive timely interest in the form of coupons. From the bondholder’s perspective, these bonds act as fixed-income instruments that receive interest on the investment and the amount invested at the end of the specified term.
Mutual Funds
These are financial contracts between two or more parties that derive value from the performance of one or more underlying assets. Can include bonds, stocks, currencies, cryptocurrencies, commodities, market indices, and interest rates. A mutual fund is a professionally managed fund that pools the money of many investors and invests the collective capital in various financial stocks. You can find mutual funds in a variety of financial instruments such as stocks, debt, or hybrid funds.
Each mutual fund issues stocks with a certain value similar to stocks. By investing in such a fund, you become a shareholder of that mutual fund. If the products forming part of this mutual fund generate income over time, shareholders will receive that income, reflected in the fund’s net asset value or in the form of dividend payments.
Derivatives
A derivative is an instrument that derives its value from an underlying security. This can be of different types such as stocks, bonds, currencies, and commodities. Buyers and sellers of derivatives have opposite expectations about the price of the asset and therefore enter into a “betting contract” about the future price.
What is Share Market and how it works?
For many people, the share market sounds like an incomprehensible and terrifyingly complex entity. But there is some basic knowledge that can change that perception. Companies list on either the primary or secondary market to raise funds or capital. A company must provide information about its business, financial situation, and shares issued (IPO).
Once listed, the issued shares can be traded by investors on the secondary market. This is where most of the trading takes place. In this market, buyers and sellers come together to trade to make profits or limit losses. But there are thousands of investors, and to expand coverage, there are stock brokers who act as middlemen. Send the order to the exchange. Exchanges find sellers. A confirmation is then sent back to the broker, who finally debits/credits your account. As trades are made, the stock price changes. Because stock prices, like all other commodities, depend on perceived value. This is reflected in an increase or decrease in demand for the stock. When the demand for a stock increase, the buy orders increase. This leads to an increase in stock prices. To summarize the steps are:
- Get an order.
- Brokers send order data to exchanges.
- Exchanges will require confirmation from the seller.
- The exchange confirms the order with the broker.
- A transaction is made – money is exchanged.
It’s like ordering from Amazon and Flipkart. This is the basic process. The share market may seem like a complicated road at first. However, since we share a common goal of successful financial planning, we need to know what it is and how it works. Investing in the share market may seem less risky once you understand what’s involved.
Final Remarks:
Today, investing in stocks can be considered one of the best ways to create long-term wealth. A strategic investment plan allows investors to achieve their long-term financial goals with the help of the stock market.
FAQs
Is the stock market a share market?
The stock market is a stock market, but in addition to company shares, other products such as bonds, mutual funds, and derivative contracts are also traded on the exchange. Companies enter the primary market to raise capital. In the primary market, companies are registered to go public and raise capital.
What is market share?
Market share represents the percentage of a total industry or market sales generated by a particular company in a particular time period. Market share is calculated by dividing a company’s sales for a period by the industry’s overall sales for the same period.
What is the importance of market share?
Importance of market share. Investors and analysts are closely monitoring market share gains and losses. This is because it can be an indication of the relative competitiveness of the company’s products and services.
How is market share calculated?
Market share calculations take into account a company’s total sales for a given period and the total sales for the industries in which it operates during that period. Market share refers to the share or percentage of the market that a company or organization obtains.
Further Readings: Click on the below links to read relevant articles.
What is a share?
