Share Market Basics For Beginners
Many of us would like to try our luck in the stock market. Yes, why not? Stock trading is one of the most lucrative methods of making money. It is because of following reasons:
You do not need much money to start making money, unlike buying property and paying a monthly mortgage.
It takes very little time to trade – unlike building a conventional business.
Cash is “fast” and allows for quick liquidation (You can easily convert shares into cash, as opposed to the sale of a property or business).
It’s easy to learn how to make profits in the Indian share market. You do not require too much time to trade, unlike building a new business from scratch.
Your investments are not trapped when you invest in the Indian share market. You can sell your shares and have ready access to your money as required unlike in the case of property or a business.
Basic Terms of Share Market:
Share And Share Market: Share is nothing, but the Ownership of the company divided into small parts, and each part is called as share or stock. A Share market is the place where buying, and selling of shares takes place Now days it is not necessary to present physically in exchanges like NSE and BSE but in fact, the buying and selling of shares can be done from anywhere, if the person has a demat account.
Index in share market: Index consists of a group of shares. Index denotes the direction of the entire market. Two types of Indices: Nifty and Sensex. Nifty consist of a group of 50 shares and Sensex consists of a group of 30 shares.
Stock exchanges: There are two main stock exchanges in India the market places where a bulk of the share trading takes place. – NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
Depository is an organization responsible for maintaining investor’s securities (securities can be shares or any other form of investments) in the electronic form. In India, there are two such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services India Ltd.)
Depository Participant or DP is organizations involved in the business of providing financial services like banks, brokers, financial institutions, etc. DPs are like agents of the Depository.
Demat (short form of Dematerialization) is the process by which an investor can get physical shares converted into an electronic form. These are maintained in a demat account with the Depository Participant (DP). As you need the bank account to save money, deposit cheques, etc, likewise, you need to have a demat account to buy and sell stocks in the Indian share market and to hold the shares. All shares what you own will show in your demat account in an electronic form, so you don’t have to possess any physical certificates.
Share Broker is a member of the stock exchange, who buys and sells shares on his behalf and also on behalf of his customers. A broker can also be a DP.
Margin Trading is the buying of shares without having money to do so. The exchanges have an institutionalized method of purchasing of shares out of capital through the futures market.
Alpha and beta parameters of the portfolio of shares are used to describe the two main risks associated with investing in stocks. Alpha factors affecting the performance of an individual stock or fund manager’s skill in selecting stocks while beta relates to market risks.