The Complete Guide to Trading in the Share Market & How You Can Start Learning Today
What is the one life skill that everyone should learn but
hardly a few people do? It is a skill that can give you a
comfortable and stress-free life. It is called the skill of
investment. You must have heard about investing in your 20s.
But the truth is, you should start investing as soon as you
earn your first rupee. The share market is an incredibly
important part of the global economy, and it’s important
to understand how it works if you want to take
advantage of potential opportunities for investment. Understanding the stock market basics can help you make more informed decisions about your investments and could potentially lead to higher returns on your investments. Additionally, share market learning can help you better plan for retirement and other long-term goals.
It all sounds very encouraging. But do you know how many
people actually invest in the share market? Around 3%.
That’s it. Only 3% of people have a trading account in
India. Do you know why? Because they fear they’ll lose
their money. Why do they fear? Because they don’t
understand the market. Let us help you understand the basics
of the stock market and help reduce the so-called fear of
investment with a beginner. Let’s start with the most
What exactly is a Share?
A share of a company is a unit of ownership in that company. It represents a claim on the company’s assets and earnings. When an investor purchases shares in a company, they become part-owners of that business and are entitled to any dividends paid out by the company as well as voting rights at shareholder meetings.
Now, what is a Share Market?
A share market, also known as a stock market, is a market where stocks or shares of publicly traded companies are bought and sold. It is the primary source of funds for many businesses and allows investors to purchase and sell shares in those companies. Investors can make money by selling their shares when the price of the stock increases or they can lose money if the price decreases. The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are two of the most popular stock exchanges in the country. Stocks along with Mutual funds, derivatives and other investment instruments are also traded on these exchanges.
How Do Stocks Work in the market?
As we understood, Stocks are securities that represent
ownership in a company. When you buy a stock, you become part
owner of the company and have certain rights, such as voting
at shareholder meetings and receiving dividends. The value of
stocks is determined by supply and demand in the market. When
more people want to buy a stock than sell it, the price goes
up; when more people want to sell than buy, the price goes
down. Stock trading is the process of buying and selling
stocks in the market. Traders open a demat account and use
stock brokers to buy and sell shares of stock. A stock broker
is an individual or firm
authorized to execute orders for investors, while a trader is someone who actively does online trading in stock markets by analyzing market data and making decisions to buy or sell a security. Stock traders make money by buying low and selling high, or profiting from changes in stock prices over time.
What are the Market Metrics and Indicators of the Stock Market for Beginners?
After understanding stocks and trading, beginners need to understand the indicators of the market. They help understand the movement of stock prices in the market. Here are some of those metrics and indicators:
1. Price-to-earnings ratio (P/E): This is a key metric used to assess a stock’s value relative to its earnings. It is calculated by dividing a company’s share price by its earnings per share.
2. Earnings per share (EPS): EPS measures the amount of net income earned on each outstanding share of a company’s common stock.
3. Market capitalization: Market capitalization, also known as market cap, is the total value of all outstanding shares of a company’s stock.
4. Return on equity (ROE): ROE measures the profitability of a company based on how much profit it generates compared to the amount of money shareholders have invested in it.
5. Revenue growth: Revenue growth is an important metric for investors that measures how quickly or slowly a company is growing over time by comparing its revenue in one period to that in previous periods.
6. Profit margin: Profit margin measures how much profit a company makes for every rupee of revenue it generates and provides insight into how efficiently it operates and manages costs and expenses.
Different Types of Shares in the Stock Market – Equity vs Debt vs Preference Shares
There are different types of shares in the market. You need to understand the type before you start share trading online. It’ll help you define your goal a little better. Here are 3 basic types of shares:
Equity Shares: Equity shares are the most common type of
shares in the stock market. They represent a share of
ownership in a company, and owners of equity
shares are entitled to their proportionate share of any dividends or profits generated by the company. They also have voting rights at general meetings.
Debt Shares: Debt shares are also known as bonds, and they represent debt rather than ownership. Investors who purchase debt shares receive regular income in the form of interest payments, but do not have any voting rights or ownership stake in the issuing company.
Preference Shares: Preference shares provide investors with both some form of an ownership stake and a fixed rate of return in the form of dividends. These types of shares generally have no voting rights, but they may be given priority when it comes to dividend payments or capital repayment at liquidation.
A Few Tips to Help You Become A Successful Investor in the Share Market
After understanding the basics, let’s move to some proven practical tips that you can employ right away for a profitable stock market trading session. This can work as a stock market guide for beginners for you to make trading strategies.
1. Do Your Research: Before investing in the stock market, it is important to do your research and fundamental analysis of the type of investments you are looking to make. This will help you understand the potential risks and rewards associated with buying and selling stocks. Additionally, researching the financials of companies can be beneficial when deciding which stocks to invest in.
2. Set Goals: Establishing clear goals for your investment portfolio will help give you a framework for making decisions when investing in the stock market. Make sure that each goal has a timeline associated with it and be realistic about what type of return you are looking for from your investments.
3. Diversify: Investing in a variety of different stocks can help reduce your risk as an investor by spreading out your assets across different industries or sectors. Also, diversifying your portfolio into different asset classes such as bonds and real estate may also be beneficial depending on your investment goals.
4. Manage Risk: Managing risk is key when it comes to investing in the stock market as there is always some level of uncertainty associated with any type of investment. Think carefully before you trade stocks and consider using stop-loss orders or other risk management techniques.
5. Stay Informed: Keeping up with news related to the markets and specific stocks you are invested in can be helpful when making decisions about whether or not to buy or sell shares of a company’s stock. Understand market functions and market volatility before investing in stocks.
In today’s day and age, investment is not an option. It
is a compulsion if you want to keep up with everyone. The
economy will always move up with time. You should too. Start
investing with your first income and keep sharpening your
trading skills over time. It is time you open a demat and
trading account. If you’re unsure how to begin your
journey, let us help you out. Bullspree is a stock market
gaming app which gives real-life trading experience with
minimal risk. You can learn how to trade with daily live contests and build your confidence. Let Bullspree be your first step into investment and learn stock market trading. Download Bullspree app now
ref for stat: https://mintgenie.livemint.com/news/infographics/percent-of-population-investing-in-stock-markets-india-vs-rest-of-the-world-151643871616428