Investors can purchase and sell shares (or stocks) of publicly traded corporations on the share market, commonly referred to as the stock market or equity market. A small portion of a firm is owned by the owner of shares, which represent ownership in that business. During certain hours, buyers and sellers congregate on the share market to trade on publicly listed shares. India’s two main stock exchanges are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Here’s a breakdown of key concepts:
1. Shares and Stocks:
- Shares: A company’s ownership units.
- Stocks: The term “stocks” describes the overall ownership of one or more businesses. As an illustration, “I own stocks in different companies.”
2. Stock Exchange: The stock market operates through stock exchanges, like the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) in India, or NYSE (New York Stock Exchange) and NASDAQ in the US. Exchanges provide a regulated environment for buying and selling shares.
3. Types of Market Participants:
- Investors: They are people or organizations that purchase shares to hold for a long time.
Traders: Individuals who regularly purchase and sell shares in an effort to generate quick profits.
Brokers: They are middlemen that help buyers and sellers complete transactions.
4. How it Works?
- Buying Shares: Investors are people or organizations that purchase shares to hold for a long time. Individuals who regularly purchase and sell shares in an effort to generate quick profits.
- Selling Shares: Brokers are middlemen that help buyers and sellers complete transactions.
5. Primary and Secondary Markets:
- Primary Market: The place where businesses raise money by issuing new shares to the general public through initial public offerings, or IPOs.
- Secondary Market: On exchanges, existing shares are exchanged between investors.
6. Risk and Return
Investing in the stock market carries risks but has the potential for large gains. A number of internal and external factors might cause price volatility. For this reason, long-term planning, risk assessment, and diversification are essential for investors.