What Is Share Market? All About Stock/Share Market! [Explained In Easy Words] (#2)

Share Market gives a chance to even the most simple people to earn some profit without working at all. It's just their money who works for them.

Many people are attracted towards Share Market because, it gives high returns which have made many people millionaires in the past.

& at the same time many people are fearful of its downfalls which have made people loose millions, in the past.

Everyday hundreds & thousands of people enter Stock Market & start their investing journey.

Today I just want to be clear with everything about Share Market in this blog. Here, you'll "Know All About Share Market From An Investor's Point Of View".

The below mentioned topics are what we'll cover today within this blog! & you can jump to a specific part of this blog from this section by clicking on that particular topic you'll like to read, first!

So today we'll know about:

1. What Is Share Market? What Does The Term Share Market Refers Towards?

2. How Was The Share Market Formed? Who Introduced It? (History!)

3. How Do Share Market Works Today? (Major Financial Bodies Who Runs The Stock Market Today?) {EVERYTHING ABOUT SHARE MARKET!}

4. Is Share Market Risky? Why Should You Invest In It? Pros & Cons Of Investing!

5. How Can We Start Investing/Trading, Today? (About DP's!) How Can You Buy & Sell Shares? What Are The Things Required To Start Trading?

6. How To Avoid Loss While Investing? From Where Can You Get The Knowledge & How?

7. Bonuses!

So here we begin with discussing the points:

What Is Share Market? What Does The Term Share Market Refers Towards?

As we know that in "NORMAL" market people buy & sell stuff to one another.
Similarly in Share Market, as the term "Share Market" itself might suggest.... is a Market Of Shares where people come, buy OR/& Sell Shares from/to one another.
In other words, Share Market is a place where people exchange securities among themselves.

How Was The Share Market Formed? Who Introduced It? (History!)

The Share Market was introduced by The Dutch East India Company (today in Netherlands) in the year 1602.
This is how the concept of Share Market was introduced,
So,

The people of the early 1600's used to travel a lot. They used to travel through sea routes to other countries in search of discoveries of new lands &/or to find other means of gold, silver, etc., which would be beneficial for their own growth.

But the system of travelling via ships became very expensive, during that time.

& in that period of time no individual owned that much amount of money required.

So basically they were struggling to travel across the world & find new means of gold, silver, etc. OR to discover new lands which would in a way benefit them.

So a bunch of smart people came up with an idea which went like....;

We'll reach public & ask them for some part of the amount of the money required. & the people whoever will agree will be known as share holders & a part of treasure/gold was promised to the Share Holders as a Profit on the basis of their investments.

"This Was The Deal Made!"

But again their was One Problem,

& this time, the problem was that this entire system became Very RISKY for the investors, especially.

Because the ships people invested in; were sometimes stolen, broken, lost & many never returned back.

& people were literally risking their Money.

Which was just not applicable!

So some investors came up with a solution to this problem, which was that....

Instead of investing in just one ship, we'll invest in multiple ships. So that there can be a chance of at least any one of'em returning back. You know, Nowadays what we know as DIVERSIFICATION & have even heard of phrases like;

"Don't Put All Of Your Eggs In One Basket."

&/OR

"Depending On A Single Source Of Income Is Known As Risk!"

*This was kind of applied here!*

(That was a real smart move, though!)

So this is how all the investors started investing from than onwards.

So ALL OF THIS somehow within itself created some sort of a SHARE MARKET!

The need of money was fulfilled by people & the people themselves got a chance to earn some profit without working at all.

& this method of raising capital through people became very popular & every Company started following the same.

The Dutch East India Company became very Rich & Powerful during that time!

So this was how really the concept of the Share Market was introduced at first!

Today SHARE MARKET plays a vital role in every Country's Economy.

How Do Share Market Works Today? (Major Financial Bodies Who Runs The Stock Market Today?) {Everything About SHARE MARKET!}

Well, everything basically starts with a Company. It requires funding for the expansion of it's Business.
A Company first decides to get listed on Share Market. & then it goes to "The Regulator Of The Capital Market" to get approved.
The regulator of the capital market is basically a Statutory Regulatory Body, who regulates the entire Securities Market of/within it's country....

It's duty is to protect its investors from scandals & fraudulent companies.

It has the power/right to check every business organisation & industry within the country.

& No Stock Exchange will list a Company until & unless it have the approval of THE REGULATOR OF THE CAPITAL MARKET!

As we know that every country have its own Share Market.

& just to inform you that, THEY DO HAVE THEIR OWN "REGULATOR OF THE CAPITAL MARKET" ,too.

& that is who regulates the securities market of within it's country.

For instance:

SEC (U.S. Securities & Exchange Commission) regulates the financial market of the US.

SEBI (Securities & Exchange Board Of India) regulates the Indian Stock Market.

*If you want to find your country's Regulator Of The Capital Market, then you can simply, Google Search:

Who is the regulator of the 'your country name' capital market?

Who is the regulator of Japan's Capital Market?

& you'll get it.

So I hope you have understood that why are we supposed to go to "Regulator Of The Capital Market" to get approved for the Share Market! & also how you can find out your country's 'regulator of the securities market'.

Well, now we know that we require the approval of The Regulator Of The Capital Market, so now what are we supposed to do?; How do a Company ask "The Regulator Of The Capital Market" to approve it?

To get approved, a Company is supposed to submit a DRHP/RHP (DRAFT RED HERRING PROSPECTUS/RED HERRING PROSPECTUS).

DRHP or RHP is basically a document which have all the vital information regarding the upcoming IPO, Company's past income reports, Owners education, Debt the company owes, etc. are all mentioned in that document of around 500 pages.

>> Also Read : What Is DRHP (Draft Red Herring Prospectus)/RHP (Red Herring Prospectus)?

"The Regulator Of The Capital Market" will cross examine the information provided within that company's DRHP/RHP & will decide whether this company is eligible for the Stock Market or not.

Different Regulatory Bodies have their own guidelines a company must follow.

It can take around 2 months to 2 years for a company to get approved by "The Regulator Of A Capital Market".

*Fast Forward To When This Company Have Been Approved!*

Okay! So now let's say that the company have been approved by "The Regulator Of The Capital Market".

So now to raise the fund for expansion, a Company will go to a Stock Exchange with The Regulator's Approval.

Well, a Stock Exchange is basically an intermediate between the investors & the company. It is a place where all the shares of a company are traded.

Each Stock Exchange have different guidelines/requirements set, that a Company must follow in order to get listed on that particular Stock Exchange.

So once a company have been listed on a Stock Exchange. Then it is finally ready to make it's shares publicly available as it issues it's IPO.

IPO stands for INITIAL PUBLIC OFFERING.

Whenever, a Company issues it's shares in market for the very first time then it is referred to as that company's IPO.

If you want to understand how a Company's Share Price is decided than Stay Tuned to "RSPH Blogs - Finances!" upcoming blogs.

So now let's say that investors started buying that company's shares & now all of the shares have been sold.

So now your company will be known as a "Listed Company".

The Company who've sold all of it's shares once, then it is known as a "LISTED COMPANY".

THE BEST PART IS THAT THERE IS NO NEED TO RETURN THE FUND YOU'VE RAISED!

The shares which have been sold will further be traded among people themselves.

That is why Share Market is the best option out there for small start ups who want to expand there business.

You can issue more shares in market by asking the "regulator of the capital market" to do so.

& If with time your company performed better. Like IF, your company's shares will be in profit & also if you'll use that fund raised properly & make the business grow.

Then you may be also one of the well performing companies of that stock exchange (in which stock exchange your company is listed) &'ll be listed on that stock exchange's index.

An Index/Indices (Indices = Plural ; Index = Singular) is basically a number which represent the average of the market & tells whether the market today is performing better than yesterday or not.

It basically takes well performing companies of different sectors & take out the average of all those 30-50 companies together & then the number obtained will tell whether the market today is UP in comparison to yesterday or not.

& If you are just curious to know about, how can one invest?

Just to let you know we can invest through DP's. DP's stands for Depository Participants.

Actually, we don't really have to go into a stock exchange to buy or sell shares. Instead we can exchange securities by just sitting at home or literally from anywhere in the world.

I'll cover this topic completely, further within this blog, only. So CONTINUE READING to know how can we invest!

So I hope that you now know that The Major Financial Bodies Who Runs The Stock Market Today Are:

A Company/Business
The Regulator Of The Capital Market
Stock Exchanges (& Within'em The Indexes)

& we've also talked about, IPO, DRHP/RHP, DP's (to be covered further within this blog) & not to mention Investors also plays a vital role in Share Market!

Is Share Market Risky? Why Should You Invest In It? Pros & Cons Of Investing!

Share Market AKA Stock Market AKA Equity Market is known as a Risky Place & to be honest it is but there is risk in literally everything we do on a daily basis. Like - cooking & driving but if you know how to cook & drive properly then you reduce the chances of an accident while driving & getting burns while cooking. So you basically reduced the chances of risk here. Similarly in Stock Market you can reduce the chances of loosing money (reduce the chances of risk) only if you have the right knowledge.

Just some knowledge & you'll be able to earn some profit without working yourself. It'll be your money working for you. Because you've worked long enough for money, you know.

I will like to give you an example through which you can have an idea of why investing today is not an option but a necessity.

(Disclaimer- I am not recommending any particular stocks or shares which may be a loss to you. I'm just giving normal information & just to let you know that how can investing change your financial status, for the good. The type of shares or stocks you'll invest in are all your responsibility even if it's a profit or a loss.)

For instance let's say, that you are a youngster between the age of 20-35.

Actually when we are young we don't have any extreme sort of responsibilty, so that's why we are capable of handling risk Much better than others/other age groups.

Well I really will only ask you to invest with that money you know you don't need/require right now or from your savings you are not using right now. Because if you invest from the money you have to do something with, then your mind may automatically be driven into severe anxiety & causing a lot of stress which may not even let you do anything else. So just for the peace of your mind, invest as much as you can handle loosing, even a LITTLE is Ok!

Because why not put that money on work which've been resting in bank for so long by not making enough profit. I know, I know Banks also do give returns but REMEMBER they are never as much as shares do.

It've been long since you've been working for money, now. Why don't you just do SOME research, find a good company & hold it's shares for some or long period of time.

Let your money work for you & Just Relax!

Stay tuned to know more about long term and short term investments.

So here comes the pros & cons of investing! (The pros here dictates that why should you start investing!)

Well, there are many advantages & disadvantages of investing. Just to state a few;

The major advantage is making more money!

Let's break it down,

If you are one of those who is doing a job & dislike it but somehow you are satisfied with the paycheck or maybe you don't have any other option right now.

Then nobody can understand better than you that how much doing work, especially the one you don't like, SUCKS.

Back to the paycheck,

Let's suppose you get 50k rs. (you can use your own currency I'm using rupees here, its just an example anyway) & out of that you utilize 20k & the rest 30k goes into the savings.

It's good to do savings coz banks also do give returns but as I said earlier that they are very less in comparison to the returns GIVEN BY THE SHARES but "REMEMBER* THE RETURNS ARE THE HIGHEST GIVEN BY A GOOD/WELL PERFORMING COMPANY.

So instead of keeping 30k rs at rest, you can push them to work to generate more money.

The point is that your money can make more money if you have the right knowledge, you do the right research & invest in the right company; YOU DON'T HAVE TO WORK! But if you consider gaining knowledge, doing research & picking the right company to invest as a DIFFICULT WORK/TASK than I think you might be working, coz you consider these things as "WORK".

& by the way I'm not asking you to leave your job now. I just am suggesting you to have multiple streams of income / a couple of assets, so when you ever leave your job; you have enough money to pay for yourself & your necessities.

"NO RECOMMENDATIONS, THOUGH!"

& the major disadvantage is loosing money due to lack of knowledge but the good thing is their is a easy cure of the disadvantage, which is having more knowledge.

In the end of this blog you'll know how can you get more knowledge.

Not to mention, you can get the best knowledge from RSPH Blogs - Finances! about every single financial concept like- share market, real estate, accounting, etc. explained in the simplest & the easiest form possible.

How Can We Start Investing/Trading, Today? (About DP's!) How Can You Buy & Sell Shares? What Are The Things Required To Start Trading?

Well, nowadays we don't go to Stock Exchanges to buy or sell shares. Today we get shares in virtual forms.
Starting from the very beginning, earlier when electronic trading system was not introduced. There used to be physical forms of shares (Paper Shares). & people were supposed to go to the Stock Exchanges themselves to collect the shares, at their own expenses. & also sometimes these shares were damaged, lost, torned, or stealed. But after the discovery of electronic trading all of these problems were solved. Nowadays we have a digital way of exchanging stocks. Its the virtual trading system but in NYC there still is physical trading system but it is used less by public in comparison with the virtual one.

So for trading; apart from The Regulator Of The Capital Market to the company & then Intermediates (Stock Exchanges) & Indexes we have one more important key role present in this chain. Which is DP's (Depository Participant). It can be anything between banks to brokers. Here, I refer it towards the trading apps.

Things Required To Start Trading:

1. Savings Account.

2. Demat Account.

3. Trading Account.

These three will be linked with each other. & Saving a/c is from &/or to where money will be transferred if a stock is sold or bought. & the Demat a/c is where the stock will be stored in digital form & trading account is through which you'll trade & the securities will be exchanged.

Also a small commission will be provided to the DP's, as well.

How To Avoid Loss While Investing? From Where Can You Get The Knowledge & How?

As I've already mentioned that the only thing you require to avoid loss is "Knowledge". The more you know about taht specific company, the more you research & also the more you understand stock market. The more chances decrease for you to face a loss.

RSPH Blogs - Finances! provides you the best financial knowledge to educate everyone about "Money" & even explains in the easiest & the simplest form possible to make our readers understand even the most complex concepts easily.

You can watch YouTube videos moreover or can read more articles or more blogs.

Well there are a bunch of YouTube videos & financial article/blogs out there which can help you out with developing your financial status & knowledge!

This article is totally based on my research!

Bonuses!

Difference Between Stocks & Shares!

We've kind of now normalized that stocks & shares are the same thing & that does not seems that bad, anyway. But just to inform y'all, there is a slight difference between stocks & shares.
DIFFERENCE:
SHARES-

Well, share (singular) is what we call a single share/part of a company & shares (plural) is multiple shares/parts of a company.

STOCKS-

On the other hand stock is what we refer towards as a bunch of shares OR multiple number of shares. & it's the same with the stocks referring towards as a multiple number of shares.

Definition Of "Securities"!

Securities are basically rights to assets mostly in the form of shares.

Here is a quick overview of what have we learned/covered today in this blog.

"So we have covered that, what does the term share market refers towards; & what are the major financial Bodies making up & running the share market, today -- as Stock Exchanges, Company, Indexes/Indices within Stock Exchange, DP's, Investors, etc.; Why To Invest & How Can We Start Investing Today; Stocks Vs. Shares; & what are Securities?"!

Apart from all of these things we've discussed today within this blog. There are a bunch of more things out there in the Real Market. Such as Intraday & Delivery in Equity Market, F&O (i.e. Futures & Options), Commodity's Investments, Currency Investments (Forex Market), 2 Types Of Markets In Share Market-- Primary & Secondary Market, Derivatives, etc.

Share Market is a place where one never stops learning because here you can never be sure if you know everything. I've almost covered all about Share Market, here. But if just in case I have missed something then just leave a comment & I'll make sure to cover it in my upcoming blogs!

Thanks For Reading!

RSPH Blogs - Finances!

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