Basics of Share Market
The share market, also known as the stock market or equity market, is a platform where individuals and institutions buy and sell shares or stocks of publicly traded companies. It is a marketplace that facilitates the buying and selling of ownership interests in companies.
Share/Stock: A share, also known as a stock, represents ownership in a company. When you buy shares of a company, you become a partial owner of that company.
Stock Exchange: A stock exchange is a marketplace where shares of publicly traded companies are bought and sold. Examples of well-known stock exchanges include the New York Stock Exchange (NYSE) and the NASDAQ in the United States, the London Stock Exchange (LSE) in the UK, and the Bombay Stock Exchange (BSE) in India.
Stock Market Indices: Stock market indices, such as the S&P 500 or the Dow Jones Industrial Average (DJIA), represent a collection of shares from a specific market or sector. They provide a snapshot of the overall performance of the market or a specific segment.
Stock Brokers: To buy or sell shares, individuals typically use the services of stockbrokers or brokerage firms. These entities act as intermediaries between buyers and sellers, executing trades on behalf of their clients.
Market Orders and Limit Orders: Market orders are instructions to buy or sell shares at the prevailing market price. Limit orders, on the other hand, specify the maximum or minimum price at which you are willing to buy or sell shares. Limit orders provide more control over the execution price but may not be immediately filled.
Bull and Bear Markets: A bull market refers to a period when stock prices are rising, and investor confidence is high. In contrast, a bear market is characterized by falling stock prices and pessimism among investors.
Fundamental and Technical Analysis: Investors use different methods to evaluate stocks. Fundamental analysis involves assessing a company’s financial health, earnings, management, and competitive position to determine its intrinsic value. Technical analysis involves studying stock price patterns and trends to make predictions about future price movements.
Diversification: Diversification is an investment strategy that involves spreading investments across different stocks, sectors, or asset classes to reduce risk. It helps to protect against potential losses from the poor performance of any single investment.
Risks: Investing in the share market carries risks, including the potential for loss of capital. Share prices can be volatile and influenced by various factors such as economic conditions, company-specific news, and market sentiment.
It’s important to note that the share market can be complex, and it’s advisable to do thorough research, seek professional advice, and consider your financial goals and risk tolerance before investing.
