Each company requires funds to run their business. At times, companies gain profits from selling off their services and goods, yet the funds are insufficient to fulfil the working needs. And this is when most of the companies call out to the normal people to invest money into their company so that they can operate efficiently; however, in return, people who invest money in the companies get a share of whatever profit the company makes. Understanding this is the very first step towards learning about the stock market basics.

Stocks & Share Market: Meaning

Stocks are a simple investment tool to create wealth. When an investor invests money in the stock market, they eventually own a share of the company that has issued the stock. Through stock investment, you can invest in some of the most well-known companies; however, make sure to open demat account to store your investments digitally.

On the other hand, even though the share market and stock market are used interchangeably, in a share market, the shares are traded or issued. The major difference between the two is that a share market allows trading of the shares both offline and via a share market app, but the stock market allows an individual to trade in mutual funds, bonds, shares of a company, derivatives and more.

Stock Market Basics: Exploring Important Terms

Given below is a list of the most commonly used terms when discussing the stock market.

• Sensex

It is the collection of the best 30 stocks mentioned on the Bombay Stock Exchange by market capitalisation.

• SEBI

The Securities and Exchange Board of India stands as the securities market regulator to oversee all the fraudulent transactions performed by any parties, investors, companies, brokers and traders.

• Demat

A dematerialised account is an online portfolio for investors to store shares and other securities in a digital format.

• Trading

It is a method of purchasing and selling shares in a company via a trading account.

• Stock index

The stock market index represents a statistical source measuring the fluctuations of the financial market. These are performance indicators, representing the performance of a particular market segment or the complete market.

• Portfolio

A portfolio is a collection of multiple types of assets owned by investors. The portfolio of an investor can consist of multiple assets, such as stocks, gold, derivatives, funds, cash, equity, property, bonds, and more.

• Bull market

Companies generate additional revenue in a bull market as the economy rises and consumers spend more.

• Bear market

Bear markets represent a slowdown of the economy, eventually making consumers spend less and creating a lower GDP.

• Nifty 50

Nifty 50 represents the collection of the top 50 companies represented on the National Stock Exchange.

• Stock market broker

The stockbroker is an advisor who performs transactions such as purchasing and selling stocks on your behalf.

• Bid price

It is the highest price that a buyer pays to purchase a particular number of shares of the stock at a given time.

• Ask price

This price represents the lowest price at which the seller will sell their stock.

• IPO

An IPO, or initial public offering, includes selling securities to the general public in the major market. This is the largest source of funds with indefinite or long maturity for the company.

Conclusion

Freshers can start stock market investment with a small amount of money. However, they need to perform their homework and monitor their risk tolerance, investment goals, and the cost of investing in mutual funds, option trading and stocks. They also need to learn about the research brokers and different fees to get their hands on the one that best aligns with their requirements. Also, beginners must be aware of the essential stock market-related terms to understand the stock market better.