There are many intricacies and uncertainty involved while investing in the stock markets. Before we could understand how to invest in the stock markets, let’s first understand the meaning and working of the stock markets.Simply put, stock/share markets is a platform, where equities, bonds, mutual funds, derivatives contract are issued on various exchanges and traded by buyers and sellers.
Working and Types of the Share Market
The share market can be divided into Primary Markets and Secondary Markets.
When a company is not listed on any exchange and wishes to raise funds, it can opt for the route of primary markets. Here, it gets registered on the stock exchange to issue shares to the general public. This is called Initial Public Offering (IPO), where it issues shares to the public for the first time to raise funds for business expansion, geographic diversification, entering new product segments, etc. The investors who purchase shares become partial owners of the company and are entitled to voting rights as per their ownership in the company.
In the secondary markets, buyers and sellers trade in the securities already listed on the stock exchanges and these trades are often placed through a broker. It is mandatory to have a demat account to trade in the Indian stock markets. This account serve as a facility to hold the securities in an electronic format, thus facilitating convenience while transacting in the stock markets.
Determination of Price in the Stock Markets
Share Prices are determined by the demand and supply. If the demand exceeds supply, then the prices go up and vice-a-versa.
Trading in the Stock Markets
It is a myth that to invest in the stock markets, one needs to invest a large chunk of money. However, one can get started with as low as INR 1000. Also once you have invested in the stock markets, the key is to remain invested in sound stocks for a long time. While investing or trading in the stock markets, many investors take the guidance of investment advisors, stock advisors or financial analysts. These professionals study in depth various companies and sectors to provide stock market investment advice suitable as per individuals risk appetite and financial goals.
Golden Tips to Invest in the Stock Markets
Research: It is strongly recommended to conduct research of the company before investing it. Investors are recommended to refer to stock market research reports before taking any investment decisions.
Patience: Never be in haste while dealing in the stock markets. We can never forget the famous quote by the financial guru Warren Buffett, “The stock market is a device transferring money from the impatient to the patient.”
Avoid the herd instinct: As rightly mentioned by Warren Buffett, “Be fearful when others are greedy and be greedy when others are fearful.” It is always a healthy habit to focus on the fundamentals of the company instead of relying on rumours and hearsays.