Business

Basics of Stock Market for Beginners

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In India, investment options are broadly defined into two categories i.e. financial and non-financial assets. Stocks are financial assets having on end or expiry date.

Let us understand basics of stock trading.

What is the stock market?

The stock market is a platform where stocks are traded on a daily basis. The companies that do not want loans from the bank but want to dilute their stake, provide stake of ownership to the public by listing their stocks in the share market. It is sometimes critical to the existence of the company so they allow to trade their shares, as they need funds to finance their business.

Deal with a Broker

For beginners, it is advisable to employ a good broker who will help you get started on the stock market. They always help and give you tips to prevent you from making investment blunders. You can use brokerage calculator to understand fees paid for brokerage services.

The first support is in the demand and supply of the shares. So it is important to understand different criterions before deciding to invest in the share market, especially for beginners. When it comes to share market investments, they are of two types namely longterm investments and short-term investments.

Long Term Investments

Long-term investments in the share market are very common for portfolio traders. It is considered as most safe and secured form of stock transactions across the globe. Though dividend is not high as compared to some other securities.

The dividends are part of the profit that the company has made for a particular year. So say you have 100 shares in ABC Company and they are paying 10% dividend every quarterly. That 10% is your profit or dividend and you will keep getting it until you sell your ABC Company shares.

People put money in long-term investment for share trading in India because they believe their money will be safe in such stocks and they will continuously receive a regular dividend over a period of time. But you need to do proper research at your end and invest only in those who are old and well reputed companies. Even if they incur a loss, preference shareholders are often paid a certain fixed amount of interest all throughout.

 Most traders hold on to positions of long-term shares for 3 or 5 years or more.

Short Term Investments

Short-term investments are also called as intraday trading investments India. These are investments that are made to earn profits. The investment is done for a short period of time; securities investment can vary between a day and a week. So unlike low dividend driven long-term investments that are held for 3 or 5 or more years, these shares are mostly held only for a day or two. These day investors are not worried about the company growth or any dividend associated with that growth. They only want to capitalise the temporary difference in the stock prices. You can download online trading app and start trading even using smartphone.

Pax Heber
the authorPax Heber