For Beginners : What is Stock Market?
You are going to step in “Stock Market” – Good !! Transformation of Market begins.
The market about which we heard earlier, shows the trading of goods and services by the emergence of buyers on sellers on the basis of agreed value. The transaction resulted from the agreement between both the parties is “What we called a market”.
Now, Let me break down this easy for you!! “Stock – Market”
First off, What is a Stock?
“Stock” refers to the collection of the number of shares. Term “Shares” clarifies its own meaning. It is a form of security purchasing which can claim a person’s ownership rights in the corporation or its assets and earnings.
They are further divided as Common Stock and Preferred Stock.
This form of security signifies ownership rights in a corporation. They are on the bottom of the priority ladder for ownership structure. In the case of liquidation, they have rights over the company’s assets after the payment is made to the external parties in full like bondholders, preferred shareholders, and other debtholders.
This class of ownership claim in the corporation claims a higher return on the assets and earning with the comparison to common stock. They have given preference before common stockholders in terms of payment of dividend whereas, they do not carry voting rights.
Types of Stock Market
Since the market in which the above-mentioned stocks are traded in the form of goods in exchange of agreed consideration known as “Stock Market”. Further, the market is divided into two sections;-
The place where the securities were created or sell (float) by the companies for the first time. This provides investors an opportunity for trading securities to buyers essentially. One of the examples is Initial Public Offerings(IPO) which occurs when the private company issues stock to the public for the first time.
Beginning price of the given securities and their oversee sales to investors is carried over within the primary market by the Underwriting groups consisting of investment banks. After the completion of an initial sale, trading is further carried out in the secondary market. Don’t worry !! We will also discuss it in some seconds.
You must be clear about the details of the primary market from above. Now, the “Secondary market” is a space where the trade of securities takes places by the investors which are already known. It is the only market which people think of as the “Stock Market”, though first issued are also sold in the primary market.
Determination of price in this market depends on the factors of demand and supply i.e if the demand of a particular stock rises as the majority of buyers rush to buy it, the stock’s price will typically rise. Similarly, if the majority of investors loses their interest in a stock, this will results in the declining of the stock price as demand for that security dwindles.
Stock Market VS Stock Exchange
A stock exchange is a place where all the listed securities include stock issued by listed companies, bonds are traded thereof. The place where the trade takes place is what we called a Stock Market which is discussed above.
It provides a great space for the stock brokers and traders to trade securities such as financial instruments including shares of stock, bonds and much more. To be able to trade on a certain stock exchange, the security must be listed there while satisfying the various terms and conditions inclusive of minimum subscription and much more.
Indian has two major Stock exchanges in which a company must be listed to carry out the trade
National Stock exchange of India Ltd. (NSE)
Bombay Stock exchange (BSE)
Each of the above-mentioned stock exchanges imposes their own listing requirements upon companies that want to be listed on that exchange which needs to be fulfilled right away.
Some interesting facts about Stock Exchange in India
1. About 5689 companies are listed in Bombay Stock Exchange (BSE) ) in India which has the highest number of listed companies in the world before National Stock Exchange (NSE) of India which has around 1750 companies.
2. Warren Buffet’s Hathaway, Class A, is the most expensive stock in world priced at USD 2,13,330 per share.
3. In India, People are engaged in gold and real estate investment other than equities. According to statistics, out of 22124.14 INR billion household savings, only 2% goes as an investment in equities.
Must Read : Stock Market tips
Investing in stocks is not that much difficult than they actually seem. A person having a little interest and dedication can reach great heights. But there are some technical terms that need some expert or professional support to be clear.
Can you see the difference between listed and traded in terms like Stock Market and exchange? Yes!! A person who is investing in stocks for a long time can easily see the distinction. However, for the first timers, it is quite difficult to see the difference between some similar technical terms. Lots of people assume them wrong and often confuse these terms for one another. If you want to clear your technical basics you can approach Royal Trading Lab. Don’t shy to take professional help it will only cultivate your efforts in long term.