Basics of Stock Market

by khalid on 25/05/2009 · 2 comments

The word Stock simply means a share in the ownership of the company. Stock represents a claim on the company’s assets and earning. When you own a share you own little bit of the company. The more shares you own the bigger your stake, and the more say you have. Once you hold the stock of the company you will become the shareholder of that particular company i.e. technically you own a tiny sliver of every piece of furniture, every trademark, and every contract of the company. Share bring money in to the company which they can invest for its growth, expansion and development

Market is a public place where things are bought and sold. Thus the term “ STOCK MARKET is simply the process by which company shares are bought and sold by anyone – from big institution such as pension companies, to ordinary investors like us”. The place or mechanism through which they are bought and sold is called an exchange

TYPES OF STOCK:

Common Stock: Common stock also referred to as common or ordinary shares. When people talk about stocks they are usually referring to this type. Common stock gives voting right to it’s shareholders ,generally common stock shareholders receive one vote per share to elect the company’s board of directors but one of the disadvantage of common share is that its shareholder will not receive money until the creditors, bondholders and preferred shareholders are paid.

Preferred Stock: Preferred stock, sometimes called preferred shares, have priority over common stock in the distribution of dividends and assets Preferred stock represents some degree of ownership in a company but usually doesn’t come with the same voting rights. (This may vary depending on the company.) With preferred shares, investors are usually guaranteed a fixed dividend forever.

Need Behind Issuing Shape: Company to raise money so that they can invest in their businesses and help them grows. Once a company has issued the shares they can be bought and sold on the stock market. The company may decide to issue more shares in future to raise more money for expansion. This is called a rights issue.

Stock market works on the basic principle of market i.e. matching buyer and seller and is governed by the laws of supply and demand and all the companies listed on the stock market are grouped together into categories, according to what they do. For example, HDFC bank and ICICI bank are in the ‘BANK’ sector. This is to help investors compare similar companies more efficiently.

How Stock Trade: Stock are traded in exchange, some of the exchanges are physical located where transactions are carried out on trading floor while the other type of exchange is virtual, composed of a network of computers where trades are made electronically. It is important to understand that the trading of a company’s stock does not directly involve that company.

Bears: Bears are cautious animals who don’t like to move too fast. An investor is said to be “bearish” if he or she believes the stock market will go down. A “bearish” investor will buy stock cautiously. The term “bear market describes a time when stock prices have been falling on the whole.

Bulls: Bulls are bold animals who might charge right ahead. A “bullish” investor believes the market will go up. He or she will charge ahead and put more money into the market. A “bull market” is a period when stock prices are generally rising.

An investor can be bearish or bullish about a particular kind of stock

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{ 2 comments… read them below or add one }

sharetipsinfo October 12, 2009

Hi,

Indian stock market is one of the most volatile market. Its two main stock exchanges are NSEand BSE. Both exchanges generally follow same trend.

NSE and BSE offers platform for investment in Indian stock market. In India there are many traders who prefer NSE over BSE as they consider BSE
as more volatile exchange but truth is that all exchanges be it NSE, BSE or LSE are volatile and should not be considered as a place for speculation.
One should strictly follow technical analyses if they want to earn regularly from any stock market.

Please remember analyses of stock market be it technical or fundamental do help!!

Regards
SHARETIPSINFO TEAM

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khalid October 13, 2009

Thanks SHARETIPSINFO TEAM, for your comment here.

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