The stock market refers to public markets that exist for issuing, buying and selling stocks exchange or over-the-counter. Stocks, also known as Equities, represent fractional ownership in a company, and the stock market is a place where investors can buy and sell ownership of such Investible Assets.
Sounds gibberish?
OK I’ll explain all of them taking some examples.
Suppose, you are an ordinary guy who wants to set up a business but you lack money. What would you do?
You would ask your friend to lend you some money. He has given you some money. But as a collateral( an security asset against the loan) you give him a Share of your business. It might a share of the profit or might be a share of total proprietorship. If your business flourishes then the value of your friend’s Share will increase and vice-versa. And your friend is called as Investor.
Just like your friend, imagine some other friends have also bought shares of your business. Now your small business is starting up picking growth. So, in order to make your business bigger, you decided to sell its share publicly so that enough money(Capital) is raised.
You heard that other entrepreneurs do that (sell shares) in a common place. The place is called the Stock Market or Stock Exchange. It is a place where all the companies are listed and trading takes place. The stock exchange provides for a platform where companies could sell their shares and investors and mutual funds could invest in them by buying shares. India has Bombay Stock Exchange(BSE) and National Stock Exchange(NSE) and many other regional stock exchanges.
Now suppose one of your friends has decided to invest in your fully grown company. He comes to the exchange but couldn’t invest directly. Here comes the Brokers, who are some professional who invest for your friend and charge a commission for that. Brokers can be either an individual or a company.
Now there are some chances that the listed company is not doing well and could be bankrupt anytime. So to protect the investors from these companies, a govt. agency regulates the market. It is known as SEBI(Securities and Exchange Board of India). According to the SEBI it helps “to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to”.
Now some of your investors can come together to another company which invests for them in the your stocks. These companies are Mutual Funds. Investors usually invest in the market through them for their professional management and simplicity.
Nowadays, to make transaction very easy and hassle-free there is a very interesting online payment system known as Cryptocurrency which will be discussed on another article.
A stock index or stock market index is a measurement of a section of the stock market. It is computed from the prices of selected stocks (typically a weighted average). It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments. India has BSE Sensex and Nifty-50 which are biggest
Some other terms are given below which will be discussed later.
Thank you
Source: www.wikipedia.org , www.cartoonstocks.com , www.investopedia.com
