It is critical for an investor to understand the fundamentals of the financial and share markets in order to make informed investment decisions. This guide will introduce these concepts and explain how they can serve an investor.
What are the shares markets?
Share market can be defined as an online space where individuals and companies can buy and sell shares of publicly listed companies. A share market is a bit like a physical market where one is able to analyze the shares on offer, understand market trends, and strategically choose the optimal time to transact. Just like one does at a vegetables market, the intention is to purchase at low rates.
Among the different types of markets forming the share market, there are two main ones:
Primary market:
Primary market is where a company will sell its stock for the very first time to the investing public through an Initial Public Offering.
Secondary market:
After being listed on the primary market, shares can be traded without restrictions among investors in the secondary market.
What is the Financial Market ?
A financial market includes almost all types of transactions. Purchasing and selling different financial goods takes place in the financial market, for instance:
Stocks/Shares:
These are parts of a company that investors can buy; they are called shares.
Commodities:
These are the main products in agriculture or any unfinished goods like gold, crude oils and copper.
Currency:
This involves exchange of different currencies like dollar, rupee or euro.
These markets provide investors with a chance to stimulate and increase their economic value by offering a channel through which funds can flow within the economy.
What are the benefits of investing in shares?
Every individual has a chance to become part owners of companies by buying shares on the stock market. As companies grow, shareholders also reap the benefits and increase the value of their shares. When these companies do well in business, stock market investors also stand to gain significantly.
The share market is also important for the overall economy. The share market acts as an alternative source of direct funding for companies compared to traditional banking loans by enabling the public to buy shares from the companies.
Types of Share Markets:
The initial public offer market (IPO)
This is where investors buy shares directly from the company’s website. In the primary market, firms register their initial shares using public offers also called IPOs. Investors can purchase shares from the business directly at a predetermined price.
The Secondary Market
After the IPO, shares are transferred to the secondary market. Moreover, participants are able to trade shares freely; the contracted price no longer applies. More trading activities is done in this market and is conducted by brokerage firms.
Investing in the Share Markets:
It is key to investigate the firms you wish to invest in before doing so. Knowing the company’s history and the price of shares will shed light on the chances of appreciation in the value of the shares.
Look for example at Wipro, Eicher Motors, SBI Bank and Reliance Industries Ltd. Study their stock performance and make informed choices.
Summary for Investors:
- These are some of the steps you will have to conduct in order to successfully invest in a company via the share market in India. The financial market consists of many forms of investment.
- Companies establish an initial public offer to sell thier equity in exchange for investment. Shares are however traded on the secondary market.
- Collect the company’ background and their past performance so as to not make bad investment choices.
- One must ensure that they are patient enough to wait for the right price conditions when maximizing returns.
By following these strategies along with knowing how the financial and share markets work you can create a good investment portfolio.
