Share Market is a marketplace for buying and selling stocks. People make long-term or short-term investments based on their financial goals and ambitions. If you are interested in a career in trading or the stock market then keep reading because we are going to cover the different types of investments like currency, equity, and bonds in India, and what is a share market!
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While defining the share market a lot of people get confused between the share market and the stock market. While a share market only allows shares to be publicly traded, a stock market allows one to trade derivatives, mutual funds, bonds, and shares of listed companies.
There are certain platforms that offer trading facilities that companies can use to trade stocks in the stock market. When one is engaged in the stock market, one can only buy and sell those stocks that are listed on it. India’s renowned stock exchanges are the National Stock Exchange and the Bombay Stock Exchange.
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|Massachusetts Institute of Technology||USA|
|University of Edinburgh||UK|
|The University of Auckland||New Zealand|
|University of Southampton||UK|
|University of Windsor||Canada|
There are two types of share markets –
In this form of share market, a company has to first register itself with the intent of raising a certain amount of money and shares. The goal of being listed in this share market is to raise money. When a company gets itself registered for the first time, it is known as an initial public offering.
Once a company has sold its new securities in the primary market, they are traded in the secondary market then. In this market, the investors have the opportunity to exit their investments or sell their shares. Most of the transactions of the secondary market consist of trades wherein one investor chooses to buy shares from another through a secondary medium. These transactions are mostly conducted through a broker or an intermediary who is known to facilitate such processes.
Shares can further be divided into Equity and Preference shares. The point of difference lies in the power given to shareholders:
- Equity shares: This form of shares gives the shareholders the power to share the profit in the company. They can also vote in the Annual General Meetings of the company. Any individual who is the holder of equity shares must bear the profits of the company or inversely bear any losses incurred by the company.
- Preference shares: This form gives the holder only a fixed amount – dividends, from the earnings of the company. The holder has no voting powers..
When someone refers to “stocks” it essentially implies the ownership certificate of any company in general and when they mention “share” it implies the same to a particular company. While equity, basically refers to the stock/shares held in a company in its various forms like private equity and so on.
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The different types of investments in the share market:
- Share: It denotes part ownership in a company which is there as a financial asset and provides an equitable distribution of profit earned.
- Bonds: When a company borrows funds from more than one investor, it is known as bonds. Bonds are traded on the share market and can be repaid through timely investment.
- Mutual Funds: Mutual Funds allow individuals to invest indirectly in the share market,
- Derivatives: Derivatives are financial instruments that allow individuals to trade at prices fixed by them.
Share prices are determined by the supply and demand of shares in the share market. When a company is expected to earn more and has positive sentiments about it in the market, investors flock to its own share which leads to a rise in share prices and vice versa.
Companies raise shares by selling parts of their company to the share market. These shares can be then bought by individuals thus giving them a partnership in the company is it as little as 0.1%. In ‘equity financing’ companies mostly generate money by selling part ownership of it in the form of shares to the investors. Through this process, the investors decrease the ownership percentage of promoters and previous shareholders in the company and hence Investors buying shares become part owners of the business/company.
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A business can raise capital through two methods –
- Debt Financing i.e. borrowing money
- Raising shares
Debt financing has a major disadvantage as it increases the financial burden on startups and businesses. Hence, companies mostly rely on raising capital by selling shares via the stock market
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Are you planning to invest in the stock market, well in that case read through this carefully as we have mentioned the steps on how to begin trading as a beginner –
- Individuals must get a PAN card as it is required for opening a bank account, investing in the stock market and mutual funds, filing Income Tax returns etc.
- Then individuals must get in touch with a broker as an individual trader, one cannot go directly to a stock exchange and trade in the stock market.
- Register a Demat account to store the securities you buy. A trading account is also needed to trade in the stock market.
- Once an individual has both these accounts, they can contact their broker and begin trading.
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Short-Term Trading Courses in Foreign Universities
|University of London||MSc Mathematical Trading and Finance|
|Regent University||MSc Finance and Investment|
|University of Essex||MSc Algorithmic Trading MSc Finance and Global Trading|
|Yale University||Financial Markets|
|Caltech||Pricing Options with Mathematical Models|
|Princeton University||Bitcoin and Cryptocurrency Technologies|
|Rice University||Investment and Portfolio Management|
|University of Geneva||Investment Management|
|University of Michigan||Stocks and Bonds|
|Rice University||Finance for Non-Finance Professionals|
|Erasmus University Rotterdam||Advanced Valuation and Strategy – M&A, Private Equity, and Venture Capital|
|University of Pennsylvania||Finance & Quantitative Modeling for Analysts|
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