How does the stock market work?
Making money overnight or becoming rich in no time we all want this right? However, it is only possible if you invest some money somewhere. The best way to double your money is to invest in the stock market. Yes, it is a very good way of making more money from your little amount. Will you believe that if you will invest some thousands in stock in a company then after ten years it will become in crore? Well, with stocks it is possible. However, in India, most people hesitate to invest in the stock market. It is because they don’t know how it works and how to put your money in it. Therefore, here are we writing a crux of the stock market for you. We are sure that after reading this you will be able to understand stocks from the basics.
Stock market: the basics
As we said, we will talk from the basics. Let us understand how it works. So, in the stock market, you will either sell or either purchase the stock of companies. These companies can be any maybe they are the new startups or maybe the leading ones from many years.
You also need to understand, that when you buy a stock of a company then you are also an owner of it somewhere. You hold some shares of it and you will have an equal amount of loss or gain according to the market functions.
The broad stock exchange takes place between the investors. This means for example you buy some shares of a reliance company from your broker’s website then you are buying the shares, which some other investor is selling. And you are not directly buying it from the reliance company. Because you all know reliance is a big company and you can’t afford to buy its shares directly.
So now, if reliance will perform well in the market then you will have your promised return. Generally, it starts from a 13% return. And if it will somehow fall in the market then you will also have to face the loss. So, invest wisely.
How does the price rise and fall in the stock market?
Stock prices are governed by supply and demand. This means that at a certain time someone will be willing to pay a higher price to you for some particular stock. On the other hand, some other shares or stocks will fall off the interest of the investors.
So in short, if there is a high demand for some certain stick in the market then investors will go for it. At the same time if some stick is falling no one will think of investing in it. This is called the market fluctuations and it depends on the rise in market demand. For example, reliance will rise only till the people will keep using its products and services. And if in some case we people tend to stop using its product or services then the company will go in loss.
After you purchase a stock: behind the scenes
After reading about stocks here, you must be wondering what happens after you purchase a stock. What are the behind-the-scenes that make your money double?
So here we are, banging all your doubts.
So if we understand in simple words then, you tell your broker (the website or application) about which stock you want to buy. You also let them how many shares you want to buy or invest in. Your broker sends your order to the exchange. Now, someone will sell you the shares at the current prices of the market. Then, after this process, your shares will be transferred to your Demat account of your broker network or website.
How to choose where to invest?
This includes a minute analysis of the market for intraday trading. Here you have to analyze some of the factors like movement average, Regarding Strength Index (RSI), etc. You can use the trends, patterns, analyses, and reports provided by stockbroking companies to analyze the stock movements.
Here, you can yourself study some key factors for example,
Returns on Equity, Earnings Yield, GP Margin, Debt to Equity Ratio, Interest Cover Ratio, Market Capitalisation, etc. This will provide you with greater clarity heeding stock prices.
From when and how can you start
Many misconceptions and wrong knowledge lead to a lot of fear and doubts regarding investment. People tend to believe that putting your money in a fixed deposit is the safest and smartest move to making more money. However, it is wrong. These days youngsters who are in their 20s should definitely start learning about stocks. Do not fall for your parent’s plans who tell you to keep your money bond in FDs and get a 5% increase on them. Whereas you can have double triple growth on your money in the stock market.
When people hear about the stock market the biggest reason for them to back off is they think they have to invest a lot of money. No, you don’t, you can start trading from even the smallest amount of 1k. You can also sign up for monthly SIP. In which you will decide how much money you want to keep investing in a particular share. After this, you can get your return in 1 year or 3 years as per your convince. So do not just sit and let your money get wasted. When you can just make them double triple by some mind games. Start investing today.
However, the stock market is considered to be a risky investment. But if once you get to know about how does the stock market works, it becomes easy and more reliable for you to invest. Meanwhile, the stock market is a vast topic itself. In this article, we have only covered the overviews and surface-level information which even a 5-year-old can understand and start his trading today. So why are waiting, read it and share it! Hope this helped.