What is the Stock Market?

During specific hours of the day, buyers and sellers trade publicly listed shares on the share market. Stock Market and Share Market are often used interchangeably. As a result, the key difference between the two is that the former allows you to trade only shares, while the latter allows you to trade bonds, derivatives, and forex as well. Nowadays, investor are usually passionate for share market investment and here we provide you the easiest way to learn stock market trading.

India has two major stock exchanges: the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Types of Share Markets

There are two types of markets: primary markets and secondary markets.

Primary Share Markets

In the primary market, a company raises funds through shares by first listing itself on the stock exchange. After the Initial Public Offering (IPO), the company becomes publicly registered and its shares can be traded in the market.

Secondary Market

As soon as a company's new securities are sold on the primary market, they are traded on the secondary market. In this market, investors are able to buy and sell shares among themselves based on current market prices. These transactions are usually conducted through a broker or other intermediary who facilitates the process.

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What Is Traded On The Share Market?

The stock exchange trades four types of financial instruments. These include:

Shares

Shares are units of equity ownership in a company. Any profits that the company earns are distributed to shareholders as dividends. The company's losses are also bear by them.

Bonds

A company needs substantial capital to undertake long-term and profitable projects. It is possible to raise capital by issuing bonds to the public. It is important to note that these bonds represent a "loan" taken by the company. Bondholders become creditors of the company and receive interest payments in the form of coupons. Bondholders receive interest on their investment as well as their invested amount at the end of the prescribed period when these bonds act as fixed income instruments.

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Mutual Funds

Investors pool their money into mutual funds and invest the collective capital in a variety of financial instruments. You can find mutual funds for a variety of financial instruments, including equity, debt, and hybrid funds.

Like shares, each mutual fund scheme issues units with a certain value. By investing in such funds, you become a unit-holder in the mutual fund scheme. Mutual fund unit-holders receive revenue over time from instruments that are part of the mutual fund scheme, which is reflected as the net asset value of the fund or as dividends.

Derivatives

The value of a derivative is derived from the value of the underlying security. Shares, bonds, currency, commodities, and more can all be included here! As buyers and sellers of derivatives have opposing expectations of an asset's price, they enter into a "betting contract" regarding its future price.

Conclusion

Stock investing is viewed as a good option for building long-term wealth today. By using the stock market strategically, any investor can achieve their long-term financial goals.