Investing in the share market is an excellent way to ensure wealth creation in the long term. But what if you’re a beginner who isn’t very well-versed in the share market? How do you go about making money through it?
In this article, we’re going to be taking a look at just that. In addition to trying to understand what the share market is, we’re also going to take a look at some of the basic things that you need to know. Let’s begin.
To put it simply, the share market is an online financial market where the shares of companies are bought and sold by various investors. When we talk about the share market, we’re referring to a stock exchange like the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE). Now, to buy or sell the shares of a company, they would have to first be listed on either of the above two stock exchanges.
The price at which you buy or sell the shares of a company constantly fluctuates and rarely remains the same. This is because many factors influence the share price of an entity; a few of them include the company’s performance, market sentiment, macroeconomic conditions, and geopolitical scenarios.
So, how does one make money in the share market? It is quite simple, actually. To generate returns from the share market, all that you need to do is purchase a few shares of a company at a particular price and then sell them once their price increases. The difference between the purchase price and the selling price would be the profit (returns) that you generate.
The above method isn’t the only way to make money in the share market. For example, some investors partake in short-selling, where they first sell the shares of a company and then repurchase them once the share price drops.
In addition to this, some profit-making companies periodically distribute their profits in the form of dividends to the individuals who hold their shares. These dividends are another source of income.
Now that you’re aware of what the share market is, let’s take a look at a few basic things you need to know.
Before you can proceed to make money in the stock market, there are a couple of prerequisites that you would have to satisfy. Firstly, you would need a Demat account, which is an electronic account that’s used to safely store shares and other securities that you purchase. And secondly, you would also need a trading account, which is an account that enables you to buy and sell shares and other securities online on the stock exchanges.
In addition to shares of companies, multiple other financial instruments are traded on the stock exchange. Debt instruments like bonds and debentures, mutual funds, and derivative contracts like futures and options are a few of the instruments that you can invest in.
The Securities Exchange Board of India (SEBI) is an independent government entity that is responsible for regulating the Indian financial markets. All the market participants, including the companies listed on stock exchanges, the stock exchanges themselves, investors, mutual fund houses, and others, are required to adhere to and follow the rules, regulations, and mandates laid out by the SEBI.
With this, you must now have gotten a fair idea of what the share market is. Now, remember first to open a Demat account and a trading account before proceeding to even step into the vast world of share trading. If you don’t have these accounts already, simply reach out to Motilal Oswal to open a Demat account for free. With that out of the way, you can invest in not only the shares of companies but also upcoming IPOs and mutual funds too.
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