STOCK MARKETING TRADING
STOCK: A stock is a financial instrument that represents ownership in a company or corporation and represents a proportionate claim on its assets and earnings . Stocks are also called shares or a company’s equity.
WHAT IS A STOCK EXCHANGE: Stock exchanges are secondary markets where existing shareholders can transact with potential buyers. It is important to understand that the corporations listed on stock markets do not buy and sell their own shares on a regular basis. Companies may engage in stock buybacks or issue new shares but these are not day-to-day operations and often occur outside of the framework of an exchange.
KEY FINANCIAL INSTRUMENTS TRADED IN STOCK MARKET:
Shares: Equities or stocks or shares give you ownership of a company. You can buy or sell shares through a broker. Mutual Funds: Here, the money is pooled from many investors and then invested in various financial instruments. Investors are referred to as unit holders. Profit generated is distributed to unit holders in proportion to the units held by them. Bonds:
These are fixed income instruments also known as debt instruments by which government or a company borrows money from investors at an agreed interest rate for a specific tenure. These are less risky when compared to shares. Derivatives: A derivative is a financial contract whose value is derived from an underlying asset. It can be used to mitigate a number of risks. Derivatives include forward, futures, options and swaps. Share Marketing Tips: Its always better to do your own research before investing. Its not wise to take decision based on rumours. Monitor your investments regularly so that you can eliminate the loss making stocks. Patience is very essential for any investor. Take the help of research experts also before making an investment move. Always be updated with share market news.
Purposes of the Stock Market Trading: The stock market serves two very important purposes. The first is to provide capital to companies that they can use to fund and expand their businesses. If a company issues one million shares of stock that initially sell for $10 a share, then that provides the company with $10 million of capital that it can use to grow its business (minus whatever fees the company pays for an investment bank to manage the stock offering). By offering stock shares instead of borrowing the capital needed for expansion, the company avoids incurring debt and paying interest charges on that debt.
The secondary purpose the stock market serves is to give investors – those who purchase stocks – the opportunity to share in the profits of publicly-traded companies. Investors can profit from stock buying in one of two ways. Some stocks pay regular dividends (a given amount of money per share of stock someone owns). The other way investors can profit from buying stocks is by selling their stock for a profit if the stock price increases from their purchase price. For example, if an investor buys shares of a company‘ s stock at $10 a share and the price of the stock subsequently rises to $15 a share, the investor can then realize a 50% profit on their investment by selling their shares.
Two Basic Approaches to Stock Market: There are countless methods of stock picking that analysts and investors employ, but virtually all of them are one form or another of the two basic stock buying strategies of value investing or growth investing.
Value Investor typically invest in well-established companies that have shown steady profitability over a long period of time and may offer regular dividend income. Value investing is more focused on avoiding risk than growth investing is, although value investors do seek to buy stocks when they consider the stock price to be an undervalued bargain.
Growth Investors seek out companies with exceptionally high growth potential, hoping to realiize maximum appreciation in share price. They are usually less concerned with dividend income and are more willing to risk investing in relatively young companies. Technology stocks, because of their high growth potential, are often favoured by growth investors.
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By
Karthika V
18 December 2021