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What is Share Market, Types, & How to Invest?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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The share market is extremely important for a country’s economy. It is a platform where big and small companies offer shares of their business to investors. The best thing is that anyone can open a Demat account and invest in the share market. Also known as share bazaar, it is crucial for investors who want to invest in publicly traded companies with high-profit potential. It also indicates an economy’s overall financial health and industrial performance.
In the following sections, we will break down what a share is, the benefits of investing in shares, its types, and how to invest.
What is the Share Market?
A share market is a marketplace where investors trade different instruments like stocks, mutual funds, bonds, etc. It is a place where big organisations sell parts of their companies called shares, and retail investors buy them in expectation of greater returns.
Each share represents a part of the company. Governing authorities like SEBI manage and monitor the shear market and its functioning. Share market investment helps investors diversify their portfolios and earn returns as the company grows.
Types of Share Markets
Share markets are of two types: primary and secondary. Let's discuss them in detail:
Role of Share Market
The share market ensures liquidity, price transparency, fair dealings, and price discovery in trading activities. It provides data access to all market participants to guarantee transparent and fair securities pricing. Moreover, it facilitates efficiently matching buyers and sellers with similar investment goals and risk appetites. By providing the necessary market liquidity, investors may trade in shares and derivates to earn appropriate returns. Companies use the platform to raise capital when required.
Investment in Share Market
Investment in the share market offers multi-faceted benefits that attract both newcomers and seasoned investors. These include the following:
Despite these benefits, investing in the share bazaar includes risks due to volatility, credit risk, and unexpected events like changing government policies, man-made disasters, or bad news specific to a company. Utilise a balance of long-term and short-term investment strategies to mitigate these risks and maximise returns.
Share Market Information
Shares, mutual funds, bonds, and derivates are the four main components of the share market. Shares can be equity or preference shares; mutual funds can be money market, bond, stock, and target-date funds; bonds are debt securities to firms or the government, while derivates can include bonds, currencies, stocks, commodities, interest rates, market indices, and cryptocurrencies.
Investors, brokers and regulators are the key market participants. Investors invest in shares, brokers facilitate the trade, and regulators like SEBI ensure fair pricing and transparency in the trade. Market indices are hypothetical investment portfolios investors use to gauge market movements. Indices like NIFTY and SENSEX indicate the performance of a particular market segment, helping investors make informed investment decisions to ensure high returns.
How to Start Investing in the Share Market?
Here is a stepwise guide to invest in the share market:
Share Market Tips for Beginners
Before making an investment in the share market, it’s crucial to understand the process of trading securities.
Frequently Asked Questions
Q: What is the share market in simple words?
A share market is a platform where companies put up their stocks for sale, and traders buy them to own a portion of the business.
Q: Which is the best share to invest in?
Certifying a share as the best share to invest in depends on its financial performance and other factors. On these lines, some of the best shares are Kotak Mahindra Bank, Reliance Industries and Nestle India.
Q: How do you start trading stocks?
The first step to start trading stocks is to open a Demat account and compare securities to make a smart investment.
Q: Which share gives the best profit?
Shares in Reliance Industries, Tata Consultancy Services, Kotak Mahindra Bank, Infosys, etc., are the best shares to generate maximum profit in 2024.
Q: Which share is low price?
Crest Ventures, Taparia Tools, Guj Inds. Power and Haryana Leather are some low-investment shares with good growth potential.
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