Basic Knowledge Of Share Market, Share Market Basics For Beginners : In this Money Pip Describe the Basic Knowledge of Share Markets For Beginners.
Stocks are one of the most common investments—and a great starting point to learn about investing. This video explains the basics of investing in the stock market: what stocks are, the risks associated with them, and what role they can play in an investment portfolio.
After a good amount of practice and learning you can take the training wheels off and really start riding along the way the roads may change will be good days and bad days and while learning to ride doesn’t guarantee you a spot in the Tour.
The France riding a bike could get you where you want to go a little faster let’s start with the basics and look at one of the most common investments stocks a stock represents partial ownership of a company.
When you purchase a stock you’re buying a piece for a share of a company by owning a share you own a small fraction of the company’s assets and have a claim on its future earnings.
There Are Two Ways You Can Make Money By Investing in Stock
The first is through stock appreciation when a stock you own goes up in value if an investor bought the stock at one price and the price went up the investor could then make money by selling the stock to another investor at the higher price.
The second way is through a dividend this is a periodic payment issued by some stocks a dividend is a way for a company to give a portion of its earnings to shareholders.
Here’s an example of how stocks work suppose there’s a company called bull flag cycling this company makes bikes really good bikes the bikes are so good in fact the company wants to expand so it can sell more bikes to people all around the world to do this the company needs to raise money also known as capital.
There are a few ways this company could do this it could take out a loan but that would mean taking on a significant amount of debt or it could issue shares of stock by issuing stock which is called going public the company can raise money without going into debt instead it sells shares of ownership and a claim on future earnings to investors.
So let’s meet a typical investor our investor is someone who has a little extra cash he’s looking for an investment. That has the potential to offer better returns than a savings account and he’s willing to accept the higher risks of investing in a stock.
He thinks bull flag cycling is a promising company that’s likely to grow because of this he thinks buying a share would be a good investment so how much does a share cost.
Suppose the company decides to raise 1 million dollars and its decides to issue 1,000 shares of stock. Because each share represents a fraction of the company’s worth and there are 1,000 shares each share represents one 1000th of both like cycling because the company is raising 1 million dollars at the initial public offering or You can Say in short form IPO each share would be initially valued at $1,000.
The price doesn’t change after the IPO so our investor purchases a single share on the open market through his online stock broker for $1,000. Now let’s see what could happen to his investment if the company does well and profits increase the value of the company is likely to go up as a result the stock price may increase as well assuming the price of the stock goes up our investor could now turn a profit by selling his shares to another investor in the stock market TIPS.
However, if the company’s ventures don’t go as planned its value could decrease and so could the stock price if this happens our investor could lose money if he decides to sell the current price when it comes to investing in the stock market.
The basic goal is to buy when prices are low and sell once prices are high but stocks in the stock market don’t always go up sometimes they stay the same and sometimes they go down and sometimes prices change quickly.
Because, of this stocks are considered riskier. Than other historically safer investments such as bonds or CDs however investors keep coming back to the stock market why because with this increased risk comes the potential for greater returns sadly investors take precautions to try to minimize risk like creating an investing plan.
Adding diversity to their portfolios by investing in a variety of companies putting money and other investments beside stocks and learning trading strategies for up down and sideways market now you know some of the basics about investing in stocks but that’s just the beginning open an account first Demat Account for access to more award-winning investing education.
Disclaimer: The views and investment tips expressed by investment experts on https://moneypip.com/ are their own, and not that of the website or its management. https://moneypip.com/ advises users to check with certified experts before taking any investment decisions.