What is Stock Market?

 What is Stock Market? How it Works?

Before knowing what Stock Market it, you should know what Share is. Whenever a business is started, the entrepreneurs pool money from his savings, relatives, friends, Financial Institutions (Banks) and from Partners (If any) as an initial investment. Which helps him to start and keep going his business for a while?   But at some point of time the business needs huge funds than the original sources for its growth/development. 

The Medium for a company to pool huge money easily is through Shares.

Now you get a question what is Shares?

The company proposes a capital amount and divides the huge amount into small individual shares, which makes everyone to afford to buy the shares of the company.  Let say for example, the capital amount is $100,000 and it is divided into 10,000 Shares, each share will cost only $10.

The whole process is carried at a Public marketplace which is called “Stock Exchange”. To make a trade in this market the company has to clear the legal procedure from Securities and Exchange Commission (SEC) in United States and Securities Exchange Board of India (SEBI) in India. 

Any company who are issuing the shares for the first time will go through IPO (Initial Public Offering). Any investors want to invest in the company becomes the owner of the company once the shares are bough by him/her, before that investor want to know the history of profitability and the future success outlook and the business products before purchasing any new stock, so it is made compulsory that the company has to publish its previous year’s Balance sheet along with the IPO.

After Shares getting quoted in Stock Exchange?

Once the shares of the company are quoted on the board, it is ready to be traded.  It is continuously updates and generally the prices of the share will be far higher than actual money the investors invested. How?

Why/How does the price of the Share go down and Upside?

In the stock market, when the stock is kept for trading, the investors buy and sell the stock to a view to make Huge Profits.  When the buyer hopes that the company is really doing well and has a great chances of success in future he invest his funds by purchasing the stock. 

Now, the asked price is the intended price which once wants to buy a stock and the bid price is the price, where one would like to sell his holding stocks. The difference between the ask price and the bid price is the profit for the seller. This is termed as “Spread”.

How are shareholder benefited?

A Shareholder not only benefits by trading of the shares. If he holds the shares, the company even pays Dividends (Part of the profits) by which the value of the shares even goes more up and he can make profit by selling in off.  

Article will be updated soon.