Share or Stock Market these days is in a boom. The story security dates back in the 13th- 14th century. A market being a place where a transaction takes place between two or more parties and stock is a piece of paper that certifies the ownership of a person in different companies. So a Stock or Share Market is a place where two or more people buy or exchange shares and other securities of different companies. Share Market also gives companies the platform to issue or redeem their securities such as bonds, shares, derivatives etc through Stock Exchange.
A stock holder or a share holder is a person who owns shares of a company and has ownership in a joint stock company which is a partnership involving two or more people under legal binding. A share holder is given special rights depending upon the class of the shares such as they may be given:
- The right in the sharing of company’s income.
- They have the right to buy new shares issued by the company.
- At the time of liquidation of the company share holder have their rights in the company’s assets.
- They have voting rights.
- The shareholder is not liable for any of the company’s liabilities.
With all these rights a shareholder is not allowed to use any of the company’s property in any kind even if the shareholder has more than 50% of ownership in the company.
In the primary market only shares are issued which are known as IPOs and in the secondary market these shares are traded.
It is necessary that the security should be listed in the stock exchange inorder to be traded. Listing requirements are conditions which are imposed by the Stock Exchange for companies which want to be listed on that particular Stock Exchange. The conditions and requirements of a Stock Exchange may vary. Such conditions may include minimum numbers of shares, minimum amount of income and minimum amount of capitalization. Trade can be done by members only on the Stock Exchange.
It is not necessary to issue or to trade stocks in the Stock Exchange and this type of trading is known as Over the Counter trading.
Different Characteristics of a Stock Market:
- They facilitates a company’s growth
- Profit Sharing
- Mobilizes savings
- Helps in raising capital for the business
- Provides new paths for small businessmen
- Companies manage themselves in a better way inorder to comply with the rules and regulations of the Stock Exchange
- A true reflection of the economy of a particular country
- Stock Market facilitates the government in raising capital for different development programs
There are two types of stocks:
- Common Stock: they usually have voting rights and at the time of bankruptcy of a company common shareholders receive their share of funds after the preferred shareholders. Usually common shares perform better than the preferred shares.
- Preferred Stock: it is also known as a hybrid instrument as it has both the qualities of equity and debt. These do not usually have voting rights but are given preference over the common stocks at time of payment of dividends.
There are twenty major Stock Exchanges in the world:
- Tokyo Stock Exchange
- New York Stock Exchange
- London Stock Exchange
- Shanghai Stock Exchange
- Hong Kong Stock Exchange
- Toronto Stock Exchange
- Bombay Stock Exchange
- BME Spanish Exchange
- BM&F Bovespa
- National Stock Exchange of India
- Borsa Italiana
- SIX Swiss Exchange
- Shenzhen Stock Exchange
- Korea Exchange
- Deutsche Borse
- Australian Securities Exchange
- JSE Limited
- Taiwan Stock Exchange
The selling and buying of stocks is simple. The stocks are to be bought at a lower price and then sold at a higher price. Sometimes there are situations in which sellers have to sell at a lower price also. In such types of circumstances the seller is simply trying to avoid any further loses that he can bear if he does not sell at the very instant.
Tips for participating in a stock market:
- You don’t need ample amount of money
- Use common ways of selling i.e. sell to earn profit
- Very little time is required
- It is quick cash; easily convertible into cash
Easy to do business in the stock market just try to depend mostly upon your knowledge about the market and don’t forget your gut feeling!