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Basics of a Stock Market for Beginners

An organization is formed in two ways:

1. When an individual makes an investment to start a business – it is called private business or sole proprietorship.

2. When a group of people (two or more) come together, make investment to run a business, it is called a partnership.

Basics of a stock market - Classification of Sole Proprietorship, Partnership and Corporation.

What is a Company?

The above said partnership is formed with known faces. When unknown people or the general public is incorporated into the partnership, it is called a company.

Companies are registered under “Registrar of Companies”. The company is held accountable for the entire liabilities and not the stock holders.

Definition of "What is a company?"

What is meant by Stock?

The shares released by the companies for the general public to buy is called stock.

Definition of "What is a stock?"

What is meant by Stock Market?

The place where shares are bought and sold is a stock market. Small traders, commission agents/brokers, big traders form the core of this market.

The popular stock markets in India are the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

Worldwide, New York Stock Exchange, London Stock Exchange, NASDAQ and Hong Kong Stock Exchange are extremely popular.

Some of the popular stock exchanges are listed.

What are the different types of Stock Market?

1. Primary Market:

When a company issues its first stock to the general public, it is called IPO – Initial Public Offering.

2. Secondary Stock Market:

To purchase or sell an existing stock a secondary market has to be approached. After IPO a company’s share is listed in the stock market. After this the investors can sell the shares in the market. The current stock value determines the demand for that company’s share.

A comparison between primary vs secondary stock markets.

Who is a Share Holder?

The shares released by the companies have a face value determined. Investors who buy these shares at the face value or more are called shareholders.

An illustartion of the stock market participants.

Who are Stock Brokers?

The members of the stock market are called stock brokers.

The power to buy/sell a share, trade on behalf of an individual/company is vested upon these stock brokers. If you plan to buy a share, you need a stock broker and a DEMAT account.

How Stock Market Works?

How a stock market works?

Price of the Stock

Price of stock

How Traders Make Money?

How traders make money in a stock market?