Before i could get going, i would like to shout out loud,
"Buying Stocks is not Gambling!"
Yes, we have a wide range of misconceptions on Stock markets but to be very clearly speaking, trading stocks is not equivalent to gambling. The concept might be similar: We put money on something and based on its performance, we win or lose. But the key difference is that, gambling is a matter of luck and sometimes statistics. But with stocks, its only knowledge.
Basically, the concept of stocks is very simple. Any company which has gained some name in open world and is preferring to expand its business will come for public issue. Then, normal public who has an interest or some knowledge in this company will apply for 'shares'. Once the shares are issued and money gets collected, that company will proceed with its undertakings. Based on its positive performances and results, its share holders will seek certain profit from the company either in the form of 'Dividends' or 'Bonus shares'; and when a company fails to deliver what it has set out to achieve, the share holders will lose their money.
i.e, We invest in a company. They do their business with our money. If they are profited, we share their profit. If they are in loss, we will have to bear their loss too.
Some times, a company might receive more than the expected number of applications during public issue. Then, on a lottery basis shares will be allotted. A single share in a company will have a face value between 1rs to 10rs. But, based on the demand and certain other factors, the share price at the time of issue will vary. For exp, a company named IMCF is doing good and when they decide to come to public issue, they might place the price range at 30rs per share (which has a face value of 10rs) or so.
Once the company gets listed in market, some might just hold the shares they got issued, but others would who prefer to make profit will sell them at a price of 32rs per share or so. All those who could not get in public issue will try to buy now. Once someone bought a share at 32rs, will try to sell it at 35rs for profit. As long as the company is doing well, everyone will gain profit. Thus, a single share price might go on up to 50,000rs too (for exp, MMTC). When such thing happened, MMTC had cut the face value of a share to 1rs from 10rs and a bonus of 1:1 was issued, making a single share cost around 2500rs odd. This enabled even common people to grab a share.
So, having a profound knowledge on a company before you invest in it, will be very fruitful. Investing in emerging companies might be a run with luck, but investing on well established companies will be very profitable.
Most importantly, never put all your eggs in one basket. i.e, Do put only that excess money you are left with, after meeting all your needs, but not the whole lot you have. Because if you put all your money on a company and it doesn't do well for sometime and an emergency shows up, you will have to sell them at a loss. Instead, if you are trading with excess money, you can give that company, the time it needs to get back to profits. Thus, loss can be avoided.
Then, another area where people might get loss is, 'Intraday Trading', where we get some amount from the 'Online stock broker', with whom we have our account. With that money we can trade and by the end of the day, if our trading sought profit, we can take it. But if our trades end up in loss, we will have to pay it on our own. i.e, if it was our money, we can give that company some time until it gets to profit. But in intraday, you will have to bear the loss.
In India, we have NSE - National Stock Exchange. A place, where every company in India, will be listed. By visiting,
www.nseindia.com, we can learn about any company. If we find it worthy, can invest.
Then, SENSEX - Sensitive Index, is the average of all the companies. Every second, while the market is open, the average growth or fall of all the companies will be calculated and updated, indicating the overall status of market.
Say, SENSEX is at 3000pts yesterday and by today, it is 3500pts. That means, price average of all the companies yesterday is 3000. Today, all the companies in NSE have gained profits and todays average is 3500pts. This shows that the market is in rise.
Then, we have NIFTY - Top 50 companies of NSE, investing in which will have a reduced risk of losing money.
To open a stock trading account, you will need a 'Demat account' which is linked with your bank account and you need to sign up with any of the 'Stock brokers', like Sharekhan or Motilaloswal or Indiabulls or 5paisa.com etc, who charge you for every transaction you do through them.
Then, before you buy a share in a particular company, go to www.nseindia.com and check its 52week high and 52week low price. If IMCF's current share price is 572rs and its 52Week high is 610rs and 52Week low is 250rs, then if you buy the share now, you might have an approximate profit of 38rs whereas loss can be upto 322rs. So, check before you invest.
Always give time to the company in whom you have invested. Most of the times, profits might not come over-night.
Sometimes, companies share their profits in the form of dividends. Total profit divided by number of shares will be the dividend money.
Always watch out for 'Public issues'. You might just grab a few shares at a good price in a company which might do very well in future. Of course many companies disappoint after public issue though. So, back ground check is important.
Thus, with certain knowledge, your money is always safe with you. In gambling, you put your money on a team or a player and by the end of the match, if they lose, your money is gone. But with stocks, its different. On day1, your investments might seek loss, but as time passes by and company grows, you will get better profits.
