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Learn Share Market Basics For Beginners

Many individuals today invest in shares for wealth creation. While some see the share market as a risky avenue, studies show that putting your money in the right shares for a long period can generate significant returns. In fact, if you learn share market investing tricks, you can make more from your investments than from real estate and gold.

Published on 21 January 2022

Some investors adopt short-term strategies for investing in the stock market. It requires tackling a lot of volatility. But by investing in the right shares, you can make quick profits.

What is the Share Market?

The market in which shares are traded or issued is known as the share market. A share market is similar to a stock market. So, if you learn share market basics, you learn stock market basics as well. A share market lets you indulge in the buying and selling of shares. A stock market lets you trade financial securities, such as mutual funds, bonds, derivatives, and listed company shares.

There are two types of share markets depending on the shares it trades in - primary market and secondary market.

Investing in the Share Market

You need a trading and Demat account to start investing in the share market. The trading account lets you buy and sell shares, while the Demat account stores your shares electronically. Both the accounts are linked to your savings account to allow for the smooth processing of money and shares.

Essential Financial Instruments Traded in the Stock Market

When you start investing, you will come across different financial instruments. It can be confusing to look at those instruments on online share market trading platforms. Here’s a brief introduction to help you get started:

  • Shares

Shares or stocks, or equities give you the ownership of a company. With the help of a broker, you can buy or sell shares.

  • Mutual funds

For investments in mutual funds, many investors pool in money and then invest the amount in several financial instruments. Investors are known as unitholders. These unitholders receive profits in proportion to the units they are holding.

  • Bonds

Bonds are used by government bodies or companies to raise money from investors. There is an interest rate agreed upon for a definite tenure. These fixed income instruments are also called debt instruments. In comparison to shares, bonds are less risky.

  • Derivatives

The most common derivatives are futures, options, forward, and swaps. They are in the form of financial contracts, and the value of the contract is derived from an underlying asset. Most importantly, the financial instrument helps to diminish several risks.
Also Read: What is Derivative Trading?

Quick Share Market Basics for Beginners

  • Perform thorough research before investing. Read about the company in detail, its background, the management’s contribution, annual reports, etc.
  • Do not make investment decisions based on rumours.
  • Keep a watch on your investments to eliminate the loss-making stocks.
  • Have patience. Deciding your moves impulsively can cause you to miss out on profits.
  • Keep yourself updated with share market news.
  • Take the assistance of research experts before investing.

Bottom Line

You can make your journey of investing in the stock market very rewarding, especially if you avoid some of the pitfalls experienced by most new investors. Beginners must spend time to learn share market strategies and develop an investing plan that works for them. An important word of advice is to stick to the investment plan through the good times and bad.

Chandresh Khona
Team Espresso

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