The stock market appears in the news every day. You hear about it whenever it makes a new high or touches a new low...You hear statements like, Sensex rose today by 300 points.
Obviously, stocks and the stock market are very important, but do you really know enough about stock market ? What are stocks? Why do we need stock? Why do people buy and sell stocks? What is Sensex, Nifty, BSE, NSE ??? If you have questions like these, this article is for you.
So What does it literally mean when you purchase stock of a company? Basically it means that a stock holder is a owner in the company it holds stock in. As an owner, you are entitled to your share of the company's earnings as well as any voting rights attached to the stock. Stock (shares, equity or stocks, they are all same) represents a claim in a particular company's assets and earnings. When you acquire more stocks of that company, your ownership in that company increases.
These stocks are traded (bought and sold) on stock exchanges. The two major stock exchanges in India are Bombay Stock Exchange (BSE, also knwon as sensex) and National Stock Exchange (NSE, also known as Nifty).
Ok, that sounds great, but how do I own an stock of a particular company? Usually stock is obtained through a stock broker. Now a days trading and/or
investment in stocks has become quite easier as most of the stock brokers like sharekhan, icicidirect, indiainfoline etc are having their online presense.
Let's say you want to buy stock of TataMotors . Either You can call the stock broker to place the order for you. When the TataMotors stock is purchased, the broker would keep a stock certificate that shows that you are the legal owner of the stock until you choose to sell it. However due to online presence of most of the stock brokers these days, you can place the order by yourself by going to their website. Trading with a click of the mouse or a phone call makes
life easier for everybody. Of course you must have DMAT account before you can buy/sell stocks of a particular company.
Being a shareholder of a public company does not mean you can interfere day-to-day business activities of that company. The extent to which you can interfere is 1 vote per share to elect the board of directors during the annual meetings. For example, if you have purchased equities from TataMotors, it does not mean that, you can call Ratan Tata to tell him how to do the business.
What are the advantages of owning stock?
We usually buy stocks of a company in an anticipation that its price would go up over a period of time. As company grow, so does the stock and its price goes up. Also, many investors can potentially benefit from the dividends on stocks that are issued by the company to Conversely, when the performance of the company goes down, you may receive lower dividends or the price of the stock may decrease. If companies goes bankrupt, you may end up loosing your entire capital as well.
One extremely important feature of stock is "limited liability" which means that, even if the company (whose stock you are holding) is not able to pay its
debt, you will not be personally liable for that, because your liability is limited and only thing you will loose is stocks.
Obviously, stocks and the stock market are very important, but do you really know enough about stock market ? What are stocks? Why do we need stock? Why do people buy and sell stocks? What is Sensex, Nifty, BSE, NSE ??? If you have questions like these, this article is for you.
So What does it literally mean when you purchase stock of a company? Basically it means that a stock holder is a owner in the company it holds stock in. As an owner, you are entitled to your share of the company's earnings as well as any voting rights attached to the stock. Stock (shares, equity or stocks, they are all same) represents a claim in a particular company's assets and earnings. When you acquire more stocks of that company, your ownership in that company increases.
These stocks are traded (bought and sold) on stock exchanges. The two major stock exchanges in India are Bombay Stock Exchange (BSE, also knwon as sensex) and National Stock Exchange (NSE, also known as Nifty).
Ok, that sounds great, but how do I own an stock of a particular company? Usually stock is obtained through a stock broker. Now a days trading and/or
investment in stocks has become quite easier as most of the stock brokers like sharekhan, icicidirect, indiainfoline etc are having their online presense.
Let's say you want to buy stock of TataMotors . Either You can call the stock broker to place the order for you. When the TataMotors stock is purchased, the broker would keep a stock certificate that shows that you are the legal owner of the stock until you choose to sell it. However due to online presence of most of the stock brokers these days, you can place the order by yourself by going to their website. Trading with a click of the mouse or a phone call makes
life easier for everybody. Of course you must have DMAT account before you can buy/sell stocks of a particular company.
Being a shareholder of a public company does not mean you can interfere day-to-day business activities of that company. The extent to which you can interfere is 1 vote per share to elect the board of directors during the annual meetings. For example, if you have purchased equities from TataMotors, it does not mean that, you can call Ratan Tata to tell him how to do the business.
What are the advantages of owning stock?
We usually buy stocks of a company in an anticipation that its price would go up over a period of time. As company grow, so does the stock and its price goes up. Also, many investors can potentially benefit from the dividends on stocks that are issued by the company to Conversely, when the performance of the company goes down, you may receive lower dividends or the price of the stock may decrease. If companies goes bankrupt, you may end up loosing your entire capital as well.
One extremely important feature of stock is "limited liability" which means that, even if the company (whose stock you are holding) is not able to pay its
debt, you will not be personally liable for that, because your liability is limited and only thing you will loose is stocks.
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