Tags- share, stock, BSE, NSE, Depository, Sensex, Nifty
In good olden days, people generally kept their savings (money) in boxes or safety lockers. But in the present day, it is a risky affair. So people are now putting their money in bank deposits. Other saving schemes are Mutual Fund and Stocks/Shares. The older generation are slightly hesitant to put their money in shares as they are slightly afraid of losing their money. The stock brokers now a days conduct seminars to educate the people giving details of safe investment in shares and stocks. Experts in the field are also holding webinars in these areas .Therefore the youngsters are evincing keen interest in this field and are investing in stocks taking into account their future needs.
A stock (also known as an equity) is a security representing the ownership of a fraction of a company. This entitles the owner of the stock to a proportion of the company's assets and profits equal to the number of stocks they own. Units of stock are called "shares." Stocks are bought and sold through stock exchanges. To protect the investors from fraudulent practices, the share transactions have to conform to government regulations.
Understanding Stocks
Companies when they require money for their business operations, raise funds through issue (sell) of stocks. The holder of a stock (a shareholder) has a claim to be part of company’s assets and earnings. In other words a share holder is an owner of the company in proportion to his share holding. Owning stock gives the share holder the right to vote in shareholders meetings, receive dividends (which are the company’s profits) when they are distributed, and it gives him the right to sell his shares when required.
How to Buy a Share?
Stocks are bought and sold on stock exchanges. In India there are two stock exchanges- Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). A company goes public through an initial public offering (IPO). At that time, its stock becomes available for investors to buy and sell on an exchange. So for an investor to buy and sell shares he has to open a trading account, demat account and a bank account. There are approved stock brokers in almost towns in India for this purpose.
Some associated terms:
Investor : A person who invests money. One can open an account either himself or through a stock broker. For operating self, one should have an internet connection and aware of the fundamentals of stock market. No minimum amount is prescribed for opening a trading account. The investor’s interest is to get capital appreciation and the part of dividend out of the company’s profit.
Stock broker: A firm or individual who executes the buy and sell on behalf an investor for a specific fee. They generally give advice to their clients what to buy /sell and when to do.
Stock Exchange: It is a place for buying and selling shares and bonds. In India there are two exchanges – Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Securities and Exchange Board of India (SEBI): The basic functions of SEBI are – To protect the interests of the investors and to regulate the securities market.
Depository: Previously share certificates were held in paper form whereas now it is held in electronic form. Organizations which keep the shares in electronic form are called depositories. They issue holding statement to the investors showing the name of the company in which they are having shares and the number of shares held. In India there are two depositories - Central Depository Securities Ltd (CDSL) and National Securities Depository Ltd (NSDL).
Nifty and Sensex: These are benchmark indices to measure the overall performance of the stock market. These indexes are considered as economic barometers. Nifty is used by the National Stock Exchange and Sensex by the Bombay Stock Exchange. Sensex is a pool of top thirty companies while Nifty is a pool of top fifty companies.
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