Stock Market | How to invest stock market for beginners

Stock Market: Investing for Beginners 

How stock market really works.

This article will help you gain all the basic stock market knowledge that is required so that you can start investing in stocks. 

The article will help you understand how the complete stock buying and selling transaction works.  

What different players are involved in how and why a stock price changes the different types of traders and investors in the market etc.  

Let's go ahead and understand what share market is and how it actually works.  

So there's a trade a friend of ours Mr. Rakesh, who owns a clothes shop, which is doing fill normally well.  

After a couple of years, he opens five grow branches in a state and after ten good years, she opens 40 branches across India. 

The business is doing exceptionally well now Mr. Rakesh wishes to expand further and open multiple branches across the world.

But for this, he would need more funds.  Let's say 5,000 Crores.  

Mr. Rakesh is not having presented now to raise this money. He has multiple options like approaching an individual financier taking a loan from a bank etc. 

But all these options would require him to pay interest on the borrowed money.  

Which would eat away his profits and what if these new branches do not do well then there would be tremendous losses. So what next ?

Share Market Basics for Beginners | How the stock market really works.

How stock market really works.

Now Mr. Rakesh would turn towards stock markets.  He will approach the public and raise money, which is an initial public offering.  

Mr. Rakesh Company would issue shares that are a partnership in the company to people and if people feel that the company is likely to do well, then they can become partners in the company.  

But buying those shares at a stipulated price now that weighs Mr. Rakesh raises interest fee money and his risk also gets distributed amongst people.

The IPO will get launched in the primary market and the company will get listed in the secondary market on the stock exchange.  

Where the shares will get traded now.  This combination of the primary and secondary markets is called the share market. 

That as simple as possible now one benefit the people derive by buying shares in Mr. Rakesh Company.

How to invest stock market for beginners

Now when the shares of the company get listed and trading starts and when the share prices go up people will make profits by selling those shares at higher prices.  

That's it, so this is a win-win deal for people. Mr. Rakesh and also the country which benefits indirectly and makes sure that all these transactions happen clearly without any cheating.  

SEBI is the Securities and Exchange Board of India Acts as a Regulatory body. So SEBI has many kinds of rules and regulations which ensure that the investor interest is safeguarded and you can safely invest in the stock markets. 

So now let's see how the stock market works and how a complete buy and a sale transaction happen.  

Now the buyer and the seller come together in the secondary market to buy and sell shares.  

The buyer feels that Mr. Rakesh’s company will do well in foreign countries and hence he is interested in buying its shares.  

So the buyer he login his trading account and places a buy order for a number of shares.  

Now there are millions of such buyers and sellers in the market and so to handle transactions between them.  

We have huge brokers like Zerodha, Up stock, Motilal Oswal etc. The trading account is provided by the Bookers. Without a trading account, you cannot trade.

Investing for beginners

Now the broker passes on the buy order to the exchange where the stock is listed.  

So NSE and BSE are the two prominent exchanges in India and it is the exchange that actually connects the buyer and the moment the exchange gets a cellar it confirms the buy order with the broker.  

The broker then completes the transaction of buying and selling now that the transaction is complete.  

The seller should get his money and the buyer should get delivery of shares.  

So whose responsibility is this Clearing House?  

The Clearing House makes sure that the give-and-take between the buyer and the seller happens smoothly. 

The Clearing House gives a guarantee to both the buyer and the seller that, this transaction of theirs will be executed successfully at all costs. 

How to buy a stock for beginners

The moment the trade gets completed the buyer gets the shares in his Demat account from the seller. 

The seller he gets money in his account from the buyer symbol and by the way your Demat account is with your broker and you get this with your trading account.  

That's how a complete buying selling the transaction is executed.  

Now let's try and understand how a stock price moves and how the buyer and seller make money in the process. 

Now both the buyer and seller are tracking the share price of Mr. Rakesh's company and there comes news at 10 o'clock that, in one month the American store of Mr. Rakesh Company has made a profit of 100%.  

Now, this is big positive news at 10 o'clock the share price was 3000.  But now a seller wants 3,100 per share. 

Fortunately, a buyer is ready to buy the shares at 3100 because he is bullish on Mr. Rakesh Company and feels that the share is indeed worth 3,100.  

Share Market Basics for Beginners | How the stock market really works.

So now at one minute past 10, the share is coating at a price of 3100 and now another seller wants 3,200 and another buyer is ready to buy the shares.  

This continues and in just 3 minutes the share price rises by 10 percent so the stock is rising because the demand is rising. 

The buyers are feeling that the company will do well in the future and sellers are selling because they see that the company might not do well in the future.  

So technically it's just a different perspective which the buyer and the seller have above the company which is indeed driving the share price.
How stock market really works.

The buyers are always bullish and the sellers are always bearish if there are more buyers in the share its price will go up and if there are more sellers its price will come down. 

That's how the prices of shares go up and down. I mean it's as simple as that now we will see the different types of players investing in the stock markets and we as retail investors should fall in which category to make money.

So the first type is an intraday trader.  This guy buys shares in the morning and sells them before the markets close on the whole day. 

He buys and sells many shares.  The second type is the scalper.  This is a guy who buys shares in bulk in huge quantities and sells them the moment he sees very little profits.  

Now the third type is swing trader.  

This guy buys shares waits for a little longer share a day or two and then sells the shares.  

Now all these players fall in the trading category and most of the times they are in tremendous losses because traders rarely make money in the stock markets today they make hundred rupees and tomorrow they lose 200.  

Degrees that's the game that goes on and on now let's talk about the second category that is the investor category. 

The first type of player under this category is growth investor this guy buys shares of those companies which in the future unlikely to show phenomenal growth.  

This guy holds these shares for a longer duration one year two years three years with a lot of patience and then when he sees that the share prices have gone up significantly he sells them.

The second type of player in this category is a value investor. This guy buys shares of companies that are already doing good and profitable but for some reason, its share price is very low today. 

This guy too shows a lot of patience and holds the shares for a longer period 6 months 1year 2 years and when the share price goes up significantly he sells that.  

Now importantly we tell all our clients and you must also get this clear that stock markets should be treated as an investment platform, do not make it a trading platform.  

Just to repeat traders do not make money in the stock markets. You can try trading for yourself for say six months to get a feel of what you're saying.  

So you need to fall in the investor category to make money in the stock markets.  Just like you invest your money in real estate you never expect your investment to double in a month right.  

You know that it's a clean investment and will give your profits after a decent period of time. 

So on similar lines in stock markets - you will have to hold on to your shares for a decent period of time you will have to select the right companies to invest which will give you huge profits.  

Now repeating again if you do trading in stock markets you will lose your money.  You will get lost and confused in the herd of buyers and sellers.  

How to invest stock market for beginners

Share Market Basics for Beginners  How stock market really works.

You will never be able to decide correctly which stocks to buy and sell.  Fear and greed will start overpowering you and eventually, you will end up losing.  

Your capital on so try and become a shrewd investors in the stock markets.  

Some food for thought, if you don't find a way to make money in your sleep you will work until you die. 

That’s a statement from Warren Buffet now how true is this if your money doesn't start working for you then you may have to slog your whole life.

The only mantra to wealth creation is that your money should work harder than you even while you asleep and that would be possible only when you invest right and invest early.  

Don't wait for a big amount to get accumulated start with whatever you have.  It's very good to experiment with smaller amounts you will get to learn a lot.  

Start small but make a start history has proven that every man who is cumulated well he started small and remember you are a tiger year.  

So let the roar get louder and louder go and break the entire shackles megastar.  It's important to make a start.

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