One-stop Guide to Share Market Basics

What is share market? It is a term used in reference with the public marketplace where interested investors can buy, sell and trade in shares of their preferred companies. Shares are traded on public exchanges with the primary ones is India being the National Stock Exchange (NSE) in New Delhi and the Bombay Stock Exchange (BSE) in Mumbai. Here is your one stop guide on the basics of share market. How does the share market work? When investors buy shares of a particular company listed on either Exchange, they are buying part ownership into the company, which stands until they sell the stocks, typically after booking a profit. Share prices solely depend on the company’s performance and its demand on the share market. As an investor, there is no restriction on the number of units you can buy, and when you sell your stocks, you have the discretion to sell them partially or completely. Essentially, this is a market that stands as a mediator between investors and companies, allowing the former to raise profits and the latter to raise capital. How to invest in share market? The share market investment process is rather simple. You just need to follow this simple, 6-point strategy Decide how much money you can afford to invest in shares and do not invest beyond that amount. Decide your investment horizon and your subsequent investment goals i.e. the amount of time you wish to stay invested in one or more stocks and the reason for investing; paying for your child’s further education, for instance. Decide your investment strategy and pick a few stocks to invest in based on their performance in the last few years. Enter the share market when prices of shares are low, to maximise your profits and exit the market once you get good returns on your investment. Execute your trades or sell shares upon booking profits, through your demat account or ask your investment broker to sell your shares on your behalf. There will be certain shares sitting idly in your investment portfolio so you must keep reviewing them from time to time. How to handle the volatility associated with share market Just knowing how to invest in stock market is not enough. As an investor, you must remember that this is a market that is, at its core, a volatile market. A stock that was performing well yesterday could become an under-performer and you could see the numbers in red. Volatility is the inevitable truth of this investment market. So how do you handle it? Just remember these tips: Try not to panic and remind yourself that share market fluctuations are a short term phenomena. Do not take any impulsive decision like selling your shares just because the market is volatile, or worse exiting the market in the face of volatility. Remember that a market crash is the best time when you can and should review your asset allocation strategy. Make the most of the bear market trend and consider investing at this time. Things to remember and final thoughts Share market basics dictate that you exercise caution before you start investing. Remember to invest after assessing your risk appetite and exit the market at the right time. Don’t get greedy or stay invested for longer than you should, hoping for share prices to increase further. Be thorough in your research and ensure you have data and numbers to back your investments. If you are new to investing, it is recommended that you hire a financial expert to help you with your investments