Wednesday, 26 February 2014

Investment in Share Market





If you are thinking about investment and looking forward to start investing in the stock market - you need to have a basic idea of the process in which stocks is traded at the stock market. No other investment available holds as much as potential as stocks over the long run. Not real estate. Not bonds. Not saving accounts. Stocks are not the only things that belong to your investment portfolio, but they may be the most important, whether they are purchased individually or through stock mutual funds. Now Question arise what is stock or share?

What is a Share?
Share means having portion of something with another. The operation carried out by companies making the first sale of shares to the public is referred to as Initial Public offering or IPO. The main purpose of such an operation is for companies to raise funds for the purpose of expanding their business. They accomplish this by selling shares of stocks to the public. In other words, it is the process of bringing a stock issue to the market for the first time. Thus, buying these shares you can become an owner of a portion of the company you have invested in.

Shares are bought and sold in a market place referred to as Stock Exchange Market. Here is where all transactions take place.

How to start Investment in share market?
For start investment in share market, we need to contact depository or brokerages firm. These brokerages firm are the only ones authorized by the government to carry out transactions on your behalf, of course , following your indications. These transactions can be performed either through the phone or via the Internet.

These brokerage firms work like a bank account, meaning that opening an account with them is like having your money in a bank. You get an account number and a password that only you know, with which, you can at any time access your account, carry out your transactions, check your account balances and check your investment development. For start investment in share market, you must have 3 types of account:

Demat Account: A demat account allows a person to hold the shares in dematerialized form i. e. electronic form. Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited to the investor’s account with his Depository Participant (DP). SEBI has made it compulsory for trades in all listed scrips to be settled in demat mode.

Trading Account: A trading account allows a person to place an order in the stock exchange to buy or sell shares. Trading refers buying and selling of goods. Trading A/c shows the result of buying and selling of goods. This account is prepared to find out the difference between the Selling prices and Cost price. If the selling price exceeds the cost price, it will bring Gross Profit. For example , if the cost price of Rs. 50, 000 worth of goods are sold for Rs. 60, 000 that will bring in Gross Profit of Rs. 10, 000. If the cost price exceeds the selling price, the result will be Gross Loss. For example , if the cost price Rs. 60, 000 worth of goods are sold for Rs. 50, 000 that will result in Gross Loss of Rs. 10, 000. Thus the Gross Profit or Gross Loss is indicated in Trading Account.

Bank Account: The bank account should be linked to your trading account. The bank account is required to transfer or receive money when you buy or sell shares through your trading account.

After opening these three accounts, you can start investment in Indian share market. You can take trading tips for getting profit from share market.

Go to the Online Finance for further detail about Finance.

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