Share Market for Beginners, Types of Shares and How to Invest

Share Market for Beginners: The share market is where people buy and sell shares of various companies. A share is a tiny part of a company owned by the company’s owners (shareholders). When you buy shares of a company, you become one of its owners. If the company succeeds and earns more money, the value of your shares can also increase. While many people think that share market is only for experts, with a basic understanding, you can enter this market as a beginner and earn good returns. The key is to understand the system and make wise decisions rather than gambling or guessing. The share market works just like any other market where people buy and sell things. The only difference is that, in a share market, instead of things like cloth or food, people trade shares of companies.

Stock Market for Beginners Courses

Share Market for Beginners

The share prices keep changing every second based on the demand and supply for those shares. When more people want to buy a share, its price goes up. When more people want to sell the share, the price goes down. By learning share market basics, you can make smart investment decisions and avoid common beginner mistakes. Let’s start from the very beginning to know more about this market.

The share market has two sections

1. Primary Market
2. Secondary Market

Primary Market

A company offers its shares for the first time to the public in the primary market through an Initial Public Offering (IPO). In the Primary Market, new shares are created and offered to the public.

Stock Market for Beginners Courses

Secondary Market

After a company lists its shares on the stock exchange in the IPO, these shares are traded between buyers and sellers on the stock exchange. The stock exchanges in India are NSE and BSE. This market is also known as the secondary market.

Types of Shares

Essentially, there are two primary types of shares that a company can issue to its investors. These shares give different types of rights and benefits. Let’s look at the two main types of shares:

1. Equity Shares

These are also known as ordinary shares. When you buy equity shares of a company, you become a part-owner of the company.

You get voting rights in the company’s decision-making, and you are also eligible for dividends if the company earns profits.

The value of your equity shares can rise and fall depending on how well the company is doing.

Benefits:

•   Voting rights in the company’s decisions.

•   Share of the company’s profits (dividends).

•   Higher potential returns if the share prices increase.

Risks

•  Share prices may decrease if the company does not perform well.

•  Returns are not fixed.

2. Preference Shares

In preference shares, the investors receive a fixed dividend and get preference over equity shareholders when the company’s profits are distributed or if the company is shut down.

The preference shareholders, however, usually do not have voting rights.

Benefits

  Fixed income in the form of dividends.

  Less risky compared to equity shares.

Risks

  Limited share of profits if the company grows.

  No voting rights in most cases.

There are other types of shares as well (not as common), these are

•  Bonus Shares

•  Rights Shares

•  Sweat Equity Shares

Bonus shares are free shares issued by a company to its existing shareholders. Rights shares are offered to existing shareholders at a discounted price before the public. Sweat equity shares are issued to the company’s employees as a reward for their contribution.

Now that you know the types of shares, you can decide which ones to invest in depending on your financial goals regular income or long-term wealth.

Stock Market for Beginners Courses

How to Invest in Share Market

Investing in the share market might look complicated but following the steps can make it simple and easy. Let’s look at the step-by-step process for beginners to start investing in shares.

Step 1: Learn the Basics

Before investing, you should learn how the market works, how to read a company’s financial reports, and understand the market trends.

Learn some essential share market terms like bull market (when prices rise) and bear market (when prices fall).

Step 2: Open a Demat and Trading Account

You cannot buy or sell shares directly in India. You need two accounts.

 Demat Account: An account to hold your shares in electronic form.

 Trading Account: An account to place orders for buying or selling shares on the stock exchange.

You can open these accounts through a broker or a financial platform.

Step 3: Link Bank Account

You will also need to link your bank account to your trading account so that money can be transferred for buying or selling shares.

Step 4: Choose Your Stocks

Study the company’s business, its past performance, growth in profits, and the quality of its management. Do not invest in new or untested companies as a beginner.

Choose large and stable companies instead.

Step 5: Place Your First Order

Once you have decided on a share to buy, open your trading app or your broker’s trading platform and place a buy order. Specify how many shares you want to buy and at what price. Once your order is executed, the shares will be credited to your Demat account.

Step 6: Monitor Your Investments

Check on your investments regularly, but don’t keep watching every few minutes. The market changes every day, and being patient is important. Investors who keep their money invested for the long term tend to earn higher returns.

Step 7: Book Profits and Learn

When the price of the shares that you bought increases, you can sell them to make a profit. You should learn from your investment, whether it is good or bad, to become a better investor in the future.

Stock Market for Beginners Courses

How to Open Demat Account

A Demat account is an electronic account that you can use to hold your shares or stocks. Instead of physical share certificates, your shares are stored safely in your Demat account in electronic form. The process of opening a Demat account has been simplified and is mostly done online these days. Let’s look at the step-by-step process for opening a Demat account.

Step 1: Choose a Depository Participant (DP)

A DP is a brokerage firm or financial institution authorized by NSDL or CDSL to open Demat accounts. Some of the well-known DPs in India are Zerodha, Groww, Angel One, Upstox, and ICICI Direct.

Step 2: Fill Out the Application Form

Visit the DP’s website or branch and fill out the account opening form.

Step 3: Submit KYC Documents

Submit your KYC documents such as identity proof (Aadhaar or PAN card) and address proof.

Step 4: Complete In-Person Verification

Some DPs may ask you to submit a short video verification or meet in person to verify your identity.

Step 5: Sign the Agreement

You will need to sign an agreement stating the rights and responsibilities as an investor.

Step 6: Get Your Demat Account Number (Client ID)

After verification, you will get your account details, and your Demat account will be opened. You will get your Demat account number or client ID, which you can use to start trading and investing in the share market.

Opening both Demat and Trading Account will take less than 24 hours if all the documents are correct and verified.

Stock Market for Beginners Courses

Stock Market Tips for Beginners

Investing in the share market as a beginner can be exciting. But it is important to take your first steps carefully. Here are some stock market tips for beginners to help you invest in the share market.

• Start Small: Start by investing a small amount of money and increase it over time as you learn how the market works.

• Don’t Follow the Crowd: Don’t buy or sell shares just because others are doing so. Always do your research before making any decisions.

• Invest for the Long-Term: Don’t expect to make a fortune overnight. The market can go up and down in the short term, but in the long term, investors tend to make money.

• Diversify Your Portfolio: Never invest all your money in one company or sector. Spread your investments across different sectors.

• Understand Risk and Reward: The higher the risk, the higher the returns. Understand your risk appetite before investing your money.

• Keep Learning: Follow business news and reports regularly and keep learning about the companies in which you have invested.

• Don’t Panic in a Market Fall: Prices are always changing in the market. Don’t panic and sell your shares when the market is falling.

• Invest in What You Know: Invest in companies whose products and services you understand.transferred for buying or selling shares.

Understanding the basic concepts like what a stock is and the different types of stocks is the first step toward financial knowledge. The stock market offers various ways to invest from the stability of a blue-chip stock to the quick action of intraday trading. If you want to learn more, a strong education is key. We recommend checking out the courses offered by PW Stock Market for Beginners Courses . Their programs break down complex finance topics into simple, easy-to-follow lessons. Start your learning journey with PW today.