Stock Market
Stock market, share market and equity market are same market. In this market you will buy and sell company share. Buying share of a company means buying some percentage of ownership of that company. That is, you become the holder of a percentage of that company. If that company makes a profit, some percentage of that profit would also be given to you. If that company incurs a loss, a percentage of that loss would also be borne by you.
Stock Exchange: stock exchange is that place, that building where people buy and sell shares of the companies. The Market can be devided in to two types the primary market and secondary market primary market where the companies sell Thier shares.
How many shares can a company have: A point to be noted here is that every share of the company has equal value. It is upon the company to decide how many of it's share it wants to make. If the total value of the company is 100000$, then it may make 1Lakh shares of 1$ each. Or it may make 2 lakh shares of ½ (0.5)$ each. When companies sell thier shares in the share market, it never sells 100% of them. The owner retains majority of the shares to keep possession of his decision making power. If you sell all the shares, then all the buyers of the shares would become owners of the company. Since the all become owners, the all can decisions regarding that company. The individual who has more than 50% of the shares would be able to make decision regarding the company. Therefore the founder of the company prefer to retain more than 50% of the shares For Example: 60% of the shares of Facebook are retained by Mark Zuckerberg. The people who have bought shares of the company can sell it to the other people. This is called the secondary market. Where people buy and sell share amongst themselves and trade in shares. In the primary market, the company set the prices of thier shares. The companies can not control the prices of thier shares in the secondary market. The share prices fluctuate depending upon the demand and supply of the shares. So, the prices of the shares fluctuate depending upon the demand and supply.
How to buy shares: Before the dawn of internet, one had to physically go to the Pakistan's Stock Exchange building to this. However, with the in place you merely need three things.
1)A Bank account
2)A Trading account
3)A Demat account
A bank account because you would need your. A trading account to allow you to trade and invest money in a company. A demat account to store the stocks that you buy in a digital form. Most of the banks today have started offering a three in one account with all three account encompassed with in your bank account. People like us would be called retail investors, that is, common people who want to invest in the stock market. A retail investors always requires a broker. A broker is someone who brings together the buyer and seller. For us, our broker could be our banks, a third party app or even a platform. When we invest money through brokers in the stock market, a broker retains some money as his commission. This is called "Brokerage rate". Banks mostly charge a brokerage rate of around 1%. But 1% is a little high. That's not how much it should be. If you look properly, you would discovers platform. That charge a brokerage rate of around 0.05% or 0.1%. This brokerage rate is a disadvantage for those who want to indulge in a lot of trading of stocks. If a lot of stocks are bought and sell in a day, a lot of money would be siphoned of as brokerage fee. But if you want to invest for a long term, then a high brokerage rate would not make a lot of difference because you had pay it only once.
I will give you more education in other blogs about Stock Market. Thanks for reading this!
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