Share Market Today

What is the Share Market? 

The share market is a marketplace where buyers and sellers trade publicly available shares at specific times. Such financial operations occur through regulated exchanges and over-the-counter (OTC) markets that follow the rules. The terms "share market" and "stock market" are frequently used interchangeably. Often, people ignore the slight difference between the two because it has little to do with financial or legal truth and more to do with syntax. You will require a Demat account to invest in stocks or, more particularly, to purchase shares of a company's stock.

If you wish to invest in the stock market today or in the future, keeping a longer horizon is best because the odds of generating inflation-beating returns improve over time. On the other hand, traders profit from increases in equity shares, which can last anywhere from a few minutes to the whole trading session.

Types of Share Markets

The two market categories are primary and secondary share markets. 

1. The primary share market: Companies register in the primary market by providing information about themselves and the stocks they wish to issue. Then, they issue shares to obtain cash, a process known as 'listing.' A firm must go through the Initial Public Offering (IPO) procedure if it wants to issue shares for the first time. 

2. The secondary market: After a firm is listed and its stock is issued, the trade commences in the secondary market. A secondary market is where investors (sellers and buyers) get together, interact (at a predetermined price), and earn a profit. After selling the shares, investors can quit the secondary market. 

The share market today is further subdivided into an equity and a derivative market based on the financial instrument traded.

●    Equity Market: When you buy stocks, a broker executes the order at an "ask price" provided by the sellers. The buyer pays the total value of the stocks, which is calculated by multiplying the total number of stocks by the current share price. Once the payment is released, the stocks are deposited into the buyer's account. Payment includes brokerage fees and transaction costs.

●    Derivatives market: Trading takes place through two instruments: the Future contract and the Option contract. Stocks are acquired and sold in both circumstances. An Option contract offers you to disregard the financial arrangement. However, a Future contract guarantees the completion of the transaction at a predetermined rate and, more significantly, within a certain amount of time. 

Why Invest in the Share Market?

You can invest in the share market today for the following reasons.

●    High Returns: Investing in the share market can yield ample returns on your investment. Thus, investing here allows you to compound your money over time and generate wealth for various life goals. If you acquire shares in a reliable firm and retain them for an extended time, you can amass a sizable fortune.

●    Diversification: Diversification is a fundamental investment principle. To diversify your risk, you can invest in various assets in the share market, including large-cap stocks, mid-cap stocks, small-cap stocks, preference shares, debt securities, and common stock. If one's returns drop, the other can compensate. However, over-diversification will not add any actual value to your investment portfolio. 

●    Flexible and Simple: Investing in the stock market is not difficult. You only need to be diligent in your approach to long-term investment and do a little research on the company’s stock you want to buy. You could do it independently or hire a broker to assist you. You also need a Demat account and a trading account. As there is no lock-in period for share market investments, you can purchase and sell shares whenever you want.

●    Beats Inflation effects: Inflation is the overall rise in an economy's price levels over time. It reduces the value of your investments and the purchasing power of your currency. A food item that costs Rs. 80 today may cost Rs. 100 next year. Bank FDs and PPF returns are unlikely to outperform the impact of inflation. Thus, they cannot effectively resist the consequences of inflation. If you stay invested for the long term, share market returns are substantially more significant and can help you beat inflation.