INVESTMENT V/S TRADING
HOW TO SELL YOUR COMPANY’S SHARES?
If a company wants to sell its shares on the stock exchange, then this termed as “public listing”. If a company is selling its shares for the first time, then it is called IPO- initial public offering. That is, offering the shares to the public for the first time.
During the old time, it was very easier to get this done. But today this procedure is very long and complicated, and so it should be. Because, think about it, how easy it is to scam the people.
Anyone could get listen on the stock exchange with a fake company, and exaggerate the value and achievements of its company. They could lie to the people and would foolishly invest in his company.
He then could abscond with the money.so, it has become extremely easy to scam somebody. India in its history, has been a witness to a lot of scams like these example, Harshad Mehta scam, satyam scam, they were all the same – fooling the people and getting themselves listed on the stock exchange.
collecting the money and then absconding. as and when these scams happened, the stock exchange realized that they need to make their procedures stronger and scam proof. For this the resolutions and rules were made stronger due to which there are very complicated rules today.
SEBI (Security and Exchange Board of India): It is regulatory body that looks into issues like which companies should be listed on the stock exchange. And whether it is being done in the proper manner or not if you want to do this, then you would have to fulfill the norms of SEBI. Their norms are very strict.
i.e. There need to be a lot of checks and balances on the accounting of yours company. At least two auditors must have ha checked your company’s accounting. This entire process maybe takes around 3 years. More than 50 shareholders should be pre present in the company if you want a company to be publicly listed. When you go to sell their shares but there’s no demand for it amongst people. Then SEBI can remove your company from the stock market list.
HOW CAN YOU BUY SHARES?
Now, how can you invest money in the stock markets?
During the times of east India company, one could go to the docks whare the ships departed from and indulge in biddings and buy and sell stocks. Before the dawn internet, one had to physically go to the Bombay stock exchange building to do this. However, with the internet in place you merely need three things-
1.Bank Account
2. Trading Account
3. DEMAT Account
A Bank Account because you would need your money. Trading account to allow you to trade and invest money in a company. A DEMAT account to store the stock that you buy in a digital form. Most of the banks today have started offering a 3 in 1 account. With all three-account encompassed within 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 investor always requires a broker.
Broker: A broker is someone who brings together the buyer and seller. For us, our brokers 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”. Bank 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 discover platforms. 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 stock are bought and sold in a day, a lot of money would be siphoned off as brokerage fee. But if you want to invest for a long term, then a high brokerage rate wouldn’t make a lot of difference because you ‘d pay it only once.
MORE DETAIL OF STOCK MARKET: https://sudharmatimes.blogspot.com/2020/11/wath-is-financial-and-stock-market.html
INVESTMENT V/S TRADING
So, investing and trading are two different things-
INVESTMENT: Investing means putting in some amount of money in the stock market and letting it stay there for some time.
TRADIND: Trading means quickly putting in money at different places and withdrawing from some places.
This all happens in quick succession. In fact, trading of shares is a job itself. There are a lot of people in our country who are traders and do this job all day long. Taking out money from one share and putting it in another.
| TRADING | INVESTING |
| Short-term Price Technical Volatility P/L Borrow Want Noise | Long-term Value Fundamental Risk Goals Save Need Signal |
Taking out from one place, putting it in another and earning profit in the process.
CONCLUSION
An importantquestion that arises is whether you should invest money in the share markets? Alot of people compare it with gambling because a lot of risk is involved init.in my opinion it is correct to say so because this is indeed some sort f gambling.
If you are not aware of the of the type of the company and its performance, theparameters of the company and its financial record. If you don’t observe itshistory and accounting information.
Then, in a way, this is akin to gambling.Because you would have no idea of how the company would perform in the future.You merely listen to people saying that the company is doing well and we shouldinvest in it in the share market, so that’s why you invest in it. You shouldnever do this because it is extremely risky. And obviously, when there arepeople that do this job day in and day out.
for example the traders, who areexperts in this field and have more knowledge about the stock market. Theyobviously would outperform the other because they have an idea of how this allworks.so, in my opinion, you should never directly invest in the share market.And instead rely on the experts. A very competent form of it is mutual funds.tomore information about mutual fund are read in incoming blog.
