Stock & Stock Trading

STOCK & STOCK TRADING

STOCK & STOCK TRADING

This is off-course a very normal situation, that everyone dreams with even close as well as open eyes to become rich, that is the story of a every alternate person in the world. But just for a moment forget about dream and think practically even with 24 hrs working of yourself for others.

"How can you become rich by this way?"

I don't know???????

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Practically you will work for whole 24 hrs in a company or firm and the owner will get all profit and benefits as he is main risk taker in business and you will be paid for the work that's all.

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But think seriously, the time which you have sold to the owner in the form of work and the money which you gets in return isn't it enough for your 24 hrs work.

If you say "YES" than stop discussion and close the article and move out and Bye-Bye but but if you say "NO" then come with me. We will explore a way to come out of this situation.

Now think for a moment what happen if you become owner or partner of that company? Then others will work for you and you will enjoy the profit proportion and benefits as a owner in that company.

What do you think? Don't you think isn't it this big opportunity become owner without completely owning company and start your journey toward becoming rich in life?

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Let's go and make a high jump and understand "How will be this possible?"

For making this impossible to possible, First understand the upcoming terms.

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What is Stocks / Shares?

Suppose a farmer having 10 Acres of farming land and he want to do farming but facing shortage of money. So he decided to get money by selling 4 Acres of land and get money for farming. But there is one condition that farmer has to do farming in all 10 Acres of land inspite of selling a 4 Acres of land to us. Because we don't know how to do farming. We only financially supporting the farmer. And by this we gets two benefits - 1. Land price appreciation and 2. Profit proportion of 4 Acres out of total 10 Acres of total land profit, subjected to the condition that if the land is valuable, fertile and give good quality product (Rice, Wheat and Pulses etc.)

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Now in same way, if any company wants money for their working. Then these companies sell some portion of their ownership ie share to public for fulfilling their money requirement  (for eg - Suppose company having 100 shares ie 100% stake or ownership and now company want to sell 10 shares ie 10% stake out of 100 shares and raise the money for working. 90 share or 90% stake is still retain by company and 10 shares sold to public in the market). In this situation also company is bound to run the industry as we don't know how to run the industry. We simply help the industry by putting money in that company. In this situation also we have two benefits- 1. Stock price appreciation and 2. Profit share in total profit.

Now I think you are very much clear about stocks / shares.

But now the question arise from where we will get this stocks?

Let's go and get knowledge about Stock Exchanges.

What is Stock Exchange?

Like for buying and selling of food grain we have Grain Market, where farmer go and sell their product and in that market there is buyer who will buy their product and hold it or sold it to someone next.......

Similar way there is market or platform for buying and selling of shares in the market i.e Stock Market also known as Stock Exchanges. Here numbers of stocks of different companies buying and selling happens daily. In India we have two very very important  and best stock exchanges of world BSE  and NSE. In our previous article we have already discussed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Where we can do stock trading.

Upto here we have understand about Stock and Stock Exchanges.

But now next question how do we get this stock and what is stock trading?

Ok, Let's understand that also.

What is Stock Trading?

For understanding Stock Trading again we will have to go back to our farmer friend example. Now for selling farmer his product in the Food Grain Market he has to do registration in the food grain market through any one of the different food grain market wholesaler and then only he will be allow to participate in food grain selling in food grain market to other buyer. Wholesalers are the window person to food grain market participation.

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Similar way for buying and selling of stocks we have to register in Stock Market through some broker or broking house and that registration is known as Demat Opening. Demat allow us to buy or sell stock in the stock market. And in this way we participate in stock market for stock trading.

How stock initially introduced in Stock Market?

Initially Company bring IPO and sell its some portion of stakes or shares to public through Stock Exchanges. That time Company is seller and Public applied for IPO are potential buyers. After that IPO buyers sell there allotted shares to another buyer. And so on chain goes on of buy and sell of shares of any company in the Stock Market. One buy share and after gaining required profit sell that share to another interested buyer. In this manner Stock Trading goes on through Stock Exchanges.

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Which Companies can participate in Stock Exchanges for Trading?

Any company whose share are listed publicly in the Stock Exchanges by off loading their shares initially in the form of IPS (Initial Public Offering) in stock exchanges for getting money for fulfilling their financial requirements and future prospects. Just only for example IRCTC. We know very well from long time that this company is related to railway catering services. Previously it was not listed on any Stock Exchange and no trading was going on. And we just call it as catering company. 

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But after listing in Stock Exchanges now we call it as the IRCTC stock. Means IRCTC have off loaded its some portion of stake or ownership to public through Stock Exchange in the form of IPO. That means now we can  purchase shares of IRCTC and now we also become the partial owner / partner of IRCTC to that extent by which we are having IRCTC share with us.

So, till this time you have got very very important basic knowledge of Stock, Stock Market & Stock Trading.

Now the question is that what to do and how to make money from  this stock knowledge.

Let's go and explore that also.

How to make money from Stock Market?

Basically since from the beginning of Nifty (Index), it have given more than +12.50% CAGR return in almost 20 yrs of it's roller coaster journey and Stocks which are the parts of Nifty50 also have given returns like +18% CAGR, +22% CAGR in last 15 to 18 yrs.

Now Nifty50 is around 10K and in future it will move to 20K, 30K and 40K also.

Then this Nifty50 stocks will also move with that % CAGR return itself. Because without Stock movement Nifty50 will not move.

So, the Hidden Truth is that select stocks among this Nifty50 and keep on buying small small amount as a systematic investment as an when your pocket allows.

And as you are purchasing you are becoming more and more share partner, stack holder of company. You will get benefits in the form of  price appreciation as well as dividend, split, right and bonus benefits also in stocks.

Make portfolio of 3 to 5 nos of high quality stocks. And then just WAIT N WATCH!

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Investment in Fundamentally strong and Trust worthy Management stock gives good appreciation to investment in long term.

To really understand the power of long term investment please click and go through below link:

Power of Compounding in Long Term Investing.

Conclusion:

Upto now you already got your answer to this question "How will be this possible?" which you have asked at the start of article and it is totally clear to you that by getting proper stock market knowledge, you can make a parallel passive earning source for future.

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Invest now and as the company grows, you and your money will also grows in future. It is just like sowing seed of your choice fruit today and wait for a while and than eat sweet fruits in future sitting beneath that big tree.

Here if you see, you are doing nothing but your money investment working for you, day and night without your effort, if invested sensibly and systematically in proper way and in strong character stock and for long term.

So, Friends Good Bye. All the best !

In next blog we are going to learn about World Stock Exchanges Timing and there impact on day to day Indian Stock Market Trading.

Disclaimer: This article is only for knowledge and information sharing and not for any type of recommendation. Do your own analysis before investment.

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