What are the things to know before investing in stock market?

Investing in stock market is the latest way opted for by investors for generating profits through investments. Earning and saving is not enough. Investing is the answer to inflation. Financial assets and share markets also provide high returns and start investing at a young age and do it regularly for a long period of time. An investor can invest in the share market for short term or long term depending on the needs. Based on an investors risk appetite, age and dependency, an individual can be a trader or investor in the share market. As markets have always associated with the risk, an investor will need to learn about these things carefully. But it is important to learn about the how to invest in stocks before going into the world of investing.

Investors can invest in the share market for short term or a long term depending on their needs. Based on their risk appetite, age and dependency, investors can also be traders or investors in the share market. Markets are always associated with the risk, a first-time investor should read about the share market basics and the documents carefully to avoid any type of mistakes. Different investment options in the Indian share market are equity, mutual funds, SIP, IPO, bonds, debentures, derivatives, commodity, currency etc.

Before starting to invest in stocks, it is important to learn about the share market basics and how it works. It is where the shares of different companies are traded. In India, there are two primary exchanges, National stock exchanges (NSE) and Bombay stock exchange (BSE).

Investment is the key to a safe and secured future. To overcome the blow of inflation, investments in old financial instruments are not enough to get something extra out of investments, the share market offers lucrative opportunities for the purchase and trade of securities like stocks and options. Investors should understand the share market basics completely for gaining profits. There are two types of markets available for investors:

1. Primary markets
2. Secondary markets

When a company comes out with an initial public offering, it is called the primary market, the normal purpose of an IPO is to list the stock in the share market. Once the share gets listed it starts trading in secondary market. Buying and selling the shares is largely like buying and selling other commodities.

Any investor who is competent to enter into a contract can easily buy and sell shares in the market. An investor will need to open a trading account with a broker, and they can easily buy and sell shares in the stock market after the trading account is opened. Trading refers to short term buying and selling of shares whereas an investment means the purchase of shares for a long term. Traders try to churn the money rapidly whereas an investor will try to buy a good stock in share market and wait for stock price. Trading account and demat account are linked to the savings account for facilitating a smooth transfer of money and shares.

Maithili Pawar is a finance professor. She has written on share market basics. Through this article, she has provided detailed information on stock market.