1. Some portion of the company sold to public is called stock. If a company has
200,000 stocks outstanding means the company has been divided into 200,000
units and different people own some units. These units are called stocks.
When you purchase stocks, or equities, you become a partial owner of the
business. This entitles you to vote at the shareholders' meeting and allows you
to receive any profits that the company allocates to its owners. These profits
are referred as dividends.
Stocks give highest return by its appreciation value and dividends. Off course it
involves highest risk. Many companies don't pay dividends and there is no
obligation for the companies to pay dividends. Hence only way to get return is
appreciation (Increase in price of stock over time) value of stock which may not
happen and you may lose your money if stock price goes low or company goes
bankrupt(The company is closed or financially ruined).

2. What is a market? It is common place where supplier and buyer meet. Supplier
sales product and buyers buy paying money. Likewise there is a market where
sellers are selling stocks and buyers are buying. It is called stock market.
Little confused, right ? Ok. Some people own stock of a company. Some people
want to buy it and the owner also wants to sell it. At common platform they meet
each other and exchange the stock ownership with money. This is stock market.
Earlier, even now also in some places stocks are being traded in an Office like any
other shop. It is called Floor trading. You have to go there give money and get the
stock certificate. This stock certificate is proof of your ownership. You have to
transfer the certificate when you sell your stock. This trading platform is called
stock exchange.
You would be finding difficult to imagine going for floor trading in such electronic
age. Yes, Computer and Internet has brought the trading floor to your desk. Now
you can buy or sell stock right from your computer. Now stock market is an
electronic market where you can buy or sell stock. It is called online trading.
Organization providing platform for this market they are designated as stock
broker. We will go in detail about stock broker in subsequent chapters

3. Now you might be thinking about types of stock market. Well. Basically there
are two types of market.
Primary Market
Now we are talking about buying and selling stock. We know that companies
are issuing stocks. Some people will be there who bought the stock first time
and then selling and buying process is going. The first stock which companies
issue to the investors is called Initial Public Offering (IPO). IPO market is called
Primary market. It is almost same as later one. We will go in detail about IPO in
subsequent chapters.
Secondary Market
Whatever we have explained above as stock market is secondary market only.
Here buying and selling process goes on for the pre owned stock. Someone
talking about stock market means it is secondary market.

4. As explained above stocks are trade in stock market. On floor or
in exchanges. Stock exchange act as a market place for trading
stock through broker. You can buy or sell stock using your broker
website. You can see the offer price and bid price for any stock in
your broke website or any application given by your broker. There
are many third party applications also facilitating this.
There are two major stock exchanges in India. i.e. Bombay Stock
Exchange (BSE) and National Stock Exchange (NSE). Any company
has to be listed in one or more the exchanges before issuing
stock.

5. It is very interesting to see stock price changing. But how it
changes? Similar to any other products, Supply and demand makes
stock price to change. No of shares is limited. Hence, if one stock
has more demand to buy then stock price will go up, similarly if one
stock has more demand to sell then stock price will fall down.
It sounds easy. But the difficult thing is to predict that when the
stock price is going to up or fall. Knowing this only you will make
buy or sell decision. Many people say that no one knows when
stock price will change and some people say that by reading
historical data or by drawing some chart it can be predicted to
some extent.

6. You should know what makes demand to rise and fall. Every
company has to show his balance sheet showing financial details
quarterly or yearly. If earnings have increased then stock price will
move up and on the opposite site it will move down. If some good
news comes like Mega order booking, Director Change, then stock
price will go up, on the other hand stock price will go down if bad
news comes. These indicators are theoretical, however there are
many other indicators used by investors to predict stock price.
It is worth to note that, Investors’ attitude, sentiment, outlook and
expectation that ultimately affect change in stock price

7. Now that you learned about stock and stock market. But why
companies issue stock? Why they are giving ownership to you?
Obviously they are gaining something.
At some point of time every company need to raise money. They
can get money from two sources, either by debt financing or by
equity financing. Debt financing is getting the money from Bank as
loan or by issuing bond. In this, the company has paid back the
money with a defined amount of interest.
In equity financing companies raise money by issuing stock. It
advantageous for company because company need not payback
the money or needn't to pay any fix interest. All that investor will
gain is dividend and/or appreciation value of stock. Appreciation
value means increase in stock price from the purchase price.

8. It is important to understand the difference between value of company and
stock price. If one company's stock price is low that doesn't mean the
company is small company.
Let one company X's stock price is Rs 400.00 and another company Y's stock is
Rs 1700.00 which company is bigger? You may be thinking company Y. It is not
true. Stock price of a company doesn't give net worth of company. What gives
value of the company is Market Capitalization. Market capitalization is the
multiplication of Stock price with No of shares outstanding. We will tell you
later where from get these data.
If no of shares outstanding for X are 2000000 and for Y are 300000, then
Market capitalization of X is Rs 80, 00, 00,000.00 and Y is 51, 00, and 00,000. So
company X is has more value than Y.
So be clear that market capitalization gives current value of company, not the
stock price

9. You know what stock is. Now you might be eager to know how many types of
stocks are available. Well, there are primarily two types of stock.
Preferred Stock:
It is stock with some guaranteed amount of dividend for ever. It gives some
degree of ownership in the company but with lower voting right.
Common stock:
It is the stock which is available for common people. Stock means Common
stock unless specified. Whatever discussion we have made about stock is for
common stock. In this type you will get ownership on the company with no
guaranteed dividend. Investors get one vote per share to elect the board
members, who oversee the major decisions made by management.
In long run common stock give very high return by growth of value of stock.
This gain comes with high risk that company may lose everything if runs in loss
for long time

10. You can earn money from stock in two ways,
First, Appreciation value of stock: It is the increase in price of stock
over time than purchase price. If stock price rises from the
purchase price, then you can sell at higher price and earn the
profit. Say for example, you have purchased stock of a company at
Rs 1000.00, after 2 months it became Rs 1200.00 and you sold it at
Rs 1200.00, then you earned Rs 200.00, i.e. 16%. Some taxes are
also will be deducted.
Second one is, Dividend: Some companies, not all, Shares some
percentage of their profit as Dividends. Companies may pay or
not, there no guarantee or there no obligation that a company has
to pay dividend.
Mostly earnings are expected from appreciation value of stock. It
fluctuates very high to both up and down side.

11. Many websites are providing stock price along with huge technical
details. If you see right side of this page "Get Stock Price"
area, Write company name in the search box and press get quote.
You will get current price. For further technical details you can
browse, www.dailyfinane.com, they have huge financial
information about many companies. There are many other sites
like www.moneycontrol.com, www.moneycentral.com etc.
You mayn’t understand some terms like, Share Holding
pattern, 52week high low, Market capitalization etc. Don't worry
leave it as it is, we will come back to these terms in subsequent
sections.

12. Stocks are famous mainly due to the reason that they come with very high
return. Mainly stocks assure the following advantages,
1. Very high return
2. You are getting ownership of a company with voting right.
3. Flexibility, You can buy and sell stocks at any time.
As usual, high reward comes with greater risk. It is same for stocks also. Stocks
encounter the following main disadvantages,
1. Very high risk of losing money.
2. Tax is higher
3. Broker commission and various fees are higher
despite of these disadvantages, due to historically higher return stocks are one
of the very good investment.

13. Buying a stock is only a click away. You can buy using your broker website or any
application given by your broker.
First of all you have to open a trading account with any broker. Then relate you
bank account with trading account. Now visit your broker site. Transfer funds from
saving bank account to trading account. In the site buying option will be there. In
the option fill the details like, stock name, no of stocks, order type etc. Then place
order. If it is a market order it will be executed immediately, if it is limit order then
it may take some time or even may get canceled depending on market price, if limit
price is not reached.
Market Order
Your order will be executed immediately in market price of the stock.
Limit order
Your order will be executed based on your specified limit price. Else it will be
cancelled on closure of the market.
After buying you stock details will appear in your account in your broker site. You
can sell using sell form from the site. You can get familiar with this after opening
trading or demat account. It is too easy.

14. Ask your broker ! This is the best question for him….
There is no formula to choose stock. Knowing the technical and historical
data you need to make some analysis. There are two types i.e. Technical
and Fundamental analysis used to identify stock. But no analysis gives
correct result to pick a stock. Analysis can help to make a best guess. In the
subsequent chapter we will discuss about Technical and Fundamental
analysis, how it can be used to select stock.
Now, at this stage we suggest, you can go for your broker's suggestion. Your
broker will suggest some stock to buy with back up details. Go through the
back up details and make little research on the company's website to find
the healthiness of company. If you feel that you should invest at that
company then please go ahead. But don't invest too much amount without
knowing how to analyze stock. For research you can invest little money.

15. There is no guarantee on return when it comes to investment in
stock. Some companies share their profit among investor regularly
i.e. called dividend, where as many companies don't do it. It is not
mandatory for the companies to pay dividends.
Other way (Mostly used) of getting return is when stock value rises.
It is not guaranteed that stock value will rise. It may fall to the very
downside causing you to lose everything.
Take example of Satyam Ltd. whose stock price fall down from Rs
180.00 to Rs 50.00 overnight. But these happenings are very rare.

16. On the other side greater the risk has greater revenue chances. You
may double the money with a year. Investment in stock sounds
negative to many people but historically it has very good return (i.e.
app. 9 to 15%) over other investments.
Risk can be minimized by experience and portfolio
diversification, but can't be eliminated. If you are ready to reap the
higher gain, challenge the risk

17. Understanding your financial position determines you success!!
Can you afford to lose all your money invested in market? If yes then
you can go forward, on the other hand you rethink about your
financial position. First of all make yourself stable, make your family
protected from market declines and unfortunates.
A 70 year old widow will be more conservative than a 30 yr executive
who has a full time income except investment. Hence age and
financial position drives your investment strategy. Invest the money
which you can afford to lose. From the beginning, if you don't have
experience or some degree in this stock market, then it is
recommended that you make it as part time work. After you get
confidence in investment you can take it as full time.
Again, be debt free before investing. Don't invest money taken from
loan. Because if you lose money invested then you may come to the
road. Be careful! Always remember borrower is servant of lender.
Avoid borrowing

18. Most of the investors don't know how much fees and taxes they are
paying. Fees and taxes vary from country to country, broker to broker
and depend on type of stocks also. Your broker can give you a clear
picture about taxes and fees they are taking. While opening demat
account ask your broker executive details on taxes and fees
applicable. Note it down.
Keep a vigilant eye on transaction report for your entire buy and
sell, see how much fees and taxes have been deducted. Taxes and
fees are very high in stock trading. They kill you income. Specifically
if you are investing less money. If your investment is higher fees and
tax amount is reduced little bit.
But remember to ask your broker about fees and taxes and keep an
argus-eyed look on transaction report.

19. Many investors who buy securities are unaware of the rights that
come with stock ownership. Your must know your rights as a stock
holder. While specific rights depend on the type of security, the laws
of the state/country where the company is incorporated, and the by-
laws and charter of the company itself, some rights are standard.
Investors who buy a share or shares of common or preferred stock
are actually buying an equity or ownership interest in a company.
The company's by-laws and charter set forth the rights of each class
of stock holder. For example, a company's charter may state that
only the common stock has voting privileges or that the preferred
stock must receive dividends before any dividend is paid common
stockholders.
The state where the company is incorporated (it appears on the face
of the certificate) also gives investors certain rights

20. Typically given in all states or countries are,
(1) Vote on questions affecting the whole company.
(2) Hold a proportionate ownership in the assets of the company.
(3) Transfer ownership of their shares.
(4) Receive dividends when declared by the board of directors.
(5) Inspect the corporate books and records.
(6) Sue the corporation for wrongful acts. And
(7) Share in the proceeds of a corporate liquidation.
In addition, most states also have laws about the kind of corporate
information given to shareholders, and concerning the annual
meetings of shareholders.
While state/country laws concerning these requirements are fairly
uniform, you should not assume that the laws of one state are
identical to another state. You should look up the specific state laws
that apply to the company

21. The first issue of stock to public is named as IPO. You understood that
stock is a share of the company. You are purchasing it from someone
who already owns it. If you go dipper, there will be someone who
bought the stock first. From where did he get? Off course from the
company. This first stock issued by company to public is called IPO or
Initial Public Offering. Afterwards those who took the stock they will
sell to someone again someone purchase it from him and game
continues.
If you are purchasing IPO means you are the first person to buy that
company's stock. Then you will sell it, someone will buy, he will again
sell and the market goes on.
Companies issue IPO in order to accumulate capital for their business.

22. Return in IPO is generally very high and very low too. If the company
takes market then you will be very rich. If you get IPO of good
company you will earn few time of the money in few months or years.
You can buy IPO from your broker by their website interface after
opening demits account.
Profit return in IPO sounds well hence everyone will try to buy, whom
the company will give. They will not give individual investors like you
and me, because we are not the targeted market, it is institutional
investors who play the game and win the race. You will get if your
broker allots something to you, this he will do if you are a regular
investor.

23. If you get IPO without your brokers allotment? What??
Cheers!!!....Sorry!! You got it because no one took.
It is the institutional investors who play game. Why didn't they buy? It
must not be profitable. Most of the time companies get capital
through IPO and fail to make profit. In such scenario stocks are sold
below offer price or much below offer price and you will lose much of
your money.
Confused!!! Whether to go for IPO or Not ?
It is recommended that you buy only when your broker gives some
allocation. Not the stock which no one is buying, it is highly risky

24. Enough things you have learned. Further details will be explained in
subsequently articles. Now it's time to start. Once you start you will
learn the practical things. Starting is strongest huddle in development.
I saw a fantastic sentence in a Gymnasium center in Rourkela, India.
"The best way to go ahead is to get started.“
Just start, the work will teach you how to do it.
Remember, “Experience is the best teacher”.
The following 10 steps you can take for starting Investing in stock
market.
1. Decide how much money you are going to invest. Is it one time or
monthly or yearly or anytime? It is always suggested to invest
consistently monthly basis or yearly basis

25. 2. Be sure that whatever money you are taking out for investment is
not affecting your living and you are ready to lose it. You may not
loose but it is better to go by boat even though you can swim.
3. Buy a computer with Internet connection if you want to be a good
investor and want to make considerable income from stock market. It
is not mandatory
4. Read some E books, Information available on different website, see
information about different companies, acquire some knowledge in
screening the stock or selecting the stock, find out a broker taking
care of various features, be acquainted about use of MS
Excel, Internet and MS word if you not . Take month time for these
activities, don't be hurry. Remember, Knowledge is power.
5. Open a bank account with Internet banking and cheque book
facility.
6. Open a demat account with the broker you have selected. Be clear
about their fees & taxes. Opening demat account are free with many
brokers.

26. 7. Go for a first step class to your broker, if they are providing.
Understand you broker's website interface for trading. If you have any
doubt or confusion you can call to your broker and ask them.
8. Decide your investment strategy. That is, how much you want to
invest in higher risk stocks, how much is lower risk stocks, how much
in Mutual Fund etc.
9. Get stock recommendations from your broker. Normally they will
mail you or you can get from their site after you login. Analyze a little
bit about that stock and decide whether to buy or not. Your broker
will give, which stock to buy, what is the buying price and what is the
expected sell price, via newsletter or website.
10. Place order form the website interface provided by your broker
and Buy. Remember: Keep eye on your stock price and market
movement continuously and sell whenever it is favorable or you get
recommendation from your broker.

27. Note:
In India, you can buy and sell stock in NSE & BSE till 3pm to 4pm
depending on your broker. After 3pm BSE will be closed and no order
will be accepted. However, NSE will be "after hour" and you can place
order, your order will be executed as soon as market opens. Avoid
giving market orders during after hours, because market may open at
a lower price. Better to give limited order with limit price and stop
loss. See below to know about Market order and limit order.