How share markets works? What are the pros and cons of share markets?

How share markets works? What are the pros and cons of share market?

Share markets are very common investment platform throughout the world, In India share market is one the major venue of investments. Investment in share market is increasing with time as share markets usually offer way more returns as compared to other investment options.

In India, there are two primary stock exchanges National stock exchange (NSE) and Bombay stock exchange (BSE).  Companies list their shares in these two stock exchanges and investors can buy and sell shares of these companies after the initial public offering.

Investment in share market can be very lucrative but at the same time some peoples consider share market investment as gambling, the share market is not gambling but investing in share market does require basic knowledge so that one should not lose money.

How share market work?

Share market is a platform where investors can trade in shares, bonds, derivates and can also do index trading. Entire trading is facilitated by stocks exchanges and stock exchanges connect investors with shares of all registered companies.

There are four main participants of the stock market which usually run and regulate stock exchanges.

Security and exchange board of India

SEBI is a regulator of securities or share markets of India and it was launched in 1992. SEBI is a regulatory body of government of India. Role of SEBI is to protect the investments and interests of the investors.

SEBI always monitor stock exchanges to promote stock markets, to improve and make the stock market safer for investors.

SEBI allows individual companies to register their shares in stock exchanges so investors can trade those shares and SEBI also monitor the listing of brokerage houses. It has the power to pass new laws and rules for stock exchanges to make stock trading safer.

Stock exchanges

Stock exchanges are an important component in share trading, the role of stock exchanges is to facilitate the transition between shares of various companies and investors.

Stocks exchanges are the platforms where buyer and seller meet each other and they trade various instruments of listed companies during specific business hours. Stock exchanges are bound to follow laws and guidelines which are formed by SEBI.

There are two primary stock exchanges in India, National stock exchange (NSE) and Bombay stock exchange (BSE).   Stock exchanges follow the guidelines of SEBI which make trading more transparent.

Stockbrokers

Stockbrokers or brokerage houses are an important part of share trading and investment, without brokerage houses share trading can be very difficult for new investors.

Role of brokerage houses to facilitate trading orders, orders which investors place to buy or sell certain shares or bonds etc. Every broker or brokerage house charge certain amount of brokerage charges on every transaction which investors made though particular broker or brokerage house.

Brokerage house usually provides all basic knowledge of stock trading to their investor which is usually very helpful especially for new investors also brokers recommend various companies or stock to invest money which make invest pretty easy especially for new investors.

Investors & traders

Investors and traders are the most important part of the share market, share markets and other authorities only exist only because of investors and traders. If there are no investors to put their money in share markets than the existence of share markets is impossible.

Investors are the peoples who place real-time buy or sell orders from stocks and bonds, every company grow in business only because of investors put their trust and money on those companies.

Pros of share markets

Higher return

If you want to earn the best possible return on your investment than the share market can be the ideal platform for you. Volatility in share market is much higher as compared to other investment options such as a fixed deposit.

You can earn a large number of profits in share markets within a short period of time and even you can double your investment if you invest your money in good shares, no other investment market have capabilities to offer such return.

Acquire ownership via shares

When you buy shares of a particular company which simply means you acquire ownership in a particular company, it does not matter whether your investment is large or small.

Once you acquire shares you have ownership in the company and company also pays you dividend if the company hit its growth targets.

High liquidity

Share markets offer you high liquidity, you can buy shares any time and if you want to exit from investment than you can sell shares anytime. Buying or selling shares trading software or apps these days literally take a few seconds which make your investments highly liquid.

Investment is protected

All companies and stock exchanges are monitored by government authorities and SEBI so your investments are always safe from any major scams.

Trading in the stock exchange and all transaction orders are completely transparent to the general public.

Cons of share markets

Risk

Share market is a volatile platform which surely has the potential to offer large gains. But at the same time there are high chances of losing money. While other investment options such as fixed deposit at not volatile they offer a small amount of return but there are no chances of losing money in fixed deposit instruments. Share market trading is only suitable for those investors who have experience of investing and trading in the share market.

High brokerage

Brokerage is the factor which can affect your share market earnings although every broker does not have the same brokerage charges. Some brokers charge high brokerage charges while some brokers offer low brokerage rates.

Team R Wealth

Team R Wealth

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