Basics of Stock Market - 2

Continuing on my post on the Basics of Stock Market, I would like to make it a series (not a mega serial), so that it will not be too lengthy each time and also allows me to post regularly. I would like to cover the following in this series:

What is a Stock ? What is Share?
Types of Companies
Types of Shares Capital?
What is Stock Market?
What is a Stock Exchange?
How to list the shares?
Different types of Issues?
What is dematerialisation?
What is Face Value?
What is an Index? (Sensex, Nifty, NASDAQ )
What are the fundemental analysis - various analysis with examples
What is online- trading?

If anyone like to have anyother topics to be covered, please do let me know.

Let us start with the very basic of the Stock Market - What is Stock & Share
Ever wonder what is a Stock and how it differs from Share? Nowadays, both are used interchangeably. Initially the companies are called Joint Stock Companies. That means the capital of the company is called the Stock and a part of the Stock is a Share. If a person holds a share in the stock is called a Shareholder.
A shareholder is a person who holds shares in the company. A member is a Shareholder, whose name appears in the Register of Members of the company. Currently with Dematerialisation (discussed later in the post) of shares the distinction between Shareholder and Member is now redundant.

Types of Companies
There are basically two types of Companies - (a) Private Company (b) Public Company
(a) Private Company - A company which has a restriction on the maximum number of members (50 members) and also restriction on transfer of shares. That is the reason, a Private Company cannot be listed
(b) Public Company - A company which has no such restriction as a Private Company. A Public Company can be again classified into 2 categories: (i) Closely held and (ii) Widely held.
A closely held company is a company where the shares are held by very few and a Widely held company is a company where the shares are held by very many. A listed company is a widely held company.

Types of Share Capital
Stocks are of 2 types - Common or Equity Capital and Preference Capital
A Common or Equity Capital is the commonest capital. The total equity capital of a company is divided into equal units of small denominations, each called a share. For example, in a company the total equity capital of Rs.2,00,000 is divided into 20,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to have 20,00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights.

A Preference Capital comes with a Preference. A Preference Capital is normally redeemable within a period. Maximum period is 10 years. It carries a preference in terms of payment of Dividend.

Let us concentrate on the Equity Shares, as we would be dealing mostly in Equity Shares in the Stock Market.

To be continued...



Anonymous said...

Sir, the new look is looking very nice. Also the stock market basics will be of much help to people like me. Is there a way to subscribe to your blog, so that i can get intimation whenever you update the blog.

BIGPROFITBUZZ on May 31, 2013, 1:10:00 PM said...

Share trading is very easy if proper hardwork & study is there.If you want to make quick money in market then always trade in blue-chip stocks.never trade in highly volatile & illiquid stocks.Because may be these stock can give you good return but once you stuck in these stocks then you will loose your capital too. SHARE MARKET FREE TIPSBefore trading always select a scrip you want to trade & then give at least half an hour to that particular script after market.This will tell you how the script moved in whole day.Do this atlest 15-20 days.After some time you will get the levels on which it get support& resistances or the range that it is showing .Try to invest half of your investment amount to that script & If price comes down then make the average with your remaining amount.Then wait for a good level for the script.Never trust anyone advise with checking his credibility &accuracy. This will the best process by which you can make a handsome profit without risk.

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