Basics of Stock Market by Ronak Nangalia

What is investing?
Investing is using savings in order to get a return on it in the future.

What are the three reasons you would invest?
The three reasons you would invest are to:

  1. Earn a return on your idle resources.
  2. Generate a specific sum of money for a specific goal in life.
  3. Make a provision for an uncertain future.

What are the three golden rules for all investors?
The three golden rules for all investors are:

  1. Invest early.
  2. Invest regularly.
  3. Invest for the long term, not the short term.

What are the physical assets you can invest in?
The physical assets you can invest in include:

  • Real estate.
  • Gold / jewelry.
  • Commodities.

What are the financial assets you can invest in?
The financial assets you can invest in include:

  • Fixed deposits with banks.
  • Small saving instruments with post offices.
  • Insurance / provident / pension fund.
  • Securities market related instruments like shares, bonds, and debentures.

What are some examples of short term investments?
Examples of short term investments include:

  • Savings bank account.
  • Money market or liquid funds.
  • Fixed deposit with banks.

What are some examples of long term investments?
Examples of long term investments include:

  • Post office savings.
  • Public provident fund.
  • Bonds.
  • Mutual funds.

Why should you trade in the stock market?
You should trade in the stock market because:

  • You don't need a lot of money to start making money.
  • It requires very minimal time to trade.
  • It's "fast" cash and allows for quick liquidation.
  • It's easy to learn how to profit from the stock market.

What is the primary market?
The primary market is the channel where new securities, originating from governments and corporations, are created and sold.

Why would a company need to issue shares to the public?
A company would need to issue shares to the public if their capital and borrowings from banks and other financial institutions aren't sufficient for the long-term.

How does a company invite share capital from the public?
A company invites share capital from the public through a Public Issue.

What is a Public Issue?
A Public Issue is an offer to the public to subscribe to the share capital of a company.

What is share capital? (1)
Share capital is the money a company raises by issuing common or preferred stock.

What is the secondary market?
The secondary market is the channel where securities are traded after they've been initially offered to the public in the primary market and / or listed on the Stock Exchange.

What do you become when you buy a share of a company?
When you buy a share of a company, you become a shareholder in that company.

What are shares also known as?
Shares are also known as equities.

What are the three types of investors?
The three types of investors are:

  1. Speculators.
  2. Hedgers.
  3. Arbitragers.