Thu, 28 May, 2020

Opinion

Stock Markets - What is it and how to get started?

24-Feb-2020

By Aabiskar Pandey

Stock Markets, a lot of skepticism and false accusations around this term make people pessimistic towards it. It’s too risky, you will lose all your money, it’s all just gambling; these are some of the commonly interpreted terms of the stock market. But, is that really the case? Most people don’t understand what the stock market truly represents and how much it can benefit any individual. In this article, I will share the basics I know and how you can get started.

Stock market or stock exchange is the market where the shares or equities of publicly listed companies are traded. Every country has its own stock exchange and in Nepal, it’s called NEPSE (Nepal Stock Exchange). It is the only stock exchange in Nepal (Yes, other countries have multiple stock exchanges which depend upon the economy of the country). When a company is first established, it is usually a private company and hence the name XYZ Pvt. Ltd. However, any company can choose to take their company public and open for the general public by submitting an application to the Securities Board of Nepal (SEBON) which is a body formed to regulate the Securities Market (or simply the Stock Market). Once approved, the company can offer its shares to the public through IPO (Initial Public Offering).


   

 

The company makes an announcement regarding the opening and closing date to apply for the IPO, maximum and minimum number of shares that can be applied and the price per share of the company (which is usually Rs 100 per share). After the application window is closed, the company allocates its shares to the public who had applied (it is not guaranteed that everyone who applied for the share will be allocated the applied quantity or any shares at all). This procedure of opening IPOs and applying for the initial shares is commonly known as the primary market. Beginners who are willing to start in the stock market enter this market first to gain knowledge and confidence before trading in the secondary market.

After the IPO has been allocated, it is then listed in the secondary market where it is open for buyers and sellers to trade upon. The price that started from Rs 100 keeps fluctuating in the secondary market. The secondary market is riskier than the primary market. However, it is the market where real trading happens. Invest smartly, you can gain 10x your investment and one foolish move can lead to loss as well.

 

 

However, there is a very good reason to not worry about going bankrupt in the Stock Market. Stock Market can be very volatile with ups and downs in the short term but will always move upwards in the long run. This is due to the fact that the stock market depends on the economy of the country for a major part and any country’s economy will grow in the long run (except for a few rare cases). You should also bear in mind that when you are buying shares of any company, you are partly owning that company due to which you will also receive timely dividends and bonuses if your company performs well.

 

Credit: Nepse Candlestick Chart

I hope you understood some major terms of the stock market and the basic functioning of it.

If you want to start your journey in the stock market as well, you will need the following things:

 

  1. A bank account to send and receive money for your share transactions

  2. A Demat account which you will be able to open in any capital or brokers (Find one near you here)

  3. A broker account (Broker is an agent which will act as an intermediate between you and the stock market and help you buy and sell shares for a certain amount of commission)

 

With these 3 accounts, you are all set to start your investing career. Remember, it’s completely upon you to do proper analysis and invest in strong companies that are likely to grow in the long run. 

 

 

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