Share Market

1. Primary Share Market: When a company goes through the process of Initial Public Offering (IPO), gets itself registered on a stock exchange in order to raise capital through shares then it is known to enter the primary market. Once the company gets listed on a stock exchange, its shares can be purchased and sold by the participants of the market. 
2. Secondary Share Market: When a company’s new shares or securities have been sold on the primary market, the investors can then purchase and sell these shares among themselves at the prevalent prices set on the market and accordingly trade them on the secondary share market. Generally, a broker or similar intermediaries are required to facilitate the purchasing or selling of such shares.

What can you trade on the Share Market? 

Given below is the list of assets that can be traded on the Share Market: 

1. Shares: A share represents a small portion of ownership in a business. Shareholders are entitled to a portion of the company's profits in the form of dividends, as well as a percentage of any potential losses. 
2. Mutual Funds: Mutual Funds are funds that are managed by professionals who pool the money of various investors and invest them in various financial instruments. There are various types of mutual funds such as equity, debt, hybrid funds, etc. in which you can invest as per your appetite for risk. Every mutual fund scheme issues units, which are similar in concept to shares. By investing in these funds, you become a unit-holder in that specific mutual fund scheme. As the underlying assets of the mutual fund generate income or gains, unit-holders receive their share of these earnings either through changes in the net asset value of the fund or as dividend payments. 
3. Bonds: Companies look for capital in order to meet their long-term project requirements. One of the ways through which they can raise funds is by issuing bonds to the public. The bond can be considered a sort of loan taken by the company where the bondholders become the creditors. Bonds can be then looked upon as fixed income instruments on which the bondholders can earn interests as well as get back the invested amount at the end of the tenure. 
4. Derivatives: A security that receives its market value from an underlying security is referred to as a derivative. This can include a vast range of things, including shares, bonds, money, commodities, and more! Derivatives buyers and sellers enter into a "betting contract" over the value of an asset because they have divergent estimates for how much it will cost in the future. 

Share Markets can further be divided into two sub-categories – equity and derivative based market. We will understand them in detail given below: 

1. Equity-Based Market: A broker executes your order to buy stocks at the "ask price" specified by the sellers. The entire value of the stocks, which is determined by dividing the total number of stocks by the current share price, is what the buyer must pay. The stocks are transferred to the buyer's account after the payment has been made. In addition, brokerage fees and transaction costs are included in this payment. 
2. Derivative-Based Market: Futures contracts and options contracts are the two main trading products in the derivatives market. Stocks are purchased and sold in both kinds of contracts. However, a Futures contract binds you to complete the transaction at a predetermined rate and within a specified timeframe, whereas an Options contract gives you the option to ignore the financial agreement. 

Reasons why you must consider investing in Share Market 

There are various reasons why you must consider investing in a share market. Some of them are given below: 

1. Returns are high: The returns promised on investing in share markets are high. If you are looking to grow your wealth, then it is considered to be a good option to invest a significant amount in the share markets. 
2. Simple and flexible: It is very easy to invest in share markets. All you need to do is conduct proper research on a particular stock before investing in it. In case you are unable to understand whether you must invest in a stock or not, you can hire a broker to help you out. In order to purchase or sell stocks, you will need a demat account and a trading account. There is no lock-in period regarding the buying and selling of stocks. This means you can buy shares and sell them as per the market movement and your needs. 
3. Diversification: There are various types of stocks such as large-cap, mid-cap, small-cap stocks, preference shares, debt securities, and common stock, all of which have their own risk features. You can diversify your investment amount and invest in these types of stocks as per your requirement. One's returns can be made up for by the other. Over-diversification, however, won't actually improve the value of your investing portfolio. 
4. Beats the effects of inflation: The general increase in price levels over time in an economy is known as inflation. Your investments lose value, and your currency loses purchasing power. The price of a food item today may go from Rs.70 to Rs.100 by next year. Returns on bank FDs and PPFs are not likely to outperform inflation. They are unable to properly withstand inflation's effects as a result. Share market gains are significantly more significant and can help you beat inflation if you keep your investments for the long term.