Stock market is referred to a place where shares of publicly-listed companies get traded. Primary market is a place where companies offer shares to general public through initial public offering (IPO) to raise capital. These shares are then traded in the secondary market. Secondary market is a place where one investor purchases shares from another investor at prevailing market price or at the price on which both buyer and seller agree upon. Secondary market or stock exchanges are regulated. In India, both the markets secondary and primary are regulated by Security and Exchange Board of India (SEBI).
Stock exchange helps in facilitating stock brokers to trade stocks of the company and other securities. The company’s stock may be purchased or sold only if it is listed on an exchange. Therefore, stock exchange is a meeting place of buyers and sellers. India’s premier stock exchanges include Bombay Stock Exchange and National Stock Exchange. Stock markets are referred as components of free-market economy as they allow democratized access to investor trading and exchange of capital.
Stock markets help in creating efficient price discovery and efficient dealing. A company needs to divide itself into numerous shares and then it sells some of these shares to general public at price per share. To facilitate and to execute this process, a company requires a marketplace where these shares can be sold. Therefore, stock market is that marketplace which helps such companies. At a later stage, any listed company can offer new and additional shares through rights issues or some other routes. The companies can also buyback or delist their shares.
In the stock market, several types of investors prefer to put their money. Both individual and institutional investors tend to participate in equity investing. Individual investors can be two types: Retail investors and High net-worth individuals. Retail investor is a non-professional investor who purchases and sells securities or funds containing basket of securities including mutual funds and ETFs. These investors place their orders through traditional or online brokerage firms or some other types of investment accounts. Retail investors tend to buy securities from their own personal accounts and they trade in dramatically smaller amounts in comparison to institutional investors.
On the other hand, high net-worth individuals are the ones who invest in big ticket sizes. They invest for a long-term and they are categorised as high net-worth individual on the basis of their net worth.
Investment in stock market is done by all the categories of investors such as growth investors, active investors, passive investors, speculative investors, etc. Growth investors are the ones who prefer to invest in stocks having huge potential to grow in the near future. Such investors invest in small-cap companies as such companies have huge growth potential. Active investors are the ones who participate in stock market actively. Such investors are always up-to-date with the market news. They do not stay invested for long-term as they actively buy and sell. On the contrary, passive investors spend less time and attention. They prefer to accept reasonable gains and such investors invest in mutual funds to save time and energy. Value investors are those investors who invest for the long-term. They invest in undervalued stocks as they believe in “buy and hold” strategy. Speculative investors are those investors who have higher risk appetite. They are quite aggressive and opportunistic as they try to earn high returns in a short span.
Investing in stocks is risky due to the inherent volatility in the stock market. VSRK Capital can help you make decisions about your money, which may include investments or some other courses of action. Team at VSRK Capital will use knowledge and expertise to build personalized financial plans aiming to achieve financial goals of different clients. VSRK Capital can offer suggestions on investments that fit clients’ style, goals, and risk tolerance levels.