Hello friends, today let’s talk about the share market. What is the share market? Why does it exist? How does it work? What are its advantages and disadvantages? And how can we invest money in it? Stock market, share market, or equity market all three mean the same thing. It is a place where companies’ shares are bought and sold.
What is a Share? Understanding Ownership and Partnership
Buying a share of a company means taking a small part of the company’s ownership. It means you become the owner of whatever percentage of shares you hold. If the company earns a profit, you also get a portion of that profit. And if the company faces a loss, that loss affects your shares too.
Take a small example: suppose you want to start a business and you only have 10,000 rupees, which isn’t enough. You ask your friend to invest 10,000 more, and you give him a 50-50 partnership. So whatever profit the business makes will be divided equally between both of you. In this case, you gave 50% shares to your partner. The same concept applies in the stock market, except instead of a friend, you invite people from around the world to buy your company’s shares.
The Origins: How 16th-Century Trading Ships Created the Modern Stock Market
The history of the share market is about 400 years old. In the 1600s, a major trading company introduced the share system, similar to how early East India–type companies operated. At that time, trade was done through ships traveling to new regions. The journeys were long, the cost was high, and a single person couldn’t afford it. So an open invitation was given for people to invest in ships.
When a ship returned with treasure, the investors received a share of that profit. But the risk was huge because many ships never returned. So instead of investing in one ship, people started investing in 5–6 ships to divide the risk. This is how the basic model of the share market developed.
Earlier, open bidding used to happen at docks. Slowly, this system became successful because companies got the funds they needed and people got opportunities to earn. Since then, the share market has grown and today every country has its own stock exchange.
Market Structure: Primary vs. Secondary Markets and the Power of IPOs
A stock exchange is a place where companies’ shares are bought and sold. The market is divided into two types Primary Market and Secondary Market. In the Primary Market, a company sells its shares directly to the public. The price is set according to demand.
If a company’s value is 100,000 rupees and it issues 100,000 shares, then the price can be 1 rupee per share. If demand is high, the price can be set higher. Nowadays companies decide a price range from minimum to maximum.
Companies never sell 100% of their shares. Founders always keep the majority so that decision-making power stays with them. If someone buys more than 50% shares, control of the company can shift to that person. This is why founders always keep the majority.
People who own shares can sell them to others this is called the Secondary Market. Here, prices depend on demand and supply, so share prices keep going up and down.
There are many stock exchanges around the world where thousands of companies are listed. Because there are so many companies, indexes are used to understand the overall market trend. Each country has a top share index that shows the average movement of major companies. An index starts from a random value in the beginning and grows over the years according to demand and market growth.
When a company sells its shares to the public for the first time, it is called an IPO – Initial Public Offering. In earlier times, this was easy, but now it is a tough and strict process and it should be. Otherwise, a fake company could get listed and steal people’s money. Many countries have seen major scams, after which rules were made stricter.
Every country has a regulator that decides which company can get listed and whether the process is being followed correctly. Before listing, companies must complete auditing, account verification, and minimum shareholder requirements. Sometimes this process can take two to three years. If a company loses demand, the regulator can remove it from the list.
Getting Started: Demat, Trading, and Bank Accounts Explained
Today, investing in the stock market has become very easy. Earlier, people had to visit the stock exchange building, but now you only need a bank account, a trading account, and a DEMAT account. The bank account holds your money, the trading account is used to buy and sell shares, and the DEMAT account stores your shares in digital form.
Now banks and platforms offer combined accounts, making the process smoother. People like us are called retail investors, and we need a broker whether a bank, app, or online platform. The broker charges a small fee called brokerage. Some brokers charge high fees, some charge low. Frequent traders feel the brokerage cost more, but for long‑term investors it doesn’t matter much.
Investment vs. Trading: Which Strategy Fits Your Financial Goals?
Investing and trading are two different things. Investing means putting money for the long term and leaving it. Trading means buying and selling in a short time to earn profit which is like a full‑time job.
Now the question is should you invest in the share market? Many people call it gambling. In some cases, this is true. If you don’t study a company’s numbers, performance, history, or accounts and invest blindly, then it becomes similar to gambling. Experts naturally perform better than normal investors.
Managing Risk: Why Mutual Funds Are a Safer Bet for Beginners
That’s why, in my opinion, instead of investing directly in the stock market, it is better to trust experts. The best way to do this is through Mutual Funds. In mutual funds, experts decide which company to invest in. Many mutual funds invest in multiple companies, which reduces risk just like in the old days when people invested in 5–6 ships instead of one to reduce the chances of loss.
