What to do in Stock market?

What are Shares?

A share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market.

A company's stock price reflects what investors think about the stock, not necessarily what the company is "worth."

* Owning a stock or a share means you are a partial owner of the company, and you get voting rights in certain company issues
* Over the long run, stocks have historically averaged about 10% annual returns However, stocks offer noguarantee of any returns and can lose value, even in the long run
* Investments in stocks can generate returns through dividends, even if the price

What we are going to do with Shares?

We can either do investment or trading with shares. To be more clear consider these 2 cases as example.

case 1: You are having lot of savings, so buying a land in some remote place. You will just monitor the land every now and then by continuing your normal actviites. After a span of time say 3-4 years, the land value would be increased. So you will sell that at higher price and will buy some other plot in different area (or) you will keep the land for few more years if you think the price of the land will go up more.

case 2: You are having some savings and through some source you came to know that the price of a particular item is going to increase shortly. You will buy as much of that item and once the price increases you will sell all that item at high price and will go in search of other such opportunity.


So, Here in Share market, by owning a share you can earn a portion (dividend) and selling shares you get capital gain. So, your return is the dividend plus the capital gain. However, you also run a risk of making a capital loss if you have sold the share at a price below your buying price.

case 1: Instead of land you are buying Shares. This is called as Investment. Investment are of 3 types depending upon the time frame.

Long Term Investment: 1 -3 years (No tax for the gain)
Medium Term Investment: 6 - 12 months
Short Term Investment: less than 3 months

case 2: Instead of any particular item you are dealing with any particular shares. Trading is of 2 important types

Day Trading: buying and selling on the same day
Position Trading: buying and selling on different days

It is for you to decide what you are going to be? An investor or Trader.............