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Stock Investment
Stock Investment
A stock is a type of investment that represents an ownership share in a company. When you purchase a company’s stock, you’re purchasing a small piece of that company, called a share. It is a place where shares of pubic listed companies are traded. The primary market is where companies float shares to the general public in an initial public offering (IPO) to raise capital.
A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers. India’s premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange.
PURPOSES OF THE STOCK MARKET – CAPITAL AND INVESTMENT INCOME
The stock market serves two very important purposes. The first is to provide capital to companies that they can use to fund and expand their businesses.
The secondary purpose the stock market serves is to give investors – those who purchase stocks – the opportunity to share in the profits of publicly-traded companies. Investors can profit from stock buying in one of two ways. Some stocks pay regular dividends (a given amount of money per share of stock someone owns). The other way investors can profit from buying stocks is by selling their stock for a profit if the stock price increases from their purchase price.
The owners of a private company may want additional capital to invest in new projects within the company. They may also simply wish to reduce their holding, freeing up capital for their own private use. They can achieve these goals by selling shares in the company to the general public, through a sale on a stock exchange. This process is called an initial public offering, or IPO. Investment banks handle the initial public offering (IPO) of stock that occurs when a company first decides to become a publicly-traded company by offering stock shares.
RISK IN STOCK MARKET
In finance, risk refers to the degree of uncertainty and/or potential financial loss inherent in an investment decision. Every saving and investment product has different risks and returns. In general, as investment risks rise, investors seek higher returns to compensate themselves for taking such risks. The greater the amount of risk an investor is willing to take, the greater the potential return.
- Risk takes on many forms but is broadly categorized as the chance an outcome or investment’s actual gain will differ from the expected outcome or return.
- Risk includes the possibility of losing some or all of an investment.
- There are several types of risk and several ways to quantify risk for analytical assessments.
- Risk can be reduced using diversification and hedging strategies.
RETURN IN STOCK MARKET
Stock Market Returns are the returns that the investors generate out of the stock market. This return could be in the form of profit through trading or in the form of dividends given by the company to its shareholders from time to time.
Stock Market Returns can be made through dividends announced by the companies.
- Stock Market Returns are not fixed or ensured.
- Stock Market Returns are subjected to market risks.
- Stock Market Returns could be positive or negative.
- Investors invest in the stock market on the basis of fundamental and technical analysis.
- Derivative instruments help investors in hedging and arbitraging in order to decrease the risk associated with the Stock Market Investments.
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