Share Market Basics Explained
Basics Information About Share Market
Every year, we are at the mercy of economic inflation. This term refers to the increase in the prices of goods and other commodities while consequently decreasing the purchasing power of your country’s currency. It is usually denoted by a percentage increase and it can really be a bummer for ordinary people like you and me.
To help hedge against inflation, one of the best ways to use your money is to invest it in the share market among the share trading firm in Malaysia. Now, you might be thinking what a share market is.
In this article, I will go over some basics about the share market and I will explain it in the simplest terms so that you can easily understand them.
What is the Share Market?
A share market is basically the place where you trade shares. It used to be quite different than the stock market in that the stock market allows you to trade derivatives, ETFs, and Mutual funds. The share market, at least before, only allows you to trade your shares.
But, that is actually not the case anymore as the lines that differentiate them both have been blurred which means that the terms can be used interchangeably to denote the same thing.
Anyway, a person acquires some shares by purchasing them from a company. The company will need some capital to help it grow. To raise that much-needed capital, the organization will do an Initial Public Offering, commonly referred to as the IPO.
Any person that acquires even a small percentage of those shares is known as a shareholder. The person who acquires the highest number of shares is going to be designated as one of the company’s board members.
Primary and Secondary
There are two share markets that you need to know about. The Primary market is where a company gets initially enlisted into the stock exchange. This is where they will conduct their IPO to gain capital for the organization to grow and they will sell shares to potential buyers.
On the other hand, the Secondary market just refers to the company being enlisted and is now officially part of the stock exchange. This is where investors and traders can now buy or sell their shares as they please.
How Do You Purchase Them?
Before you can join in on the fun, you will need to register two accounts: the demat (dematerialized) and the trading account. The former gives you the ability to settle all online transactions and the latter is proof that you can start trading in the shares market.
It will be much easier to go to a brokerage agency and sign up from there as they will guide you through the entire process.
Instruments Being Used in the Market
There are actually four financial instruments that are used in the shares market. These are:
- Bonds- When a company borrows capital from many investors, the paper that denotes that trade is called a Bond.
- Mutual Funds- Usually handled by a financial manager, Mutual funds is just the collective investments of different traders. All of the pooled money will be used as one investment so that you can gain a higher profit.
- Derivatives- Since the Share Market prices are volatile in the sense that they can change at any moment, a Derivative is just a financial instrument that allows you to set a fixed price on a share. So no matter how the market moves, the price of your stock still remains the same.
Since money is being used to invest in the share market, some countries have invested their time and money on regulatory boards to help oversee the operations and trades being conducted inside.