In the stock market, the term “Share” is related to investment options like Mutual Funds and Limited Partnerships.
The Stock Market is a place where shares and other securities are actively traded.
However, both “Share” and “Stock Market” are fundamentally based on the same concept.
Shares are units of the total valuation of a company.
For example, if you invest in a company, based on the amount you invest, you will receive a certain number of shares.
Example:
The price of one share of Company A – ₹5
If your investment amount is ₹1000, you will receive 200 shares.
As the company’s growth increases and the share price rises, the value of your shares will also increase.
Example:
If Company A’s Share Price increases – Rs. 15
Bought Price – Rs. 5
Current Price – Rs. 15
Profit per share – Rs. 10
Net Profit = Number of shares × Profit per share = 200 × 10
Net Profit = ₹2000.
The stock market is the platform that helps you buy and sell shares.
When you buy shares of a company, you become a ‘shareholder’ of that company.
For example, when someone says they hold shares in a company, it means they have invested in a specific company and are a shareholder of that company.
Through dividends, the investor can enjoy a portion of the profits earned by the company.
If the company in which you invested does not perform well, the investor may also bear the loss.
A stock market provides the infrastructure to trade in a secure and regulated manner. It brings together the share seller and the buyer.
The Securities and Exchange Board of India (SEBI) regulates stock markets in India.
