Things to know before starting stock market trading

September 29, 2020

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What is the stock market?

If you are getting started with stocks, you may be without a clue to move on. The stock market is the collection of markets and exchanges that conduct the activities of buying and selling shares of publicly owned companies. There will be several companies that claim themselves as public and issue shares in the market. You, as an individual, can buy these shares to become a shareholder of that company. If the talk about the company among the masses and the operation of the institution are better, the stock price will increase in the long run. You can decide to sell your stocks at some point in time to another trader in the market. There will be national stock exchanges along with some over-the-counter marketplaces to do the trading activities. Since these processes will be tedious, you can get assistance from a middleman known as a brokerage who will take care of all the backstage activities of the stock trading. You would have to research and opt for the buying and selling of the stocks through the brokerage’s platform like a mobile application or a website. In this article, let us discuss the processes involved in stock trading in brief.

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What are the benefits of being a shareholder of a company?

You will get dividends.

Some companies will label their shares as dividend stocks. In these cases, the shareholders will get some dividend amount whenever the company makes a profit.

You may get rare discounts.

Although most of the companies will not provide discounts and offers on their products for the shareholders, some companies will do.

You own a part of the company’s assets.

If you are a shareholder of a company, you own a fraction of what the company owns. The percentage of your holdings will be as below,

No. of shares you won/Total No. of shares x 100% = % of the company’s assets you own.

Annual shareholders meeting

Some companies will conduct annual meetings for all the shareholders. It will be like a huge board meeting. Even if you own very few shares, you can attend the meeting. Some shareholders may also get a right to vote on some small decisions on the company’s operation.

Get profits by selling stocks

If your stock price is higher than that when you bought it, you can sell the stocks to other participants without anyone’s permission.

What are the misconceptions about being a shareholder of a company?

Although there are some benefits of being a shareholder of a company, it does not mean that you will influence the company’s operations. Inexperienced shareholders will confuse the concept of holding the shares of a company with being a whole-partner of it. Some of these misconceptions are as below.