How do you make money from investing in stocks?

What is a stock exchange?

A stock market is where investors meet to buy and sell shares. Stocks allow you to own a share of a public corporation. The stock price is based on the corporation’s earnings.

A stock market is similar to a share market. The key difference is that a stock market helps you trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies. A share market only allows trading of shares.

Role of a stock exchange

The main function of a stock exchange is to facilitate the transactions associated with both buying and selling of securities. Stock exchanges have multiple roles :

Raising capital for businesses

  • Profit sharing
  • Facilitating company growth
  • Creating investment opportunities for small investors
How to buy shares?

In order to buy shares, the first step is to open a trading account or Demat (dematerialized) account so that you will get Unique User Id and Password through which you can Buy/Sell Shares.These accounts are linked to the account holder’s bank savings accounts to ensure smooth transfer of funds.

Once you open an account you will tell your broker how many and what types of stocks you’d like to purchase. The broker executes the trade on the your behalf. In turn, he or she earns a commission, normally several cents per share. Online trading sites typically charge lower commission fees, because most of the trading is done electronically.


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How does a stock exchange operate?

Open an account:   Open an trading and D- Mat account with them. To open an account You need to submit your documents like PAN , Adhar and bank statement. And get ready with both trading and D-mat account.

Select stock broker:  The first and foremost step is selecting the stock broker, as you cannot trade in stock market without broker. It is advisable to chose discount broker because their brokerage will be less.

With the help of stockbrokers, the buyers and sellers participating in a stock market carry out their transactions. The brokers representing selling parties take their orders to the stock exchange floor and then find brokers representing parties willing to invest in similar stocks. If both parties agree to trade at the fixed price, the transaction takes place.

Requirements to trade in a stock exchange :

Minimum age : 21 years
Education : At least HSC or equivalent qualification

Benefits and drawbacks of listing your company on a stock exchange

Benefits :

  1. Creates a market valuation for the business and enables the opportunity to raise capital for expansion.
  2. Provides access to an acquisition currency and transparency around the value of the business.
  3. Encourages employee commitment by rewarding them with something of clear value.
  4. Creates a heightened public profile and improves the ability to attract high calibre board members.
  5. Improves supplier, investor and customer confidence and improves your standing in the marketplace.

Drawbacks :

  1. Going public is an expensive, time-consuming process. Going public is the process of selling ownership of a part of your company to strangers
  2. Once your corporation goes public, management becomes more complicated. You can no longer make decisions autonomously.
  3. A public corporation, however, must make extensive quarterly and annual disclosures about business operations, financial condition and other internal matters.
  4. Taking your company public increases the potential liability of the company and its officers and directors for mismanagement.



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