If you’ve been thinking of investing in the share market, but you’re unsure of even the share market basics then read on. In this article we will break down the tips, share market basics and share trading basics in order to give you an overview of what it means to invest your money on stocks, shares or bonds and how you can trade them in the share market.
What is a share?
At it’s most basic, a share is simply part ownership in a company. Companies are able to provide finance for their business by becoming listed on a stock exchange and issuing shares for sale to interested investors. This is known as ‘going public’. An investor, by purchasing a share, is buying ownership of the company and the money.
Shareholders have rights associated with the company also, such as the ability to participate in annual general meetings and receiving information or reports about the company in which they have invested.
What is the Share Market?
A share market is essentially the place where you trade shares with other shareholders through the assistance of a stock broker. Many countries have a share market, include the United States, United Kingdom, Japan and Australia.
The main purpose of the share market is to:
- Operate the primary market – this is where companies are able to raise money by issueing shares.
- Operate the secondary market – this is where investors can trade shares, both buying and selling, based on the market forces in play at any one time.
A company can determine how many shares it will issue depending on how much money it needs to raise and the size of the company. Owning many shares in a company gives the investor a larger piece of ownership and therefore greater control. Companies can also choose to buy back their shares or to issue more shares.
What is Share Trading?
Share trading is where shareholders buy or sell shares. People often wonder why share prices rise and fall, but it is simply the interplay of market forces that drives share price.
Investors are not allowed to trade directly with a stock market, they must act through a stockbroker. Investors can trade through full service brokers, which are brokers who provide a trading service, but also provide advice, strategic planning and recommendations. Investors may also use a broker who does not provide recommendations or advice and merely acts to execute trades for a brokerage fee. Brokers may provide online, phone or personal service.
The sharemarket is regulated by an overseeing body to ensure that the rules (and laws) of investing are adhered to.
Obviously share trading basics is a pretty big topic and we’ll be delving deeper into this on this website.