Level 1 of 13 · Basic concepts
Stock Market Fundamentals
By the end you will: understand what the stock market is.
Welcome! This chapter assumes you know nothing, and that's perfectly fine. We start with money and business, the two ideas the whole stock market is built on, and slowly build up to shares, dividends and the accounts you need. Take your time. If one idea isn't clear, re-read it before moving on, because every later chapter builds on this one.
Start with 1.1: What is money?
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Money and business
- 1.1What is money?Money is something everyone agrees to accept in exchange for goods and services. In India we use the Indian Rupee (₹).
- 1.2What is a business?A business is an activity that sells goods or services to customers to earn profit. Profit is what is left after paying all costs.
- 1.3Why do companies need money?Companies need money (called capital) to start, run and grow: to build factories, buy machines, hire people, open shops and do research.
The stock market and shares
- 1.4What is the stock market?The stock market is a marketplace where people buy and sell shares (small pieces of ownership) of companies. In India, this happens mainly…
- 1.5Why does the stock market exist?The stock market exists to connect companies that need money with people who have savings and want them to grow.
- 1.6What is a stock?A stock is a general word for ownership in a company. When people say "I invest in stocks", they mean they own parts of one or more…
- 1.9What does it mean to own a part of a company?Owning shares makes you a part-owner of the company. You get a share of its profits (if it pays them out), and usually a vote on important…
- 1.10Why do companies sell their shares to the public?Companies sell shares to the public (called going public or listing) mainly to raise money for growth, and to let early owners and…
- 1.11How can ordinary people make money from stocks?There are two main ways: capital appreciation (the share price rises and you sell for more than you paid) and dividends (the company pays…
- 1.12Why do stock prices increase and decrease?Share prices move because of demand and supply. When more people want to buy than sell, the price rises. When more want to sell than buy,…
- 1.14What is a dividend?A dividend is a part of the company’s profit paid in cash to shareholders, usually a fixed amount per share.
- 1.15What is capital appreciation?Capital appreciation means the value of what you own going up. For shares, it is the rise in share price above your buying price.
Exchanges, brokers and accounts
- 1.16What is a stock exchange?A stock exchange is the official, regulated marketplace where shares are bought and sold. India’s main ones are NSE and BSE.
- 1.17What is a broker?A stockbroker is a SEBI-registered company that lets you buy and sell on the exchange. You cannot trade on NSE/BSE directly; you trade…
- 1.18What is a Demat account?A Demat (dematerialised) account holds your shares in electronic form, the way a bank account holds money.
- 1.19What is a Trading account?A trading account is the account you use to place buy and sell orders. It sits with your broker and connects your bank account to your…
- 1.20What is the bank account’s role in investing?Your bank account is where money comes from when you buy and goes back to when you sell. It is linked to your trading account.