So, If you are new to the world of investing and wondering how to buy shares in companies then this blog post is for you.
But before we go further, it will be interesting to chat a little bit.
I would be eager to know how you got introduced to the world of stocks! Because stocks and investing is still not part of any curriculum taught in schools or colleges. This is a harsh reality though that the prime purpose of our education system is to make us stand on our feet financially.
In the meantime, let me share how I got to know about stocks. Stocks were not the first investment options I came to know. I came to know about them much later. Maybe, I guess , I got to know them when I was 30 plus. And I did not operate any Demat account ( you’ll get to know very soon what they are!) Until I was 34! Well this is the price you pay if you are not financially educated which most of our population still is.
Anyways, let’s get down to knowing how we buy shares in India. Or the world over. It works almost the same everywhere in this globalised world.
First of all, what are shares ?
The shares as the word suggests is about ownership. It’s about having a stake. So, when we talk about company shares, we are referring to buying ownership in companies. There are several companies that you can buy shares of.
But, not every company that you may see around. You can buy shares only of companies that are publicly listed. Ok, what does it mean to be listed publicly?
So, those companies that are willing to give stake/shares in their companies have to first get listed on a stock exchange. Now, what is stock exchange ?
Stock exchanges are like a marketplace where people come to buy and sell the shares. And these people who are licensed to enter the exchanges are called beokers. We can’t enter the exchange and buy or sell if we don’t have a broker. These brokers are important because they hold the trust of both – the buyer and the seller.
These days, we don’t get to literally see these brokers or the exchanges. What we see are our computer terminals. And everything done on the screens. But, we still these operators of stock exchanges – the brokers.
These brokers provide us with the softwares to buy and sell the share through Demat Account.
Demat Accounts are similar to your bank accounts. Demat is actually derived from the word – dematerialized. It means paperless and electronic. So, Demat Accounts will offer you the option through brokers to buy and sell shares on the stock exchanges.
Demat account, though it is similar to your bank account but the similarity ends there. It doesn’t hold cash or lets you do the banking functions. Rather, it will help you to deal in securities. Securities are nothing but your shares of the companies etc. Securities could also mean bonds, mutual fund units, certificate of deposits etc.
So, basically securities are financial instruments and shares are one of those instruments.
Coming back to shares, you can buy these companies whose shares are listed on the stock exchanges. Once you open a Demat, the whole menu of all companies is presented to you through your Demat Account. You can pick any of them.
Shares are bought in quantities. Like one, two, three etc. You can buy half, ¾, ⅖ etc. And these shares are priced differently. Just like how the cost of dal makhani will be different from steam rice or tawa roti. This is one thing.
The other thing is that the price of these shares is dynamic. The dynamic means they will be variable. They will change every day. And many times in a single day. So, you can call them to be dynamic in nature. Or even volatile.
