Both the terms share market and stock market are often used as synonyms for each other, but technically there is a difference between the two. In this blog post, we will understand the difference between these two in detail.
What is share market?
The share market is a market where companies sell a part of their ownership to investors. These parts are called shares. When a company issues shares, it raises capital from investors, which it can use to grow its business, develop new products, or repay debts.
Shareholders become one of the owners of the company and are entitled to a share in the company’s profits. Apart from this, shareholders also have the right to vote in the election of the company’s board of directors.
What is stock market?
The stock market is an organized market where shares are traded. It is a platform where investors can buy and sell shares. Various types of shares are traded in the stock market, such as equity shares, preference shares, bonds, etc.
The prices of shares in the stock market constantly change depending on demand and supply. When the demand for a company’s shares is high, their price increases, and when the demand is low, their price decreases.
Key Difference Between Share Market and Stock Market:
- Meaning: Share market is a broad concept that refers to the process of issuing shares by companies and their purchase by investors. While the stock market is a specific place or platform where shares are traded.
- Function: The main function of the share market is to help companies raise capital. While the main function of the stock market is to provide investors with a platform to buy and sell shares.
- Components: Apart from shares, other financial instruments can also be traded in the share market. While the stock market is mainly known for the trading of shares.
Relation between Share Market and Stock Market:
Although share market and stock market are different concepts, there is a deep connection between them. Shares issued in the share market are traded in the stock market. Hence, the share market provides the source of shares for the stock market.
Conclusion:
Both the share market and the stock market are important components of the financial market. The share market helps companies to raise capital, while the stock market provides investors with an opportunity to invest in shares and earn profits from their investments. Though there exists a difference between the two, they complement each other and play a vital role for a healthy economy.
How to Invest in the Share Market?
If you want to invest in the share market, you should follow the following steps:
- Do research: Before investing in the share market, you should research the market thoroughly. Get information about different companies, their financial performance, and market trends.
- Open a brokerage account: To invest in the share market, you need to open a brokerage account. The brokerage firm will provide you assistance in buying and selling shares.
- Determine your investment goal: You should clearly define your investment goal. Your goal may be long-term, such as saving for retirement, or short-term, such as making quick profits.
- Build your investment portfolio: You should diversify your investment portfolio. By investing in different companies and industries, you can reduce risk.
- Invest regularly: Regular investments are important to invest in the stock market. You can invest on a monthly or quarterly basis.
- Review your investments regularly: You should review your investments regularly and make necessary adjustments in line with your investment goals.
Risks of investing in the stock market:
Before investing in the stock market, you should be aware of the risks. Stock prices are volatile and can rise or fall rapidly. Therefore, investing in the stock market can lead to loss of capital.
Disclaimer:
The information provided in this blog post is for general information only and should not be construed as professional financial advice. Before making an investment decision, you should always consult a qualified financial advisor.