Yes, the share and share market are being major trending topics in Nepal right now. Everyone is into the share market these days. Definitely, it is better to know things and understand the concept before putting your hands on anything. In this article, you will find everything you need to know about the basic terms of share market.
Before we Begin…
Lets know about what is a share
Firstly, talking about a share, a share is a part of a certain amount of capital that is divided into individuals, or a certain number of people to contribute to it.
People or companies having shares of certain companies are called shareholders. Shareholders have certain ownership rights and are the receiver of some amount of profit made by the company. Shares are issued by a company to collect capital for operation, expansion, or any other project of a company.
What is a Share Market?
A share market is a market where shares are bought or sold. Around the world, in Share market companies’, shares are traded for short term or long term. A share can be bought or sold only if it is listed on the stock exchange of a respective country. Therefore, a share market is a place where buyers and sellers meet to buy and sell shares.
Terminologies of Share Market
For Understanding, basics of the share market, here are some basic terms of share market or that you need to know before you enter the share market.
A stock is a general term or security that certifies the ownership of a company.
Shares are units of stocks. Share is an ownership certificate for a particular company.
The stock exchange is a service or facility where public listed companies’ stocks are traded. Stock exchanges in Nepal can be now carried out from the online broker account.
There are two types of share market i.e. Primary market and Secondary market.
- Primary market or IPO: Primary market or IPO (Initial Public Offering) is the process of issuing or offering shares for the first time to the general public by a company for raising a company’s capital.
- Secondary market: The secondary market is the market in which previously offered shares are bought and sold. In the secondary market, shares are traded or invested for long and short periods for earning profit.
A dematerialized account, in short, a Demat account is an account which is used for holding financial securities and investment like equity or debt in electronic form. Demat account is needed to fill IPO, buy and sell shares. It is mandatory for share market investment. It can be created through any local bank.
A broker is an authorized party or agent approved by the stock exchange of a country to make it easier for people to buy and sell shares in the share markets.
There are many brokers in Nepal through which you can trade shares in stock exchanges. Brokers are compulsory to perform buy and sell transactions of shares. A broker account is needed to buy and sell shares. Now, shares can buy or sell online through the “Trading Management System” using the specific broker account.
A dividend is an amount that is divided by a company to its shareholders. When a company earns profit, then it pays a certain part of the profit to its shareholder which is the dividend. The dividend is paid by a company usually once a year.
In the bullish market, the price of shares goes up in an upward trend.
In the bearish market, the price of share goes down in a downward trend.
In basic terms of share market, a mutual fund is a type of financial investment which is collected from many investors to invest in stocks, bonds, or other assets. In a mutual fund, the fund manager of the company decides where to invest the money collected.
Right share is the share which is additionally issued by the company for its existing shareholders
Book closure is a time in which a corporation will not manage or control the process of transfer shares or the register of shareholders. Companies use the book closure date to determine which shareholders will receive dividends.
Open price shows the prices of shares in which shares are transacted at first on a business day.
A share’s closing price is an average price in which a share is traded at the last closing minutes of the share market.
Liquidity means how easily a stock or share can be sold in the market. Companies with higher liquidity have higher trading volumes.
In basic terms of share market, trading volume means how much quantity of shares is sold on a specific business day.
Trading is buying and selling’s of stocks at a gap of a very short or short period of time. Traders have a high risk with high returns.
Investing is buying and selling’s of stocks at a gap of a long period of time. Investors have a low risk with low return.
Share market Index
The share market Index is an indicator that shows the performance of the share market at a certain time.
Market capitalization shows the total market value of the company as per the stock market of the company.
So these were the terminologies one should understand before getting into the share market. The basic idea of these terminologies will help you to understand the share market better.
Basic Mechanism of Share Market
Now, in this section, you will know the basic concept of how the share market works.
In the share market, we know that shares are bought and sold daily. The buyers and sellers, negotiate/bargain to fix the price of a share to buy and sell. A share market is controlled and examined by the stock exchange of a country.
In the case of Nepal, there is Nepal Stock Exchange to monitor the Nepalese Share Market. We can buy and sell shares of companies that are listed on the Nepal Stock Exchange.
Actually, the demand and supply of shares fix the price of the share. For instance, high demand increases the price, and low demand decreases the price of the share.
Basics of Share Market in Nepal
On the End Note…
Nowadays, many people are showing their interest to invest or trade stocks in the share market. Looking and comparing the index of the share market of Nepal then and now, it is increasing gradually.
Furthermore, various laws, policies, rules, and regulations are formed and implemented to make the share market a well and safe place to invest. Also, the share market is now traded online. With this online system, people can easily fill IPOs, buy and sell shares from anywhere in a few minutes from their mobile or computers.
The share market has equal potential for success and failure. Everyone needs to understand the basic terminologies and mechanisms of the share market before investing in it. As a matter of fact, investing in a share market requires knowledge, analysis, and research about the firm that you are going to invest in. Correspondingly, without the proper study of the market as well as fundamental and technical analysis of the share market is very difficult to sustain in the share market.
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