Table of Contents
50 SHARE MARKET Q&A
This blog is designed to answer the top general 50 questions people asked on Google. All the questions are answered in simple bullet points format for easy understanding of the users. This blog mainly covers the questions about equity, share market, and futures and options. After going through all the below questions, a newcomer to the share market will have a basic idea about the share market and how to make money from it.
1. What is the share market and how it works?
- Share market is the place to trade the shares of pubic listed companies.
- Companies float shares to the public through an initial public offering (IPO) to raise capital in the Primary market, through investment banks, financial institutions, brokers…
- Then these listed stocks bought or sold on an exchange, these exchange is share market.
- A share market is a secondary market where traders can sell and buy stocks among themselves.
- The stock market works much like an auction house, it enables sellers and buyers to negotiate prices and make trades.
- In the stock market, Investors can sell and buy these stocks among themselves.
- The stock exchange tracks the demand and supply of each listed stock.
2. What is the difference between the share market and the stock market?
- In operation wise, both stock market and share market is similar in operation.
- The difference between the share market and the stock market is, in the share market only shares of the listed companies are allowed for trading but in the stock market, traders can trade any financial instruments like Shares, Mutual funds, Bonds, Derivatives…
3. what is the Demat account?
- A Demat account is an account that is used to hold securities and shares of companies in electronic format.
- Dematerialised (means converted from physical to electronic form) account is the full form of Demat account.
- The purpose of the Demat account is to hold shares in dematerialized form and trade the shares online, through any trading platform provided by brokers.
4. Is the Demat account safe?
- Demat accounts are safe and secure.
- Demat accounts are opened with the NSDL or CDSL, both depositories have their own security measures to protect the holdings of investors.
- All the brokers also take their own security measures to avoide the misuse of Demat account.
5. Is the Demat account free?
- Now most brokers made the account opening free, but need to pay a maintenance fee every year.
- If it is a basic Demat account then there are no charges up to the certain limit of holdings.
- Some brokers charge to customers monthly and some yearly to the customers.
6. Which is better CDSL or NSDL?
- Technically there is no difference between NSDL and CDSL depositories.
- NSDL started in the year 1996 and CDSL started in the year 1999.
- In NSDL, NSE is the largest shareholder and CDSL has BSE as the shareholder.
- Depository charges of CDSL and NSDL are slightly different.
- The revenue source for depositories is the DP charges which they charge during the sell order.
7. What is the stock market?
- A stock market is a network of exchanges used to trade the shares of companies listed on an exchange.
- The stock market is a safe and regulated auction house where sellers and buyers can negotiate prices and trade on the stocks of listed companies or any financial instruments.
8. How can I open a Demat account?
A Step-by-Step Guide to Open a Demat Account
Step 1: Choose the broker on which, we prefer to open the account.
Step 2: Submit Demat Account Opening Form in an online or offline format
Step 3: Fulfill KYC (Know Your Customer) Norms in the portal.
Step 4: Complete the Verification Process.
Step 5: Upload all the required documents in an online format or submit signed documents to the respective office.
Step 6: Get the Demat ID Number from the broker.
9. Can we withdraw money from the Demat account?
- Our money is in the Trading account not in the Demat account.
- We can withdraw money from the trading account at any time, but for some brokers, it will take some processing time.
- To withdraw money customers need to login to the online portal of trading account and select the option ‘funds'( option name vary broker to broker) and select the withdraw funds option in it.
10. Can I have 2 Demat accounts?
- Yes, investors can have multiple Demat accounts
- It is legitimate to have multiple Demat accounts and trading accounts, with different brokers.
- It is not allowed to have multiple trading and Demat accounts with the same broker or the same DP.
11. Is NSDL a govement company?
- Both CDSL- Central Depository Services (India) Limited and NSDL- National Securities Depository Ltd. are government registered share depositories in India.
- The function of both depositories is to hold shares in an electronic form.
12. How do I know if CDSL or NSDL?
- By checking the first 2 digits ( 1stand 2nd out of 16-digit) of the Demat account, the account holder can identify, it is with CDSL or NSDL.
- If the account has only numeric character, then it is with CDSL (Eg:1234567812345678)
- If the account number starts with “IN” and followed by a 14 numeric code, then is with NSDL( Eg: IN12345678912345).
13. How to buy shares?
- We can buy stocks or shares through any online stockbroker, by opening an account with them.
- Once we open the account and add funds to the trading account, you can buy stocks through the broker’s trading platform or through the website.
- Other options are directly or over phone trading services provided by full-service stockbrokers.
- Also, we can buy stock directly from the company or through applying IPO.
14. What are the minimum and maximum age limits for opening a Demat account?
- There is no minimum age limit for investors to open a Demat account and invest in the stock market.
- Both adult and a minor can invest in stocks after submitting their respective documents for account opening.
- For a minor account, it must be opened in a minor’s name by the parents or the appointed guardian.
15. What is NSDL DP?
- DP is the short form of Depository Participants, who is an intermediary (Broker) between investors and the depository (NSDL or CDSL).
- NSDL depository provides its services to investors through Depository Participants (DP), who work as market intermediaries.
- All DP comes under SEBI regulations.
- DP is a financial service providing organization.
- DP can be banks, share brokers, custodians in the share market, financial institutions who provide the service to investors.
16. What trading account means?
- In simple language, the Trading account is an account used to trade shares, bonds, commodities…
- A trading account helps investors or traders to trade securities, cash, or other holdings.
- In the share market domain, a trading account is a primary account in 2 in 1 or 3 in 1 account for traders.
17. How do I start a trading account?
Step by step process to open a trading account:
Step 1: Select the stockbroker or firm with whom need to open the account.
Step 2: Compare brokerage rates and other charges for trading.
Step 3: Decide the mode of opening online or offline. Most discount brokers provide offline account opening options.
Step 4: In the online method, fill up the details and upload the required documents. In the offline method, visit the office and submit the required documents.
Step 5: Re-verify all the details and submit, remaining process broker will take care of.
18. Is day trading illegal?
- Buying and selling or vice versa in a single day are called day trading.
- Day trading is neither unethical nor illegal.
- Day trading is highly risky if do it without learning it.
- Day traders should have emotional control to handle the losses, which day trading can bring.
19. What is the share market meaning?
- Share market means a market where selling and buying of share happens.
- A unit of ownership of the company is called Share of the company.
- By buying shares of a company, an investor become the partial owner of the company.
- If the company grows, the value of share also increases and the invested asset will increase.
- Investors will get profit by selling the shares of the companies if it is more than the buy price.
20. How do we buy shares?
- We can buy or sell stocks through an online stockbroker trading platform.
- Once the fund added to the trading account, we can buy stocks through the broker’s trading platform during market hours.
- If it is a full-service broker, investors can buy stock directly from the office or over the phone trading service during the market hour.
- Some discount brokers also provide phone trading services.
21. What are the 2 types of stocks?
- Common stock and preferred stock are the two main types of stocks of companies.
- Common stock is an equity share of a company, i.e a security that represents partial ownership in the company. At the time of liquidation of companies, common stockholders get only whatever assets remain after paying for bondholders, creditors, and preferred stockholders.
- Preferred stock is like a combination of equity and a debt instrument It is generally considered a hybrid financial instrument. During liquidation Preferred stockholder receives the money along as a creditor in the company.
22. How many shares should I buy?
- An investor can buy any number of shares, which traded in the share market.
- About 20 different companies from different sectors are ideal diversification number, advised by most financial experts.
- During the selection of stocks, it is advisable to diversify across industries and sectors.
23. How do I start investing?
- The first step is to open a Demat and trading account with a broker.
- Select the companies that need to invest.
- Prepare financial planning including goals.
- Buy the stocks as per our preference, which will help to meet our financial goals.
24. When should I buy stocks?
- For investment, there is no right time to buy shares, any time we can buy and start investing.
- If it’s for long term investment, only consider fundamentally strong companies.
- It is the responsibility of every investor to do research and get confident that price will rise in the short or long term, before investing.
25. How do you make money from stocks?
- An investor can make money by booking profit at the time of selling of stocks.
- Investors can also earn money by getting dividends from the companies.
- Dividends are usually paid on a yearly or half-year or quarterly basis to the shareholders.
26. How can you select a good stock?
Below are the 8 things to consider in selecting the stocks.
- Market Capitalization
- Stock price
- Possibility of revenue growth of companies.
- Earnings Per Share of the stock.
- Dividend yield.
- Historical prices data at least for last 5 years
- Positive technical analysis
- The Sector
27. Where do I buy stocks?
- Investors can buy and trade it in the stock market through brokers’ trading account.
- First, need to open a Trading and Demat account with a stockbroker, and then using their platform investors can buy stocks
28. What are the different stock sectors?
There are basically 1o main sectors in the stock market based on domain
- Information Technology.
- Financial sector.
- Health Care.
- Real Estate.
- Communication Services.
- Consumer Staples.
29. Can I buy 1 share?
- There is no minimum order limit to buy shares from the stock market.
- An investor can buy 1 share of listed companies in stock
30. Can you get rich from stocks?
- An investor can get rich from the stock market if invested in growing companies.
- To get rich investors to need to wait for a long time frame like 10 to 15 years.
31. Can I buy a share today and sell tomorrow (BTST)?
- Some brokers provide the option of BTST, Buy Today, Sell Tomorrow.
- Traders can sell the shares before the actual delivery before credited in the Demat account.
- With BTST option, a trader can sell shares within T+2 days.
32. Should I buy red or green stocks?
- An investor can buy green or red stock.
- Green means the prices in the recent past have gone up (positive momentum), whilst Red means prices have gone down( negative momentum).
- It is advisable to buy stocks that have the chance of having positive momentum.
33. What is a good price for a stock?
- If P/B (price-to-book) ratio is less than 1 is considered as a good value for a stock to purchase.
- If the value is less than 1 is indicating undervalued stock.
- Some value investors consider P/B value under 3.0 is potential to buy.
34. How are the stock’s total holdings calculated?
- The number of shares of stock holding multiplied by the current market price is the method to calculate the total holdings.
35. What time of day is best to buy stocks?
- Regular trading begins at 9:00 m. and ends at 3:30 PM.
- The best trading time of the day is between 9:30 AM and 3:00 PM as the market will be comparatively stable after half an hour of market opening and half an hour before market closing.
36. What is a good amount of money to invest?
- It is ideal to decide on the base of percentage of Income.
- Between 10% and 15% of your annual income is the amount most financial planners advise.
- If possible to invest more percentage in value stocks will help to create wealth early.
37. Can I sell intraday share the next day?
- Intraday trade needs to square off before the market hour close.
- Some brokers allow converting Intraday position into delivery by paying the balance trading amount.
- It is advisable to close the trade position in a day itself.
38. Can I sell shares without buying?
- Traders can sell the stock without buying using the short sell option provided by the brokers.
- Using the short sell method, traders can make money in equities markets without owning shares, during downtrend.
- Using short sell, the trader is borrowing stock from a broker and sell the borrowed stock, and then buy it when the price drops.
39. Can I sell futures without buying?
- Yes, futures can sell without buying them.
- Trader cannot realize a profit or loss in futures trading until square off the position.
- Square off means placing an apposite position order for the same quantity later.
40. How can I buy a future?
- A futures contract is an agreement on an underline asset that traded on an exchange.
- In a future contract, one party agrees to buy a given quantity of securities on a future date and another selling party agrees to provide it.
41. How can I buy Nifty options?
- First need to add the NIFTY options to the watch list and select CE or PE, which need to buy.
- Select the strike price and buy CE or PE by paying the premium.
42. Why is the option better than the future?
- Option contract provides only the right to the buyer, not an obligation.
- In option, the maximum risk to the buyer is limited to the premium paid.
43. What is the future in the share market?
- Futures share market is a financial contract on an underlying asset.
- A futures contract is an agreement between the buyer and seller to sell or buy a specified quantity of underlying equity share upon a price agreed on a future date.
44. Can I buy Nifty 50?
- There is no option for an investor to buys Nifty 50 directly.
- Nifty 50 is an Index comprising of the top 50 stocks listed in the share market.
- We can buy 50 stocks in the Index so that we will get the same growth as Nifty 50 grows.
45. What is F&O trading?
- F&O stands for Futures and Options, it is a derivative of shares in the stock market.
- F&O derive their values from an underlying asset such as shares, currency, gold…
46. What is F&O expiry?
- For every F&O contract, it will have an expiry date i.e. up to that date only the F&O contract is valid.
- Before an option expires, its owners need to square off the position to realize their profit or loss.
47. Can I buy Bank Nifty?
- Bank Nifty can buy like any other option contract.
- Bank Nifty comprising 30 shares of different listed banks.
- A trader can buy a call or put option on the base of a bullish or bearish market.
48. Can I buy Nifty intraday?
- Yes, it is possible to buy or sell nifty options intraday.
- The process of Nifty intraday trade is similar to normal option trade.
49. Can we invest directly in Sensex?
- The Nifty consists of the top 50 listed companies of the share market and Sensex consist of 30 companies.
- An investor can invest in the companies that come in this list so that they will get the same growth of Sensex or Nifty.
50. What is PE & CE?
- PE & CE are the two terms of options trading PE-Put Option and CE- Call Option.
- CE stands for “call European” (Right to Buy) and PE stands for “Put European” (Right to Sell).
- When the market goes up, the premium will go up and when underlying security’s price goes down PE premium goes up.
Share market is the place where people can buy and sell shares and make a profit. There are many ways traders can make money from the share market like intraday, BTST, short sell, position trading… More than a trading instrument, the share market is a perfect investment option for those who would like to have financial growth. Every investor needs to learn at least fundamental and technical analysis before investing in the stock market.
Thanks and Regards