What is a Stock?

A stock is something which makes you partly owner of an organisation. It is a way through which you can become a part of a companies growth. An easy term to understand stock is “Share Holder” which simply means holding a share (a small Part) of a company, so when you buy a stock, you are actually buying a small part in the company and becoming a partly owner.

Example: Let us say you bought one stock of Tata Motors, which means now you own a small part in the company, and the company’s growth for that small part of the share.

Why Do Companies Sell their Shares?

As by issuing stocks to the public generates a good investment funds which companies uses for different purposes depending on their long term goals and strategies. This also gives an opportunity to the public to tag along with them in the journey of future growth.

Example: Let’s take a company who makes cars and automobiles as there core business and they need funds to setup a new plant to manufacture electric vehicles so raising shares to public will give a good opportunity to fulfil this future plan.

What are different types of Stocks ?

• Common Stocks: Share holders who owns common stocks have the right to cast a vote in company’s decision which means they can take part in decision making process of the company and have share of profit, however profit from the share is not always confirmed.
• Preferred Stocks: Here Share holders does not have the right to cast a vote in company’s decision but they have priority in getting profits from the shares they hold as compared to common stock holder.

Example: Let us say you started a company along with your friends and own around 10 percent of shares also you have right in making decisions in the company so you have “Common Stocks” and now let’s say you bought some shares of this company from stock market this may give you profits (Dividends) but you will not have right to be a part of any decision making process in the company.

What are Stock Exchanges or Stock Market (NSE, BSE)

Stock Exchanges also known as stock market are a platform where stocks of various companies (which are listed in the particular stock market) can be traded (Buy and Sell). NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are two biggest stock market in INDIA

Example: Consider a stock as potato then a stock market is a super market where people can buy and sell potatoes and prices will be determined by supply and demand.