What is a Share ?
In finance a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. In British English, the usage of the word share alone to refer solely to stocks is so common that it almost replaces the word stock itself.
In simple Words, a share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market.
By owning a share you can earn a portion and selling shares you get capital gain. So, your return is the dividend plus the capital gain. However, you also run a risk of making a capital loss if you have sold the share at a price below your buying price.
A company's stock price reflects what investors think about the stock, not necessarily what the company is "worth." For example, companies that are growing quickly often trade at a higher price than the company might currently be "worth." Stock prices are also affected by all forms of company and market news. Publicly traded companies are required to report quarterly on their financial status and earnings. Market forces and general investor opinions can also affect share price.
Quick Facts on Stocks and Shares
Owning a stock or a share means you are a partial owner of the company, and you get voting rights in certain company issues
Over the long run, stocks have historically averaged about 10% annual returns However, stocks offer noguarantee of any returns and can lose value, even in the long run
Investments in stocks can generate returns through dividends, even if the price
How does one trade in shares ?
Every transaction in the stock exchange is carried out through licensed members called brokers.
To trade in shares, you have to approach a broker However, since most stock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders.
The general investors should identify a sub-broker for regular trading in shares and palce his order for purchase and sale through the sub-broker. The sub/broker will transmit the order to his broker who will then execute it .
What are active Shares ?
Shares in which there are frequent and day-to-day dealings, as distinguished from partly active shares in which dealings are not so frequent. Most shares of leading companies would be active, particularly those which are sensitive to economic and political events and are, therefore, subject to sudden price movements. Some market analysts would define active shares as those which are bought and sold at least three times a week. Easy to buy or sell.
What is Demat Account ?
Demat refers to a dematerialised account.
Though the company is under obligation to offer the securities in both physical and demat mode, you have the choice to receive the securities in either mode.
If you wish to have securities in demat mode, you need to indicate the name of the depository and also of the depository participant with whom you have depository account in your application. It is, however desirable that you hold securities in demat form as physical securities carry the risk of being fake, forged or stolen.Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, Nowadays, you need to open a demat account if you want to buy or sell stocks.
So it is just like a bank account where actual money is replaced by shares. You have to approach the DPs (remember, they are like bank branches), to open your demat account. Let's say your portfolio of shares looks like this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100 of ACC. All these will show in your demat account. So you don't have to possess any physical certificates showing that you own these shares. They are all held electronically in your account. As you buy and sell the shares, they are adjusted in your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions.
Is a demat account a must? Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more.
So a demat account is a must for trading and investing.
Most banks are also DP participants, as are many brokers.
You can choose your very own DP.
To get a list, visit the NSDL and CDSL websites and see who the registered DPs are.
A broker is separate from a DP. A broker is a member of the stock exchange, who buys and sells shares on his behalf and on behalf of his clients.
A DP will just give you an account to hold those shares.
You do not have to take the same DP that your broker takes. You can choose your own.
