If you have acquired sufficient savings, it must be high time that you look for an investment option that has a better potential of increasing your money. Most of you already know that depositing your money in the bank is the safest way to keep your money, but the interest banks will pay you is very minimal that it could hardly be called an investment. Risking on putting up your own business, on the other hand, do offer a good probability of getting a huge profit, but only if you really work hard and enter the right business. Another way you can invest your money is on the share market. However, many may still be wondering what is share market?
Share Market Basic Definition
To define a share market it is best to split the words and understand each. First is share. A share is basically a piece of a company’s ownership. For instance, a huge company can divide the bulk of its assets into one thousand shares, which they can own solely for themselves or offer to the public. Second is market. As most of you know, a market is where a seller and a buyer meet to transact a sale. A share market, therefore, is a venue where buyers and sellers of company shares meet to do business.
The Need to Sell Shares in Stock Market
Most companies start their businesses with a capital. They either loaned this or financed it from their own pockets. Once the business progresses and grows bigger, the amount of money needed to keep the operation going and to finance the growth will also increase. Now, the company owner has two choices. That is whether he takes additional loan or sells part of his ownership of the company to raise the money he needs. A practical solution is to sell a part of the ownership. Here, the company is not obliged to pay back the money raised and there are very little strings attached. Whoever buys their shares are now deemed co-owners, who in a way are risking their money on the future of the company.
How Share Market Works?
In a share market, those who already own a share on a specific company can still sell their shares in the future. This could be because they need their money back or they do not want to be a co-owner of the company anymore. Usually, you would need a broker to do the transaction between buyer and seller. Brokers can be individuals, banks, or other financial institutions. They match buying and selling prices, and they attend to orders based on who made the orders first. Therefore, if a buyer is interested to buy shares of a certain company, he has to speak to his broker and make his orders before he runs out of shares to buy, which happens if the share is showing a great potential for growth.
What is Share Market: Benefits of Having a Stock Market
A share market provides a venue where seller and buyer meet to transact business legally and with utmost reliability. Here, buyers are obliged to pay and sellers are obliged to issue certificates. In other words, risks are eliminated. A share market also allows for the discovery of fair price for shares of certain companies. Everyone is on level ground, buying and selling at a price that is determined by the current market.