Stock Market

Amazon to invest $1 Billion in digitising small businesses in India. The CEO of Amazon Jeff
Bezos is planning to invest in Indian Market to globalize the business. To make such a big
investment requires a big source of funds. Jeff cannot take a loan while he cannot invest all
by himself, so to overcome this situation Stock Market comes into picture.

A stock market, equity market or share market is the aggregation of buyers and sellers of
stocks, which represent ownership claims on businesses. A stock or share is a financial
instrument that represents ownership in a company or corporation and represents a
proportionate claim on its assets and earnings. Common stocks are securities, sold to the
public, that constitute an ownership stake in a corporation. When you buy a share of a stock,
you automatically own a percentage of the firm, and an ownership stake of its assets.

Basically, a stock market is a mediator between the business man or the company and the
public or the buyers. For example, let’s say an entrepreneur who is willing to start a business
requires fund. He may raise the funds through banks or personal assets, but share market is
another source. Let’s say his business requires a total amount of 1 crore. When he registers
into share market, he divides the firm into shares. He may divide into 1 lakh shares of
Rs.100/- each which sums up to 1 crore. So these shares are sold to the public through stock
market. When an individual buys a share of the company, he/she becomes an owner of a
percentage of the firm. If the individual paid Rs.100 for a share of stock, and the stock
appreciates in value by, say, 10% during the period you own it, he has earned Rs.10 on your
stock investment.

The stock market works through a network of exchanges — you may have heard of the New
York Stock Exchange or Bombay Stock Exchange. Companies list shares of their stock on an
exchange through a process called an Initial Public Offering or IPO. Investors purchase those
shares, which allows the company to raise money to grow its business. Investors can then buy
and sell these stocks among themselves, and the exchange tracks the supply and demand of
each listed stock.

“The stock market is a device for transferring money from the impatient to
the patient.”
― Warren Buffett