Today We are going to see the most important and Most Frequently Asked Questions in the stock market.
When you enter the stock market then every beginner faces a lot of difficulties and then has a lot of questions that come to their mind. I have searched a lot and found some question that generally comes to the mind of beginner investors of the stock market.
So, let’s see some related stock market question answers.
Stock market FAQs
1- Why Do people buy Stocks?
The stock market is one type of old tool that has been generated wealth for a lot of people.
As long as there are companies in the world, then the stock market will exist. But the question is why do people buy stocks?
When someone wants power in the company, they buy a share of the company.
Suppose if you own 10% of the total share of the company, then you own 10% of the company.
Then it goes without saying that when you own a 10% share of the company, you will have some power in the company.
2- Where does the money go when you buy the stocks?
Generally, what happens, when companies issue shares in the stock market to raise money.
when you buy a stock of the company, the money goes to the company, right?
That is not totally right.
Sometimes when you buy a share from the company itself, your money goes to the company.
When you buy stock from the stock market the money goes to the person who sold you the stocks during trading hours in the stock exchange.
The sellers of the stock can be an individual or an institution.
- First, your money goes to your broker pool account
- Then to the Clearing Corporation
- Then to the seller brokers pool account
- Then to the seller account.
3- Is the stock market and the Economy the same?
Stocks are not the economy.
However, stocks give a representation of the economy sometimes.
The economy is how the companies and the people in the nation performed financially.
The stock market is how the stocks performed. Stocks often perform in sync with the economy.
The economy is generally based on the real incomes of the people, manufacturing, imports, exports, etc.
The stock market is based on the demand and supply of shares.
The question is why do we compare the two?
The reason is
Sooner or later, the stocks have to be valued at par with the condition of the economy.
4- Is the Stock market a safe place?
Let’s talk about what the book says?
As per the theory, the stock market is safe in the short-term duration and risky in the long-term duration.
Because in the long term, there are many events that can take place that can affect your investment portfolio.
But in real life, stocks are very predictable in long-term investing. This makes the stock market safe in long-term investing.
Stocks tend to quickly move in the short term based on the smallest of the bad or good news.
In the long-term investing in stocks tend to satisfy their performance as a business.
5- Can I make Rs1000 every day in the stock market?
Yes! you can.
There will be someday when you might earn Rs100. There will be some days you might earn Rs3000.
There will some days when you even lose money in the stock market. But ultimately you can average an Rs1000 profit over a day in the stock market in the long term. Although it is not certain and it depends on several factors. It depends on how you are trading or investing in the stock market.
It also depends on how much money you invest. You cannot male Rs1000 per day by investing Rs100.
6- Can Stocks Make You Rich?
First of all, don’t make expect you will surely get very rich with stocks because stocks have an associate risk with them.
Have realistic expectations in the stock market.
You need to invest a sizable amount into a portfolio of well researchable stocks.
If your research is correct, then the stock price of the company will appreciate over time and you shall get the benefits.
If you want to generate a lot of wealth passively then focus on long-term investing in the stock market.
If you want to generate an income then focus on short-term trading.
You can eventually get rich by trading and investing.
The only difference is you don’t constantly have to be working if you are investing for the long term.
7- What is a bad Stock?
It is very easy to find or identify a bad stock.
Go to google.com and search for the “(stock name) fraud”
The more pending lawsuits a company has, the more are the chances of it being a bad stock.
Look for any changes in executives very frequently or without prior notification.
Stay away from such stocks that have high operator activity.
Such stocks may not necessarily be bad but they are very volatile and induce fear and greed in investors.
Try to understand the product line of the company and its quality. if the product is not good then the company will likely underperform.
8- Is it a good time to Buy Stocks?
There is no perfect time to buy or sell stocks.
The perfect time to buy a stock depends from person to person.
I personally prefer to add stocks to my portfolio on small dips as long as they are available at a minimum 20% discount from their intrinsic value. How much at discount one decides to add more stocks is also a personal choice and varies from person to person.
Thus, there isn’t a perfect time to buy stocks for everyone.
They need not belong to a particular sector.
If you believe in them and the stocks are available at a discount buy them.
But also make sure you do not disturb the diversification of your portfolio in the long term by investing heavily in just one stock/Sector.
9- How to make money from Stocks?
There are two ways to make money from stocks.
Buy low and sell high
Sell high and buy low
Both are basically the same thing just in a different Order.
When you buy low, you are said to be ‘long’
aka. ‘Long position’
to exit this position profitably, you have to sell stock at a higher price than that you bought it for.
When you sell high, you are said to ‘short’
aka. ‘Short Position’
to exit this position probably, you have to buy the stock at a lower price than that you sold it for.
Read more- investing with Harshal Patil