Stock market Introduction - Path to Financial Independence #2

"It is the set of the sails, not the direction of the wind that determines which way we will go."

- Jim Rohn

Investment is the key towards Financial Independence. When we initially start earning money, our first thought will be about what to do with it. Okay, we'll have some costs, but what will we do with the excess cash? The questions that will cross our minds are whether we should keep that money in our bank account or invest it in a fixed deposit or buy assets.

Investing in assets is a terrific method to put our money to good use.

So what is an asset?

As I have already said in my first (Path to Financial Independence) blog, Asset is something that gives us money. And Liability is something that takes money away from us.

So where to invest?

Some of the best ways of investing money are

1. Real Estate

2. Starting a business

3. Stock Market

In this blog I will give some basic insights on stock market.

What is stock market?

We all know that a market is a place where we buy and sell products. Similarly stock market is a place where individual or institutional investors come together to buy and sell (trade) bonds, derivatives, mutual funds and shares of listed companies.

Where can we trade?

We can buy and sell shares in stock exchanges. It is the place where buyers and sellers meet. Some of the examples of Indian stock exchanges are National stock exchange, Bombay stock exchange.

How is the price of the shares determined?

Let's think about this for a moment. What factors go into determining the pricing of the things we buy? It is actually dependent on Supply and Demand. The same is true here. The price of the shares will be determined by supply and demand.

What is a share?

Share is the percentage of ownership in a company or a financial asset.

Okay, I invested in the stock market. What are my options for earning money?

Earning from Capital appreciation i.e., on the gains made on the capital (principal invested) when the share price rises.

Earning from dividends - A company distributes profits to its share holders by declaring partial or full dividends. Even if we get dividends, it is important to remember that paying dividends to shareholders is not mandatory.

The first thought that comes to everyone's mind after reading the above is

STOCK MARKETS ARE RISKY.

(Take risks to live life/work to the fullest)

Everything in life is fraught with danger. Attending a job interview, for example, is dangerous because there is no guarantee that we will be hired. It is dangerous to drive on the road. To be honest, walking, jogging, eating, cooking, and even showering are all dangerous in various ways. Will we, however, cease to do so? No, we'll do them and try to keep them under control while remaining cautious.

The same is true for the stock market. Instead of complaining, get to know them and give them a try.

Rakesh Jhunjhunwala – Successful Stock Market Investor
He started his career with $100 in 1985 when the BSE Sensex was at 150. He made his first big profit of Rs 0.5 million in 1986 when he sold 5,000 shares of Tata Tea at a price of Rs 143 which he had purchased for Rs 43 a share just 3 months ago.

That concludes the Share Market Overview. Continue to read my blog for more information.

Look into Path to Financial Independence #1 as well.

Thank you for your patience, everyone. Leave your thoughts or opinions in the comments section.

Follow my Instagram page - anindependentwoman for regular updates.

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