by Sachin Mishra

Created on: May 21, 2008   Last Updated: September 11, 2008

Stock market means dealing in shares. This is true for many of the beginners. However, shares are just one investment option in the stock market. Then, to start investing as a beginner you need to understand

What is Stock Market and investment option?

Stock market is a place where you invest your surplus money to earn more on it instead of the normal bank interest. As an individual, you can opt to invest in any of the available investment options in the market. Shares, the most common investment option. Companies issues shares in the market. Investor can buy and sell these shares. Trick here is to buy these shares at lower price and sell at higher price. Only problem with this investment type is you have to analyze and judge yourself when to buy and sell called timing the stock. Another popular option is Mutual fund. In mutual funds, a person (called fund manager) does all the analysis and decides the buy and sell time of shares to earn profit. You can put your money in such a fund. Fund manager manages the money by investing money in shares and other investment options. Here you buy fund units instead of company shares. Other investment option includes Future options, bonds, Gilts etc mainly for more professional person in stock market.

How to invest in Stock Market?

After a brief on investment options, next comes how you can invest your surplus money in the stock market. To invest in stock market, you need a broker. Broker is a person or authority, authorized to buy and sell shares or units in the stock market. You have to get yourself register with these brokers. If your broker is a person than you can place your request with him/her to buy or sell a specific stock (called trading). If the broker is a bank then you can trade in stock market yourself through the medium provided by the bank. However, these banks or individual charges some money called brokerage to trade on your behalf or provide a facility for you to trade. It is very important to identify which stock to trade in for profit. To identify a profitable stock you can either follow your broker's advice or an expert opinion on regular basis through investment specific TV program, news papers or magazines. You can also identify profitable stocks at your own through techniques called technical analysis and fundamental analysis.

Money earned in stock market

You will always be happier to see gains in the stock market over your investments. There is someone else as well who shares your happiness by taking some part of your earned money through stocks. Yes, the government and its inevitable income tax. You need to declare your earnings from the stock market as these earning attracts income tax. Government charges these taxes based on how long you have kept the stocks with you. This duration is known as term - short term or long term. Usually one-year duration considered as short term and anything more than that is long term. Both of these attract different tax rates. Check with the government what these tax rates are for a these terms.

This is the brief summary of the stock market to you as a beginner. Last but not the least, it is really interesting to trade in stock market if you like the predictions and risks. Prediction is to judge the profitable stock. Risk is to loose money if prediction goes wrong. Game is challenging, so play with your surplus money only.

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