A share market enables the issuance and trade of shares. The key difference between a share market and a stock market is that a stock market assists you in trading financial instruments like bonds, derivatives and shares of companies. A share market allows the trading of shares only.
The stock exchange is the primary platform to trade company stocks and other securities. Two kinds of share markets are– primary and second markets.
Primary Market is a place where a company is registered to issue a certain amount of shares to raise money. When new securities are once sold in the primary market, these shares are traded in the secondary market. This provides investors a chance to exit an investment and sell the shares. Secondary market transactions are trades where one investor buys shares from another at the prevailing market price or at a price upon which the two parties agree.
Usually, investors conduct such transactions using an intermediary, such as a broker, who facilitates the process. Different brokers offer different plans.
When a trading account and a Demat account invest in the share market, this trading and Demat account will be further linked to your savings account to enable an easy transfer of money and shares. Four key financial instruments traded in the Stock market are ‘Bonds,’ ‘Shares,’ ‘Derivatives’ and ‘Mutual Fund.’
A bond is a way of investing money by lending to others. When you invest in bonds, it shows the face value, the coupon rate, the interest payments, and the deadline for paying back the money called the maturity date.
Shares are a certificate of ownership of a corporation. Hence, as a stockholder, you share a portion of the company’s profit and a portion of the loss a company may take. As the company keeps growing, your stocks will increase in value.
Mutual Funds are investment vehicles which enable you to invest indirectly in share markets or bonds. It pools money from many investors and then invests that amount in financial instruments. An expert fund manager manages this.
Every mutual fund scheme issues units with a fixed value like a share. When you invest, then you become a unitholder. When the MF scheme invests in making money, as a unitholder, you get money.
The value of financial instruments keeps varying. So, it is hard to fix a certain price. Derivatives instruments come in handy here. These are instruments that assist you in trading in the future at a price that you fix today.