What Are Stock Fundamentals? - ShapeMeGood

Stocks! Do you know what is called 'STOCKS'?


Content 

  • Introduction of stock
  • What are stocks - share vs stocks 
  • How stock makes money in Stock Market
  • Are there any pros for understanding stocks
  • The cons of  misunderstanding of stocks
  • Why investing in stocks brings you a ton of opportunities.

Introduction to Stocks

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Whenever the term STOCK comes, the most common question is what is a stock? 

And many are new to this term. So to clear this, a stock is a bundle of shares that are the parts of company ownership that can be bought by the general public. 

It simply means a part of a company available to the public to buy as a means to raise funds.

You can buy stocks in the stock market and the basics intention to buy stocks is to earn a profit from that owned part of the company.

For example, you bought stocks of XYZ ltd. At $5 per share and you own 100 shares. As the market value increases the stocks are now $20 each.

Now, your invested capital was $5×100 and your present investment is $20×100. This means $500<$2000 and you earned a profit of $1500 which is your return on your initial investment.

What are STOCKS - share vs stock



Let us first understand the difference between a share and a stock.

A share is a single part of a company, it's a part of something big that is stocks or a lot whereas stock is the collection of shares, is the bigger part consists of smaller parts which are shares.

Share is a bun and the stocks are the whole packet of buns it's just that simple.


How stocks make money in the stock market.

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The stock market is the most ignored part of an industry in India. Stocks and the stock market do wonder regularly but there are only less than 5% of the Indian population that participate in the stock market.

Let us understand how the stock makes money for the investors as well as for the company.

As the stocks of a company get listed in the stock market the process of demand and supply gets commenced, the whole share market works based on demand and supply.

The stock of a company attract investor and people start buying stocks and this creates a demand in the market for that particular stock and this increasing demand increases the price of the stock which makes it a win-win situation for the company and investors.

Let us understand with an example-  XZY ltd. Gets listed in the stock market and the listing price is $300 a share and after the subscription, the price moves to $600 for each share. This surge in stock price proves as a profit for both companies as well for the investors.

Investors' point of view, their investment gets double, they gained a profit of $300 on each share. 

Companies point of view, the company's market capitalization increases 2× times.

Are there any benefits for understanding stocks?

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Yes, there many plus points for understanding stocks and their fundamentals.

  1. You can easily read stocks and companies, to better understand how the share market works you need to know how the stock moves the share market. Stocks' performance can change the market trend and its direction and every investor's basic instinct are to find the trend
  2. Your chances to make a profit increase, if you already know about the stock market then you must know that traders are better at reading the charts of any stock. The more you know the trend direction, and where the stock is taking support, and where it is resisting, your chances to book higher profit increase drastically.
  3. Your risk of loss-making reduces, what happens when a person knows after walking 4 meters there is a big hole, he naturally avoids the risk of falling in the hole. The same happens when you know that the stock is about to move in the negative direction and you just exit the trade and avoid loss. 
These are very basic benefits you get when you know the nature of stocks in the stock market.

Are there any cons of misunderstanding the Stocks Market?

Yes, unfortunately there are many downsides to misunderstanding the fundamentals of stocks.
Many people have a misconception regarding the stock market and its all because they don't know the concept of share market 

  • Stock Market and stock are two similar concepts, and it is called the stock market because it is a network where different types of stocks are present. It's like a general store. 
  • The stock market is not a casino, you tend to speculate in the stock market which will result in bad decisions.
  • When you don't know how to read you thought it was impossible but eventually as you get to know its foundation you find it easier to learn. This works the same in the stock market, it's not a hub of complexity you just don't know how to study it. 

Investing in stocks can bring a ton of life-changing events.


You won't believe it unless you try it on your own how just simply putting your money to work will change the way you live.

When you spend a good amount of time investing your way of living change, you are now not depending on your salary, you have a great source of income, you are more involving in the learning process and personal growth, you are managing your spending your time precisely, and you are getting a better understanding of needs and wants.

These types of sense evolve into something much more when you try to get more than a normal life. 





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