#100ThingsIlearnt- Lesson: 2- What is all this stocks and shares?- The basics.

 Hello, I have had some overwhelming views, on the blog and  it feels amazing. Knowing at least one person must have learnt something through me. Remember I told you, you would most definitely only learn things you can apply? Well, I am not sure you will apply this lesson, but I would advice you to. Being a proud daughter of an ex-serviceman and a current bank manger, I will tell you what my dad has told us always " Saving is a necessity". SOUNDS BORING, doesn't it? And I am telling you it really, really is, if you dont love economics and don't like your head wrapped around inflows,emerging markets, risk management yada yada. This is not for you. But the good news is, when you have some money and can throw it around someone does these things for you and you just sit there watch money come your way. 
But for my dad, it is not how it is done. Not in our household. So what if he has two daughters in a stereotypical world that looks down upon only men that dont know squat about investing? He wants us to take control and learn. I am not saying I know all about it, but I know my bit and learning has improved it. So I am going to tell you the little I know, and try not to bore ( Because, It really really can be. ) Stay awake till the end,okay? This knowledge is worth it. 


So, somethings you should know before you read further, are these things : 

1. Do not blindly invest. Don't go by he said,she said. EVER. Unless the he or she knows everything under the sun there is to know about investing and does it himself.
2. Do not spend what you dont have. For heaven's sake if you are on like a tight budget (and no, partying today and expensive brunch tomorrow is not included),if you are hands to mouth dont do it, but if you still want to, invest in small amounts (You are not Mohandas Pai, you dont know everything. You dont know him either, do you? Sigh. This is tough road then, but stay on! )
3. READ. Papers, books,blogs. Keep doing that unless you reach out to someone who you connect and understand well. You wont understand anything at first but you will ease into it, these are my top five picks, PICK AT LEAST ONE, At least download or buy them to make yourself feel better that you are trying.      

•  Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere 
•   Rich Dad, Poor Dad" (2000) by Robert Kiyosaki 
• Think and Grow Rich" (1937) by Napoleon Hill
•   The Neatest Little Guide to Stock Market Investing (RevisedEdition) by Jason Kelly 
• Peter Lynch - One up on wallstreet.  

But you should really read more, if you're wanting to do this for real, if you are not into reading just go to your dad. All dad's know this stuff. It is like their own kind of magic.

      4.  Think. And Think long term. This is not money for your new limited edition shoes, it is for the dream house you have been going at in your head since forever.

      5.  Play around. There are so many virtual stock games out there,  do them and when you are confident go ahead. I liked these

•  Wallstreet survivor
• Teach me to trade

  Okay I think you know enough, of these tips will overpower everything I have to say!

Let's exploreeeeeeeeeeeeeeeeeeeeeeee.

Okay one last thing, I have to tell you. I am going to make this about Indian stock market, because it is what I learnt about. But there is no one saying you can't invest in India or that making this about the US markets would be better, because you know what? I read this, and I think we should change it.

Indians are hugely equity averse.  Only 1.2% of the Indian household financial savings is directly invested in shares (2010-2011).  This amounts to a laughable figure of 2.5 Billion dollars for the entire Indian household population 

So Indian market is divided into 2 stock exchanges, BSE and NSE. BSE has close to 4700 odd companies listed while NSE has 1200 odd. 

Now if you know people who are into stock exchange, you will see the constantly following NDTV & CNBC, if you bothered to look, you will see something like this. 

What is this you ask? they are called index. You need someone to tell you if your share prices are high or not,right? These tell you that. We have two here SENSEX and NIFTY. But have you noticed these things don't have 4500 or even 1200 companies shown? Are you womdering, if these are all listed why dont they show them? It is not a stupid question at all. But there is lot of explaining to it, I will keep it simple though. So imagine your mom earns 50 bucks and your dad earns 100 a day and you do some chores around and earn 20, will how you guys survive today depend on your 20 or the 150 that your parents bring to the table? The latter right? Just like that, our economic stand in each sector can be determined by looking at the top few companies. So SENSEX has 30 core companies that tell us if we are doing well or not. Then you map these and decide if you should invest in them or not. And NIFTY has 50 companies(NIFTY FIFTY, that's how I remember it )

So you know this, but where is all this mysterious work done?

 

I mean there has to be some market right? IF you watch enough movies you will see people rushing to one place, yelling out things like " Take 100 of TCS give 4000 SBI" . Huh,what? Well, there are two ways to do it, you go to the exchange floor, (NYSE works this way), or

Electronically(NASDAQ,comes into picture here)

If you think you do the work here, you dont. You have a broker that makes sure when you have 100 shares of TCS to sell someone is willing to give you 4000 SBI's share for it. You get the drift?

Now, all this said and done someone has to put the ground rules and say what to do and what not to right? SEBI does exactly that ( Securities & Exchange Board of India) . So when you look into  brokers, you have to make sure they are registered with SEBI. 

So you want to make sure your trade is placed, how do you do that? Well your broker maintains every transaction and you have Unique code for each of them. The payment for the shares purchased is required to be done prior to the pay in date for the relevant settlement or as otherwise provided in the Rules and Regulations of the Exchange.In case of sales, you get your money within 24 hours give or take. 

So now you know the basics, but there is so much more to this story. That being said, it is exhausting all this information thrown at your face. So I decided, I will post it in three parts,  next two being intermediate and expert(well, not expert trader, but knowledge wise, yeah much more to come) 

I think I kept it interesting, at least I know I will come back and read this if my mind loses sight about this. That is good enough. I sincerely hope, I  piqued your interest too. Until next time we talk economics, bye bye :). And you know what? Warren Buffet first traded at 11. So unless you're 9, dont tell me, this is all too early information for you. GET ON IT.

Keep learning.