Introduction: Shares Made Simple
Imagine your favorite pizza place is expanding and needs money. Instead of taking a loan, the owner asks friends and customers to chip in ₹1,000 each. In return, they get a small ownership slice of the business—and a share of future profits.
That’s essentially what a share is—a tiny piece of a company you can own!
But how does it actually work? Why do people buy shares? And can you benefit from them? Let’s break it down.
What Is a Share?
A share (or stock) represents a single unit of ownership in a company.
- When you buy a share, you become a part-owner of that business.
- Companies issue shares to raise money (instead of borrowing).
- Shares are traded on stock markets like BSE (Bombay Stock Exchange) or NSE (National Stock Exchange).
Real-Life Example:
If Reliance Industries has 10 lakh (1 million) shares and you buy 1 share, you own 0.0001% of Reliance. Tiny, but still ownership!
Why Do Companies Issue Shares?
Companies sell shares to:
- Raise money for growth (new factories, hiring, research).
- Avoid debt (no loans = no interest payments).
- Share profits (and risks) with investors.
Analogy:
Selling shares is like crowdfunding for businesses—except instead of a thank-you note, you get actual ownership!
Why Do People Buy Shares?
Investors buy shares for two main reasons:
1. To Earn Profit
- Price Appreciation: If the company grows, share prices rise.
- Example: You buy 1 share of Tata Motors at ₹500. Later, it rises to ₹800 → You sell and earn ₹300 profit.
- Dividends: Some companies share profits with shareholders (like a bonus).
2. To Own a Business (Without Running It)
- Ever wanted to own Infosys, HUL, or ITC? Buying shares lets you do that!
How Do Shares Work?
- Company IPO: A business first sells shares to the public via an IPO (Initial Public Offering).
- Stock Exchange Listing: Shares are then traded daily on markets (BSE/NSE).
- Price Fluctuations: Share prices change based on demand, company performance, and economy.
Example:
- Day 1: You buy 1 HDFC Bank share at ₹1,500.
- Day 30: HDFC announces record profits → Share price jumps to ₹1,800.
- Result: Your investment grew by ₹300 (20%)!
Types of Shares
| Type | Key Feature | Best For |
|---|---|---|
| Common Shares | Voting rights + dividends | Long-term investors |
| Preferred Shares | Fixed dividends (no voting) | Steady income seekers |
Risks of Buying Shares
- Prices can fall (you may lose money).
- No guaranteed returns (unlike FDs).
- Market volatility (short-term ups & downs).
Rule of Thumb:
*Only invest money you won’t need for 5+ years.*
How Can You Buy Shares?
- Open a Demat Account (e.g., Zerodha, Groww).
- Transfer funds to your trading account.
- Buy/Sell shares via the broker’s app.
*(We’ll cover a step-by-step guide in another post!)*
Final Takeaways
✔ A share = ownership in a company.
✔ Companies sell shares to raise money without loans.
✔ Investors buy shares to earn profits (price rise/dividends).
✔ Risky but rewarding—long-term investing works best.
