After the Initial Public Offering (IPO) process, the stock trades in secondary market also called the stock market. The shares come in secondary market for trades and trades on stock exchange on which IPO has been launched on daily basis. There are several reasons for market participant to trade that stock. We will discuss those reasons in this article.
Fundamental of Stock Market:
The stock market is an electronic market where buyers and sellers meet and trade their stocks.If there are two traders in the stock market and one has the positive point of view on particular stock and other has negative point of view. Then there will be trade in between them the system will meet the buyer with seller. The secondary market or stock market is a place where market participants can have access to any listed stock and trade them from their point of view, as long as there are other participants who have a different point of view. After all, opposingpoint of viewsis what makes a market.
Why Stock Market Move?
The stock market moves on various news and events. Suppose, a company has very good fundamentals and the company see fascinating growth in coming years. Then the stock price will started to move in positive direction as investor will have positive view in the stock. On the other hand, if a company has any negative news or the company has reported bad results then the stock price of that stock may result in falling in the stock price of that company. There are many economic data also which impact the stock market too. If thecountry sees growth in future then the stock market will result in positive way. For example, when Narendra Modi became prime minister of India the stock market perceived this as a positive news and result in positive sentiment in the stock market. However, many times stock prices moves without any news because of demand and supply situation.
What does owning a stock means?
After you buy any stock that stock goes to your DEMAT account. If you have stock in your DEMAT account you are part owner of that company. As much holding in particular stock you have that much part ownership you will have. Also, if you have any company’s stock that will be result in entitlement of several benefits like dividends, stock split, bonus, right issue, voting rights etc.
How long you can hold a Stock?
The holding period of any listed stock can be as short as few minutes or the holding period could be also forever. Any investor can hold his stockas long as the company is in the stock market. Many long term investors keep the good stocks in their portfolio for their life time and enjoy the benefits of stocks like dividends. However, an investor can book his profit or exit from the stock at any time he wants and find other opportunity. Investors are mostly advised to stay invested in good stocks for long term in order to get good returns.