Introduction – What Are Stocks?
If you’re entering the world of investing, one question naturally comes first: What Are Stocks? As a beginner, the concept may feel confusing, but once you understand how stocks work, the entire stock market becomes easier to navigate.
This guide breaks everything down into simple explanations, real-life examples, visuals, and actionable steps—perfect for young investors and first-time learners.
What Are Stocks?
What Are Stocks?
Stocks are units of ownership in a company. When you buy a stock, you become a shareholder, meaning you own a small part of that company.
Think of it like this:
- If a company is a big pizza,
- Stocks are the individual slices,
- And when you own a slice, you own part of the pizza.
✔ Why this matters
Owning stocks means you have a financial interest in the company’s growth. If the company grows, your stock value increases. If it performs poorly, the stock price may fall.
Simple Example
If you buy 10 shares of Infosys at ₹1500 each and the price rises to ₹1800:
- Your profit = ₹300 × 10 = ₹3000
This is the basic idea behind wealth building through the stock market.
Why Do Companies Issue Stocks?
Companies issue shares for the same reason people take loans—to raise money.
✔ Main reasons companies issue stocks:
- To expand their business
- To launch new products
- To hire more employees
- To reduce debt
- To scale operations
Instead of borrowing money from banks, companies raise money by selling part of their ownership to the public.
This process is called an IPO (Initial Public Offering).
How Do Investors Earn Money From Stocks?
You can make money from stocks in two main ways:
✔ 1. Price Appreciation (Buying low, selling high)
Example:
Buy at ₹200 → Sell at ₹350 → Profit = ₹150 per share.
✔ 2. Dividends (Passive income)
Some companies share their profits with shareholders as dividend payouts.
Example:
If a company declares ₹10 dividend per share and you hold 100 shares →
You earn ₹1000 passive income.
Types of Stocks Every Beginner Should Know
Understanding stock types helps you make better investment decisions.
✔ 1. Equity Shares (Common Shares)
Most traded shares on NSE/BSE.
Shareholders get voting rights.
✔ 2. Preference Shares
Fixed dividend, but no voting rights.
✔ 3. Large-Cap Stocks
Stable companies like Reliance, HDFC, TCS.
✔ 4. Mid-Cap Stocks
Growing companies with high potential.
✔ 5. Small-Cap Stocks
High growth + high risk.
How the Stock Market Works (NSE/BSE Basics)
India has two major stock exchanges:
Both are platforms where buyers and sellers trade shares.
✔ How trading works (In simple steps)
- Company lists shares on an exchange
- Investors place buy/sell orders
- Stock brokers match trades
- Money and shares are exchanged electronically
Things Beginners Must Know Before Buying Stocks
✔ Always do research
Understand the business, not just the price.
✔ Check fundamentals
Look at:
- Earnings
- Debt
- Growth
- Management quality
✔ Don’t follow tips blindly
Avoid random WhatsApp/Telegram “sure-shot” tips.
✔ Start with small amounts
Even ₹500–₹1000 is enough for your first buy.
✔ Use trusted brokers
Examples: Zerodha, Upstox, Groww.
Risks of Investing in Stocks
Stocks offer high returns, but also come with risks.
✔ Market Risk
Prices fluctuate daily.
✔ Company Risk
A company may fail or perform poorly.
✔ Liquidity Risk
Some shares are hard to sell.
✔ Emotional Risk
Fear and greed cause bad decisions.
How to Start Investing in Stocks (Beginner Step-By-Step)
Step 1: Open a Demat Account
This is where shares are stored.
Step 2: Open a Trading Account
Used to buy/sell shares.
Step 3: Choose a Stockbroker
Check:
- Brokerage charges
- App interface
- Charting tools
- Customer support
Step 4: Add Funds
Your trading app lets you add money instantly.
Step 5: Research Stocks
Use apps like TradingView, Screener.in.
Step 6: Place Your First Order
Choose:
- Market Order
- Limit Order
- Stop Loss Order
Step 7: Track Your Portfolio
Review performance weekly or monthly.
Common Terms Beginners Should Learn
✔ Shareholder
Owner of shares.
✔ Market Capitalization
Total value of company shares.
✔ P/E Ratio
Tells if stock is over/under-valued.
✔ Bull Market
Market rising.
✔ Bear Market
Market falling.
✔ Portfolio
Your collection of investments.
FAQs – What Are Stocks?
❓ 1. Is stock market safe for beginners?
Yes, if you research well and avoid risky trades.
❓ 2. Can I start investing with ₹100?
Yes. Many apps allow investing with very small amounts.
❓ 3. Do I need a Demat account?
Yes, it’s mandatory for buying listed shares.
❓ 4. How much return can stocks give?
Long-term returns average 10–15% per year.
❓ 5. Which stocks should beginners buy?
Start with large-cap and stable companies.
Conclusion
Understanding what are stocks is the first milestone in your investing journey. Once you learn how shares work, why companies issue them, and how investors earn money, the stock market becomes less confusing and more empowering. Remember, every successful investor today started from the same point where you are now—learning the basics and taking small, consistent steps. With patience, discipline, and the right knowledge, your investments can grow into long-term wealth. Keep learning, stay curious, and explore the world of stocks confidently.
Learning what are stocks is more than just understanding financial terms—it’s about building the mindset of a true investor. Every time you study a company, read a balance sheet, or place your first order, you’re strengthening your financial literacy and future stability. Don’t rush the process; great investors grow with time, experience, and discipline. Treat each lesson as a step toward financial independence, and let knowledge be your biggest investment.
If you’re ready to learn more about the stock market, trading strategies, and beginner investing tips…
