“If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffett
The stock market might seem confusing, risky, or even intimidating — especially if you’ve never invested before. But once you understand the basics, it’s not as mysterious as it seems.
This guide is your simple, no-jargon introduction to how the stock market works — what it is, why it matters, and how you can start investing confidently.
What Is the Stock Market?
The stock market is a place where buyers and sellers trade shares (also called stocks) of companies. It’s like a giant online marketplace — but instead of buying groceries or clothes, you’re buying ownership in a company.
What Is a Share or Stock?
A share is a unit of ownership in a company. When you buy a share, you become a part-owner of that company.
- Buy 1 share of TCS → You own a tiny piece of TCS
- The more shares you own, the more stake you have
If the company grows and earns profits, its stock price usually goes up — and you benefit as a shareholder.
Why Do Companies Sell Shares?
Companies raise money from the public by offering shares through an Initial Public Offering (IPO).
They use this money to:
- Expand their business
- Pay off debt
- Build new products or services
In return, you — the investor — can potentially benefit from the company’s growth.
Where Do People Buy and Sell Stocks?
In India, stocks are traded mainly on two exchanges:
- NSE (National Stock Exchange)
- BSE (Bombay Stock Exchange)
You don’t go there physically. You trade online using a broker or investment app (like Zerodha, Groww, Upstox, etc.).
What Makes Stock Prices Go Up or Down?
Stock prices change every second based on supply and demand.
Factors that affect stock prices include:
- Company performance (profits, growth, news)
- Market sentiment (investor emotions and confidence)
- Global events (war, oil prices, elections, etc.)
- Interest rates and inflation
- Government policies
Example: If a company announces big profits, more people want to buy its stock → price goes up.
How Do You Make Money in the Stock Market?
There are 2 main ways:
1. Capital Gains
Buy low, sell high.
Example: You buy 1 share at ₹100 and sell at ₹150 → You earn ₹50.
2. Dividends
Some companies share profits with shareholders in the form of dividends.
Example: Infosys pays ₹10 per share every year. If you own 100 shares, you get ₹1,000/year.
What Is a Demat Account?
Just like you store money in a bank, your shares are stored in a Demat (Dematerialized) Account.
To buy/sell stocks in India, you need:
- A Demat account (to hold shares)
- A Trading account (to buy/sell shares)
- A Bank account (to deposit/withdraw money)
You can open these for free using apps like Zerodha, Groww, or Upstox.
What Are the Risks?
Stocks can offer high returns, but they come with market risks. The value of your shares can go up or down daily.
Common risks include:
- Market crashes
- Poor company performance
- Global economic slowdown
- Panic selling
That’s why it’s important to:
- Invest for the long term
- Diversify across multiple stocks
- Avoid following random tips or rumors
Who Should Invest in the Stock Market?
Anyone who wants to grow their wealth over time.
Ideal if:
- You can stay invested for 5+ years
- You can handle short-term ups and downs
- You’re willing to learn before you leap
Beginner Tips Before You Start
- Start small (₹500–₹1000)
- Invest in large, stable companies (like Infosys, HDFC, TCS)
- Don’t chase quick money
- Use SIPs or mutual funds if you’re unsure
- Read and learn — books, blogs, and beginner guides
Stock Market vs Mutual Funds (Quick View)
| Feature | Stocks | Mutual Funds |
|---|---|---|
| Control | You choose stocks | Fund manager chooses |
| Knowledge Needed | High | Low to Medium |
| Diversification | You build your own | Already diversified |
| Time Involved | High | Low (hands-off) |
| Ideal For | Informed investors | Beginners |
Final Thoughts
The stock market is not a casino. It’s a powerful wealth-building tool — if used wisely.
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Philip Fisher
Don’t wait for the perfect moment. Start small, learn the basics, and grow slowly.
Because your first lakh can begin with your first stock.
Want to Learn More?
- Follow @myfirstlakh on Instagram and Twitter
- Write to us: myfirstlakh@gmail.com
- Explore our beginner guides on SIPs, and Mutual Funds, and Debt Management
