How to Buy us stocks – Best Platform to buy us stocks 2022

How to Buy us stocks - Best Platform to buy us stocks

What is share market ( stock market)

what is stock or share market and the Best Platform to buy us stocks Now since this is a course on the stock market I’m going to start by defining what is a stock or a share but instead of just giving your definition upfront I’m going to give you an example so that you get a better feel on the topic Now let’s say you have some money saved up and you want to start a manufacturing business.

so if you have $10,000 saved up and you are using that to start a business the first thing you probably would need is a place where you can manufacture goods let’s assume that real estate is very cheap where you live and say you buy a place for $3000 you are very smart and you want to keep an account of what you’re doing.

and so you write it down Since you purchased a piece of land or building for $3000 you write this transaction down So you write downland or building and right beside it you write down $3000 Next you probably need some Manufacturing Equipment and that costs you another $3000.

You again note it down and write machinery $3000 Next you will also need some raw materials that can be fed into the machinery So that you can produce finished goods also probably you need employees to operate the machinery and you need to pay them Apart from that you need to pay for other miscellaneous expenses like electricity bill etc.

keeping all this in mind you keep the remaining $4000 of cash that you will use as needed now to make sure you have accounted for all the money you need to keep track of the original money you started with so on the right-hand side you create another column and write down your original sum of $10,000 in accounting.

the term owner’s equity is used to denote this sum so we are also using the same term here so in order to keep track of our investment we have created this simple table which is actually a simplified balance sheet by looking at the sheet anyone can clearly see that around $3000 was invested in Buildings.

another $3000 went into machinery and the $4000 is kept as cash for meeting other expenses related to the business All these items are denoted as assets and since the business owner paid for all of these assets he owns everything and this is denoted as the owner’s equity of $10000 on the right-hand side of the table.

since the total on the left-hand side and the right-hand side of the table is the same we can be sure that we have accounted for every penny of the business owners money Now let’s assume instead of having $10,000 in savings you have only $8000.

Now if you want to start the same business At the same scale with the same assets, you are short of Capital by $2000 So now what do you do Obviously you can get a loan for this amount to fill for this short fall in order to keep track of the money we represent this item In our balance sheet as borrowings.

So on the right-hand side, we write borrowings and against This item we write $2000 Now this balance sheet reflects the fact that you don’t have complete ownership of all the assets of the business in fact now your ownership is only limited to the net assets of the company net assets is essential.

the value of assets after settling your liabilities due to borrowings Hence net assets is defined as total assets – Total liabilities This is so because now the business has an obligation to people who have to lend the business money Now the lenders hope to receive interest over the borrowing period and also the principal after the borrowing period has ended.

so if you have to liquidate all your assets today these people have the right for their money to be returned to them and their right comes before the rights to these assets accordingly the value of your equity is equal to the net assets of the company.

So this is how the balance sheet of a simple business looks like Now shares or stocks essentially represents one’s business interest in the owner’s equity Continuing with this example if for some reason you decide that you no longer want to invest $8000 in the business and say now you only want to invest $4000 as you need the rest of the capital for something else.

But at the same time, you don’t want to disturb the activities of the current business by either reducing the size of the business or borrowing more money you have the option to bring another partner who can give you $4000 and in return will become a part-owner of the business.

This partnership can be represented by a piece of paper or agreement that states that you own 1 share that is worth $4000 and your partner owns one share which is worth $4000 by making this arrangement you have managed to release.

the money without affecting a running business this arrangement also clearly says that since you own one share out of a total of 2 shares issued by the business you have 50% ownership of the net assets of the company this also means that each shareholder has the right to 50% of a business’s net profits this net profit is arrived after being the borrowers that interest due to them on the loans.

Hence here too you are entitled to a share in the profits of the Company only after the lenders have got their due So now we will formally define what is stock or share A stock or share represents a fixed percentage of ownership in a company or business, for example, if a company has issued a hundred shares and if someone were to own 1 share than they essentially have 1% ownership in the company.

this means that the shareholder has the right to 1% of the net assets of the company and they also have a right to 1% of the net profit of the company. So now having defined what is .. stock or a share next we are going to see what is a stock market now a stock market is a marketplace for stocks where willing buyers and Sellers of stocks come together and trade with each other this trading may happen either on a stock exchange.

where the exchange manages the risk of trading in various stocks Or this trading may happen privately between two willing parties stock exchange is essentially a platform where buyers and Sellers transact in any security We will cover stock exchanges in a greater detail in a later lecture.

but what is important to note is that even in the case of private trading where two willing parties trade each other in case the stock they are trading is listed on an exchange then the buyer and the seller in case of private trading are also obliged to register the trade with the exchange.

However in case the stock of the company being traded privately is not listed on the exchange, then this is not applicable for the purpose of this course we are limiting ourselves to stock trading on exchanges when it comes to the stock market and stock exchanges the trading of stocks may happen either in the primary market or in the secondary market.

2 thoughts on “How to Buy us stocks – Best Platform to buy us stocks 2022”

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