What are Stocks? A Complete Beginner’s Guide
What are Stocks? A Complete Beginner’s Guide
Author: Janamana | Updated: October 2, 2025
Introduction
“Stocks” or “Shares” represent your ownership stake in a company. When a person buys shares of a company, they become a shareholder, which means they share the company’s profits and losses.
How Do Stocks Work?
Companies sell equity shares to raise money.
These shares are bought and sold on the stock market such as
NSE (National Stock Exchange) & BSE (Bombay Stock Exchange).
➡ Example:
If a pizza has 10 slices and you buy 2 slices, you own 20% of the pizza.
Similarly, owning shares gives you a percentage ownership of the company.
Types of Stocks
- Common Stock: Voting rights + dividends (if announced).
- Preferred Stock: Fixed dividend but no voting rights.
- Growth Stocks: Focus on rapid company growth.
- Value Stocks: Undervalued companies.
- Blue-Chip Stocks: Large and stable companies (Infosys, TCS, Reliance).
Benefits of Investing in Stocks
- Capital Appreciation (Price increases)
- Dividends (Profit share)
- Ownership in the company
- High Liquidity
- Inflation protection
Risks of Stocks
- Market Volatility
- Company-specific risk
- Economic recessions
- Psychological pressure
How to Buy Stocks in India?
- Demat Account: For storing shares electronically (NSDL/CDSL).
- Trading Account: For buying and selling (Zerodha, Groww, Upstox).
- KYC Documents: Aadhaar, PAN & Bank Account.
- Stock Exchanges: NSE & BSE.
- Regulated By: SEBI.
Stocks vs Mutual Funds
| Factor | Stocks | Mutual Funds |
|---|---|---|
| Ownership | Direct ownership of a company | Indirect ownership through pooled money |
| Risk | High | Moderate |
| Management | Self-managed | Professional fund manager |
| Returns | Potentially very high | Moderate to high |
Investment Tips for Beginners
- Start small (₹5000–₹10000)
- Diversify across sectors
- Invest long-term (5–10 years)
- Avoid risky penny stocks
- Learn fundamental & technical analysis
FAQ – Frequently Asked Questions
1. What are Stocks?
Stocks represent your ownership share in a company and rights to its profits.
2. Why is a Demat Account needed?
It stores your shares in electronic form safely.
3. What is the difference between NSE & BSE?
These are the two major stock exchanges in India.
4. How much profit can I make from stocks?
Profit depends on the company performance and market conditions.
5. Where should beginners start?
Begin with Mutual Funds (SIP) or Blue-Chip Stocks.
