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Equity Basics

Equity Trading Basics For Beginners

A stock is a share in a company's ownership, on its assets and profits earned. It signifies a small stake on everything under its name; licenses, trademarks, personal assets. It enables a company to find multiple owners through its monetary purchase, who will be gaining a right to make decisions in its functioning, including a right to vote. The extent to which one owns a percentage of profit and has a say in the functioning of the company is proportional to the money they have invested.

It's hard for a common man to have any material influence as the amount being shared is less and voting rights are restricted to selecting the board of directors, annually.

Why does a company offer shares?

It requires money to make business, for its daily functioning. It can either raise money by taking a loan from a bank or by issuing a public offering of shares. The former is an example of debt financing, issued through a bond where the company is liable to pay the amount with an interest promised, while the latter is an example of an equity share, an investment which carries a risk of loss if a company results unsuccessful.

Open equity trading account

In a share market, different companies offer trades which could be concluded online. If you are an account holder with a bank, your online equity trading account would correlate with your Demat account, facilitating a transaction electronically. To use it as a channel, the bank or a third party (usually a broker) will negate a specific charge."

Zero brokerage and Equity brokerage

Let us understand these through examples;A broker charges you 1 paise on an intraday transaction. You buy a share of a company for Rs. 70 a piece, a total of 1000 shares and sell it on the same day for Rs. 80 a piece.The brokerage would then amount to (1000*70*.01% + 1000*80*.01%) = 70 + 80 = 150 Rupees.You could leverage this as an example of equity brokerage.Otherwise if your broker charged you a flat Rs 15 for a trade, your transaction would work out to be Rs 40, an example of zero brokerage.
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