In today’s time, a single income may not be sufficient to live the life that one desires. With the rising costs, maintaining the same lifestyle with a single income is becoming challenging day by day. This is why many millennials and Gen Zs are turning towards the share market for a secondary source of income. If you are one of them or even if you want to take trading or investing as your full-time career, then you must be thinking how to learn Share Market Investment, aren’t you? Don’t worry, we heard you and this article is all you need to read.
Here in this article, we will cover all the spheres of the capital market where you can invest or trade, we will answer the most commonly asked question – what is equity market, and we will delve into the details of equity cash trading as well. Often, beginners in the share market find it confusing whether they should trade or invest, so we will cover the difference between the two as well in this article.
Different Segments of the Share Market Investment
The equity market is divided into certain segments. These segments differ in terms of investment.
Equity Cash Segment:
The first and most popular segment in the stock market is the equity cash segment. It is also known as the equity spot market or cash market. It is the segment where the buying and selling of stocks of different companies happen. The buyers and sellers of any stock openly buy and sell the security. One can either buy or sell the stocks in this segment in the same trading session, which is known as intraday trading, or take delivery.
Derivatives:
In this segment, the buyers and sellers do not directly purchase or sell the securities. Instead, they enter into a derivative contract to buy or sell assets at a specified rate on a specified date. The derivative contracts derive their value from the underlying asset’s price movement. So, here the buyer and the seller do not pay for the asset’s actual price for buying or selling it.
Mutual Funds:
Mutual Funds are one of the most common segments in today’s time, as they help in passive investment. Here, you do not invest in a single security; rather, you invest in a basket of different securities with the same objective or theme, or other criteria. Mutual Funds are offered by Mutual Fund Houses, Asset Management Companies, where fund managers build different schemes as per different investment goals, and you can pick the scheme that aligns with your investment goal. Here, you do not invest in stocks or other securities directly; instead, you invest a lump sum of money, which grows over time, or via the Systematic Investment Plan (SIP) method.
IPOs:
Finally, we have IPOs – Initial Public Offering. As the name suggests, it is the first instance when a company issues its shares to the general public. You need to subscribe to the IPOs, and then you can get allotted the shares of the company. IPOs take place in the primary market, unlike the above segments, which are part of the secondary market. Once you are allotted the shares you subscribed to in any IPO, then you can sell them in the secondary market, once the company gets listed on the stock exchange post IPO.
What Is the Equity Market?
So, we just read about primary and secondary markets, and these are the two that make up the equity market. The equity market is an asset-based division of the capital market, as equity is an asset. The equity market comprises equity cash segment, derivatives, mutual funds, and IPOs. Now, as mentioned above, there are two segments within the equity market which are –
- Primary market:
It is the equity market segment where companies issue their shares for the first time. Usually, companies raise capital for different objectives of the business via IPOs. Once the IPO launch completes and shares are allotted to the subscribers, then the stock is listed on the National or Bombay Stock Exchange.
- Secondary Market:
Once the stock is listed, the same becomes available for trading in the secondary market. Now, anyone who wants to buy or sell stocks has to do the same in the secondary market. Now, in this secondary market, there are different ways one can buy and sell stocks, and one of them is via equity cash trading.
Equity Cash Trading
Equity cash trading can be defined as a trading segment where trades are settled on an immediate basis. Usually in India, the cash segment trades are settled within T+2 days, where T is the trading day itself.
Here, the price of the stocks bought by the buyer has to be paid upfront in full, and the seller gets the full amount at which he or she has sold the shares.
Within the equity cash segment, intraday trading also comes in when you do not take delivery of the stocks bought or sold during the day, rather square off the trade at the end of the trading session.
If you are looking for long-term investments, then you also need to buy the stocks from the equity cash segment and take delivery of the same and hold them for your desired period. This is the difference between trading and investing. We will also elaborate on this later in the article. For understanding how equity cash trading works, you can join an equity market course online.
How To Invest in the Equity Cash Segment?
If you are wondering how to invest in the equity cash segment, here are all the details you need to know.
- You need to open a free Demat account and a trading account with a brokerage house
- Once the accounts are live, fund your trading account by linking your bank account
- Then you can start trading or investing via the equity cash segment
- Once the trading platform and select the stocks you want to trade or invest in
- Click on the buy or sell button
- Enter the number of units of the stock you want to buy or sell
- You can choose the market price or a Limit order for the price of the stock
- Then click on order
- Once the order is executed, you can see the stocks in your portfolio, and if you have sold the stocks, then your amount will be credited within T+2 days.
For a detailed understanding of how this equity cash segment works, you can join one of the best courses for the stock market, which are available online.
Difference Between Trading and Investment
For anyone who wants to start in the equity market, it is crucial to understand the difference between trading and investing. Here is a detailed comparison between the two –
| Basis | Trading | Investing |
|---|---|---|
| Definition | Trading is a short-term phenomenon involving the buying and selling of securities. | Investing is a long-term phenomenon involving the holding of securities. |
| Objective | Short-term gains | Building wealth |
| Time frame | Can vary from a few minutes to a few days or months | Usually, in years, depending on the investment goals or the type of securities invested in |
| Analysis of the Market | Mostly Technical Analysis | Mostly fundamental research and analysis |
| Risk Involved | High Risk | Comparatively lower risk |
| Involvement | Requires continuous tracking of the market, complete involvement | It can be done passively as well |
| Transaction costs | Higher transaction costs | Lower transaction costs |
| Tax Imposition | Higher taxes due to short-term capital gains | Usually, lower taxes owing to long-term capital gains |
Wrapping Up
So, if you are thinking about how to learn share market investment and are curious about the equity market, and within that equity cash segment, you must join free online trading courses in India. For understanding the market from the core, you need to start practicing what you learn, and you can do so by opening a Demat account and starting with small amounts.
