3 Replies to “what is stocks,shareholders,mutualfund,sensex,nifty?”

  1. A company issues portions of ownership and calls these stocks (or shares). So the stockholers (or shareholders) are the people who own part of a company. If the company is called “publically traded”, the shares trade on a stock exchange.

    Now a mutual fund is run by a mutual fund company and they buy stocks or shares in many differnt companies. So If the average investor buys UNITS of a mutual fund, they are buying a small piece of many different investments which are
    “pooled” in the mutual fund. Note that different mutual funds invest in differnt things. Some Do not invest in stocks or shares, but might only invest in governmnet bonds for example, or precious metals. Mutual funds are a very good way for an individual who has a small amount of money to diversify their investments. A BALANCED mutual fund will invest in some bonds, some stocks, some high risk investments, some low risk investments, etc.


  2. hi rajesh..

    DONT GET WORRIED BY SEEING CONTENT..I HAV WRITTEN IN COMPLETE LAYMAN TERMINOLGY..U JUST GO AHEAD..ALL D BEST

    pls read carefully (a) STOCKS and SHARE HOLDERS

    What are stocks? Definition:
    Plain and simple, a “stock” is a share in the ownership of a company.

    A stock represents a claim on the company’s assets and earnings. As you acquire more stocks, your ownership stake in the company becomes greater.

    Note: Some times different words like shares, equity, stocks etc. are used. All these words mean the same thing.

    So what does ownership of a company give you?
    Holding a company’s stock means that you are one of the many owners (shareholders) of a company and, as such, you have a claim to everything the company owns.

    This means that technically you own a tiny little piece of all the furniture, every trademark, and every contract of the company. As an owner, you are entitled to your share of the company’s earnings as well.

    These earnings will be given to you. These earnings are called “dividends” and are given to the shareholders from time to time.

    A stock is represented by a “stock certificate”. This is a piece of paper that is proof of your ownership. However, now-a-days you could also have a “demat” account. This means that there will be no “stock certificates”. Everything will be done though the computer electronically. Selling and buying stocks can be done just by a few clicks.

    Being a shareholder of a public company does not mean you have a say in the day-to-day running of the business. Instead, “one vote per share” to elect the board of directors of the company at annual meetings is all you can do. For instance, being a Microsoft shareholder doesn’t mean you can call up Bill Gates and tell him how you think the company should be run.

    The management of the company is supposed to increase the value of the firm for shareholders. If this doesn’t happen, the shareholders can vote to have the management removed. In reality, individual investors like you and I don’t own enough shares to have a material influence on the company. It’s really the big boys like large institutional investors and billionaire entrepreneurs who make the decisions.

    For ordinary shareholders, not being able to manage the company isn’t such a big deal. After all, the idea is that you don’t want to have to work to make money, right? The importance of being a shareholder is that you are entitled to a portion of the company’s profits and have a claim on assets.

    Profits are sometimes paid out in the form of dividends as mentioned earlier. The more shares you own, the larger the portion of the profits you get. Your claim on assets is only relevant if a company goes bankrupt. In case of liquidation, you’ll receive what’s left after all the creditors have been paid.

    Another extremely important feature of stock is “limited liability”, which means that, as an owner of a stock, you are “not personally liable” if the company is not able to pay its debts.

    In other legal structures such as partnerships, if the partnership firm goes bankrupt the creditors can come after the partners “personally” and sell off their house, car, furniture, etc. To understand all this in more detail you could read our “How to incorporate?” article.

    Owning stock means that, no matter what happens to the company, the maximum value you can lose is the value of your stocks. Even if a company of which you are a shareholder goes bankrupt, you can never lose your personal assets.

    B)MUTUAL FUNDS

    What are Mutual Funds?

    Mutual funds are one of the most convenient way to invest! Mutual funds allow you to invest your money like an expert without being an expert!

    Basically, mutual funds are a way for you to outsource the whole “investing” headache to people who are experts at investing. Simply put, you give the money you want to invest to people who are experts at investing. They will invest your money and make it grow & for this service they charge you a small fee!

    Why invest in mutual funds?
    Good investing generally requires a good knowledge about the market, economics, world politics and a lot of experience etc. Most people who want to invest their money, do not have the time to follow and learn all these things. For them “Mutual Funds” are the best option. You do not have to worry about anything when investing in Mutual Funds. You just have take out the money for investing. The Mutual Fund managers are people who will do all the work for you and make your money grow!

    The actual process of investing in mutual funds is also quite easy. You do not have to do anything except for write a cheque and give it to the mutual fund company. You do not have the hassles of using a “broker” or a “demat” account or anything.

    Besides this, there are certain mutual funds that will “really” help you in your financial planning. There are certain mutual funds that are designed to help you invest and accumulate money for your “big buys”! All in all, we highly recommend that you use mutual funds for investing, as you are probably a new investor.

    Mutual funds have some risk associated with them. But the risk is not very high. It is generally considered to be a moderately safe investment. However, mutual funds can produce pretty good returns!

    One of the best things about mutual funds is that they are “liquid”! What is liquid? To understand what “liquid” means, let us try to understand what non-liquid investments are.

    There are some investments that take some time period to “mature”. This means that once you invest the money in the investment, you cannot withdraw it until the time period is up. Once the time period is up, then only will you be able to withdraw the money you invested and the returns produced. These investments are non-liquid. If on the other hand, you can withdraw the money invested and the returns at any point of time, then the investment is considered to be a liquid investment.

    Generally, it is good to try and put your money in liquid investments. This is because in case there is a sudden need for money like an operation, an accident etc. you should not have to borrow money. You should have the money available.

    Mutual funds are very liquid investments. The process of re-claiming your money in most mutual funds will take a maximum time of 2-3 days.

    How to invest in mutual funds?
    There are many different kinds of mutual funds. Instead of trying to figure out what is good for you what is bad for you etc, you should get yourself a good mutual fund agent! You just call one of these agents up and tell them you invest in mutual funds. They will help you out with everything that you need to know. You just have to tell them what kind of “financial aims” you have and they will come up with a whole plan for you to reach your “financial aims”!


  3. stocks and shares mean the same viz. extent of holding in share capital of company. shareholder is a person who holds shares in a company. mutual fund is a conduit organization which enables to indirectly partcipate in share capital and also debt instruments. an investor invests in mutual fund scheme, and the mutual fund invests the funds so collected in shares of company and/ or in other instruments. the returns from shares etc. are reflected in net asset value of m.f. scheme.





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