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What Are Stocks?

Stocks are shares in a company listed on the stock exchange. Stock holders are considered owners of the company. Learn more about stocks here.

Stocks (also known as shares or equities) are a type of financial instrument issued by a corporate organization with a view to raise capital. When you buy the stock of a company, you are actually helping the company raise capital; such a transaction gives you proportionate ownership of the company.

When you buy the stock of a company, you are actually helping the company raise capital; such a transaction gives you proportionate ownership of the company.

Stocks of various companies are listed and traded on the stock exchange. They can be bought and sold on the stock exchange by anyone who has a demat account. Various individuals, brokerages, traders and corporate entities trade stocks through the two major stock exchanges in India, namely the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Companies need to meet specific criteria in order to get listed on the stock exchange and issue shares to investors. Some of the largest Indian companies have issued stocks to shareholders in order to start a business and raise capital.

Understanding stocks better…

Here's an example to understand stocks better: imagine that you want to start a business that requires an initial capital of Rs 1,00,000. In order to raise these funds, you divide the company in 10,000 pieces and sell each piece at Rs 10 to people who are interested in investing their money in your business.

All the buyers are owners of your company in proportion to the number of shares they hold. Consequently, they are given profits of the company in the same proportion.These shareholders elect a few people—known as the Board of Directors—to take active interest in day-to-day operations of your business. If any of the stock holders wish to quit being an owner, all they have to do is call their broker or log into their demat account and sell their holdings.

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