Introduction to Stock market investing. What is stock market?

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What is Stock Market? 

Stock Market is a place where pepole(investors) buy or sell shares of a publically listed company.

Even if you are not comfortable with the terms 'shares', 'publically listed company'.Don't worry just bear with me and read this blog you will be able to understand it quickly. 

Shares

Let's start. To truly understand what stock markets is we need to know about 'shares' and how are they connected to the company. 

Imagine you're friend is starting a company named "ABC". This company needs money to grow — maybe to build a product, hire employees, or open an office. Now your friend has two choices:

        1. Use his own money, or  2. Ask others to invest in the company.

Suppose he chooses the second option. To raise money, he decides to divide the ownership of the company into small pieces.

Each small piece is called a share.

So if the company ABC is divided into 1,00,000 shares, and you buy 1,000 shares, then you own 1% of the company.

Let's see an example :

Let’s say

He needs ₹1,00,000 to start the company. But he only has ₹20,000. So he needs ₹80,000 more. What can he do? He can divide his company into small pieces and sell those pieces to other people in exchange for money.

These small pieces are called shares.

Think of a company like a big chocolate bar . If your friend cuts the chocolate into 100 small pieces, each small piece = 1 share. So,

  • ABC company = 100 shares
  • 1 share = 1 small piece of the company

If someone buys 1 share, they own 1% of the company.

Since your friend needs money, he sells some pieces (shares) to people who want to support the company.

  • ABC has 100 shares
  • Your friend sells 80 shares at ₹1,000 each
  • 80 shares × ₹1,000 = ₹80,000

Now he has the money he needs to start the business.

A share is simply…A small piece of a company that people can buy.

Publically Listed Company

Now, you will be able to understand what share is .What is Publically listed company? To understand what is publically listed company we need to understand the stages of investors. we keep it simple 

Stage 1: Angel Investors (Very Early Stage)

Imagine ABC is just an idea. Your friend has no office, no team, and no sales yet. But he is confident that his idea will work. At this point, big investors won’t trust him, because he has no proof the business will succeed. So who helps him?

🙋Angel Investors

These are usually:

  • Friends
  • Family
  • Rich individuals
  • People who believe in the founder

They give small amounts of money to help the company get started. In return, they get shares (ownership) of the company.

Example:

Your friend needs ₹5 lakh to build the first product. An angel investor gives ₹5 lakh and receives say 5% ownership of ABC.

This early money is called Seed Funding.

Stage 2: Venture Capitalists (VCs)

Once ABC grows a little—maybe it now has customers, small profits, and early traction—your friend needs more money to expand.

Example:

  • Hire more people
  • Improve the product
  • Advertise
  • Enter new cities

This time, angel investors are not enough.

So he approaches Venture Capital(VC) firms.

VCs invest larger amounts (₹50 lakh, ₹1 crore, ₹5 crore etc.) but only if:

  • The idea is strong
  • The company is growing
  • The founder is capable

They take higher ownership, maybe 10–20%, depending on how much they invest.

This is called Series A, Series B funding, etc. Each of these will be covered in a seperate blog.

Stage 3: Private Equity (PE)

Years later, ABC becomes a big business.

Now your friend wants to:

  • Expand nationwide
  • Launch new products
  • Open branches in multiple cities

This requires BIG money — maybe ₹50–200 crore. This level of investment is provided by Private Equity investors, who invest in mature companies that already have:

  • Stable revenue
  • Proven business model
  • Strong management

They invest huge amounts and take a good share of ownership.

Stage 4: IPO (Initial Public Offering)

After years of growth, ABC is now ready for the next step:

It wants to raise even more money to grow further.
It wants global expansion.
It wants to give early investors an “exit” (a chance to sell their shares).

So ABC decides to list on the stock market.

This is called an IPO – Initial Public Offering.

During an IPO:

  • The company offers its shares to the public (you, me, everyone).
  • Once listed, anyone can buy or sell ABC’s shares.
  • The company becomes a publicly listed company.

Now ABC’s journey reaches the stock market, and the shares you see trading every day are results of all these stages.

A company can directly go for an IPO, but only if it is already a well-established business with strong revenue, profit, and a clean financial history. Such companies don’t need Angel Investors or Venture Capital because they already have enough growth and stability to attract the public. However, most small or new startups cannot do this, so they usually take funding from angels and VCs before reaching the IPO stage.

Now , we are clear enough to know why these stock markets are there and what is shares. But question arises why we have to invest in it? The answer is simple to beat inflation. We will find more about it in our next blog . 

our next blog : <link will be available here once the blog is posted>




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