In finance a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. In British English, the usage of the word share alone to refer solely to stocks is so common that it almost replaces the word stock itself.

In simple Words, a share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market.

By owning a share you can earn a portion and selling shares you get capital gain. So, your return is the dividend plus the capital gain. However, you also run a risk of making a capital loss if you have sold the share at a price below your buying price.

A company's stock price reflects what investors think about the stock, not necessarily what the company is "worth." For example, companies that are growing quickly often trade at a higher price than the company might currently be "worth." Stock prices are also affected by all forms of company and market news. Publicly traded companies are required to report quarterly on their financial status and earnings. Market forces and general investor opinions can also affect share price.

Quick Facts on Stocks and Shares

• Owning a stock or a share means you are a partial owner of the company, and you get voting rights in certain company issues
• Over the long run, stocks have historically averaged about 10% annual returns However, stocks offer no
  guarantee of any returns and can lose value, even in the long run
• Investments in stocks can generate returns through dividends, even if the price

How does one trade in shares ?

Every transaction in the stock exchange is carried out through licensed members called brokers.

To trade in shares, you have to approach a broker However, since most stock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders.

The general investors should identify a sub-broker for regular trading in shares and palce his order for purchase and sale through the sub-broker. The sub/broker will transmit the order to his broker who will then execute it .

What are active Shares ?

Shares in which there are frequent and day-to-day dealings, as distinguished from partly active shares in which dealings are not so frequent. Most shares of leading companies would be active, particularly those which are sensitive to economic and political events and are, therefore, subject to sudden price movements. Some market analysts would define active shares as those which are bought and sold at least three times a week. Easy to buy or sell.

2). Demat refers to a dematerialised account.

Though the company is under obligation to offer the securities in both physical and demat mode, you have the choice to receive the securities in either mode.

If you wish to have securities in demat mode, you need to indicate the name of the depository and also of the depository participant with whom you have depository account in your application.

It is, however desirable that you hold securities in demat form as physical securities carry the risk of being fake, forged or stolen.

Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, Nowadays, you need to open a demat account if you want to buy or sell stocks.

3). Investing Vs Trading

Many people confuse trading with investing. They are not the same. The biggest difference between them is the length of time you hold onto the assets. An investor is more interested in the long-term appreciation of his assets, counting on that historical rise in market equity.

He’s not generally concerned about short-term fluctuations in prices, because he’ll ride them out over the long haul.

An investor relies mostly on Fundamental Analysis, which is the analytical method of predicting long-term prospects of a particular asset. Most investors adopt a “buy and hold” approach to assets, which simply means they buy shares of some company and hold onto them for a long time. This approach can be dangerous, even devastating, in an extremely volatile market such as today’s BSE or NSE Indexs Show.

Let’s consider someone who bought shares of XYZ Company at their peak value of around Rs.650 per share at the beginning of the year 2000. Two years later, those shares are worth Rs.100 each. If that investor had spent Rs. 65,000/-, his net loss would be Rs.55000/- ! I don’t know about you, but losing Fifty Five Thousand Rupees would be a relatively big loss for me.

Many investors suffer such losses regularly, hoping that in five or ten or fifteen years the market will rebound, and they’ll recoup their losses and achieve an overall gain.

What most investors need to remember is this: investing is not about weathering storms with your “beloved” company – it’s about making money.

Traders, on the other hand, are attempting to profit on just those short-term price fluctuations. The amount of time an active trader holds onto an asset is very short: in many cases minutes, or sometimes seconds. If you can catch just two index points on an average day, you can make a comfortable living as an Trader.

To help make their decisions, Traders rely on Technical Analysis, a form of marketing analysis that attempts to predict short-term price fluctuations.

4). What is Premium Issue:

Generally, most shares have a face value (i.e. the value as in a balance sheet) of Rs.10 though not always offered to the public at this price. Companies can offer a share with a face value of Rs.10 to the public at a higher price. The difference between the offer price and the face value is called the premium. As per the SEBI guidelines, new companies can offer shares to the public at a premium provided :

1.The promoter company has a 3 years consistent record of profitable working.

2.The promoter takes up at least 50 per cent of the shares in the issue.

3.All parties applying to the issue should be offered the same instrument at the same terms, especially regarding the premium.

4.The propectus should provide justification for the propose premium. On the other hand, exisiting companies can make a premium issue without the above restrictions.

A company’s aim is to raise money and simultaneously serve the equity capital. As far as accounting is concerned, premium is credited to reserves and surplus and it does not increase the equity. Therefore, a company which raises Rs.100 crores by way of shares at say Rs.90 premium per share increases its equity by only Rs.10 crores, which is easier to service with an investment of Rs.100 crores.

Thus the companies seek to make premium issues. As well shall see later, a premium issue can increase the book value without decreasing the EPS. In a buoyant stock market when good shares trade at very high prices, companies realize that it’s easy to command a high premium.

5). Diffferent Kinds of Investments:

These days, you can't retire without using the returns from investments. You can't count on your social security checks to cover your expenses when you retire. It's barely enough for people who are receiving it now to have food, shelter and utilities. That doesn't account for any care you may need or in the even that you need to take advantage of such funds much earlier in life. It is important to have your own financial plan. There are many kinds of investments you can make that will make your life much easier down the road

401K Plans
The easiest and most popular kind of investment is a 401K plan. This is due to the fact that most jobs offer this savings program where the money can be automatically deducted from your payroll check and you never realize it is missing.

Life Insurance
Life Insurance policies are another kind of investment that is fairly popular. It is a way to ensure income for your family when you die. It allows you a sense of security and provides a valuable tax deduction.

Stocks
Stocks are a unique kind of investment because they allow you to take partial ownership in a company. Because of this, the returns are potentially bigger and they have a history of being a wise way to invest your money.

Bonds
A bond is basically a promise note from the government or a private company. You agree to give them a set amount of money as a loan and they keep it for a set number of years with a predetermined amount of interest. This is typically a safe bet and one that is a good investment for a first time investor because there is little risk of losing your money.

Mutual Funds
Mutual funds are a kind of investment that are based on the gains and losses of a shareholder. Basically one person manages the money of several or many investors and invests in a list of various stocks to lessen the effect of any losses that may occur.

Money Market Funds
A good short-term investment is a Money Market Fund. With this kind of investment you can earn interest as an independent shareholder.

Annuities
If you are interested in tax-deferred income, then annuities may be the right kind of investment for you. This is an agreement between you and the insurer. It works to produce income for you and protect your earning potential.

Brokered Certificates of Deposit (CDs)
CDs are a kind of investment where you deposit money for a set amount of time. The good thing about CDs is that you can take the money out at any time without paying a penalty fee. We all know life isn't predictable, so this is a nice feature to have in your option.

Real Estate
Real Estate is a tangible kind of investment. It includes your land and anything permanently attached to your piece of property. This may include your home, rental properties, your company or empty pieces of land. Real estate is typically a smart and can make you a lot of money over time..