The Share market, stock market or equity market- all three mean the same. These are markets where you can buy or sell a company’s shares. Buying shares of a company means buying some percentage of ownership of that company. That is, you become the holder of a percentage of that company.
If that company makes a profit, some percentage of that profit would also be giving to you.
If that company incurs a loss, a percentage of that loss would also be borne by you. Telling you an example of this on the smallest scale, presume you have to establish a start-up. You have 10,000 rupees, but that’s not enough. So, you go to your friend and tell him to invest another 10,000 rupees and offer him a 50-50 partnership. So, whatever your company profits in the future, 50% of it would be yours. 50% of it would be your friends.
In this case, you’ve given 50% of the shares to your friend in this company. The same thing happens on a larger scale in the stock market. The only difference being, instead of going to your friend, you go to the entire world. And invite them to buy shares in your company.
Share Market History And Purpose
The origin of share markets dates to around 400 years ago. Around the 1600s, there was a Dutch East India Company, like the British East India Company. There was a similar company in the country of the Netherlands. Today, known as the Dutch East India company.
In those times, people used to indulge in a lot of exploration using ships. The entire world map had not yet discovered. So the companies used to send their ships to discover new lands and trade with faraway places. The journey used to be of over thousands of kilometers aboard a ship. There was a huge amount of money required for this.
Not one person possessed such amounts of money individual in those times. So, the public invited people to invest money in their ships. When these ships would travel long distances to go to other lands. And come back with treasures from there. They promised a share of these treasures/money eventually. But this was a very risky affair. Because during those times, more than half of the ships failed to come back.
They got lost, or broke down or got looted. Anything could happen to them. Then investors realized the risky nature of this company. So, instead of investing in a single ship, they preferred to invest in 5-6 of them.
So at least one of them had chances of coming back. One ship used to approach multiple investors for money. So, this created somewhat of a share Or Stock market.
East India Company and the Dutch East India company
There were open biddings of the ships on their docks. Docks are the places where the ships come out from. Regularly, this system became successful because of the money crunch faced by the companies. was supplemented by the common people. And the common people got a chance to earn more money. You must have read in the history books.
About how rich the East India Company and the Dutch East India company became during those times. Today, each country has its own stock exchange. And every country has become greatly dependent upon the share market.