Details On Share Market And The Various Types Of Shares


There are various methods of shares that are traded in the trade market or the share market and I have taken some efforts to study them in detail. I have provided the various types of shares in the market along with suitable explanations. I have also discussed in detail the two types of share market that exist in our nation.

There are various shares traded in the stock market, let me first explain the basics of share and share market.

SHARES :


Shares are the part of the share capital. The share capital is broken into small parts known as shares and these shares are sold in the open market and the brokers to sell the shares to various investors.

Security Market :


Share Market is a place where these shares are purchased and sold there are basically two types of security market they are
1. Primary security market and
2. Secondary security market

Primary Security Market :


Primary market is the place where shares and securities are sold for the first time, here the shares once sold do not sell their shares once again. Usually the new companies which are issuing shares to raise capital for the first time are doing their business here.

Secondary Security Market :


Secondary Security Market is the market whereby the shares already sold are resold here. The purchase and resale of shares are done here. It is the most important Market which plays most of the role in stock market. The major operations of the business are done here.

Types of Shares :
There are various types of shares they are,
1. Preference Shares
2. Equity Shares
3. Deferred Shares or Founders Shares

Preference Shares


Preference shares as the name suggest are given preference by the company at the time of payment of Dividend. They are provided preference both at the time of winding up and that of the issue of dividend. I would also state that these are one of the safest methods to invest as you will get the dividend before the dividend is issued to the equity share holders.
There are various Types of Preference shares

Cumulative Preference Shares


Cumulative preference shares are those shares that help the investor to get a dividend even if the company is affected by the loss. This is the method in which the dividend of shares are cumulated incase the company has some loss and the cumulated money will be paid as soon as the company earns a good profit. In case the company earns some profit always the member gets the money regularly as dividend. This is the most important type of shares that has no risk in them.

Non Cumulative Preference Shares


Non cumulative shares are just the opposite of the cumulative preference shares it does not pay the dividend in case the company has some loss the dividend will be paid only when there is a profit and the risk here is the difference between the Cumulative and non cumulative method.

Participative Preference Shares


Participative preference shares are those shares where the shareholder gets a share in the preference shares when there is a profit after this the shareholder can also get a share in the dividend to be paid for the equity shareholders.

Non Participative Preference Shares


Non preference shares are those shares that are entitled to get the profits only liable for the preference share holders and they have no right to get a dividend from the money to be paid for the equity shareholders.

Convertible Preference Shares


Convertible preference shares are those shares which can be converted in to equity shares after a particular period of time, the equity shareholders are the real owners of the shares and this status can be achieved when the shareholder has got a convertible preference shares.

Non Convertible Preference Shares


Non convertible preference shares are those shares that cannot be changed into equity shares at the long run. They have to be the non convertible preference shares till the end of the lifetime of the company the shareholder can either sell the shares or the transfer the share but it cannot be converted into equity shares.

Redeemable Preference Shares


Redeemable preference shares are the shares that can be returned back by the company after its maturity period and the amount on the share can be returned to the shareholder after a certain period of time.
These are various types of preference Shares that are provided by the companies based on the development in the market.

Equity Shares


These are the shares which give the holders the ownership rights and they are the real owners of the company. They get two most important rights essential to run a business like voting rights and sharing of profit.
The Equity shares are having the voting rights on the Basis one vote one shares, Hence a person having more part of shares can influence in selecting the director by himself.
In case of excess profit the whole profit after interest and payment to preference shares the remaining amount will be shared by the Equity shareholders.

Deferred Shares


These are the shares which do not have any rights with them. These are often bought by the owner of the company himself. To start a business the company needs to sell 90% of the shares to the public in order to start the business if the company sells suppose only 75% the remaining 15% to bring minimum subscription would be made by the owner himself. Therefore it is also known as Owners Shares.

Conclusion


The details of the various types of the shares in the market have been explained briefly in the above paragraphs. Each share is superior to the other share in a particular aspect and the importance of all the shares are briefly in the above paragraphs.


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Comments

Author: Mahalakshmi T08 Nov 2011 Member Level: Gold   Points : 1

This is a well written article giving various types of shares available for investors. As rightly said each share is unique and investors must get full information before buying any shares, either through IPO or secondary market.

Author: Swagatika Pattanaik04 Aug 2016 Member Level: Gold   Points : 8

Are you interested to make money from share trading? You must have finished reading the above mentioned article. I am explaining you some practical logic. Now days share trading has become first option of many persons who want to make some extra money by working from home. As all stock brokers provide you online trading platform as well, you can trade with your smart phone.
I will not explain how share market works as you have already learned from the above article. Just find out a stock broker nearer to your home (compare between some brokers for cheap brokerage and all services). Do not go to fully discounted brokerage initially as you won't get technical help from them.
Open a share trading at ICICI direct, Share Khan, Kotak Securities, Aliceblue India Securities, SBI Capital etc.
Start reading business news papers and watch business news channel. Watch either Zee business or CNBC Awaz. In both the channels you will find some trading recommendation early in the morning (before the share market opens at 8-8:30 am). Do write all trading tips on a paper, watch them for 7 days and after that analyze those trading recommendations and choose any news channel or particular analyst and trade according to his calls.
Avoid some things while you enter in to stock market- Fear, Greed, over trading etc.
Follow some basic rules- Keep a good margin money as per your capacity, proper money management, do not take the money from broker to trade, do not fear to use stop loss to close your position at certain level of loss, book part profit, do not over greed to become rich in one single trade, do withdraw some part of your profit.
After a week of your trade just analyse all of your trade history, and find out which company gives you what percentage of profit, start collecting information about major companies like SBI, Reliance, ICICI, Maruti, Tata steel etc.



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