Understanding Finance

Finance is basically, understanding the concept of money. Finance is a very important subject because it is fascinating and important at the same time. To become successful in any field an understanding of finance is required.

Money moves the world and hence it is important for us to understand how to move money. Basically there are two ways to earn money

1.Salary-This is basically the fixed amount of money you receive at the end of a certain amount of time because of the work you have done or services you have rendered.

2. Investments-These are basically assets or products that you have bought and that grow over time and keep giving you money without having a physical input from your side.

According to me the latter is of more importance because it has no boundaries on its growth. What I am trying to say is that while the salary a person is paid is basically dependent on the amount of work the person puts in while an investment gives you returns even when you are not working.

Investment is a very broad term and includes a lot of areas ranging from the stock market to making movies. I am going to start off with the stock market and then broaden up on the other major sectors that come under Investing.

The Stock Market

Basically the stock market is a platform that is used to buy and sell companies. Now when I say companies I do not mean complete companies (though this can be done) but parts of the companies are sold. Now a share is like the fundamental unit of a company. Let’s say a company consists of 2000 shares this means that when you buy a share of this company you are actually buying 1/2000^th (.05%) of this company. Now in reality a company is composed of more than a million shares and hence it is difficult to actually buy a company on the stock market.

Now the basic way you make money in the stock market is that when you buy a share of the company and then the prices of the share rise, (this could be due to multiple reasons but the most fundamental one is the good performance of the company) you can sell these shares to some other person and make money. In the coming articles I’ll elaborate more on this and then write about how to invest in the stock market.

Cheers

Shail

If you have any feedback's please feel free to comment and if you have any specific topics you would like to know about i would love to hear about them.