Investing in the stock market may sound difficult, but it becomes easier when we understand some basic terms. In this blog, we will explain three important terms: Shares, Dividends, and Market Capitalization. Let’s understand them one by one.
What Are Shares?
Shares are like small parts of a company. When a company wants to raise money, it sells these small parts to the public. Anyone who buys them becomes a shareholder (part-owner) of the company.
For example: If a company has 1,00,000 shares and you buy 1,000, then you own 1% of the company.
People buy shares in the hope that the price will go up in the future, and they can sell them to make a profit.
What are Dividends?
Dividends are the company’s way of sharing its profit with its shareholders. If the company makes good money, it may decide to give a part of the profit to the people who own its shares.
For example: If a company gives Rs. 10 dividend per share, and you own 100 shares, you will get Rs. 1,000.
Not all companies give dividends. Some companies prefer to use the money for growth and expansion instead.
What is Market Capitalization?
Market Capitalization (or Market Cap) tells us how big a company is in the stock market. It is calculated by multiplying the total number of shares with the current price of one share.
Formula:
Market Cap = Total Shares × Share Price
For example:
If a company has 10 lakh shares, and each share costs Rs. 100, then
Market Cap = 10,00,000 × 100 = Rs. 10 crore
Companies are usually divided into three types based on their market cap:
- Large Cap – Big companies like Reliance, TCS
- Mid Cap – Medium-sized companies
- Small Cap – Smaller, growing companies
Conclusion of Shares, Dividends and Market Cap
Understanding shares, dividends, and market capitalization can help you make better investment decisions. You don’t need to be an expert to start; just start small, learn step-by-step, and invest wisely.
If you are new to investing, always do your research or talk to a financial advisor before buying any shares.