"Understanding the Different Types of Stock Market : A Comprehensive Guide"

Long-term securities are bought and sold on the stock market. It is a market that businesses use to raise long-term capital and supplies them with the necessary liquidity. By offering to sell or pledge their shares that are listed on the stock exchange, stock markets can assist businesses in raising liquid funds when they are needed. Stock markets are necessary to draw foreign institutional investors to our nation, and this hot money determines whether our indices move higher or lower.

Sectors of the stock market :

Depending on what their main line of business is, companies can also be divided into different sectors. According to the Global Industry Classification Standard (GICS), there are 11 market segments:

• Energy
• Materials
• Industrials
• Consumer discretionary
• Consumer staples
• Health care
• Financials
• Information technology
• Communication
• Utilities
• Real estate

Large-cap, mid-cap, and small-cap stocks :

The market capitalization of stocks refers to how much money all of their shares collectively are worth. The largest market capitalizations of companies are referred to as large-cap stocks, while successively smaller companies are represented by mid-cap and small-cap stocks.

These categories are not clearly delineated from one another. However, one frequently-used rule states that stocks are considered to be large-cap if their market capitalization is $10 billion or greater, mid-cap if their market capitalization is between $2 billion and $10 billion, and small-cap if their market capitalization is under $2 billion.

Mid-cap and small-cap stocks have greater potential for future growth but are riskier than large-cap stocks, which are typically regarded as safer and more conservative investments. But just because two businesses are grouped together here doesn't mean they are similar investments or that they will perform similarly in the future.

What are the 4 types of stock market :

Currency markets, money markets, derivative markets, and capital markets are the four different categories of financial markets. Equities (stocks) and debt securities are sold on capital markets.

Which trading is best for beginners :

For beginners in particular, the Indian Stock Market is a fantastic place to begin investing. For those looking to enter the market without worrying about the specifics of buying and selling stocks, it presents a fantastic opportunity. There are numerous benefits for investors on the Indian stock market.

Growth vs Value Stocks :

The two types of investing are value investing and growth investing. Value stocks typically offer the chance to purchase shares at a discount to their market value, while growth stocks typically have the potential for above-average revenue and earnings growth.

Growth Investing :

Simply put, the growth investing approach entails buying stocks whose earnings growth is significantly higher than the market average.

Growth stocks typically have higher P/E (price to earnings) and P/B (price to book) ratios and better earnings per share because the market values them aggressively (EPS).

Due to the fact that the majority of profits are reinvested in the business, dividend yields may be minimal at the same time.

Value Investing :

Value investing focuses on finding established, sound businesses with depressed prices. Therefore, value investing entails purchasing stocks with a high potential upside whose calculated intrinsic value is significantly higher than the current market price.

Such companies may be undervalued for a variety of reasons. Some might have experienced cyclical underperformance, some might have been overlooked by the market because of subpar prior financial results, and some might be turning.

Growth v/s Value Investing – which one to choose ?

In a nutshell, value investing concentrates on seizing opportunities when fundamentally sound companies are currently undervalued, whereas growth investing refers to investments in businesses that are growing faster than the market.

When growth stock prices appear to be too high, value stocks occasionally attract more attention. This is so because value stocks frequently trade below their intrinsic value, which includes P/E and P/B ratios that are lower than the industry standard.

The stock market occasionally penalises fundamentally sound companies whose short-term business performance may have been subpar, even though overall firm fundamentals may still be strong.

Before the Indian stock markets made a comeback in 2021, value investing underperformed while growth investing produced profitable results in three out of the last four calendar years (2018, 2019, 2020).

Following just one of these two strategies can increase a portfolio's volatility and have a negative impact on the risk-adjusted performance of the portfolio.

Over an extended period of time, no one investing strategy consistently outperforms the others. Additionally, any of these investment styles could experience a protracted cycle of underperformance.

Pros :

• Grow with economy
• Stay ahead of inflation
• Easy to buy & sell
• Don't need a lot of money to start investing
• Income from price appreciation and dividends
• Liquidity

Cons :

• Risk
• Stockholders of broke companies get paid last
• Takes time to research
• Taxes on profitable stock salesEmotional ups and downs
• Competing with institutional and professional investors