Ownership has always been captivating. We always work through our life to be the owner of something; be it a house, car, land, gadgets, production house, company, or any other type of asset. The sense of ownership is inculcated in us right from our childhood days. When we were a kid we wanted to have toys of our own, when in teenage we wanted to own a bicycle or a computer, in the early twenties when we take up our first job we want a car, in our thirties owning a house becomes a priority and hence, so on and so forth. While passing through age, only the choice of asset changes but the sense of ownership remains. 

Ownership is not only a state but a tool to measure an individual. We judge a person’s class by seeing the assets that he owns, mostly the physical ones. There are other types of assets as well that a person owns which we are mostly unaware of. Those assets are financial assets. One of the financial assets that define ownership is – Equity. 

Equity gives you the ownership in the firm that you invest in. Equity is not only limited to the stock market but it can also be related to the physical asset. The question here is how you measure equity or how you measure your ownership percentage. When we talk about physical assets, let’s take the example of buying an apartment. The price of the apartment is Rs. 50,00,000. You only have Rs.20,00,000, and the rest Rs.30,00,000 you owe to the bank. So, now, there are two parties who have ownership rights on the apartment and have equity split into 40%-60% – you owning 40% {(20,00,000/50,00,000)*100} of the house and the rest bank owning 60% of the house until you don’t pay back the loan with interest.

Now, let’s take into the picture owning shares in a firm through the stock market. The calculation remains the same but the number of owners increases from one or two to hundreds and even thousands or lakhs. It is possible through the stock market where thousands or lakhs of people can be the owner of a firm simultaneously. As the valuation of the company changes, so does the value of your shares. Suppose you own 2% of the firm by investing 10,000. Do you know what the value of the firm is? The value of the firm is 5,00,000. So, as the value of the firm increases suppose to 10,00,000, then the value of your shares increases to 20,000 with the same 2% of your ownership. 

The question is always asked what the use of investing in the stock market is? How do people make money there?

I will use the same example to tell you how you make money out of it or how you can be the owner of the shares for free. In the above, example you have seen that the valuation of the firm doubled and so did the value of your shares. Now, it’s the right time to liquidate your shares and own them for free. You can sell 1% of your holdings to recover the original investment that you made. (i.e. 10,000) and rest 1% you can still keep it invested. This way, you own the shares for free. That’s how the investors make money in the stock market. I am not saying you start with a hefty amount. Start with a small amount and actively monitor the market.

There are several apps that can help you to easily monitor the markets as well as your investments. If you really want to know how the stock market works, you really need to take control eliminating the mediator. Start small to know how it works, and gradually be a big player.