You have probably heard people talk about the stock market — sometimes with excitement, sometimes with dread. But strip away the jargon and the drama, and the stock market is a surprisingly straightforward idea. Let us walk through it from the ground up.
A Company Needs Money to Grow
Imagine you run a small garment factory in Gazipur. Business is good, and you want to open a second factory. You need ৳5 crore to make it happen. You have three options:
- Use your own savings — But you may not have ৳5 crore lying around.
- Borrow from a bank — This works, but you will pay interest regardless of whether the new factory succeeds.
- Sell a portion of your company to investors — This is where shares come in.
If you divide your company into 10 lakh shares and sell 3 lakh of them to the public at ৳50 each, you raise ৳1.5 crore. The people who buy those shares now own 30% of your company. They are shareholders. You keep 70% and control of the business, and you got the money without taking on debt.
This is the core idea behind a stock market: it is a place where companies raise money by selling ownership, and investors buy that ownership hoping to profit.
What Exactly Is a Share?
A share is a small unit of ownership in a company. If a company has 1 crore shares outstanding and you own 1,000 of them, you own 0.01% of the company. That may sound tiny, but it entitles you to:
- A slice of profits — When the company earns money and decides to distribute some of it, you receive dividends proportional to your shares.
- Capital gains — If the company performs well, demand for its shares rises, and their price increases. You can sell your shares for more than you paid.
- Voting rights — On major company decisions, shareholders typically get a vote.
How Do Investors Make Money?
There are really only two ways:
1. Dividends
Some companies share their profits with shareholders regularly. For example, if a company declares a ৳2 cash dividend per share and you hold 500 shares, you receive ৳1,000. Many DSE-listed banks and pharmaceutical companies pay dividends consistently. This is income you receive without selling anything.
2. Capital Gains
If you buy a share at ৳80 and later sell it at ৳120, your capital gain is ৳40 per share. Over time, well-run companies tend to see their share prices rise as their businesses grow. This is how long-term investors build wealth — not through speculation, but through patience.
It is worth noting that share prices can also fall. If you buy at ৳80 and the price drops to ৳60, you have an unrealized loss. This is why research and diversification matter, topics we will cover later in this series.
What Is an IPO?
When a company sells its shares to the public for the first time, it is called an Initial Public Offering, or IPO. Before an IPO, a company is “private” — owned by its founders, early investors, or family members. After the IPO, it becomes a “public” company listed on a stock exchange.
In Bangladesh, IPOs are regulated by the Bangladesh Securities and Exchange Commission (BSEC). Investors can apply for IPO shares through their brokerage accounts. IPO shares are often priced attractively because the company and its advisors want to generate interest and ensure the shares sell.
However, not every IPO is a good investment. Some companies go public primarily to cash out early investors. Always read the IPO prospectus and understand the company’s financials before applying.
The Stock Exchange: Where Buying and Selling Happens
Once a company’s shares are publicly listed, they trade on a stock exchange. Think of it as a marketplace — but instead of vegetables and fish, people are buying and selling ownership stakes in companies.
In Bangladesh, the primary stock exchange is the Dhaka Stock Exchange (DSE), established in 1954. There is also the Chittagong Stock Exchange (CSE), though DSE handles the vast majority of trading volume. The DSE lists over 400 companies across sectors like banking, pharmaceuticals, textiles, engineering, power, and technology.
You cannot walk into the DSE building and start buying shares. Instead, you trade through a licensed stockbroker who connects you to the exchange electronically. We will cover how to choose a broker and open a trading account in a later post in this series.
Why Do Share Prices Move?
At its simplest, prices move because of supply and demand. If more people want to buy a stock than sell it, the price rises. If more want to sell, the price falls. But what drives that demand?
- Company performance — Strong earnings, new products, and growing revenue attract buyers.
- Economic conditions — Interest rates, inflation, and GDP growth affect investor confidence.
- Industry trends — A booming construction sector lifts cement and steel companies.
- Investor sentiment — Fear and greed can push prices away from a company’s true value, sometimes dramatically.
Understanding what moves prices — and what does not — is a skill that develops over time. The key insight for now is that short-term price movements are often noise. Long-term price movements tend to reflect genuine business performance.
Is the Stock Market Gambling?
This is a common misconception. Gambling is a zero-sum game where the odds are stacked against you. Investing, done properly, is participating in the growth of real businesses and the broader economy.
Bangladesh’s GDP has grown consistently over the past two decades. Companies that serve this growing economy — banks, pharmaceuticals, consumer goods, infrastructure — have created genuine wealth for patient shareholders. The difference between investing and gambling comes down to method: research, diversification, patience, and discipline versus tips, hunches, and chasing quick profits.
What Is Next in This Series
This post was about the big picture. In the next post, we will zoom into the Dhaka Stock Exchange specifically — how it is structured, who regulates it, what the key indices mean, and why it matters for your money.
Think About This
- If a friend offered to sell you 10% of their profitable restaurant for ৳5 lakh, what questions would you ask before deciding? How is this similar to buying shares?
- Why do you think some investors earn consistent returns while others lose money in the same market?
- Can you name three DSE-listed companies whose products or services you use in daily life? What does that tell you about the connection between the stock market and the real economy?
