Investment in shares.


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Investment in shares.

  1. 1. Dharmik Patel 33
  2. 2. • • • • • What is a Share ? Ans :In finance a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. In British English, the usage of the word share alone to refer solely to stocks is so common that it almost replaces the word stock itself. In simple Words, a share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market. By owning a share you can earn a portion and selling shares you get capital gain. So, your return is the dividend plus the capital gain. However, you also run a risk of making a capital loss if you have sold the share at a price below your buying price. A company's stock price reflects what investors think about the stock, not necessarily what the company is "worth." For example, companies that are growing quickly often trade at a higher price than the company might currently be "worth." Stock prices are also affected by all forms of company and market news. Publicly traded companies are required to report quarterly on their financial status and earnings. Market forces and general investor opinions can also affect share price.
  3. 3.  Quick Facts on Stocks and Shares :  Owning a stock or a share means you are a partial owner of the      company, and you get voting rights in certain company issues Over the long run, stocks have historically averaged about 10% annual returns However, stocks offer no guarantee of any returns and can lose value, even in the long run Investments in stocks can generate returns through dividends, even if the price How does one trade in shares ? Every transaction in the stock exchange is carried out through licensed members called brokers. To trade in shares, you have to approach a broker However, since most stock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders.
  4. 4. Investing in shares can make you rich  If there’s something big that you want – from a comfortable retirement to a house on the beach – and you can’t afford it today, you need to save and make your money work for you. When you have lots of time, but not lots of money in a lump sum, the best way to build wealth is by investing in stocks.
  5. 5.  How To Invest In Share Market ?  Share Market  Share Market is a place where everyone take bath in order to taste the money. But it purely depends on the fundamentals, luck, global cues, behavior of other country markets, currency rate, Forex rates, currency trading etc. Trading is done in terms of the shares. These shares are the name of the companies which gets listed, generally. Also the share price varies time to time even second by second, if the variation graph is critical. Types Of Sectors  There are various sectors in the share market. Some of the known sectors are Oil, Reality meaning RealEstate, Construction, Finance, Telecommunication, Refineries, Steel, Broking firms, Food and beverages, Metals, Jewelery, Packing, Consumer Goods etc. The best sector to invest is the decision taken by the investors understanding the fundamentals of the company, turnover, volumes traded, balance sheet and so on. Terms Of Investment  Basically investors should go for two types of investments, short term and long term. Short term investments are one that an investor will buy stocks and keep in his portfolio for at least 3-6 months. Gain must me kept in mind and thus the selection of stocks plays vital role here. Equity advisor consultancy is recommended. Long term investments are one that an investor will buy stocks and keep in his portfolio for more than 6 months and for years. Here portfolio management is very important as many tax free income flashes the eye like Dividend, investment duration etc. Share Trading Houses  Generally shares are traded electronically today and these process is done through the brokerage houses and from exchanges like Bombay Stock Exchange BSE and National Stock Exchange NSE. Some of the well known brokerage houses are ICIC Direct, Reliance money, Sharekhan, HDFC Securities, India Infoline, Mangal Traders etc. Share Tips, trading tips are provided by these houses to their customers regularly.
  6. 6.  Why Share Prices Go Up  Because companies tend to grow and prosper over time–and because a share of stock allows you to participate in the prosperity–stock prices, in the aggregate, tend to appreciate over long periods of time. However, individually, some companies prosper; others fail. If you buy a share in a loser, you could lose all, or a significant portion, of your initial investment. In other words, when you invest in stocks, you risk losing your initial investment, but because you are taking a bigger risk, you get the opportunity to earn far bigger rewards.
  7. 7.  Identify the Best Sector  As we saw above there are lot of sectors available in front of the investors. But which sector one should choose that will give good returns in short term and long term investments. If the economy is weak and the world is facing a financial pressure or crisis then it is tough to identify the sector as every sector would get affected. So it is better to pick up the mid cap stocks that will not go worse in near future. Because large cap stocks will plunge and surge drastically like anything. If you were caught at the peak say January 2009. then it is tough to get to that level. How To Invest ?  This is the first question a person asks himself and approaches others when he wants to invest in sharemarket. Basically you should have a clear vision when you want to reap the benefits that is the returns. If you want to pullout the invested money in short term, you should choose the critical moving sectors and shares and also don't act blindly on the third party suggestions. If you want to have the investment to be taken by your generation, then you can go for Long Term investment. In long term investment one should analyze the pure fundamentals of the company, the dividend amount it pays to the share holders,the capital and the percentage of share ratio between the company and the public.
  8. 8. How to Deal With Price Yo-Yos : These heady climbs and sickening slumps are called volatility. When an investment is as volatile as the stock market, it is unwise to invest unless you have a fairly long time horizon that allows you to wait out the price swings and go for the long-term price appreciation.  How long is a “fairly long” time horizon? That depends on you and why you are investing. Let’s say you want to buy a house in five years, and you’re trying to determine where to invest the down-payment money. The stock market would be a good place for all or part of that money if you wouldn’t be crushed if your home-buying plans had to be put off because of a market slump that depressed the value of your investment portfolio and thus reduced the amount you had saved for the down payment. What if you would be crushed if you couldn’t buy the home as planned? Then put the down payment money in bonds that mature (or pay back their principal) at the same time as your plans do.  Stocks are also ideal to have in your retirement portfolio. The younger and farther from retirement you are, the more stocks you can handle. And they’re a good choice for college funds for young children. However, if you are investing in individual stocks rather than mutual funds, you must diversify your portfolio by buying stocks in several different companies that do business in several different industries. That ensures that your net worth won’t crash if one industry, whether it’s oil, technology, or retailing, hits a slump. Experts suggest you own shares in at least eight to ten different companies. Ideally, those companies should be operating in substantially different industries.  