Investing is an essential part of your life and can help youachieve your financial goals. It is a simple and effective toolto increase your wealth. It is about taking smart, well-informed and timely decisions. We have compiled some ofthe basics of investing just for beginners like you. This willhelp you in making a smart start to investments.Read on for the basics of investing, and do not forget toplay the contest in the end and win surprise gifts.
1. What is investing?If you keep your hard earned money in a safe at home, itwill not increase, but will reduce in value. Investing letsyour money earn some more money, thus getting it to workharder for you. In effect, your savings do not sit idle, buthelp you profit from them. Investing, unlike saving, has thepotential to increase wealth faster and with professionalguidance and sound planning, investing can help you leada financially independent life.2. Why should I invest?There are two main reasons why you should invest and notjust save:To stay ahead of inflation - cost of living keeps increasingconstantly and investing lets you keep pace with thesechanging market conditions.To achieve financial goals - as the saying goes - ajourney of a thousand miles begins with a single step.Investing small amounts of money over a period of timebrings you closer to your financial goals.3. What are the various investment instruments?There are many investment instruments, namely Equities(or shares), Mutual Funds, Derivatives, National SavingsCertificates, Bank Fixed Deposits and Commodities likegold, oil, etc. However, investing in shares is one of thebest options for individual investors over a long-term.4. Isn’t investing in shares a risky business? Shouldn’tI simply save?Not if you rely on research reports and make informedinvestment decisions. Saving does not take care of theinflation rate; investing does.5. Why are shares better than other investmentinstruments? And what are the benefits of investingin shares?Shares have the potential to give you higher returns thanany other investment instrument. On an average shares
have given returns of about 18% a year between 1980and 2004 (post inflation and tax).Additional income from dividend: By investing inshares, you don’t just gain from the appreciating shareprices, but also from the dividend the companies pay.Tax advantage: You do not have to pay tax on thedividend income from your investments in shares.In case you book profits within a year, you have to onlypay 10% short-term capital gain tax on the profits made,but in case of a long-term investment, for e.g. of morethan one year, there is no tax on profits made.Easy liquidity: Shares can be liquidated from anywhereand at any time you wish as there is no lock in period.6. What are the different ways of investing in shares?Fundamentally, there are two ways in which you caninvest in shares:Buy shares from the primary market (IPO): When acompany issues its shares to the public for the first time,it is done by a process called Initial Public Offering (IPO).What the company does in an IPO is that it offers acertain percentage of its total shares to the public eitherat a fixed offer price or by following a method called thebook-building process.In a book-building process the offer price is placed in arange with the highest and lowest value. The public canbid for the shares at any price within the specified range.Once the bids come in, the company evaluates all thebids and decides on an offer price in that range. Oncethis offer price is decided, the company either allots itsshares to the people, who have applied for it, or returnstheir money.Trade in the secondary market: Once the shares areallotted to the people, secondary market, or stockexchange, is where trading of shares takes place. As anexisting shareholder you can sell your shares to anyonewho is willing to buy them at a price agreed upon by youand the buyer. However, you cannot buy or sell shares ina stock exchange directly. Members of the stockexchange, known as stock brokers, act as anintermediary.
7. What are the components of the stock market andwho is its regulator?Stock exchanges: Stock exchange is an organizedmarket place where stocks are bought and sold. A stockmay be bought or sold only if it is listed on an exchange.India’s premier stock exchanges are the Bombay StockExchange and the National Stock Exchange.
Brokers: Brokers are essential for the functioning of thestock market. To buy or sell shares, you have to contacta broker. Every stock exchange has its set of brokers,who buy and sell shares in the stock market on yourbehalf. Basically, the broker acts as a middlemanbetween the buyer and the seller. Some brokers haveeven authorized sub-brokers to conduct transaction onbehalf of them. The buy/sell transaction can also happenthrough online investing websites likewww.kotaksecurities.com. For all transactions thatbrokers conduct on your behalf, they charge you a feecalled brokerage.Registrars: The registrar maintains records of all theshare owners of a company and the number of sharesthey own, and updates the shareholder’s database.Depositories and their participants: Depositories areorganizations that hold shares of investors, on request,in electronic form, through a registered depository (DP).A depository functions just like a bank - it holdssecurities in an account, transfers securities betweenaccounts on the instruction of the account holder,facilitates transfer of ownership without the accountholder needing to handle securities and facilitates safe-keeping of shares.A depository participant is an agent through which adepository interfaces with the investor. You can open ademat account with a DP, who will keep an account of allthe shares in your ownership. The demat account alsoupdates you on your money and the transactions youhave made. Just like your bank account keeps yourmoney, the demat account keeps shares in an electronicformat. Every time you buy and sell shares, your demataccount is updated.Securities and Exchange Board of India (SEBI):Securities and Exchange Board of India (SEBI) is theregulatory body that governs the stock market.8. I don’t have any experience of investing in sharesYou need not worry, as investing is for everybody anddoes not need experience. To start investing now, youcan choose from our Solutions for beginners like you.9. When should I begin investing?With investing, time helps you make money. Thus, theearlier you open an account and start investing thebetter, as you can take advantage of the power ofcompounding, and reach your financial goals faster.Compounding is the process by which interest is earnedon interest. When a principal amount is invested, interestis earned on the principal during the first period or year.
In the second period or year, interest is earned on theoriginal principal amount plus the interest earned in thefirst period. Over time, this re-investment process canhelp an amount to grow significantly.Eg. Suppose you invest Rs.100 today. It grows at 15%compounded rate every year, then next year you will getRs.115 i.e. Rs.100 + Rs.15 (15% of Rs.100). After oneyear has passed you have Rs.115. The next year youwill get Rs.132 ( Rs.115 + Rs.17 ). Why Rs.17 ?Because Rs.17 is 15% of Rs.115. So, start investing nowand make use of the power of compounding.10. What is it that I require to do to start investing inshares?To begin with, you need to open an investment accountwith a registered broker and a demat account with a DP.Once your account is opened, you get everything youneed to start investing in shares.Kotak Securities is a registered broker with both BSEand NSE, and being a DP it also provides you a demataccount along with your investment account.
11. How do I buy/sell shares?Buying and selling of shares is absolutely simple. Youcan either trade online or if you prefer speaking tosomeone and take advice before you buy or sell shares,you can always call and place a trade. For Eg. KotakSecurities offers a special online trading software calledKEAT to view live rates and place instant orders. Forothers who prefer calling and placing orders there is thecall and trade facility as well.While buying/selling a share, you must specify the nameof the company, the quantity of shares you want tobuy/sell and the price at which you want to buy/sell them.If you don’t specify the price, the shares will bebought/sold at the market rate prevalent at that time.12. What are the benefits of online investing?Online investing is simple, quick and convenient. Iteliminates the hassles of standing in long queues andcarrying out tedious paperwork. You can buy/sell sharesfrom home, office, or from any place where you haveaccess to the Internet.13. When do I get delivery of the shares that I buy andwhen do I get the money for the shares that I sell?Any transaction executed through the exchange is settledin T+2 days. Where, T denotes the day of orderplacement. This process of settlement is called asettlement cycle. For Eg: If you have sold shares onMonday you will receive the money in your tradingaccount on Thursday. Similarly if you have bought shareson Monday you will get the shares in your demat accounton Thursday.14. How can Kotak Securities help me meet myinvestment objectives?Kotak Securities is your one-stop investment destination,offering you investment opportunities in a host of financialinstruments; with offerings like Easy Equity, Easy MutualFund, Easy IPO, Easy Derivatives and Easy Insurance.Furthermore, our offerings are customized to suit yourinvestment profile, helping you meet your investmentobjectives. In addition to this, our extensive research andwide range of products would cater to your needs andobjectives.
15. How do I open an account with Kotak Securities?a. To start investing, you can choose from our twoproducts for beginners - AutoInvest and Gateway, and fillin the form.b. Our representative will contact you and introduce youto our services.c. He/she will not only answer your questions, but alsohelp you fill the account-opening forms.d. Soon after submitting the form, you will get theWelcome Kit, guiding you on how to make your firstinvestment.Kotak Securities Ltd. is India’s leading stock broking house with over Rs. 2934 crore ofAsset Under Management (AUM). Kotak Securities has been the largest in IPOdistribution and has about 796 outlets across 313 cities, servicing over 3 lakh customers.At Kotak Securities, we are committed to making investing easy for you, providingsolutions that fit your needs. We can help you invest smartly while taking into account:- The amount you wish to invest- Your risk appetite- Your major life goals: whether you are looking to accumulate assets, securing yourchildren’s education, retirement planning and more.These are some of the awards we have won over the years:- Best Performing Equity Broker in India CNBC TV-18 - Optimix Financial AdvisoryAwards 2008- Best Brokerage Firm in India by Asiamoney for the year 2006, 2007 and 2008- The Leading Equity House in India in Thomson Extel Surveys Awards for the year2007- Best Provider of Portfolio Management: Equities - Euromoney Awards, 2007
- Avaya Customer Responsiveness Awards (2007) in Financial Services SectorWhatever may be your choice of investments, with Kotak Securities, you can access awide range of services that make investing easy and convenient.Easy Equity: Investing in equities has never been easier. You may think it is risky toinvest in equities or may not know which stocks to buy. This is exactly why we havereliable research experts, who recommend you which stocks to invest in. We also have abooklet for beginners, which will be sent to you along with your Welcome Kit,explaining the 3 easy steps to start investing.Easy Mutual Fund: Mutual Funds not only help in saving taxes, but they are also one ofthe best investment solutions that help reduce the risk of the fluctuating market. Now,with Kotak Securities, investing in mutual fund schemes is very easy. All you have to dois go through our huge list of mutual fund schemes on kotaksecurities.com and pick yourchoice. No need to stand in long queues or be burdened with never-ending paperwork.Easy IPO: Investing in Initial Public Offerings (IPO) is a great way to get higher returnsin a shorter period of time. We provide you with information on the forthcoming IPOsand also other IPO news on kotaksecurities.com, which will help you invest in IPOs atthe right time.Easy Derivatives: As a beginner to investing, you can learn all about derivatives - typesof derivatives, derivatives strategies, etc. from us. We also provide you with dailyderivatives reports, which offer ideas on yielding good returns.If you are seeking investment opportunities, the stock market has a lot to offer. So, be itEquities, Mutual Funds, IPOs or Derivatives, go ahead and start investing today. All youhave to do is click on Solutions for You, pick the product of your choice and fill in yourdetails. Simple.
We have two special products just for new investors like you. These products arespecially designed to simplify the investment process for you.Click on the products mentioned below and choose the one that best suits yourinvestment needs:We have two special products just for new investors like you. These solutions arespecially designed to simplify the investment process for you.Click on the investment solutions mentioned below and choose the one that best suitsyour investment needs:An investment solution for those who don’t have time to spend on understanding themarket and identifying the right investment opportunity.Instead of investing a huge lump sum at one time, you invest a small sum of money everymonth.
It helps you grow wealth over a period of time to achieve your short-term and long-termgoals.It is Indias first SIP in equity and it invests only in well-researched stocks, recommendedby our expert research team.It is relatively a safer mode of investing in Equities.We have two special products just for new investors like you. These solutions arespecially designed to simplify the investment process for you.Click on the investment solutions mentioned below and choose the one that best suitsyour investment needs:This account is ideal for independent new investors, who wish to start with a basicinvestment account.It opens up the gateway of investment opportunities to all those who are new andinexperienced in investing.It gives you access to Research Reports, SMS Alerts, Mobile Portfolio Manager (M-Trade), Live Trading Terminal (K.E.A.T.), After Market Orders (AMO for placing orderseven after market timings). And along with investing online you can also Call And Trade.To see how simple it is to invest through the Gateway account, click on the demos below:- Buying a share- Selling a shareWho says you need to be a finance expert to start investing? Anybody can invest andincrease wealth, including you. But, to make investments work for you, you must startinvesting early. If you have not started investing yet, do not waste another minute. Peoplearound you are increasing wealth through investments every day; do not miss out on theopportunities.
At Kotak Securities, we can help you start investing right away. In fact, our researchreports make it absolutely simple to know where to invest.Kotak Securities ResearchInvesting is simple. Our financial analysts do the hard work of finding out when andwhere to invest, and all you have to do is invest your money.Our research desk recommends stocks, which has the potential of providing you goodreturns. Supported by valid, fact-based and reliable research inputs, our research reportshelp you understand the changing trends of industries, sectors, and gives you a fair ideaof which company scrips to buy, sell, hold etc.What’s more, you can also get these expert recommendations as SMS on your mobilephone by registering for SMS Alerts. So, no matter where you are, you can take instantinvestment decisions.Click here to view Dipen Shah,Vice President, Research speak.Read Mr. Shahs quote.Kotak Securities NewsFinancial market news at your finger tips: be it equities, IPOs, mutual funds orderivatives, you don’t have to go anywhere to get the latest news on the financial market.We at Kotak Securities are always at the forefront of bringing the latest news. All youhave to do is log on to www.kotaksecurities.com and visit the News section. Simple!By investing in the right place at the right time, you can secure a financially independentlife in the future. Investing is imperative for wealth creation. Following some tried and
tested investment advice will allow you to walk the path of investing successfully andmake the whole exercise of investing a satisfying one.Points to remember while investing:Start early: Begin investing at an early stage. The earlier you start, the higher will beyour wealth accumulation.Be disciplined: Be disciplined with your investments. Investing small amounts on aregular basis over the long term usually delivers better results than one-time lump suminvestments.Invest your idle money: Try not to let too much of your money lie idle. Invest it and letit work for you.Invest before you spend: Allocate a minimum of 10-20% of your income forinvestments.Spread your investments: To reduce risk, spread your investments across a basket ofinvestments - equity, mutual funds, physical assets such as gold or real estate, etc. This isknown as asset allocation.Invest to match your risk appetite: Choose your investment in such a way that the riskinvolved matches your risk appetite. The bottom line is that you should be comfortablewith your investments.Never borrow money to invest in equities: A wrong decision can lead to loss of eventhe principal amount. Invest only the sum that you do not need in the immediate future.Invest for the long-term: This is the first and foremost rule for successful equityinvesting.Understand the company’s business: Buy shares of a company whose business youunderstand. This will allow you to asses its future performance and decide whether youshould hold on to your investment or sell it.
Do not get emotional: Sell a stock that is making losses for you, if it does not have anyfuture promise. Do not get emotionally attached to your shares, as it could lead to makinglarger losses in the future.Keep your calm: Do not panic when the markets are volatile. This may make youpurchase shares that you do not really want or sell shares of fundamentally strongcompanies.Base your decisions on fundamentals: Don’t buy a stock simply because everyone isdoing so.Do not try to time the stock market: Invest regularly to protect yourself from marketvolatility and even use it to your advantage.Tax is just one aspect: When you choose an investment, don’t do so solely because of atax benefit attached to it.