| “Every fall has a rise and every rise has a | | | | SIP is an excellent tool to build up a capital base in |
| fall”. | | | | the long term to meet your financial goals and |
| The globe has turned out to be a materialitic and no | | | | objectives. It also creates a disciplined mindset and |
| one can survive without money. Money has taken | | | | gives the benefit of cost averaging. It is necessary |
| precedence over other things in life. Although every | | | | to invest regularly into specific stocks so as to |
| one knows and admits that money is not everything | | | | average and leverage. If the scrip falls then by |
| but yet money is essential to survive in this world. | | | | adopting this tool, the scrip can be acquired at a |
| But how can we make money? Can every one make | | | | lower rate and if the scrip goes up then also you can |
| money? Of course, if there is a mindset to make | | | | average it at a little lower level than the real present |
| money. The performance of any individual depends | | | | price. SIP leaves no room for regrets. Many Mutual |
| on his mindset. If there is passion to make or mint | | | | Funds schemes are encouraging and offering with a |
| money and also if one knows the secrets and | | | | provision to invest through SIP by post dated cheque |
| strategies of generating more money, then it is very | | | | instruments. |
| much possible. Above all if an individual has firm | | | | MUTUAL FUNDS: |
| mindset to make the same. | | | | When investors do not know how to invest in the |
| One of the fastest ways to gain or lose money is by | | | | stock market directly and if they want to learn the |
| way of share market trading. Indian economy is doing | | | | tricks of the trade it is better to invest in Mutual |
| well due to the privatization, liberalization and | | | | Funds. These are run by professional people who |
| globalization. The share market is also bullish with | | | | have flair for investment. The Mutual Funds collect |
| minor hiccups here and there. Stock market has | | | | the funds from the public and make a corpus and |
| given excellent returns and presently is in the down | | | | then they invest into various securities and |
| turn due to the fear of global recession. Indian | | | | instruments. They do lot of research, visit the |
| market is cut out for long term players and still there | | | | companies, gather the information and know the |
| is a huge potential for growth and appreciation. | | | | upcoming companies and sectors that have huge |
| This script provides basic guidelines for new players | | | | potential for growth and appreciation. Every now and |
| to know the fundamental concepts related to stock | | | | then they change their strategies to stay invested in |
| market. Below are the related jargons. | | | | to the best stocks. At times, they get the internal |
| TECHNICAL JARGON: | | | | information of the companies much faster and act |
| ‘Long selling’ is the position where a trader | | | | accordingly. The Mutual Funds follow Net Asset Value |
| has stocks and sells and in short it is called as selling. | | | | (NAV) where it is converted into units and it is very |
| ‘Short selling’ is a position where the trader | | | | easy to trade and liquidate also. There are tax |
| has no stocks but sells with an intention to buy the | | | | savings schemes in the Mutual Fund so that the |
| stocks at a lower price later on. It is not advisable to | | | | investors will get the tax benefits. But there will be |
| go for short selling as the stock markets are totally | | | | lock in period and during which the units can not be |
| unpredictable. | | | | sold. To conclude, investing in Mutual Funds is a safe |
| One might question why and how the fluctuation | | | | bet for new investors. |
| takes place in prices of scrips. For instance, if buyers | | | | HIGH NET WORTH INDIVIDUALS (HNIs): |
| are more and the sellers are less then the stock price | | | | There is a huge potential in the area of HNIs. The |
| goes up depending upon the orders of the buyers. | | | | elite investors have no time to manage their |
| Similarly if the sellers are more and buyers are less in | | | | investments and they hire financial consultants to |
| a given situation the stock price falls. When the | | | | take care of their investments. The bosses find |
| market trend is towards downward it is known as | | | | inadequate time due to their hectic work schedules |
| bearish market and on the other hand if the market | | | | and as a result they hand over the responsibility to |
| trend is towards upward it is known as bullish market. | | | | the trusted and professional financial consultants. |
| While trading if the stocks are bought and sold with | | | | These consultants keep the HNIs informed about the |
| in the same trading day it is known as intra trading | | | | developments in their portfolios. |
| and it is also known as ‘day trading’ as the | | | | RISK DIVERSIFICATION: |
| trading is executed with in the same day. On the | | | | “Wide diversification is only required when |
| other hand, if the scrips are bought on a specific day | | | | investors do not understand what they are |
| and sold on some other day, the delivery of the | | | | doing”, quoted Warren Buffet. |
| stocks has to be taken and it is known as ‘inter | | | | Risk is directly proportional to return. Higher the risk |
| day trading’. | | | | higher the return and lower the risk lower the risk. |
| The scrip is traded from stock exchanges via share | | | | The risk is divided into low, medium and high risk. |
| brokers or institutional brokers and there are many | | | | Taking risk depends on the risk appetite of the |
| such exchanges. BSE and NSE is the acronym for | | | | individual. And again taking risk depends on the age of |
| Bombay Stock Exchange and National Stock | | | | the individual. The age is inversely proportional to risk. |
| Exchange and each has a specific quantity of scrips in | | | | Lower the age, higher the risk an individual can take |
| its fold. People say that the BSE or NSE has gone up | | | | and vice versa. |
| and that happens when the majority of the scirips go | | | | It is essential to invest money in various scrips. And |
| up and collectively it is said that the sensex has gone | | | | always invest in the scrips from different sectors |
| up. Sensex is nothing but the sensitivity index. It is | | | | that have a huge potential for growth. Observe the |
| not mandatory that the all the scrips in the BSE or | | | | day to day life and find out what sectors are |
| NSE should move up so as to conclude that the | | | | progressing and prospering and what sectors may |
| sensex has moved up. The majority scrips with | | | | flourish in the years to come and then invest your |
| market capitalization will tip the scales of the index. | | | | money in the best companies of different sectors so |
| When an individual acquires shares from the company | | | | that if a particular sector did not do well then other |
| directly then the transaction can be called as | | | | sector will support you thereby having average, |
| ‘primary market’ source. If the scrips are | | | | healthy and sustained growth. |
| bought from the exchange through broker then the | | | | TIPS FOR INVESTMENT: |
| transaction can be called as ‘secondary | | | | “Of the billionaires I have known, money just |
| market’. When a company issues shares directly | | | | brings out the basic traits in them. If they were jerks |
| to the public through an offer for the first time, then | | | | before they had money, they are simply jerks with a |
| it is known as Initial Public Offer (IPO). IPO’s and | | | | billion dollars”, quoted Warren Buffet. |
| if is second time or any other times it is called Follow | | | | • Look at the fundamentals of the company and |
| on Public Offer – FPO and another concept is | | | | check its previous track record. |
| NFO – New Fund Offer. There are also concepts | | | | • Find out the management of the company |
| like rights issue and bonus issue. In rights issue the | | | | whether it is professionally run or not? |
| company offers shares to the existing shareholders | | | | • What are the plans, prospects and expansions it |
| at a price and against the existing shares and in | | | | is undertaking. |
| bonus issue the company offers the shares free of | | | | • Does the company have good will and brand |
| cost based on the number of shares the person | | | | image in the corporate world? |
| holds. | | | | • Are there any related and unrelated |
| All the companies offer shares with a face value of | | | | diversifications, acquisitions or mergers etc? |
| Rs 1 or 2 or 5 or 10/- etc with a premium price with | | | | • Closely observe the promoter holding and track |
| a lower and upper price band for bidding. It all | | | | record of its dividend, EPS, P/E ratio. |
| depends on the investor whether to accept at the | | | | • Does the company have any other sister |
| lower or any other price band or may leave it at the | | | | concern companies? Is the company financial sound |
| discretion of the company by stating ‘cut | | | | or not? |
| off’ price. In such a situation whatever the price | | | | • Look at both the fundamental analysis and |
| the company fixes to issue shares becomes the final | | | | technical analysis and check for its consistency and |
| price. | | | | complementary. |
| INDIAN STOCKMARKET SCENARIO: | | | | • Read various business magazines, journals and |
| India has the second largest population in the world | | | | newspaper before investing. |
| and it has very low investor literacy rate. In western | | | | • From Mutual Fund Fact sheet find out the |
| countries people’s participation in stock market is | | | | investment pattern and you can learn the percentage |
| far higher. Of course, there are number of reasons | | | | of the investment and the companies the Mutual |
| towards the same. India is a country of savers and | | | | Funds have invested. |
| Indians taking risk in the share market is one of the | | | | • Pick up the scrips that have consistent growth |
| lowest in the world. People feel safe and comfortable | | | | and appreciation as well as giving handsome returns. |
| by depositing their money in Fixed Deposits, Banks, | | | | • Avoid penny stocks. |
| and Postal savings. Besides, Indians have great taste | | | | • Don’t overtrade as overtrading kills. |
| towards yellow metal – Gold. They also invest in | | | | Ultimately it is the broker who gets commissions |
| lands, buildings and real estate. In western countries | | | | against each transaction. |
| there are social security measures like old age | | | | • Don’t speculate but invest. |
| pensions, unemployment allowance and other | | | | • Never borrow and invest. Cut the cloth as per |
| insurance. The Govt. takes care of the welfare of | | | | the coat. |
| their people. That is the reason why there is a strong | | | | • Treat volatility as your friend not as a foe. |
| credit card culture there. People spend and borrow. All | | | | • Always look at the margin of safety. |
| these measures have made the people living in | | | | • Above all, read between the lines. |
| developed countries to take high risks. Therefore, we | | | | CONCLUSION: |
| can’t expect Indian population to behave and | | | | Investing in equity market is both an art and science. |
| invest like them. | | | | The management institutes in India have started |
| DEMAT FORMAT: | | | | academic courses related to stock markets. It |
| In the past, the scrips were held in paper format and | | | | indicates the significance and importance attached to |
| in physical format. There were too many loopholes | | | | equity investments. Investing in stock market |
| and things were getting delayed. Brokers and | | | | requires a lot of knowledge, inner information, |
| intermediatories manipulated the transactions and | | | | patience and perseverance. An individual must be |
| ultimately the retail investors burnt their fingers. | | | | willing to take a risk and should have his own capital. |
| Conversion from floor based trading to screen based | | | | He should also keep himself updated with the latest |
| trading has enhanced transparency levels in the | | | | happenings about the company in which he has |
| business transactions. In demat format the securities | | | | invested. If all the conditions are met, making money |
| are held in electronic form and the charges for the | | | | in the stock market is easy and any one can become |
| same are nominal and minimal. | | | | a billionaire. Globally renowned investor and the richest |
| For opening demat account it is always advisable to | | | | man in the world Mr. Warren Buffet has not come to |
| approach institutional brokers who offer better | | | | number one slot in overnight. It took many years of |
| services promptly and there is total transparency in | | | | efforts, financial discipline, patience, perseverance and |
| the dealings. The brokerage charges can be | | | | business acumen to come to this stage. Anything and |
| negotiated and it all depends on the volume and the | | | | everything is possible in the world if there is passion, |
| frequency of the business transactions. | | | | patience and perseverance to reach to the top slot. |
| SYSTEMATIC INVESTMENT PLAN (SIP): | | | | |