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Saturday 26 April 2014
By Nitin Gupta
It is widely assumed that stock market investment is game of professionals and experts. Sectoral movements and index volatility created extra fear factor for individual investors. Various domestic and global factors, economists’ expectations from economy and brokerages reports add another complications. Individual investors remain confuse over future of their hard earned money. Let’s consider some of them –
It is widely assumed that stock market investment is game of professionals and experts. Sectoral movements and index volatility created extra fear factor for individual investors. Various domestic and global factors, economists’ expectations from economy and brokerages reports add another complications. Individual investors remain confuse over future of their hard earned money. Let’s consider some of them –
- While doing homework before investing we may find 5-6 companies in one sector which are worth investing. We believe that they have excellent track record and they will achieve our target. We make a mistake of allocating our capital to all these companies which are identical in nature. We need to understand that only one or two companies will be best to invest in one sector. So, we need more rigorous study of company’s track record to select best of pack before putting money in them.
- There is a strong misconception of not understanding various economic survey reports conducted by Govt/Pvt agencies. Simple excuse is “I don’t understand this so I have no idea how it works for market”. Read these reports carefully as these are very rich source of data. Try to correlate it with market movements. It will give better understanding of these reports and how it affects Stock Market.
- Everybody knows the basic rule of market “BUY LOW SELL HIGH” but what will be the lowest low and highest high nobody knows. So, without getting confused about when to purchase and when to sell better use every dip to buy. Therefore, it is famously said “DON’T TIME THE MARKET SPEND TIME IN THE MARKET”.
- It is commonly observed that once a stock is purchased at a particular price there is no further purchase is made in that stock unless until price of that stock falls below of previous purchase price. Being a small investor and having long term horizon we should not to be stick to this rule.
- Recent sudden surge in the market gives the feeling to retail investor of missing the bus. They try to follow momentum stocks which are of little heard companies or companies which are having heavy debt on their books. They may get trapped at higher valuations as stock price of such companies have already run up from 20%-50%. Rather than following momentum there are plenty of opportunities exist for long term value investors.
- Small and retail investor having liquidity crunch all time think of creating portfolios. Opportunities for creating long term portfolios occur over period of time when market falls. Market peaks are not the time to build portfolios of stocks which had already run up 25-30%. This is the time of lighten your basket of stocks which have run up and loss making stocks.
- Rotation of money from one sector to another is important characteristics of index which adds volatility to it. It is not necessary to follow index movements strictly. Individual investor should switch over from one sector to another depends on his/her time horizon. Warren Buffet famously said “MOST PEOPLE GET INTERESTED IN STOCKS WHEN EVERYONE IS. THE TIME TO GET INTERESTED IS WHEN NO ONE ELSE IS. YOU CAN’T BUY WHAT IS POPULAR & DO WELL”
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Thursday 20 March 2014
By Nitin Gupta
World’s most successful investor Mr. Warren Buffet has unique way of investing. He says investing is very simple. It is not a rocket science. His techniques are very simple but very difficult to follow. His holding period is forever. He loves to look at market when nobody looks there. He writes annual letters to employees and investors of his company. Let’s take look some of its sayings which give glimpse of his style of investing.
World’s most successful investor Mr. Warren Buffet has unique way of investing. He says investing is very simple. It is not a rocket science. His techniques are very simple but very difficult to follow. His holding period is forever. He loves to look at market when nobody looks there. He writes annual letters to employees and investors of his company. Let’s take look some of its sayings which give glimpse of his style of investing.
- “Someone’s sitting in the shade today because someone planted a tree a long time ago”. - It clearly means that if we want to make our tomorrow better then start working today for it. Early investing bear more fruits as it provides compounding effects. It matters lot in long run.
- “In the business world, the rear view mirror is always clearer than the windshield”. - Mr. Buffet is pointing that past performance of company shows that how it had performed. It gives clear picture of company’s past profitability during economic/industry slowdown or cyclic time. It shows that how company will perform in future. He screens stock based on past performance of company to highlight the future earnings.
- “Buy a business, don’t rent stocks”. – It means don’t just keep buying and selling the stocks. Buy it for long term. While investing in particular stock of a company thinks, will you purchase whole company if you have money?
- “Buy companies with strong histories of profitability & with a dominant business franchise”. – Mr. Buffet has his own style of investment. He chooses to invest in those companies which are leader of industry. He finds these companies can pass price escalation to customers very easily which makes them profitable.
- “Our favorite holding period is forever”. – It says that purchase a stock for longer term and this term ends when you will exit the investment world. It shows buy a stock and forget it.
- “Be fearful when others are greedy and be greedy when others are fearful”. – It is as difficult to practice as easy to say. Mr. Buffet says that when market is blood bathed and everyone is crying for market fall that is the only time to purchase stocks. One fundamental reason of doing so is we get good companies at cheap valuations. When market recovers these good companies will be leader of market run.
- “A great investment opportunity occurs when a marvelous encounters a onetime huge, but solvable problem”. – it means strong professional and market leader companies don’t provide opportunity to enter in the stock. Suddenly these companies cracked due to some mess which is temporary in nature. This led to huge price correction. This is time to accumulate such stocks. Consider Maruti Suzuki for its problem with trade union and stock was trading that time Rs. 1000-/- odd level. Long term investor collected the stock at very cheap valuation to its instinct value.
- “If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays”. – Mr. Buffet writes annual letters to its employees and investors of Berkshire Hathaway where he discuss his investing techniques and give guidance to ………... His recent letter to his company on 01 Mar 01 says “If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays”. There is wide misconception among investors who says that they try to follow Warren Buffet way of investment style but they can’t resist themselves from watching daily price fluctuations. Investment guru points out that if can enjoy market holidays without looking at screen then you can enjoy weekdays too.
- “I am better investor because I am businessman & better businessman because I am investor”. – There is difference between speculator and investor. Speculator is a person who doesn’t bother about loss or gain. He is a person of very short term horizon and move on with whatever the result. Businessman is a person who starts his venture with very long term view and has “Going On Concern” concept in mind. Having loss in business don’t force him to shut it down. He believes it turning in around and make profitable. This concept is rightly applicable to investors. Therefore, he says that better businessman is also best investor.
- “The investor of today is not profit from yesterday’s growth” – World’s most successful investor points out that you need to invest in growing companies with very long term view. Tomorrow, when these companies have grown enough up you need to sell investments and find new growing companies. Yesterday’s growing company who have expanded it operation in full scale may not yield better returns in longer terms. For more news on the stock market click here.
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Friday 27 December 2013
By Nitin Gupta
Stock market business is such that it has different set of principles for different people but some rules are applicable to all. You might have earlier heard this. It is more important because I am telling from my personal experience. Some of them are as follows: A great journey starts with one small step. To make investment we don’t need huge cash at our disposal. Start investing whatever small investment can be spare for future. It will make great difference in long term. A rekey party is sent to judge the situation in conflicted areas by Army before launching full operations. Same way small amount of investment needs to be made to check decision feasibility and selection process. Though it may not fetch profits but you have little to lose too. Swimming against the flow needs more courage than with flow. Same applies to investing also. If you are short term investor having time horizon one month or less. Then it is better to invest in the sector or company which is booming along with market. Better to walk with trend rather than against trend and incur losses. As retail investor feels liquidity crunch at all times. They sell their fundamentally strong investments to generate internal cash. Sell loss making investments rather than taking out cash from profit cows. This capital needs to be allocated to good companies. In bull market some of companies run up faster than the Sensex/Nifty itself. It is very true in case of Small and MidCap companies. Small investors with poor knowledge enter in these stocks to make quick profits. Check reasons for this huge run up. If fundamentals getting change then wait for cool of this stocks to make investment. These faster run up companies get free fall when market gets consolidated. We continue to holding loss making stocks hoping that one fine day it will recover and we will make profit from this. It is biggest mistake retail investor makes. Rising market is better opportunity to book losses. If bull market not giving profit on your investment then there are least chances to recover later on. So, this is time to take some pain of loss.
Stock market business is such that it has different set of principles for different people but some rules are applicable to all. You might have earlier heard this. It is more important because I am telling from my personal experience. Some of them are as follows: A great journey starts with one small step. To make investment we don’t need huge cash at our disposal. Start investing whatever small investment can be spare for future. It will make great difference in long term. A rekey party is sent to judge the situation in conflicted areas by Army before launching full operations. Same way small amount of investment needs to be made to check decision feasibility and selection process. Though it may not fetch profits but you have little to lose too. Swimming against the flow needs more courage than with flow. Same applies to investing also. If you are short term investor having time horizon one month or less. Then it is better to invest in the sector or company which is booming along with market. Better to walk with trend rather than against trend and incur losses. As retail investor feels liquidity crunch at all times. They sell their fundamentally strong investments to generate internal cash. Sell loss making investments rather than taking out cash from profit cows. This capital needs to be allocated to good companies. In bull market some of companies run up faster than the Sensex/Nifty itself. It is very true in case of Small and MidCap companies. Small investors with poor knowledge enter in these stocks to make quick profits. Check reasons for this huge run up. If fundamentals getting change then wait for cool of this stocks to make investment. These faster run up companies get free fall when market gets consolidated. We continue to holding loss making stocks hoping that one fine day it will recover and we will make profit from this. It is biggest mistake retail investor makes. Rising market is better opportunity to book losses. If bull market not giving profit on your investment then there are least chances to recover later on. So, this is time to take some pain of loss.
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Friday 20 December 2013
By Nitin Gupta
Stock market business is such that it has different set of principles for everyone but some of the golden rules work for all.
Some of them are as follows:
Stock market business is such that it has different set of principles for everyone but some of the golden rules work for all.
Some of them are as follows:
- Don’t buy or sell before an important event like RBI monetary policy, GDP numbers or inflation data etc. This data affects whole market rather than a particular sector. Sometimes we want to make quick buck and create positions in market, which may or may not work.
- Volatile market provides lot of chances to enter & exit stocks and make quick bucks. But, this is good chance to pickup handful good companies for long term. These returns will be surely more than short term benefits.
- Check out some beaten down stocks and find out the reason for the same. These reasons may be of economic slowdown, management/promoters issues or business restructuring/consolidation. Economic slowdown is general in nature which affects every sector and stock. Business restructuring can be time bar phenomena whereas management issues cannot be solved easily in short term. Consider Tata Steel/ Crompton Greavous and Financial Technology (FTIL) in this regard.
- Fundamental good stocks hardly give any opportunity to enter in the stock because they just keep growing. So, enter in the stock at price which is comfortable to you and add it at lower levels.
- Make investment in stocks for a specific target and whenever your target is achieved sell it. Problem arises when we get greedy as our target is achieved but we are not booking profit because stock price is increasing. Solution lies in booking partial profits. For example- you had purchased 100 shares of XYZ company at the cost of Rs.50-/-. Over period of time share price had increased to 75-/-. Book partial profits here with realising cost with profit. Sell 80 shares at 75-/- amounting Rs. 6000-/-. So it means your original cost of investments (Rs.5000-/-) had recovered along with Rs.1000-/- profit. But still, you are holding 20 shares which is BONUS to investment. Now you can take risk of being greedy.
- After spending considerable time in doing homework for searching good worth companies for investment. We think that we had become an expert in this field and we know everything about every company. We try to gain profits at the earliest and we become trader from investor. Result we lose hard earned money. There are number of virtual trading platforms are available which works on real time basis with NSE and BSE. Before playing with real money first check your expertise with virtual money.
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Wednesday 16 October 2013
By Nitin Gupta
Warren Buffet, Father of investment had famously said "Be fearful when others are greedy and be greedy when others are fearful". But practically, it is as hard to follow as it is easy to say. When market was blood bathed in Aug 2013 and Nifty nose down to 5285.85 on 28 Aug 13. Everybody was talking about falling it below 5000 mark. Even some brokerages have given the target for Nifty at 4700. Investor especially small investors feel very afraid in such situations. They don't dare to take risk and put their hard core money in stock market. Here, trap is fixed by HNIs, professional traders, market experts and most importantly by FIIs. They accumulate the best companies of Sensex which are professionally and financially sound. They sold stock of these companies at premium or fair value or when Sensex/Nifty getting higher. This is the time when retail investors get activated and try their hand in stock market. Nifty touched the high of 6155 on 15 Oct 13. Small investors might be thinking that market is getting higher day by day and they should try to make quick bucks from here. But be cautious friends, this is not time to look towards stock market. Wait patiently and opportunities will come to enter in the market.
Retail investors must keep following points in mind before entering this risky zone:-
- Decide at first stage itself that weather you are going to trade or invest for longer term. If you are long term investor and have the time horiszon there to five years or more then you need not to be bothered short term volatility of market. But if you are trader then you need to learn all strategies of market as a famous quote says FIRST LEARN THEN REMOVE "L".
- Invest for longer term. Take a view of one to three years. If you don’t have that much patience then must invest for minimum six months.
- Small investor's biggest problem is liquidity crunch. They every time feel shortage of funds. As they cannot invest huge money at one instance. They need to follow Systematic Investment Plan (SIP) to keep their investments alive for longer terms. The pattern of SIP is to be followed at all cost.
- Stock market is not bed of roses and there is no stock which provides comfort of get sleepy with it. Keep rotating your cash with profit booking. For example, you had purchased stock of "A" company at certain price and with passing of time it had reached its fair value. Book your profit at this time and wait for opportunity to re-enter. Problem arises when one get greedy hoping that the stock price will rise further. By the time macro factor of economics get changed and stock price back to where you had purchased after touching high.
- You may have followed the SIP systematically but problem may arise when this money is put in wrong stock at wrong time. The solution lies with following SIP but kept aside this SIP amount and keep accumulating this money and wait for opportunities to invest.
- It is not necessary that your investments start appreciating from the second day you have purchased it. Give it time to grow. In between it may get positive or negative. If your decision goes wrong and investment bring negative results to you. Don’t get panic and run to book losses. As famously said "if can't manage 20% losses in stock market then you need not to be here".
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Tuesday 10 September 2013
By Praveen Kumar
After opening an account with Kotak Securities I felt very happy, because it provided me with a very good android app and I could easily browse using the same or on their website, kotaksecurities.com.
The website and android app is very user friendly to do transactions, and hence, I am very happy with Kotak Securities
After opening an account with Kotak Securities I felt very happy, because it provided me with a very good android app and I could easily browse using the same or on their website, kotaksecurities.com.
The website and android app is very user friendly to do transactions, and hence, I am very happy with Kotak Securities
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By Pawan Kumar Rai
It's a great pleasure to work with Kotak Securities as a Sub-Broker since May-2011. First of all, there is a strong Risk Management System which helps to deal in all market situations.
It has been a learning experience and has added to my knowledge. Their strong research team gives us some helpful recommendations. Thanks to Kotak Securities today I have a loyal and satisfied clientele.
It's a great pleasure to work with Kotak Securities as a Sub-Broker since May-2011. First of all, there is a strong Risk Management System which helps to deal in all market situations.
It has been a learning experience and has added to my knowledge. Their strong research team gives us some helpful recommendations. Thanks to Kotak Securities today I have a loyal and satisfied clientele.
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By Amarjeet Kumar
It was a great experience to trade with Kotak Securities. I got amazing customer support as I was new in trading arena. Kotak has always been with me whenever I need any kind of support, weather it is for equities or derivatives. Keep it up guys :)
It was a great experience to trade with Kotak Securities. I got amazing customer support as I was new in trading arena. Kotak has always been with me whenever I need any kind of support, weather it is for equities or derivatives. Keep it up guys :)
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By Deepak Lasane
I didn't have any idea about how I could move towards the Stock Market. Then I searched on the internet. On my Search, I found Kotak Securities among many others. Kotak Securities, like me, was also new in the market. I decided to take risk and move to Kotak.
But Now I realized taking a risk with Kotak isn't actually a Risk. In fact Kotak helps me how to take decisions in bearish as well as bullish market. The Customer Care of Kotak is also supportive and Helpful.
I could never have been in the market if Kotak Securities did not help me in various problems I faced.
I didn't have any idea about how I could move towards the Stock Market. Then I searched on the internet. On my Search, I found Kotak Securities among many others. Kotak Securities, like me, was also new in the market. I decided to take risk and move to Kotak.
But Now I realized taking a risk with Kotak isn't actually a Risk. In fact Kotak helps me how to take decisions in bearish as well as bullish market. The Customer Care of Kotak is also supportive and Helpful.
I could never have been in the market if Kotak Securities did not help me in various problems I faced.
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By Daksh Jain
I have the privilege of trading stocks and derivatives with Kotak Securities. It's been a very convenient and hassle free experience. The mobile app has worked great for me and Kotak's goodwill has earned me profits that i invested in this relationship. It's really one of best private entities and very professional, and customer oriented.
I have the privilege of trading stocks and derivatives with Kotak Securities. It's been a very convenient and hassle free experience. The mobile app has worked great for me and Kotak's goodwill has earned me profits that i invested in this relationship. It's really one of best private entities and very professional, and customer oriented.
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By Sanjay Banerjee
I have been dealing with Kotak Securities for the past 5 months. Apart from the monetary gain, I can keep my money secured in the same way as a nationalized bank would. Kotak Securities call often whenever they feel to give their suggestions to buy or sell a share. And I have seen that following their suggestions I have gained some immediate profit which I would have never gain keeping the money in my savings account.
In short I love to keep my money in Kotak Demat Account and I feel secured.
I have been dealing with Kotak Securities for the past 5 months. Apart from the monetary gain, I can keep my money secured in the same way as a nationalized bank would. Kotak Securities call often whenever they feel to give their suggestions to buy or sell a share. And I have seen that following their suggestions I have gained some immediate profit which I would have never gain keeping the money in my savings account.
In short I love to keep my money in Kotak Demat Account and I feel secured.
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By Saurabh Sharma
It was 1994 when I approached Kotak Securities in Pune on FC Road. They were new kids on the block and a welcome change from the brokers club on BSE that had ruled.
Those were the days of IPO's. I started doing my IPO's from Kotak. I had luck in some , lack of luck in others. I would always discuss an IPO or public issue as it was then called with Harshal the branch manager. He was a willing participant. He saw that I came to him after reading Capital Market , Dalal Street and the TOI review of the IPO. A relationship emerged.
Harshal, the manager was generous in another way. He gave me as many research reports I wanted without asking for anything in return. Reading them taught me how to appraise a share in the secondary market (I was only 25 odd years from a non-business background) and discussing the same report after a year taught me a lot.
Then came another bank's IPO. Proportionate allotment system had come. My father had just retired and we had about Rs 4 lakh in the bank. I had acquired shares of this bank in its IPO and had seen the benefits. The question was - do I put all the money in one application or do we make multiple applications. The key was how the shares would be allotted.
I told Harshal my dilemma. We discussed it. He asked his seniors. Finally the decision was taken. We made one application for the entire amount my father had received as his pension settlement. We were allotted 400 shares then. Had we made multiple applications chances are we would have got none. Only Rs.4000 were spent and we got a refund i.e.: our stock invests.
Those 400 shares are now 8000 shares @Rs.625/-. And growing. My father is no more , but those shares are going to pay for the education of one of his grandchildren as per his wishes... still time before a child needs it!
A good broker should educate, empower and encourage rational investments. Kotak Securities encourages this. And hence it remains in memory. The shares of the other bank which I had invested in during its IPO remind me of this particular aspect even today !
Good Luck Kotak Securities. May you continue to grow and offer good services to your clients.
It was 1994 when I approached Kotak Securities in Pune on FC Road. They were new kids on the block and a welcome change from the brokers club on BSE that had ruled.
Those were the days of IPO's. I started doing my IPO's from Kotak. I had luck in some , lack of luck in others. I would always discuss an IPO or public issue as it was then called with Harshal the branch manager. He was a willing participant. He saw that I came to him after reading Capital Market , Dalal Street and the TOI review of the IPO. A relationship emerged.
Harshal, the manager was generous in another way. He gave me as many research reports I wanted without asking for anything in return. Reading them taught me how to appraise a share in the secondary market (I was only 25 odd years from a non-business background) and discussing the same report after a year taught me a lot.
Then came another bank's IPO. Proportionate allotment system had come. My father had just retired and we had about Rs 4 lakh in the bank. I had acquired shares of this bank in its IPO and had seen the benefits. The question was - do I put all the money in one application or do we make multiple applications. The key was how the shares would be allotted.
I told Harshal my dilemma. We discussed it. He asked his seniors. Finally the decision was taken. We made one application for the entire amount my father had received as his pension settlement. We were allotted 400 shares then. Had we made multiple applications chances are we would have got none. Only Rs.4000 were spent and we got a refund i.e.: our stock invests.
Those 400 shares are now 8000 shares @Rs.625/-. And growing. My father is no more , but those shares are going to pay for the education of one of his grandchildren as per his wishes... still time before a child needs it!
A good broker should educate, empower and encourage rational investments. Kotak Securities encourages this. And hence it remains in memory. The shares of the other bank which I had invested in during its IPO remind me of this particular aspect even today !
Good Luck Kotak Securities. May you continue to grow and offer good services to your clients.
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By Deepaliben Damani
Kotak Securities is one of largest investment company which gives people right advise and huge amount of profit from stock market and other mutual fund schemes.
Kotak Securities is one of largest investment company which gives people right advise and huge amount of profit from stock market and other mutual fund schemes.
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By Aditya Dang
When you need a partner in investing at the right time, it is best to rely on Kotak Securities which with its unparalleled speed and execution of the order can deliver the needed results without any glitches.
When you need a partner in investing at the right time, it is best to rely on Kotak Securities which with its unparalleled speed and execution of the order can deliver the needed results without any glitches.
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By Soniya Bedi
As we all know Kotak Securities provides best services in online stock trading, currency derivation, mutual funds, NRI services, etc. I must say that Kotak Securities is very good platform for all. I solved many queries with customer support, from whom I got instant reply without any waiting. Account opening was never a problem and trading with Kotak Securities was never a problem too. I have been using this website since last one year, So happy about Kotak Securities.
Good Trading Platform, not the best, but still good. Their desktop trading system (KeatProX) is decent. It's easy to figure out all your transactions from the ledger. Customer Service is decent.
You get contract notes on time in your mail id. You can log in to their website to see if you owe them money. Well integrated with other major Banks. Equity Portfolio Tracker on their website is pretty good and I use it a lot. You can track all your holdings, see the total profit or loss in your holdings, even your realized profit, loss is visible. They give sectoral snapshots.
and it gets automatically updated unlike free Portfolio Trackers. Overall its very well designed.
As we all know Kotak Securities provides best services in online stock trading, currency derivation, mutual funds, NRI services, etc. I must say that Kotak Securities is very good platform for all. I solved many queries with customer support, from whom I got instant reply without any waiting. Account opening was never a problem and trading with Kotak Securities was never a problem too. I have been using this website since last one year, So happy about Kotak Securities.
Good Trading Platform, not the best, but still good. Their desktop trading system (KeatProX) is decent. It's easy to figure out all your transactions from the ledger. Customer Service is decent.
You get contract notes on time in your mail id. You can log in to their website to see if you owe them money. Well integrated with other major Banks. Equity Portfolio Tracker on their website is pretty good and I use it a lot. You can track all your holdings, see the total profit or loss in your holdings, even your realized profit, loss is visible. They give sectoral snapshots.
and it gets automatically updated unlike free Portfolio Trackers. Overall its very well designed.
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By Arko Roy
The best thing about Kotak offline is that it gives everything you ask for provided you give it what it asks for. I love Kotak securities. It's also best Brokerage Firm in India.
The best thing about Kotak offline is that it gives everything you ask for provided you give it what it asks for. I love Kotak securities. It's also best Brokerage Firm in India.
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Monday 24 June 2013
By Junaid Mahboob
Hello friends, I want to share my journey with the Stock Market in brief. I started trading with Coal India IPO. I saw all television news channels to stay updated about all kinds news related to CIL. As there was huge publicity for this script, I applied for CIL IPO which was the beginning of my journey. In the beginning, everything was going good but later I started day trading which became my biggest mistake till date. So friends, I sincerely advise you not to fall into day-trading. One should follow stop loss strictly. When you purchase a script keep it for short term, keep your stop loss and target in mind. Exit once the target is achieved. Don’t invest blindly. Know about the company before you enter.
LOVE YOUR MONEY, NEVER FALL IN LOVE WITH A SCRIPT. HAPPY TRADING.
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Thursday 16 May 2013
By Neetu Sehgal, FinGyan.com
Investment in stock market needs a lot of patience and discipline. Every investor should read and gain an understanding of basic accountancy principles, rules of stock market functioning and stock market history. Investing is a serious investment option and also highly volatile, hence investors should treat it with extreme seriousness. The education should include reading the daily papers that cover the movements on the stock exchange in detail. While investing, people should try to avoid investing purely in one or two companies; instead the risk should be spread over a few companies. Stock market investment is for people who are ready to play with risk. All bull runs come with a few sudden dips, which is the essence of stock market investment, the investor should be able to hold on to his nerve even when the stock market dips down. The selection of stockbroker is as important as the stocks. While choosing a broker the following shall be kept in mind:
- Don’t choose on the basis of what friends say
- Should allow placing trades online
- Should not charge a high fee.
A DEMAT account needs to be opened for stock trading and investing. Almost all banks offer the option of opening a DEMAT account. It’s best to hold your investment for at least 5-10 years minimum; this is the best way to milk the stock market. Emotions shall not affect stock market decisions, and selling should be done only if the stock is performing exceptionally well. Try to use those resources for investment that won’t be needed for a long term. Many experts advice to use “stock tips from insiders” very cautiously and advocate it’s always best to do your own research on the market. The bear market is the right time to buy fresh stocks. Stock market investment should be done systematically and gradually.
Stock market is brimming with shady agents, and one must always be cautious and refrain from offers which promise more than 50% return. Any guaranteed return in a stock market investment is highly doubtful. “Day trading” means not holding on to your market positions beyond the current trading day, this reduces potential drop in the market in the next opening, due to some news overnight. As investor, you can choose between being a ‘Scalper’, in which large volumes of different stocks are bought and sold in minutes to earn a small profit per share or being a ‘Momentum Trader’ where trading is done in stocks that are in momentum at a particular day to earn profit by selling and buying at peaks. It’s very important to avoid the “herd mentality”, every investor shall make his own choices and not be influenced by anyone. One strategy is to invest in the industry you understand, as this will help you make better decisions without being influenced. With the stock market learning shall never stop and one shall always consult an investment banker or broker if any help is required. Stock market investment is risky but if planned well can surely be a good investment option.
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Tuesday 23 April 2013
By Bhavikk Shah
Many beginners ask me the basics of share market and how a company is formed, so here is a short explanation to that –
Company can have Equity Shares, Preference Shares and or Differential Voting Rights Equity shares as its Share Capital. Share Capital denotes to the amount of capital raised by the issue of shares (viz Equity, Preference, DVR or all of them), by a company. It is collected through the issue of shares and remains with the company till its liquidation. Share Capital is owned capital of the company, since it is the money of the shareholders; so these share holders are the owners of the company. The total share capital is divided into small parts; each part is called a 'SHARE'. Share is the smallest part of the total capital of company. In India, Share holding of 51% in a company is considered as a controlled holding. Any company willing to go public or willing to have an IPO has to maintain at least 10% of its total issued shares with the general public. Recently SEBI have extended the deadline for all the companies in India to maintain at least 25% of their total issued shares with the general public. So, it means promoters cannot hold more than 75% of the total issued shares in a company. 25% public shareholding is must.
Types of Share Capital –
Authorized Capital - The maximum amount of capital which a company can collect or raise by selling its shares, it is also known as Nominal Capital or Registered Capital.
Issued Capital - Is the part of the Authorized capital which is actually issued to general public.
Subscribed Capital - Is the part of the issued capital which is actually subscribed by the general public.
Paid Up Capital - Is that part of the called up capital which is actually paid up by the shareholders.
Now in general, companies are not in practice to have partly paid up or call up money. The Company takes full face value money on the issue. So fully paid up Face value is the Paid Up Capital of the Company.
What is Share Capital Base?
When I form a company, I use my personal wealth as Capital i.e. I invest my own money into the company and into the business activities. In the process of forming; registering a new company under the Companies Act 1966 it needs to be Capitalized whereby I infuse money or assets into the company and get shares of that company in return. e.g. If I infuse Rs. 5000 or assets worth Rs. 5000 to form a company , I will be getting Shares worth Rs. 5000 of that newly formed company ; so I become the promoter of the company. Capitalization is the process in which owners have to come with number of shares and its face value. Here in India, per share value used is Rs. 10, Rs. 5, Rs. 2, Re. 1 as its face value which is then multiplied by number of shares issued or divided by total invested money. Let’s take some example – In my company I invest Rs. 5,000 - Thus the capitalization of my company is as follows – Authorized capital is Rs. 5,000 i.e. 500 Shares x Rs. 10/share. Paid up Equity Capital is Rs. 5,000, thus Rs. 5,000 becomes the total capital base of my company at the time of registration or inception. There can also be second scenario where, I can have my capital base of Rs. 6,000 but I paid only Rs. 5,000. Therefore – Authorized capital will be Rs. 6,000 i.e. 600 shares x Rs. 10 each. Issued, Subscribed; Paid up Equity share capital is Rs. 5,000 i.e. issued capital is only of Rs. 5,000 ; Issued equity shares is only 500 shares. This is also the VALUE of business because it is still not generating any profits or it is still not established etc. I will use the second scenario for the further discussion which is in usual practice. To increase the value of my company, I work hard and increase the value of my company by branding, marketing, market positioning, revenue, profits, future potential, and market share. I keep all the profits as I am the only share holder having all the company's paid up equity capital and so my business has high net-worth. The total earnings of my company are divided by 500 shares. So the company’s Earnings per Share (EPS) is based on 500 shares that are issued to me. Remember, according to my authorized capital, I still have 100 shares of Rs. 10 face value more remaining to be issued. They are not yet issued or not been paid up ; hence authorized capital is not considered while calculating EPS – it’s just taken as a note. Going forward, at some point in the future, I feel that I am in need of more money or capital for the expansion or I want to grow my business – I have 2 ways – either I can go to banks or go to other sources of finance or I forgo a little bit of my equity holdings. If I go to banks which are loans/debts taken from banks – then I have to pay Interest which under all circumstances I have to pay. And, If I issue shares i.e. I forgo a little bit of my equity holding then in this case I don’t have to pay interest to them (my new shareholders) nor its compulsory to declare dividends, but I have to share my profits, losses and even bankruptcy with my new shareholders. So I decide to go for raising capital by diluting the equity i.e. I am taking additional partners by issuing them new shares. These partners can be Private Equity players, financial institutions or any public investor (if it is opened to common public which is called IPO) which will be my new shareholders. During this course of time, the value of my business has raised much more than Rs. 6,000 as it is now an established business making lots of good profit and with lots of potential; whoever wishes to become partner or stakeholder will be getting partial ownership of the well established profitable business with minimum risk and so I will be demanding Premium on the face value of Rs.10 from my new shareholders, this premium will be as per the present value of the business. How to determine Present Value – For example – Consider that the present value of the business comes to Rs. 1,20,000. With this increased value of the business, the market value per share will be Rs. 200/share. (Rs.1,20,000/600 shares). I decide to issue 50 share from remaining 100 shares to go public. I use public offering (IPO) ; price my share at Rs. 200/sh. I raise Rs.10,000 (50 x Rs. 200). Now, the capital structure is as under – Authorized capital is still Rs. 6,000 (600 share of Rs.10 each). Issued, Subscribed; Paid up Equity is Rs. 5500 (original 500 share; additional 50 share). Share premium Account will now come to existence with Rs. 9500 (Rs. 10,000 – 50 x 10) Share premium is considered as part of total shareholders’ equity. Additional money beyond face value is called Share Premium. Total Shareholder's Equity is also known as Net-worth or Stockholders Equity or Shareholders Fund or Share Capital. A company can also issue Preference shares or DVR share along with Equity shares. Many beginners presume that Equity base is the IPO price x IPO shares, but the fact is that in IPO the owner is only opening partial ownership to raise additional capital for growing business. At this point the total earnings of the company is divided by 550 shares. Because now a total of 550 shares have been issued; issued subscribe; paid up equity has increased to 550 shares. Even though the mass public has only 50 shares, it is not the only shares in company, IPO shares are add on to existing 500 shares. Company issues lavish Bonuses of Shares before IPO - If one reads the Draft Red Herring Prospectus of any IPO one will notice that before the IPO the promoters or pre IPO shareholders are given lavish bonuses of shares reducing the net worth of company and increasing the issued, subscribed; paid up capital base of the company.
When I form a company, I use my personal wealth as Capital i.e. I invest my own money into the company and into the business activities. In the process of forming; registering a new company under the Companies Act 1966 it needs to be Capitalized whereby I infuse money or assets into the company and get shares of that company in return. e.g. If I infuse Rs. 5000 or assets worth Rs. 5000 to form a company , I will be getting Shares worth Rs. 5000 of that newly formed company ; so I become the promoter of the company. Capitalization is the process in which owners have to come with number of shares and its face value. Here in India, per share value used is Rs. 10, Rs. 5, Rs. 2, Re. 1 as its face value which is then multiplied by number of shares issued or divided by total invested money. Let’s take some example – In my company I invest Rs. 5,000 - Thus the capitalization of my company is as follows – Authorized capital is Rs. 5,000 i.e. 500 Shares x Rs. 10/share. Paid up Equity Capital is Rs. 5,000, thus Rs. 5,000 becomes the total capital base of my company at the time of registration or inception. There can also be second scenario where, I can have my capital base of Rs. 6,000 but I paid only Rs. 5,000. Therefore – Authorized capital will be Rs. 6,000 i.e. 600 shares x Rs. 10 each. Issued, Subscribed; Paid up Equity share capital is Rs. 5,000 i.e. issued capital is only of Rs. 5,000 ; Issued equity shares is only 500 shares. This is also the VALUE of business because it is still not generating any profits or it is still not established etc. I will use the second scenario for the further discussion which is in usual practice. To increase the value of my company, I work hard and increase the value of my company by branding, marketing, market positioning, revenue, profits, future potential, and market share. I keep all the profits as I am the only share holder having all the company's paid up equity capital and so my business has high net-worth. The total earnings of my company are divided by 500 shares. So the company’s Earnings per Share (EPS) is based on 500 shares that are issued to me. Remember, according to my authorized capital, I still have 100 shares of Rs. 10 face value more remaining to be issued. They are not yet issued or not been paid up ; hence authorized capital is not considered while calculating EPS – it’s just taken as a note. Going forward, at some point in the future, I feel that I am in need of more money or capital for the expansion or I want to grow my business – I have 2 ways – either I can go to banks or go to other sources of finance or I forgo a little bit of my equity holdings. If I go to banks which are loans/debts taken from banks – then I have to pay Interest which under all circumstances I have to pay. And, If I issue shares i.e. I forgo a little bit of my equity holding then in this case I don’t have to pay interest to them (my new shareholders) nor its compulsory to declare dividends, but I have to share my profits, losses and even bankruptcy with my new shareholders. So I decide to go for raising capital by diluting the equity i.e. I am taking additional partners by issuing them new shares. These partners can be Private Equity players, financial institutions or any public investor (if it is opened to common public which is called IPO) which will be my new shareholders. During this course of time, the value of my business has raised much more than Rs. 6,000 as it is now an established business making lots of good profit and with lots of potential; whoever wishes to become partner or stakeholder will be getting partial ownership of the well established profitable business with minimum risk and so I will be demanding Premium on the face value of Rs.10 from my new shareholders, this premium will be as per the present value of the business. How to determine Present Value – For example – Consider that the present value of the business comes to Rs. 1,20,000. With this increased value of the business, the market value per share will be Rs. 200/share. (Rs.1,20,000/600 shares). I decide to issue 50 share from remaining 100 shares to go public. I use public offering (IPO) ; price my share at Rs. 200/sh. I raise Rs.10,000 (50 x Rs. 200). Now, the capital structure is as under – Authorized capital is still Rs. 6,000 (600 share of Rs.10 each). Issued, Subscribed; Paid up Equity is Rs. 5500 (original 500 share; additional 50 share). Share premium Account will now come to existence with Rs. 9500 (Rs. 10,000 – 50 x 10) Share premium is considered as part of total shareholders’ equity. Additional money beyond face value is called Share Premium. Total Shareholder's Equity is also known as Net-worth or Stockholders Equity or Shareholders Fund or Share Capital. A company can also issue Preference shares or DVR share along with Equity shares. Many beginners presume that Equity base is the IPO price x IPO shares, but the fact is that in IPO the owner is only opening partial ownership to raise additional capital for growing business. At this point the total earnings of the company is divided by 550 shares. Because now a total of 550 shares have been issued; issued subscribe; paid up equity has increased to 550 shares. Even though the mass public has only 50 shares, it is not the only shares in company, IPO shares are add on to existing 500 shares. Company issues lavish Bonuses of Shares before IPO - If one reads the Draft Red Herring Prospectus of any IPO one will notice that before the IPO the promoters or pre IPO shareholders are given lavish bonuses of shares reducing the net worth of company and increasing the issued, subscribed; paid up capital base of the company.
I have seen some issues whereby the promoters are given bonus in the ratio of 100 shares for every 1 share held before the IPO this makes the promoter's acquisition price of equity share less than its Face value, in same cases it goes to paise. You can see many big investors exit wholly or partially in the IPO as they already have taken back their invested money in the form of Bonus shares, so one should also consider this while investing in the IPO's.
Author Bio: Bhavikk Shah an Independent Equity Analyst who is working for a proprietary firm dealing in capital market as an Equity Analyst. His blog is an upcoming independent equity research forum with his independent macro & micro economics views, in which he tries to present his views on various stocks and sectors. The blog also offers live stock market commentary and free newsletters along with global economic data.
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By Ganesh Iyer
I would frame for a pre-determined economic reforms in certain sectors like Pharma, Realty & IT. I would also encourage foreign capital investments in the Indain-based companies. This would extend our export limits & will also increase standard of living of people. I would also promote research & development in the fields of science, pharma, IT, etc. When in Inflation, we need to increase the people's income; in return it will increase consumer spending, rather than lowering fuel & food prices is not possible as the rates are upon the Global Issue(means it is inter-dependent on the countries’ economies). Keeping these plans in our minds we can surely fulfill Mr. Kalam's dream of seeing India as a developed Nation. No Global Crisis can hit us, if we are strong from our roots. Though I am just a civil citizen presently, I would surely try giving a chance to become the FM in the Bright Future.
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