Stock brokers play a most important role in the Brokerage Firm. Stock Brokers are the Middleman between the stock exchange and trader/client/customers. Stock Brokers are a Professional trader. They buy & sell shares on behalf of clients and their standing instructions. The stock broker may also be known as a registered representative or an investment advisor. Stock brokers maintains the number of transactions of individual clients of institutional customers. Brokerage firms & Broker dealers are sometimes referred to as stockbrokers. This includes both full service brokers & Discount brokers. As a representative of his clients, a stock broker seeks the best deals to buy and sell stock. They usually deal in all types of securities and also handle derivatives, such as Commodity Futures, Currency Market, Option Market, Future Market. They also advise their clients about when to make transactions and guide them about what to look for in market dealings. Stock brokers are paid in form of commissions which usually consist of a percentage of a value of the trade transaction in a stock market. Brokerage firms are also known as discount brokers as they offer trade transactions at a single price. A stock broker provides advisory services for investing in a stock market and in return an investor pays a fixed fee to them. Margin interest payments are charged to investors for borrowing against the brokerage account for investment in a stock market. They also take service charges from their clients for performing administrative tasks, such as for handling Individual Retirement Account (IRA) and for mailing stocks in the form of certificates.
Stockbroker Pros and Cons
The job of a stockbroker is not without its challenges. Here are some of the pros and cons of becoming a stockbroker:
Pros:
Great career option for people who have in-depth knowledge of the stock market.
Offers high commission-based income potential
Good fit for ambitious individuals with strong selling skills
Cons:
Must be able to handle rejection.
Extremely competitive work environment.
May require excessively long work hours.
May have difficulty building a significant client base due to availability of online trading.
IPO or Initial Public Offering is when the shares of a private companies are opened up to the public for the very first time. It is the first sale of the company’s stock to the public to raise funds or capital. IPOs are very attractive for investors as there is a high chance of the stock price multiplying from its initial offer.
An initial public offering (IPO) is one way to Buy shares of a company that is going public. It is a popular mode of investment because it has the potential to grow manifold in a short period of time.
Decision
The first step is to choose the right company’s IPO for investment and understand the past performance of companies & underlying companies before applying for IPO. Gain knowledge about the company through the prospectus of the company. You can find the prospectus of the company on Securities & Exchange Board of India (SEBI) website. The prospectus gives a fair idea about the company’s business plan & its purpose.
Funding
The next & second step is to arrange for the funding. You can use your savings to invest in an IPO. But worry not if you don’t have funds, several nationalized banks & private banks like ICICI, HDFC & popular stockbrokers, offer the facility to apply for loans to invest in IPO. So inquire about the Interest before you take a loan.
Demat-cum-trading account
The next step is a Demat account is a prerequisite to apply for an IPO. Demat accounts provide facilities to store your stocks or buying & selling stocks online. A Demat account can be opened by submitting your PAN card, Aadhar card, Address & Identity proofs. You can easly get many options for trading platform to trader with your shares.
Application Process
You can apply for an IPO through your trading account and Bank account. You need to understand ASBA (Application Supported by Blocked Amount) facility, which is compulsory for IPO Application. The ASBA is an application allowing the Banks to block money in your bank account at the time of placing for IPOs. The ASBA is available in both form physical & demat. The facility eliminates the use of demand draft & cheques. You need to specify your PAN, Demat account number, bank account number and bidding details in the application.
BIDDING
Bidding is the next step to be followed. You need to bid while applying for shares, as per the lot size is mentioned in the prospectus. Lot size is the minimum number of shares you have to apply for during an IPO. There is a bid price too. The company usually sets a price band. The upper limit is known as the Cap price while the lowest is called floor price. You have to bid for shares in this price range. Although you can revise your bid during an IPO, it is important to note that you will need to block the money required while bidding. The blocked amount stays in the bank account and earns interest till allotment.
Allotment
Once the bidding is completed, depending on the investor’s reaction to the IPO, you will be allotted the shares. One thing to keep in mind is, there are possibilities that you might get less than the number of shares you asked for or in some cases none at all. Such instances arise due to the massive demand in the market. When such incidents occur, the bank unblocks your bid money. However, if you get the full allotment of shares you’ll be issued with a Confirmatory Allotment Note (CAN) within 6 working days after closure of the IPO and the next process is to wait for the listing of stocks on the stock exchange.
Process to apply for IPO Online
Login to your online net-banking account
In the investment section,click on the IPO/e-IPO option.
Fill out your depository details and bank account details to complete the verification process.
After this, you are led to a screen titled “Invest in IPO”.
Select the IPO for which you would like to apply.
Enter the number of shares and the “bid price.”
Read the “Terms and conditions” on the documents before you place your bid.
Confirm and place your order by clicking on “Apply Now”.
“ETFs or Exchange Traded funds are similar to index mutual funds. However, they trade just like stocks.”
MEANING:
In 1990 the world’s first ETF was created in Canada, transforming the investment landscape & offering the advantages of pooled investing & trading flexibility. Demand continues to grow as both retail & institutional investors depend on ETFs. The first ETF in the United Stateswas Launched in 1993.
ETF stands for Exchange Traded Fund, & just like a Stock, it is traded on stock exchanges such as NYSE & NASDAQ. But unlike a stock, which focuses on one company, an ETF tracks an index, a commodity, bonds, or a basket of securities. ETFs were started in 2001 in India.
ETFs are securities that closely resemble index funds, but can be bought and sold during the day just like common stocks. These investment vehicles allow investors a convenient way to purchase a broad basket of securities in a single transaction. Essentially, ETFs offer the convenience of a stock along with the diversification of a mutual fund.
An exchange-traded fund is a marketable security, meaning it has an associated price that allows it to be easily bought and sold. ETF combine the range of a diversified portfolio with the simplicity of trading a single stock.
ADAVNTAGES OF ETFs
There are numerous advantages to ETFs, especially when compared to their mutual fund cousins.
Diversification
Diversification is another key benefit that an investor derives from ETF investments. Firstly, one can potentially choose from a wide range of ETFs which mainly differ on the basis of the underlying asset such as gold, equity or index funds. Further, certain ETFs such as an equity ETF will save you from concentration risk as it would invest its funds in a diversified portfolio of equity stocks. An ETF can track a broader range of stocks, or even attempt to mimic the returns of a country or a group of countries.
Cost Efficient
ETF is a cost-efficient product and often considered unique because of the low expense ratio. A lower fund management fee can generate incremental savings and therefore, increase payouts in the long term. ETF shareholders don’t need to pay a manager and a team of analysts and brokers to buy and sell funds on their behalf, nor to manage fund inflows and outflows, exchange traded funds typically have much lower expense ratios than traditional mutual funds.
Flexibility
Speaking of flexibility, like an equity, ETFs trade throughout market hours. ETFs can be sold short or on margin, and prices are continuously updated during the trading day. In other words ETFs trade just like equities on the stock market.
Lower Fees
ETFs, which are passively managed, have much lower expense ratios compared to actively managed funds, which mutual funds tend to be. What drives up a mutual fund’s expense ratio? Costs such as a management fee, shareholder accounting expenses at the fund level, service fees like marketing, paying a board of directors, and load fees for sale and distribution.
Can Be Purchased in Small Amounts:
Since ETFs trade like stocks there are advantages for position sizing. Small positions can be purchased (no minimum investment) to scale in or scale out of a position, or take a single small position in a particular ETF.
DISADVATAGES OF ETFs
Investors need to have a demat & a trading account. Mainly holds large capitalization stocks. Attract longer term investors; Intraday trading is not required. For larger corporations, direct investment in an index can be a perfect substitute for an ETF. Alternatively, an investor may have a lower cost & lower taxes.
They have to pay a brokerage (usually around 0.35% to 0.99%). This is considered high for a new short-term investor.
Intraday Pricing Might Be Overkill
Longer-term investors could have a time horizon of 10 to 15 years, so they may not benefit from the intraday pricing changes. Some investors may trade more due to these lagged swings in hourly price. A high swing over a couple hours could induce a trade where pricing at the end of the day could keep irrational fears from distorting an investment objective.
TAX IMPLICATIONS
For ETFs which invest beyond the traditionally popular asset classes of equities and fixed income, investors need to exercise caution as apart from an increased tracking error, tax implications may be high at best or unclear at worst, which may have a sizable impact on returns.
Over Diversification
Many ETFs participate in over diversification. ETFs are generally not actively managed, but are programmed to follow a specific index. The index, and therefore the ETF, may not own the very best stocks.
It may be more advantageous to buy a limited number of the best companies rather than own the entire index. This would be particularly true with ETFs that track indices with a small universe of stocks such as a specific sector or industry.
Intraday Pricing Might Be Overkill
Longer-term investors could have a time horizon of 10 to 15 years, so they may not benefit from the intraday pricing changes. Some investors may trade more due to these lagged swings in hourly price. A high swing over a couple hours could induce a trade where pricing at the end of the day could keep irrational fears from distorting an investment objective.
STEPS OF BUYING ETFs ONLINE:
You have to find a good online broker. Then open Demate A/C & Trading A/C. And decide which ETFs you want to buy. Then place an order with Broker.
Broker enters the order to be filled in the market
Order is filled in the market .
Broker deliver ETF shares to the Investor. Monitor your ETF position regularly.
DIFFERENCE BETWEEN MUTUAL FUND AND ETF
The biggest difference between mutual fund & ETF is that Mutual Funds trade at the end of the day, while ETFs tradeintraday Stock orders can be made with ETFs but not with mutual funds. ETFs often have lower expenses ratio than mutual funds.
MUTUAL FUND
ETFs
Professionally managed investment vehicle, where the resources from multiple investors are collected and traded is known as Mutual Fund.
The ETF is a investment scheme that tracks the index, and are listed & traded on a stock exchange.
“Volume Weighted Average Price (VWAP) is a technical analysis tool used to measure the average price weighted by Volume. VWAP is typically used with intraday charts as away to determine the general direction of intraday prices. VWAP is similar to a moving average in that when price is above VWAP, prices are rising & when price is below VWAP, prices are falling VWAP is primarily used by technical analysts to identify market trend.”
Full form of VWAP is Volume Weight Average Price. The average price weighted by volume. VWAP is a trading tool calculated by taking the number of shares bought times the share price & dividing by total shares.
Volume Weighted Average Price is an Indicator, or used for Intraday trading. VWAP equals the dollar value of all trading periods divided by the total trading volume of the current day.
The VWAP appears as a single line on intraday chart (1min,5min,15min & so on), similar to how a moving average looks. The calculation starts when trading opens & when it closes. Because it is good for the current trading day only , intraday periods & data are used in the calculation.
HOW TO CALCULATE VWAP:
VWAP is calculated through the following steps:
For each period, calculate the typical price, which is equal to the sum of the high, low, and close price divided by three [(H+L+C)/3]. One bar or candlestick is equal to one period. What this period is set at is up to the trader’s discretion (e.g., 5-minute, 30-minute, etc.).
Take the typical price (TP) and multiply by the volume (V), giving a value TP*V.
Keep a running tabulation of the TP*V totals as well as a running tally of volume totals. These are additive and aggregate over the course of the day.
VWAP is calculated by the formula: cumulative TP*V / cumulative volume
This calculation, when run on every period, will produce a volume weighted average price for each data point. This information will be overlaid on the price chart and form a line, similar to the first image in this article.
Moving VWAP is simply adding up various end-of-day VWAP figures and averaging them out over a user-specified number of periods.
VWAP will be calculated automatically in one’s charting software. There should be no mathematical or numerical variables that need adjustment. On the moving VWAP indicator, one will need to set the desired number of periods.
HOW TO ANALYSIS VWAP:
VWAP initiate at the opening price level, & will move up or down with price movement & volume as the session continues. It can help to eliminate a lot of the noise within a stock throughout the day, even more so than a moving average would. It is compared at time to a moving average, & though it shares similarities, they are not the same.
It’s said when price is below the indicators, the stock is in downtrend or there is a downtrend bias to the day and when price is above the indicator, the stock is a uptrend.
Find the average price the stock traded at over the first five-minute period of the day. To do this, add the high, low, and close, then divide by three. Multiply this by the volume for that period. Record the result in a spreadsheet, under column PV.
Divide PV by the volume for that period. This will give the VWAP value.
To maintain the VWAP value throughout the day, continue to add the PV value from each period to the prior values. Divide this total by total volume up to that point. To make this easier in a spreadsheet, create columns for cumulative PV and cumulative volume. Both these cumulative values are divided by each other to produce VWAP.
VWAP Pullback Entry:
Entry Option 1 – Aggressive Traders
Wait for a break of the VWAP and then look at the tape action on the time and sales.
You will need to identify when the selling pressure is spiking, and the tape is going crazy.
This, my friend, is more art than science and will require you to practice reading the tape.
The goal is to identify when the selling pressure is likely to subside and then enter the trade.
This approach will break most entry rules found on the web of simply buying on the test of the VWAP. The problem with this approach is you don’t know if the price will breach the VWAP by 1% or 4%.
I learned the hard way, and if the VWAP were at $10, I would place my limit order at $10. At times there were traders who couldn’t care less about the VWAP, and it would slice through the indicator with such swiftness, the lasting sting to my psyche persists until this day.
This technique of using the tape is not easy to illustrate looking at the end of day chart. You will need to practice this approach using Tradingsim to assess how close you can come to calling the turning point based on order flow.
VWAP Breakout Entry:
Entry Option 2 – Risk Averse Traders
This is what I would recommend to traders that are new to the VWAP indicator.
Essentially, you wait for the stock to test the VWAP to the downside. Next, you will want to look for the stock to close above the VWAP.
You will then place your buy order above the high of the candle that closed above the VWAP.
While this is a more conservative approach for trade entry, it will open you up to more risk as you will likely be a few percentage points off the low.
You will need to determine where you are in your trading journey and your appetite for risk to assess which entry option works best for you.
It goes without saying that while we have covered long trades; these trading rules apply for short trades, just do the inverse.
The Internet is stuffed with resources. You’ll find tons of data out there free of charge. However, as the count increases, it’s actually inconceivable to remember all of the websites that you simply visit even in a single day.
However, when the subject comes to acquiring the related info and the maximum information and all the related data, one always wish to persist with his favorite websites where he may get all the quality information.
Stock market investing is a risky venture. It’s worthwhile to be very cautious whereas putting your hard-earned money into it. Before diving into the dynamic stock market, you must possess the best set of information and sufficient information. So, as an investor, you should be aware of a few of the finest websites for Indian stock market analysis.
All have their own favorites! However, in terms of selecting the most effective websites for Indian stock market research, we would have a standard selection. Let’s see if our choice matches together with your short term and long term investing objectives.
The website was started by the husband and wife team of Victor and Sangeeta Fernandes. In 2000, it was acquired by E-Eighteen dot com, a subsidiary of the Indian TV channel TV18. The couple were given 7.5% of the equity capital and E-18 got 92.5% following the acquisition. In 2014, Reliance Industries acquired Network 18 and TV18. This acquisition included Moneycontrol.com and several other websites and channels owned by TV18.
Moneycontrol is definitely the preferred website among the many Indian stock investor. You’ll find all types of information on this website like market news, trends, charts, livestock prices, commodities, currencies, mutual funds, personal finance, IPOs and many others.
That is certainly one of many extremely standard stock market website for an Indian investor. In different words, it may be considered probably the most accessed website, each by potential and present stock investors.
You even have a platform to track your investments and create a wish list too. Furthermore, Money Control mobile app is much more handy to put in and use. So, an entire bundle for a stock investor, whether a beginner or a professional.
It gives numerous stock securities info like their Sensex and Nifty value. Stock securities include Equities, debts, Latest IPOs, currencies, live stocks, commodities, and derivatives. Historic knowledge and present efficiency of the various companies can also find right here.
Forums are also facilitated for doing discussions in the group. You’ll be able to refer to those boards and may update yourself with the updated information.
The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, situated in Mumbai. The NSE was established in 1992 as the primary demutualized electronic trade within the nation. NSE was the primary exchange within the nation to offer a modern, totally automated screen-based electronic trading system which provided simple trading facility to the traders spread throughout the length and breadth of the country. Vikram Limaye is Managing Director & Chief Executive Officer of NSE.
It has a complete market capitalization of greater than US$2.27 trillion, making it the world’s 11th-largest stock exchange as of April 2018. NSE’s flagship index, the NIFTY 50, the 50 stock index is used extensively by investors in India and all over the world as a barometer of the Indian capital markets. Nifty 50 index was launched in 1996 by the NSE. Nevertheless, Vaidyanathan (2016) estimates that solely about 4% of the Indian economic system / GDP is definitely derived from the stock exchanges in India.
In contrast to countries like America where nearly 70% of the GDP is derived from bigger companies and the corporate sector, the corporate sector in India accounts for only 12-14% of the nationwide GDP (as of October 2016). Of these solely 7,800 corporations are listed of which solely 4000 commerce on the inventory exchanges at BSE and NSE. Therefore the stocks trading on the BSE and NSE account for under round 4% of the Indian economic system, which derives most of its earnings associated exercise from the so-called unorganized sector and households.
As the company has an obligation to submit their financial reviews to the NSE, therefore you may always find the financial information of any firm right here, in case you may find it elsewhere. You’ll find details about the corporates, domestic and foreign buyers, new listings, IPO and many others. NSE India also offers programs and certifications.
It ranks effectively within the prime stock research websites in India. You get to see tons of historic information relating to NSE and Nifty as effectively. You additionally take pleasure in free technical analysis of Indian stocks, reports, charts and different website tools.
The Bombay stock exchange was founded by Premchand Roychand. He was probably the most influential businessmen in 19th-century Bombay. A person who made a fortune within the stockbroking business and got here to be often known as the Cotton King, the Bullion King or simply the Big Bull. He was also the founding father of the Native Share and Stock Brokers Affiliation, an institution that’s now referred to as the BSE.
Whereas BSE Ltd is now synonymous with Dalal Street, it was not all the time so. The first venue of the earliest stock broker meetings within the 1850s was in relatively pure environs – beneath banyan trees – in entrance of the Town Hall, the place Horniman Circle is now located. A decade later, the brokers moved their venue to a different set of foliage, this time under banyan trees at the junction of Meadows Street and what’s now referred to as Mahatma Gandhi Road. The group ultimately moved to Dalal Street in 1874 and have become an official group referred to as “The Native Share & Stock Brokers Association” in 1875.
On August 31, 1957, the BSE grew to become the primary stock exchange to be acknowledged by the Indian Government under the Securities Contracts Regulation Act. Historically an open outcry flooring trading exchange, the Bombay Stock Exchange switched to an electronic trading system developed by CMC Ltd. in 1995. It took the exchange solely 50 days to make this transition. The BSE has also launched a centralized exchange-based internet trading system, BSEWEBx.co.in to allow traders wherever on the planet to trade on the BSE platform.
The BSE can also be a Partner Exchange of the United Nations Sustainable Stock Exchange initiative, becoming a member of in September 2012.
BSE established India INX on 30 December 2016. India INX is the first international exchange of India.
That is much like NSE India. Nevertheless, you will discover extra historic information right here as BSE Sensex has been included for an extended time in comparison with NSE Nifty.
As well as, over 5,500 companies are listed on BSE whose company actions and financial information could be found on this website. You may also obtain the whole checklist of ‘public’ companies from this website.
Investing.com is a global financial portal and internet brand owned by Fusion Media Limited, registered in the British Virgin Islands, composed of 28 editions in 21 languages and mobile apps for Android and iOS that provide news, analysis, streaming quotes and charts, technical data and financial tools about the global financial markets. The editions each cover a broad variety of financial vehicles including Stocks, Bonds, Commodities, Currencies, Interest Rates, Futures and Options
Branded initially as Forexpros.com, the portal launched in 2007 with editions in four languages: English, Spanish, Hebrew and Arabic, offering free data, information, analysis, news and tools over the Forex market for traders. Six additional editions followed in 2008, growing to a total of 18 different localized editions by the end of 2011.
Investing.com currently offers 30 localized (Language localisation) editions in 22 languages including: Arabic, Chinese, Dutch, English, Finnish, French, German, Greek, Hebrew, Italian, Indonesian, Japanese, Korean, Malay, Polish, Portuguese, Russian, Spanish, Swedish, Thai, Turkish and Vietnamese. Additional editions are dedicated to the Australian, Brazilian, Canadian, Hong Kong, Indian, Mexican and South African markets.
Investing is a good site if you want to find all the information on the same website simultaneously. You can do both fundamental and technical analysis of stocks on this website. The different options available on this website are general info, chart, news and analysis, financials, technicals, forum etc.
Its wide range of tools and comprehensive data can surely incline any investor towards it. Stock screener, Fed rate monitor tool and currency converter are the biggest attractions. The live and interactive charts, stocks charts, indices and forex charts further add to its advantages.
Investing is just like the best newspaper for stock market India.The screen of the site reproduces every detail information towards you regarding the NAV value of your stocks, the index value, the peer information and many other details which can be simplified by customizing the screen according to your preferences.
Screener, a stock analysis instrument especially meant for equity traders in India. With this, you’ll be able to have entry to long term financials of various companies and additional simplify it. Thereby, turning lengthy knowledge into small helpful chunks by customised studies. So, you’ll be able to simply make your self acquainted with helpful financial info of an organization.
Furthermore, with the assistance of it’s screening instrument, you’ll be able to design your personalised display screen and get computerized alerts to trace outcomes. A mixture of a “Firm evaluation” and a “screening” instrument, this absolutely attracts readers to navigate by it.
It is among the greatest Indian stock market technical evaluation web site. It serves you normal details about the market financial system, the corporate efficiency previously and the current, their friends out there and their efficiency too, the corporate’s revenue and losses and the balance sheet, analysis studies and numerous evaluation instruments just like the charts are provided on this platform.
The sophisticated lengthy knowledge might be personalised and customised as per your selection and choice which is able to simplify the understanding.It additionally supplies display screen alerts on the person’s mobile and the websites additionally for each up to date info in the market.
“A stock is a general term used to describe the ownership certificates of any company. A share, on the other hand reffers to the stock certificate of particular company . Holding a particular company’s share makes you a shareholder.”
The stock (also capital stock) of a corporation is all of the shares into which ownership of the corporation is divided. In American English, the shares are company known as “stocks”.
A stock is an investment. When you purchase a company’s stock, you’re purchasing a small piece of that company called a share.
A stock is a type of investment that represents an ownership share in a company. Investors buy stocks that they think will go up in value over time.
A share of company held by an individual or group. Corporations raise capital by issuing stocks & entitle the stock owners (shareholders) to partial ownership of the corporation. Stocks are bought & sold on what is called an Exchange. There are several types of stocks & the two most typical forms are preferred stock & common stock.
Owning a stock gives you certain rights & those rights can differ depending on the types of stock you own.
There are two main types of stock:
COMMON STOCK
PREFERRED STOCK
1. COMMON STOCK:
Common stock is a form of corporate equity ownership. It being primarily used in the united states. They are known as equity shares or ordinary shares in the UK.Common stock comes with voting rights; as well as the possibility of dividends & capital appreciation. Each share of common stock represents a share of ownership in a company. If a company does well or the value of its assets increases, common stock can go up in value. On the other hand, if a company is doing poorly, a common stock can decrease in value. Simply put, common stock allows investors to share in a company’s success over time, which is why they can make great long-term investments.
2. PREFERRED STOCK
“Preferred stock is also known as preference stock. The word “Preferred” refers to the dividends paid by the corporation. Each year, the holders of the preferred stock are to receive their dividends before the common shareholders are to receive any dividend”.Preferred stockholders generally do not have voting rights, though they have a higher claim on assets & earnings that the common stockholders.
Preferred shares can be converted to a fixed number of common shares, but common shares don’t have this benefit.Like bonds, preferred stocks are rated by the major credit rating companies. The rating for preferred stocks is generally lower than for bonds because preferred dividends do not carry the same guarantees as interest payments from bonds & because preferred stock holders claims are junior to those of all creditors.
Some things you need to know about stocks:
a. P/E RATIO –
The price to earnings ratio (P/E ratio) is the ratio for valuing a company that measures its currents share price relative to its pre share earnings (EPS)…. P/E ratios are used by investors & analysts to determine the relative value of a company’s shares in an apple to apples comparison.The ratio is used for valuing companies & to find out whether they are overvalued or undervalued.Earnings are important when valuing company’s stock because investors want to know how profitable a company is & how profitable it will be in the future.
b. CHART –
Chart reading is the single most important investing skill you’ll ever learn. To understand why stock chart are so valuable. Chart tells you a whole story about stocks. The weekly chart helps you see longer term trends. And daily chart helps you spot specific buy & sell signals while daily price fluctuation perspective.
c. Dividend –
If you don’t have time watch the market every day, and you want your stocks to make money without that kind of attention, look for dividends. Dividends are like interest in a savings account. You get paid regardless of the stock price. Dividends of 6% or more are not unheard of in high quality stocks. Before purchasing a stock, look for the dividend rate. If you simply want to park money in the market, invest in stocks with a high dividend. (For more, see Why Dividends Matter.)
d. Taxes Can Take A Bite Out Of Your Profits –
The FANG stocks – Facebook FB +0%, Amazon.com AMZN +0%, Netflix NFLX +0% and Google GOOGL +0% (Alphabet) — had a great run in 2015, with returns ranging from 34% to 134%, but from a tax perspective any investor who bought last year and eyeing the exits wants them to keep climbing. That’s because the one-year mark is a line of demarcation for the tax man.
Selling stocks, you’ve held for less than a year triggers a short-term capital gain, taxed as ordinary income. That could mean kicking back anywhere from 25% to 39.6% to Uncle Sam. But hold those same stocks for at least 12 months and the tax rate drops to 15% for most tax brackets.
WHY TO INVEST IN IT
Investing in the stock is the only way most people have of building real wealth. Stock is just one of many potential places to invest your money. Investing in stock is often risky, which draw attention to huge gains & losses of some investors.
One of the primary benefits of investing in the stock market is the chance to grow your money. Over time, the stock market tends to rise in value, though the prices of individual stocks rise and fall daily. Investments in stable companies that are able to grow tend to make profits for investors. Likewise, investing in many different stocks will help build your wealth by leveraging growth in different sectors of the economy, resulting in a profit even if some of your individual stocks lose value.
Stocks are risky This means they don’t have a guaranteed return and sometimes lose money. However, the long-run trend of the stock market has been undeniably upward. Stocks have the highest return of any investment asset over the long term. According to the Federal Reserve, the stock market has grown by an average of more than 10 percent a year over the past 50 years. During this same period, government bonds only grew by 5 percent a year. If you can stomach the market swings, you will see the highest return on your money with the stock market.
Purchasing stocks of companies operating in different sectors as well as segments is possible, which helps in optimizing the asset-allocation and provides diversification.
The primary market is also known as new issues market. Here, the transaction is conducted between the issuer & buyer. The primary market is the part of the capital market that deals with issuing of new securities. Primary market creat long term instruments through which corporate entities raise funds from the capital market. In short, the primary market creates new securities & offers them to the public. It is a public issue, if anybody & everybody can subscribe, for it. If the issue is made to select group of people then it is termed as private placement.
Capital & Equity can be raised in the primary market by any of the following four ways:
1. Public Issue
As the name suggests, public issue means selling securities to the public at large, such as IPO. It is the most vital method to sell financial securities.
2. Rights Issue
Whenever a company needs to raise supplementary equity capital, the shares have to be offered to present shareholders on a pro-rata basis, which is known as the Rights Issue.
3. Private Placement
This is about selling securities to a restricted number of classy investors like frequent investors, venture capital funds, mutual funds, and banks comes under Private Placement.
4. Preferential Allotment
When a listed company issues equity shares to a selected number of investors at a price that may or may not be pertaining to the market price is known as Preferential Allotment.
B. SECONDARY MARKET:
The secondary market also called the after market & follow on public offering is the financial market in which previously issued financial instruments such as bonds, stock options, & futures are bought & sold.
THE SECONDARY MARKET IS FURTHER DIVIDED INTO 2 KINDS OF MARKET:
An auction market is a place where buyers & sellers convene at a place & announce the rate at which they are willing to sell or buy securities. They offer either the ‘BID’ or ‘ ASK’ prices, publicly. Everything is announced publicly & interested investors can make their choice easily. Where trading & settlement is done through the stock exchange & the buyers & sellers don’t know each other.
2. OTC
OVER THE COUNTER/ OFF EXCHANGE TRADING is done directly between two parties, without the supervision of on exchange. Is based in Mumbai, Maharashtra.It does not take place, however, on the stock exchanges.OTC MARKETS are the informal types of market where trades are negotiated.
DIFFERENCE BETWEEN PRIMARY MARKET & SECONDARY MARKET
“A mutual fund is a professionally managed investment scheme, usually run by an asset management company that brings together a group of people & invests their money in stocks, bonds & other securities.”
INTRODUCTION:
Mutual funds are the most popular investment types for the everyday investor. Because they are easy to use in many in many ways, investing for dummies. A mutual fund is a kind of investment that uses money from many investors to invest in stocks, bonds & other types of investment. A fund manager decides how to invest the money & for this he is paid a fee, which comes from the money in the fund. All the MUTUAL FUNDS are registered with SEBI.
In simpler terms, mutual funds are like baskets. Each basket holds certain types of stocks, bonds or a bland of stocks & bonds to combine for one mutual fund portfolio.
Eg: An investor who buys a fund called XYZ international stock is buying one investment security, the basket that holds dozens or hundreds of stocks from all around the globe, hence the “International” monike.
TIP’S FOR BEGINNERS INVESTING IN MUTUAL FUNDS
Start saving & investing early in life.
Try to understand the fund in which you are investing.
Check the past performance of your mutual fund.
Don’t avoid Index fund.
Experience of fund managing team
Do not commit common mistakes
Understanding the risk involved
Keep your investment objective clear.
The NAV does not matter.
Diversify your investment over time.
Have an investment discipline.
Invest in stocks if you are prepared to take risks.
Never forgot your mutual fund investment.
Stay invested for a longer period of time.
NAV ( NET ASSET VALUE )
NET ASSET VALUE is the total asset value (net of expenses) per unit of the fund & is calculated by AMC (asset management company) at the end of every business day. In order to calculated the NAV of a mutual fund, you need to take current market value of the funds assets minus the liabilities, if any & divide it by the number of share outstanding. NAV is calculated as follows.
NAV Rs. = MARKET/FAIR VALUE OF SECURITIES + ACCRUED INCOME + RECEIVABLE + OTHER ASSETS + ACCRUED EXPENSES – PAYABLES – OTHER LIABILITIES
/ NO.OF UNITS OUTSTANDING OF THE SCHEME/OPTION
Eg. If the market value of securities of mutual fund scheme is Rs. 500 lakh & the mutual fund has issued 10lakh units of Rs. 10lakh each to investors, then the NAV unit of the fund is Rs.50.
ADVANTAGES OF MUTUAL FUND
DIVERSIFICATION
Mutual funds provide the benefits of diversification across different sectors & companies. A single mutual fund can hold securities from hundreds or even thousands of issuers. This by investing in a mutual fund, you can gain from the benefits of diversification & asset allocation, without investing a large amount of money that would required to build an individuals portfolio. The diversification considerably reduces the risk of serious monetary loss due to problems in a particular company or industry.
AFFORDABILITY
You can begin buying units or shares with a relatively small amount of money.
Eg. Rs. 500 for the initial purchase.
Some mutual funds also permits you to buy more units on a regular basis with even smaller installments.
Eg. Rs.50 per month.
LOW TRANSACTION COST
Due to economics of scale, mutual funds pay lower transaction costs. The benefits are passed on to mutual fund investors which may not be enjoyed by an individual who enters the market directly.
TRANSPARENCY
Funds provide investors with updated information pertaining to the markets & schemes through fact sheets, offer documents, annual report etc.
DISADVANTAGES OF MUTUAL FUNDS
· High Expense Ratios and Sales Charges
If you’re not paying attention to mutual fund expense ratios and sales charges, they can get out of hand. Be very cautious when investing in funds with expense ratios higher than 1.20%, as they will be considered on the higher cost end. Be weary of 12b-1 advertising fees and sales charges in general. There are several good fund companies out there that have no sales charges. Fees reduce overall investment returns.
· Management Abuses
Churning, turnover and window dressing may happen if your manager is abusing his or her authority. This includes unnecessary trading, excessive replacement and selling the losers prior to quarter-end to fix the books.
· Tax Inefficiency
Like it or not, investors do not have a choice when it comes to capital gain payouts in mutual funds. Due to the turnover, redemptions, gains and losses in security holdings throughout the year, investors typically receive distributions from the fund that are an uncontrollable tax event.
· Poor Trade Execution
If you place your mutual fund trade any time before the cut-off time for same-day NAV, you’ll receive the same closing price NAV for your buy or sell on the mutual fund. For investors looking for faster execution times, maybe because of short investment horizons, day trading, or timing the market, mutual funds provide a weak execution strategy.
