In a recent development, the Securities and Exchange Board of India (SEBI) has extended the deadline for adding nominees in mutual funds and demat accounts. This decision comes as a significant move by the regulatory body to enhance investor protection and streamline financial processes.
The world of finance is ever-evolving, and regulatory bodies play a crucial role in ensuring the security and well-being of investors. SEBI’s recent announcement to extend the deadline for adding nominees in mutual funds and demat accounts underscores the importance of safeguarding investors’ interests.
SEBI had initially set a deadline for investors to add nominees to their mutual funds and demat accounts. However, recognizing the complexities involved and the need for widespread compliance, the regulatory body has decided to extend the timeframe.
Why Adding Nominees Matters
Adding nominees is not merely a procedural requirement; it is a vital step in protecting the financial interests of investors. This section will explore the significance of having nominees and how it contributes to the overall security and efficiency of financial transactions.
How to Add Nominees
Understanding the process of adding nominees is paramount for investors. This section will provide a step-by-step guide for both mutual funds and demat accounts, ensuring that investors can navigate the procedures seamlessly.
Implications for Investors
Investors stand to benefit significantly from complying with SEBI’s directive. This section will elaborate on the advantages of having nominees and the potential risks for those who neglect this important aspect of financial planning.
SEBI’s Decision Impact on the Market
SEBI’s decisions often reverberate throughout the financial market. In this section, we will analyze the market’s reactions to the extended deadline and speculate on possible future regulatory changes.
Challenges Faced by SEBI
Implementing regulatory changes is not without challenges. This section will delve into the hurdles faced by SEBI in enforcing nominee-related regulations and the strategies employed to overcome these obstacles.
Quick Review:
Why did SEBI extend the deadline for adding nominees?
SEBI extended the deadline to accommodate the complexities involved and ensure widespread compliance.
What are the benefits of adding nominees to mutual funds and demat accounts?
Adding nominees protects the financial interests of investors and streamlines financial transactions in the event of unforeseen circumstances.
Can investors face risks for not adding nominees?
Yes, investors may face risks, and their financial transactions could be complicated in the absence of nominees.
How can investors comply with SEBI’s regulations on nominee additions?
Investors can follow a step-by-step guide provided by SEBI and ensure they add nominees to their mutual funds and demat accounts.
When you are interested in the share market the first thing what you do is open a demat account to invest or trade. But as time passes we forget or don’t have time for trading. Then there is time you do not use your Demat account for a long time but you have to pay the charges and the demat account annually. It is the right time or good idea to close your inactive demat account. If there are active balances, they can be consolidated into one account and remaining redundant demat accounts can be closed. Closing a Demat account involves visiting the DP office or branch by any Demat account holders & submission of requisite forms & documents.
Required Information for Closing Demat Account:
DP ID & Client ID
KYC detail
Reason for closing Demat account
Is there more than one person holding the demat account ? then all holders must sign a closure form.
Procedure Of Closing Demat Account:
1. FORM:
The account holder can download the form from the website of the depository participants or DP.
2. DETAILS: The following details need to be mentioned:
DP ID and Client ID
Existing details like name & address – it should match records.
3. Transfer:
If the demat account has any balance (holdings), details of the account to which this balance needs to be transferred must be mentioned in the form. The transfer can also be carried out by filling up a delivery instruction slip (DIS) before closure of the account.
4. There are no shares in the account:
To close your account, the foremost thing is to ensure whether there are any shares in the account. If there are, you need to transfer them to another account. You need to make sure your Demat account is empty before you can decide to close it.
5. Submit The Application:
Once the form is submitted and is in order, it takes 7 to 10 business days to close the account.
Remember to this point before closing the Demat account:
If the account has any negative cash balance, it must be settled before submitting the request for its closure.
Unused delivery instruction booklet slip should be submitted back to the DP.
The financial media promotes overtrading. Because if you’re not trading you’re not trying, right? Wrong. They create exciting stories about where markets will move and why. For many investors, the desire to play outweighs the desire to win. They rather medicate their boredom by making trades and hopping on the latest hot trend. The best traders are much less active than you’ve been led to believe. They aim to profit by riding long-term trends that play out over months and years, not minutes and hours. Trading on such short time frames gets you nowhere.
THE BEST TRADERS:
On average, trade each market only 1-3 times per year
Do not make predictions, but follow trends
Do not let short-term volatility shake them out of their positions
Do not feel the need to trade every day, every week or month; only when they see opportunity
2. GOING AGAINST THE TREND:
We all need a trend to make money. If we buy at price A, then we must sell at a higher price B in order to profit. Betting against trends is not only unnatural, but inherently unprofitable. Surfers do not try to ride waves out to sea. Those that do, wipe out – and look ridiculous. Traders do not make profit by holding long positions in downtrends or short positions in uptrends. In trading, the only thing that matters is price. Our job is to measure it and align with each market’s trend. How we do this doesn’t matter.
3. LETTING LOSSES RUN:
You must have an exit point for every investment you hold. Without one, whether you admit it or not, all of your money is at risk. Ya gotta know when to let it go. This goes for everything in life. If ascertain food doesn’t agree with your stomach, stop eating it. If an exercise gives you pain, stop doing it. If you’re dating a person who makes you miserable, break up with them and move on. When you let losses run, you waste resources – namely, time and money. But you also miss out on other opportunities. Exiting losing investments frees up your capacity to be deployed to new and possibly better opportunities in other markets or stocks
4. CUTTING WINNERS EARLY:
As the old saying goes: “If it ain’t broke, don’t fix it”. Investors are too eager to book gains, especially those that come quickly. Our lizard brain likes being right and feeling smart. When one of our investments shows a profit, our lizard brain wants us to quickly ring the register. This behavior comes at a cost though. Like pulling our flowers before they bloom, cutting winners inhibits us from generating huge gains. If you want big profits, you must hold your winners and let them grow. Investments do not always grow into big winners, but you allow them that chance. One or two big winners can make your year or even your career. You may be tempted to pull a George Costanza and go out on a high note, but George was one of the biggest losers in TV history. Selling your winners keeps your profits small and, thus, from major investing success.
PROFIT-LIMITING TACTICS INCLUDE:
Selling a position soon after it becomes profitable
Selling profit targets
Selling volatility targets
Selling price targets
5. IGNORING YOUR RISK TOLERANCE:
If you know how much pain you can take, you increase your odds of survival and winning Knowing your pain threshold allows you to grow at your desired speed. If you want to grow fast, you must take on more risk, but with more risk comes higher volatility and larger drawdowns. If you’re OK with this, great! If and when your performance becomes volatile, you won’t abandon your plan. As an investor, you want to stay away from your pain threshold or “uncle point” – the point at which you lose all faith in your plan. If your plan delivers too much volatility (especially on the downside) then you risk losing your discipline.
ADVANTAGES OF RISK AWARENESS:
Lower stress
Lower risk of aborting your plan
More capable of setting and managing performance expectations
6. NOT DIVERSIFYING:
What’s the point of diversification? To reduce your portfolio’s maximum loss below that of each individual investment’s. People prefer picking winners and betting it all. The possibility of making a lot of money in a short amount of time attracts many people to this strategy. Think: the lottery. In most years, a diversified portfolio rarely beats the absolute performance of the best performing market(s) or stock(s). Consistent underperformance in the short-term can be too much to bare for some investors. So, rather than striving for steadier long-term results by building a portfolio of dierent markets and strategies, they choose to move all of their money from one market to the next attempting to catch a big winner. This strategy inherently places more emphasis on Market-timing instead of diversification.
BENEFITS OF DIVERSIFICATION:
Rather than trade one market and experience all of the swings in that instrument, diversifying helps create a smoother ride.
By having a large number of markets in the portfolio, you can ride the ones on the move and avoid the choppy ones
Risking a small amount on each position, you do not have to win on every trade. You can still win even with 30-40% winners.
7. FOCUSING TOO MUCH ON WINNING PERCENTAGE:
Winning percentage matters, but so does the size of your winners. The combination of your winning percentage and average winner size tells you if you have a good strategy. No one can accurately pick winners above a 70-80% rate for an entire career. Not happening. Has never happened. Will never happen. But it doesn’t need to happen. The best traders can produce win rates of only 30-40% and still produce huge profits. How? They make up for their low winning percentage by letting their winners run. They do not cap their profit potential. If they did, then they’d have to be much more accurate in order to maintain their large profits
8. PAYING TOO MUCH ATTENTION TO NEWS AND “EXPERTS”:
Convincing media outlets can force you to jump o-your plan, often at the wrong times. TV and online personalities pitch their ideas every single day. Their job is to get you to tune in. Their strategy is selling certainty – making you believe they know what’s coming next. Investors without a plan of their own become susceptible to falling hard for convincing stock picks-jumping from one idea to the next. Media only focuses on 1) what markets to trade and 2) when to enter. They never talk about position sizing or exit methodology to protect your capital if/when the market goes against you. Investors must not concerned with pie in the sky ideas. They first must have a plan of their own and then be able to tune out other people’s opinions. When you have a plan, you already have all you need to be successful.
Chart patterns are the basis of technical analysis that requires a trader to know exactly what they are looking at, as well as what they are looking for. A chart pattern or price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern study plays a larger role during the technical analysis. When data is plotted there is usually a pattern which naturally occurs and repeats over a period. Technical analysts have long used price patterns to examine current movements and forecast future market movements.
The assumption is made that trading results can be improved when trading skills are improved. This requires practice! Surely any time spent learning to trade on past historical data, will not be wasted when it comes to preparing to trade for the future.
TYPES OF CHART FORMATION:
Here you will learn some types of chart formations. These formations will help you to improve your trading skills.
1. TRENDLINES:
Trendlines shows the direction & speed of price, and also describes the chart patterns during periods of price contraction. Let’s discuss about which types of trendlines we can drawn:
a. INCLINING TRENDLINE
A straight line is usually drawn to define an uptrend against or through price bar low.
b. DECLINING TRENDLINE
A straight line usually drawn to define a downtrend against or through price bar high.
c. SUPPORT
In general terms, the Support level is a price point on the chart where the traders expects maximum demand (in terms of buying) coming into the stock/index. Typically, support can be identified on a chart by a previous set of lows.
d. RESISTANCE
Resistances are used by traders to refer to price level on the chart. A horizontal ceiling where the pressure to sell is greater than the pressure to buy. Therefore, an increase in price is reversed and prices revert downward. Typically resistance can be located on a chart by a previous set of highs.
2. CHANNELS:
a. INCLINING CHANNELS
The inclining channel is a formation with parallel price barriers along both the price ceiling and floor. Unlike the sideways channel the inclining channel has an increase in both the price ceiling and price floor.
b. DECLINING CHANNEL
A descending channel is drawn by connecting the lower highs and lower low of a security’s price with parallel trendlines to show a downward trend.
c. HORIZONTAL OR SIDEWAYS CHANNEL
A horizontal or sideways is a formation that features both support and resistance. Support forms the low price bar, while resistance provides the price ceiling.
3.TRIANGLE:
a. SYMMETRICAL TRIANGLE
A symmetrical triangle is a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs. These trend lines should be converging at a roughly equal slope.
b. ASCENDING TRIANGLE
A continuation pattern. Price contracts with level swing highs (short term resistance) and higher swing lows (rising trendline) towards a single point. The pattern is confirmed on a break of short term resistance, usually occurring in the final third of the pattern.
c. DESCENDING TRIANGLE
A Continuation pattern. Price contracts with lower swing highs (falling trendline) and level swing lows (short term support) towards a single point. A pattern is confirmed on a break of short term support, usually occurring in the final third of the pattern.
d. PENNANT TRIANGLE
A continuation pattern. Price forms a short term symmetrical triangle pattern (smaller scale than the usual symmetrical triangle). The pattern is confirmed on a break of the pennant in the continuation direction.
4. WEDGES:
a. RISING WEDGE
A continuation or reversal pattern. Price forms higher swing highs and higher swing lows which both converge towards one point. The pattern is confirmed on a break of the lower trendline of the pattern.
b. FALLING WADGE
A continuation or reversal pattern. Price forms lower swing highs and lower swing lows which both converge towards one point. The pattern is confirmed on a break of the upper trendline of the pattern.
5. FLAG:
A continuation pattern. Price forms a short term consolidation, tilted against the direction of the market trend, between approximately parallel sloping support & resistance. The pattern is confirmed on a break of the pattern in the continuation direction.
6. DOUBLE TOP:
A reversal pattern at the top of an uptrend. Price forms to highs at approximately the same price level. The pattern is confirmed on a break of the intermediate swing low.
7. DOUBLE BOTTOM:
A reversal pattern at the bottom of a downtrend. Price forms two swing lows at approximately the same price level. The pattern is confirmed on a break of the intermediate swing high.
8. TRIPLE TOP:
A reversal pattern at the top of an uptrend. Price forms three swing highs at approximately the same price level. The pattern is confirmed on a break of the lowest of the intermediate swing lows.
9. TRIPLE BOTTOM:
A reversal pattern at the bottom of a downtrend. Price forms three swing lows at approximately the same price level. The pattern is confirmed on a break of the highest of the intermediate swing highs.
10. ROUNDED TOP:
Anticipate change in price from up to down.
11. ROUNDED BOTTOM:
Anticipate a change in price from down to up.
12. HEAD & SHOULDERS:
A reversal pattern at the top of an uptrend. Price forms a swing high, a higher swing high, and a lower swing high. The pattern is confirmed on a break of the neckline – the line joining the intermediate swing lows.
13. INVERTED HEAD AND SHOULDERS:
A reversal pattern at the bottom of a downtrend. Price forms a swing low, a lower swing low, and a higher swing low. The pattern is confirmed on a break of the neckline – the line joining the intermediate swing high.
In the share market, support & resistance these two concepts are highly discussed among the trades & investors. Trading by using support & resistance concepts is considered an old methodology. It has been popular for a long time.
Support & Resistance play a key level in trading. And obviously each & every traders and even investors are aware about this concept/levels. Support & Resistance are the zones where price will either halt & reverse or break through. These zones can also be called supply & demand zones, where buyers & sellers are active.
It is the most powerful concepts in Technical Analysis. Most of the technical analysis use support & resistance levels to identify price points on the chart where the possibilities of prices are reversal or pause of a prevailing trend.
The past price action indicates where these zones are. Mark them on the chart for future reference. An important concept to remember is that support & resistance zones marked from higher time frame charts are relatively more reliable. If you trade the 5 min chart, then go to 15 mins or hourly chart to mark these levels & import them on your 5 min chart & observe the reactions off these.
TWO TYPES OF SUPPORT & RESISTANCE
HORIZONTAL SUPPORT & RESISTANCE
a. Horizontal Support
The first support is called Minor support. When market return touch this level and take support & go up side, then these second support is considered as a strong support. Third time price return comes to this level & return move up side.,then this level is called Major Support. The third support is most strong.
b. Horizontal Resistance
We see the price going up & stop at a level or take a resistance & return goes down. This first resistance is called minor resistance.When Price goes up again & price goes around the first resistance & goes down again, so that is Second resistance which is called as strong resistance.When the price once again becomes the resistance to the same level, then you call that level a major resistance. It is not necessary that only 3 resistances are made. There is more supply compared than demand. When we look at the Horizontal Support & Resistance chart, we have to note that at least 7 to 8 candles between the levels are deferred.
TRENDING SUPPORT & RESISTANCE
a.Trending Support
When the market starts moving towards the uptrend and when the market comes down it makes it’s first support and then it returns towards the up side.The second support is made higher than the first support. As we have got two supports so if we touch the lowest of first & second supports then it makes a Trendline. Then there are chances that third support touches the trendline & goes upside. It is a bullish continuation signal.
b. Trending Resistance
When the market starts moving towards downside then resistance is formed. When the second resistance is formed it is lower than the first resistance. We have to touch the highest point of the first & second resistance than draw the trendline. There is a possibility that the third resistance will touch the trendline & move towards the downside. It shows a bearish continuation signal.
Importance for S&R Zones
a. Number of Touches
The more times the price tests a support or resistance area, the more significant the level becomes. When prices keep bouncing off a support or resistance level, more buyers and sellers notice and will base trading decisions on these levels.
b. Preceding Price Move.
Support and resistance zones are likely to be more significant when they are preceded by steep advances or declines. For example, a fast, steep advance or uptrend will be met with more competition and enthusiasm and may be halted by a more significant resistance level than a slow, steady advance. A slow advance may not attract as much attention.
c. Volume at Certain Price Levels
The more buying and selling that has occurred at a particular price level, the stronger the support or resistance level is likely to be. When strong activity occurs under high volume and the price drops, a lot of selling will likely occur when price returns to that level, since people are far more comfortable closing out a trade at the break-even point rather than at a loss.
d.Time
Support and resistance zones become more significant if the levels have been tested regularly over an extended period of time.
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”.
“Blue – Chip companies are by definition the companies that have MADE IT BIG. Blue chip stocks are shares of very large and well-recognized companies with a long history of sound financial performance. These stocks are known to have capabilities to endure tough market conditions and give high returns in good market conditions. Blue chip stocks generally cost high, as they have good reputation and are often market leaders in their respective industries.”
WHAT ARE BLUE CHIP STOCKS?
The term Blue Chip stock was coined in 1923 by a Dow Jones employee, Oliver Gingold , referring to some high priced shares of $200 above, at a brokerage firm.
Blue chip Stocks are companies that are often worth billions of dollars, pay dividends & have a long history of reliable operations. This comes from the game of POKER where the blue chip carries the highest value.
It is a stocks of companies which are leading in its sector and are famous at the national level having a record of giving continuous dividend payments and other strong investment qualities. Usually have a great reputation for QM (Quality management), product & services. Generally, blue chip stocks are the safest stocks to invest in.
This stock is usually the market leader or come in the top three companies in its sector and are very well known and also have the market capitalization in billions. Ben Graham in his book The Intelligent Investor has written that an investor should look for a company which has been giving its investors dividends for twenty years or more. This thought gives us an idea of how a such stocks should be.
Blue-chip stocks are synonymous with fewer debts, consistent dividends/returns and goodwill of the company. Such stocks are not only safe but also help investors in mitigating risks. Blue chip stocks have experienced a number of bear phrase, a market downturn, financial troubles, etc., but since they are survived, they are still going strong. When the market corrects blue chip, stocks remain stable. This stability in share price is the biggest benefit of blue chips. If in any situation their price falls, this fall is slower and recovers again soon.
FEATURES OF BLUE CHIP SOCKS:
Large Market Capitalization –
Since blue chip stocks are the leaders in their respective sectors they have a market cap of Rs. 20k Crores.
Risk and returns
Blue Chip Stocks are considered safe investment options as they can endure economic downturns and are not highly volatile. They also present a slow but moderate growth potential. These are typically dividend paying stocks where the payment is made quarterly. It is advisable to diversify your portfolio when investing in individual stocks, to avoid company risk.
Dividend Payments
A solid trend which shows that the company pays dividends to its shareholders in a timely and consistent basis is a great morale booster for a stock owner simply because it acts as a cherry on the cake. It is income over and above your capital appreciation so, for example, a 20% dividend would mean an extra 20% income over and above your investment appreciation in a particular blue-chip company.
Remarkable Performance Even in the Economic Downturns:
When we talk about blue chip stocks, it can be recognized as one of those stocks which perform well even when there is a downfall in the market or economy.
The diversification
Blue chip companies tend to be large corporates with an international portfolio that spans several sectors. For instance, BP is ostensibly an oil and gas company, but it also owns its own petrol stations, a string of convenience stores in the US, as well as the Wild Bean Coffee Company in the UK. This gives the firm some exposure to the retail and consumer markets, in addition to the commodities sector.
ADVANTAGES OF BLUE CHIP STOCKS:
The tax—free benefits
Every blue chip stock is eligible for inclusion within a stocks and shares ISA, which means that all of your returns are protected from taxation. Blue chips can also be held within a lifetime ISA or a self—invested personal pension (SIPP), meaning that you can keep blue chip stocks in your pension portfolio without paying any tax on the interest that you accrue.
Price stability:
Price stability of blue chip stocks in falling market is one of its biggest advantages. It does not mean that price of blue chip stocks does not fall when index is falling. Its price will also fall, but the fall will be slower and recovery will be faster.
Long-Term Returns:
These stocks provide stable returns in the long run.
Regular Dividends:
These stocks are known for providing routine returns in the form of dividends to their shareholders as a result of their efficient dividend policy.
DISADVANTAGES OF BLUE SHIP STOCKS:
This is a wrong assumption. No company can continue to enjoy its prime position forever.Some known examples are: Reliance Communication, DLF, Kodak, Nokia, Lehman Brothers, etc.
High Downside Risk:
There is a considerable market risk associated with the blue chip companies too. The reason being, some of these organizations fail to keep up with the competition, leading to the downfall of their stock prices.
Older Companies
As a younger investor, you have a significant advantage over older stock buyers. You very likely have an understanding and knowledge of the hot new products in sectors like technology and retail. These products are often sold by newer, hipper companies that will not be on anybody’s blue chip stock list. Any money invested in an older, boring, established blue chip company is money you do not have to purchase stocks of companies that are on the cutting edge of what is happening in the economy.
Slower Growth:
In most cases this is true. As Blue chip companies are all matured, large companies, hence their future growth is not as fast. If we will compare potential returns of a good “growth stocks” verses a blue chip stock, the latter cannot win. Hence, it is essential to estimate ones investment goal accurately. If objective is faster capital appreciation in long term, growth stocks are better.
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