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”.
Candlestick is the most popular & most usable chart in trading. Even most of the successful traders also advise to use this charts for trade. Candlestick chart is invented by MUNEHISA HOMMA.
This charts were developed in the 18th century by Munehisa Homma, a Japanese rice trader. He is considered as the father of the candlestick chart. He is one of the most successful trader in History. The Candlestick trading Bible is one of the most powerful trading systems in history. This trading system is based on Japanese candlestick patterns in combination with technical analysis. Learning Japanese candlestick is like learning a new language. We have to understand the psychology behind the candle formation, understand the candle pattern & most important thing is to understand the trends.
CANDLESTICKS BODY
Candlesticks have different colors and body size.
The most trading platforms were using White & Black color refers to Bullish & Bearish candlestick charts.But, at present it has been upgraded with colorful charts where white candle is denoted by Green Color & Black candle is denoted by Red color.Filled part of the candlestick is called the Real Body. Thin lines poking above & below the body are called Shadows/Tail.
If the candle closes above the open price, it indicates the market forms a bullish candlestick. Bullish candles always display as Green color.And if the candle closes below the open price, it indicates the market forms a bearish candlestick. Bearish candles always display as Red color.
But the color doesn’t matters, you can use whatever color you want.
Long v/s Short
Long bodies of candles shows strong buying & selling pressure. Bullish long candle indicates that buyers are more stronger than sellers and they are taking control of the market during this period of time. Conversely, a bearish long candle indicates that sellers are stronger than buyers & they are taking control of the market during this period of time.
Short & small bodies indicate a little buying & selling activity.Upper & lower shadows give us important information about the trading session. Candlestick with long shadows show that trading action occurred well past the open & close. Japanese candlesticks with short shadows indicates that most of the trading actions are confined near the open & close.
If a candlestick has a longer upper shadow, and short lower shadow, this means that buyers flexed their muscles and bid price higher. But for one reason or another, sellers comes in and drove the price back down to end the session back near its open price.
If a Japanese candlestick has a long lower shadow and short upper shadow, this means that sellers flashed their washboard abs and forced the price lower. But for one reason or another a buyer comes in and drove prices back up to end the session back near its open price.
CANDLESTICK PATTERNS
Candlestick patterns are one of the most powerful trading concepts, they are simple, easy to identify, & very profitable setups. Candlestick patterns are the language of the market. Here are some of the candlestick patterns that will help us in the market:
1. THE DOJI CANDLESTICK PATTERN
Doji is the most important Japanese Candlestick Pattern. When this candlestick forms, it tells us that the market Opens & Close at the same price which means that there is equality & indecision between buyers & sellers there is no one in control of the market. If the closing & opening prices are same, that means candle is giving us a single, that market is not able to decide which direction to take. The above chart shows how the market has changed the direction after the formation of the Doji candle pattern. If Doji forms in uptrend it gives a signal, that the buyers are failing to keep the price up & sellers are pushing the price back to the opening price. When Doji form in downtrend that indicates the market is ready to go up side & it gives a reversal signal.
2.THE DRAGONFLY DOJI PATTERN
Dragonfly Doji is a Bullish candlestick Pattern. Dragonfly Doji is formed when the open, high & close are the same & it has no upper shadow. An important identification of dragonfly doji is its long lower shadow. Indecision & trend reversal are indicators of the dragonfly Doji. The long lower tail suggests that the force of supply & demand are nearing a balance & that the direction of the trend may be nearing a major turning point.
The above chart shows how the downtrend market changes the direction of the market toward uptrend. The formation of dragonfly Doji with long lower tails shows us that there is a high buying pressure in the area. The war between Bull & Bear, attempted by the bear towards pushing price down, but here buyers are stronger than sellers.
3.THE GRAVESTONE DOJI
The gravestone doji is the Bearish version of the dragonfly doji. It is a bearish reversal candlestick which mostly occurs at the top of uptrends. The formation of the long upper tail is an indication that the market is testing a powerful supply or resistance area.
The image above is a perfect gravestone Doji. This pattern indicates that while buyers were able to push prices well above the open. Later in the day, sellers overwhelmed the market pushing the price back down. This is interpreted as a sign that bulls are losing their momentum and the market is ready for a reversal.
4.THE BEARISH ENGULFING BAR CANDLESTICK PATTERN
The bearish engulfing is one of the most important candlestick patterns. Engulfing bar is formed when it fully engulfs the previous candle.
The first candlestick shows that the bulls were in charge of the market, while the second shows that bearish pressure pushed the market price lower. The second period will open higher than the previous day but finish significantly lower.
The engulfing bar can engulf more than one previous candle, but to be considered an engulfing bar, at least one candle must be fully consumed. When this pattern occurs at the end of an Uptrend, this indicates that buyers are engulfed by sellers which signals a trend Reversal.
The pattern is also a sign for those in a long position to consider closing their trade.
5.THE BULLISH ENGULFING BAR PATTERN
A bullish engulfing pattern is the opposite of a bearish engulfing pattern. Many traders use this candlestick pattern to identify price reversals and continuations to support their trading strategies.
The bullish engulfing bar consists of two candlesticks, the first one is the small body, & the second is the engulfing candle. When a bullish engulfing candle forms at the end of downtrend the reversal is much more powerful as it represents a capitulation bottom. The color of the body is not important, what’s important is that the smaller one is totally engulfed by the second candlestick.
6.MORNING STAR CANDLESTICK
The Morning Star Pattern is considered as a BULLISH REVERSAL PATTERN. A morning star candlestick pattern can successfully predict or explain trends in price movements in the case of equity, currency trading or financial derivatives. This pattern occurs at the bottom of Downtrend near a support level, it is interpreted as a powerful trend Reversal Signal. The first candlestick is bearish. The second candle is small & this can be Bullish Or bearish. Second one produces indecision in the market, second candle could be a DOJI or any other CANDLE. The Third candle is a bullish candlestick that gapped up on the open & closed above midpoint of the body of the first day, this candlestick holds a significant trend reversal signal.
7.THE EVENING STAR PATTERN
The Evening Star Pattern is the opposite of the Morning star pattern. The evening star pattern is considered as a Bearish Reversal Pattern. This pattern occurs at the top of an Uptrend. The First candle is a Bullish candle. The second candle is a small candlestick, it can be bullish or bearish or it can be a DOJI or any other Candles. The third candle is a large bearish candle. In general the evening star pattern is the bearish version of the morning star pattern. Third candlestick gaping lower than the previous candlestick indicating a confirmation of the reversal & the beginning of new trend down.
8.HAMMER (BIN BAR)
The hammer is a reversal candlestick pattern when it occurs at the bottom of a Downtrend. Long lower shadow that indicates a bullish rejection from buyers & their intention to push the market.
Understand the psychology behind the formation of patterns , here sellers forcefully push the price down but that time of period buyers are more powerful than sellers which result in trend reversal.
9.SHOOTING STAR (BEARISH PIN BAR)
Shooting star is the Bearish version of the hammer. This candle is characterized by a small body. And long upper shadow. Shadow should be twice the length of the real body. This pattern occurs in an uptrend. It indicates a bearish reversal pattern.
It is one of the most powerful signals.
10.HARAMI PATTERN ( INSIDE BAR)
Harami pattern (Pregnant In Japanese) is considered as a Reversal & Continuation pattern, & it consists of two candlesticks. The first candle is the large candle, it is called the mother candle, followed by a smaller candle which is called the baby. Harami pattern to be valid, the second candle should close outside the previous one. This candlestick is considered as a Bearish Reversal Signal when it occurs at the top of an uptrend, and it is Bullish Signal when it occurs at the bottom of a Downtrend. Smaller body is totally covered by the previous mother candle. Don’t bother yourself with colors, the most important is that the smaller body closes inside of the first bigger.
11.TWEEZERS TOPS & BOTTOMS
The tweezers top formation is considered as a Bearish Reversal Pattern seen at the top of an Uptrend. The tweezers bottom formation is interpreted as a Bullish Reversal Pattern seen at the bottom of a Downtrend. The first one is a bullish candlestick followed by a bearish candlestick. And the tweezer bottom formation consists of two candlesticks as well. The tweezer bottom happens during a Downtrend.
Note:
The candlestick pattern is more workable in higher time frame (weekly, daily & 4hr.) compare to lower time frame. When candlestick pattern is form in the chart, than wait for confirmation & follow up.
“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.
“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.
“The ratio of the volume of put options traded to the volume of call options traded, which is used as an indicator sentiment (bullish or bearish).”
Put-call ratio (PCR) is an indicator that forecast the trend of the INDEX/STOCKS.
A “Put” or put option is a right to sell an asset at a predetermined price. A “Call” or call option is right to buy an asset at a predetermined price. Many traders use options for directional beta; buying call when market bullish & buying put when market bearish.
PCR is a popular derivative indicator, specifically designed to help traders gauges the overall sentiment of the market. The ratio is calculated either on the basis of options trading volumes or on the basis of the open interest for a particular period.
This indicator will show you which gang is dominating the market; the bearish gang (short masters), or the bullish gang (long masters).
The put call ratio can be calculated for any individual stock, as well as for any INDEX, or can be aggregated.
HOW TO ANALYSES PCR:
The put call ratio is calculated by the dividing the number of OPEN INEREST of put option by the number of OPEN INEREST of call option.
PCR (OI) = PUT OPEN INTEREST ON GIVEN DAY/ CALL OPEN INTEREST ON SAME DAY:
PCR for marker wide position can be also be calculated by taking total number of OI for all OI call options & for all OI options in a given series.The PCR can be calculated for indices, indivu
Eg.
PUT (OI)CALL (OI)
CURRENT MONTH CURRENT MONTH
NEXT MONTH NEXT MONTH
FAR MONTH FAR MONTH
PCR = PUT (OI)/ CALL (OI)
PCR = ?
A rising put-call ratio, or a ratio greater than .7 or exceeding 1, means that equity traders are buying more puts than calls. It suggests that bearish sentiment is building in the market. Investors are either speculating that the market will move lower or are hedging their portfolios in case there is a sell-off.
A falling put-call ratio, or below .7 and approaching .5, is considered a bullish indicator. It means more calls are being bought versus puts.
A trading account can be any investment account containing securities, cash or other holdings. Most commonly, trading account refers to a day trader’s primary account. These investors tend to buy and sell assets frequently, often within the same trading session, and their accounts are subject to special regulation as a result. The assets held in a trading account are separated from others that may be part of a long-term buy and hold strategy.
DEFINITION
The account which is prepared to determine the gross profit or gross loss of a business concern is called trading account.
DEMAT A/C
Demat account or dematerialised account is an account that holds the shares and securities of an individual in an electronic form. When an individual indulges in trading or investing in shares or securities all the transactions are done through the DA. To put it another way, just like the banks hold the money of the individuals. Similarly, the DA holds the shares and securities of the individual in the account.
https://www.youtube.com/watch?v=uwWbBq4mL4o
DIFFERENCE BETWEEN TRADIN A/C & DEMAT A/C
1. The functionality of a Demat Vs a Trading Account
One major difference between the two accounts pertains to the functions each performs. A trading account is used for the buying and selling of the securities by means of it getting debited from your demat account and sold in the market.
A demat account, on the other hand, allows investors to keep their financial instruments in an electronic format. This also works in a way where you can change your electronic format securities into physical form as well.
2. BENEFITS of using DEMAT A/C & TRADING A/C
DEMAT A/C-
In the demat account, all the shares and securities are held in electronic form. There is no paper work at all. Thus, it reduces the risk of theft, wrong delivery of shares, etc. In addition, any company related activity like a stock split, bonus etc. are credited to the demat account.
Before demat account, trading of shares was done in lots. However, after demat account, this problem no more exists. Now the shares can be transacted in any numbers. All the transactions in the DA are automatically updated. The DA holds all the details of the account holders like address, name, time of the transaction, etc. So the companies always have details of all the transactions. The biggest benefit of demat account is that it acts like a bank and holds not only shares in the account. In fact debt instruments like bonds, etc. can be held in a single account.
TRADING A/C –
The moment you open a trading account, you get access to different kinds of stock exchanges that are there in the country. This will help you to make your investments better and stronger and of course you will have more options to explore. You can personalize your account, like set alerts and notifications as per your requirement with an online trading account. You will also enjoy the benefit of accessing your account from any media and any device.
HOW TO OPEN DEMAT A/C & TRADING A/C
OPENING DEMAT A/C
Step 1: To open a demat account; you have to approach a depository participant (DP), an agent of depository, and fill up an account opening form. The list of DPs is available in the websites of depositories: CDSL (Central Depository Services (India) Ltd) and NSDL (National Securities Depository Ltd).
Step 2: Along with the account opening form, you must enclose photocopies of some documents for proof of identity and proof of address.
Step 3: You will have to sign an agreement with DP in the depository prescribed standard format, which gives details of rights and duties of investor and DP. You are entitled to receive a copy of the agreement and schedule of charges for future reference.
Step 4: The DP will then open an account and give you the demat account number. This is also called beneficial owner identification number (BO ID). All your purchases / investments in securities will be credited to this account. If you sell your securities, your demat account will be debited.
“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.
Long bodies of candles shows strong buying & selling pressure. Bullish long candle indicates that buyers are more stronger than sellers and they are taking control of the market during this period of time. Conversely, a bearish long candle indicates that sellers are stronger than buyers & they are taking control of the market during this period of time.
