Friday, October 7, 2011

Introduction to Share Market Beginners

Share market is an area which fascinates each and every individual who is craving for more money. Some common phrases are “If we want to earn just try with share markets; my friend has made lot of money in that “.
As beginners we should understand one thing. If we are planning to invest in share market, first we have to categorize our self.

Are we a long term investor?
Are we a short term investor? (Daily trading).
In share market we are 95% secured if we are ready to wait (provided company fundamentals are good. Exclude cases like enron, worldcom.etc) .The problem comes when we have invested in a bank we can withdraw same amount with interests till date for any of our emergency.
Assume our money is in form of stocks we got an emergency by today evening 7 pm of 1 lakh. We have seen our stock’s worth in today’s closing was our investment 1 lakh+ whatever market price added to it. We think we have more than required and sell it tomorrow. But tomorrow fate decided the other way market falls our stock value becomes 90 thousand. If we sell that’s where the problem comes.
It may even go upto 1.25 laks next week /next month. Can we wait? That’s the million dollar question.
Case1 – short term investor (Risky)
Remember its here we play not invest.
Make investment break ups: If we have “x” Rs in our hand don’t get carried away to buy shares for all “x” Rs. Always we should have fifty percent in our hand.
Reinvest only when profits: Make the profits what we earn on the first trade if daily trader (if so happens) to buy extra shares. Suppose if 0ur stock didn’t go up after first investment wait till (may be months) till our holding goes up.
Capital maintain: Always ensure that our capital is maintained with till date interest rate of banks. Though depository participants suggests us its always better we should have basic ideas of the company. We have lot of information sources (net, softwares).
In case of IPO: Buy and sell within max 1 week of IPOS. Invest in established stocks. If we feel trend of IPO is good come back and invest.
Sell well ahead of your expected need: Suppose we have a marriage and we wanted money for that. If we feel that today our investment + return (m-cap) is good may be 30 days ahead of marraige.sell it today. We are secured.
The very simple formula will be if we crave for more we have more chances to lose more.
Case 2 – Long term investor
It’s here we invest. We are most secured in this case because we don’t consider money invested to be used for emergency. Any company will one day have a growth curve. Even a sick company value can be raised by psychological factors of investors.

Source: website