almost everything you need to know about stock market version 1.0

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1 | P a g e Almost Everything You need to Know about Stock Market

© Aparna TA www.aparnata.wordpress.com

Almost

Everything

You

NeedTo

Know

AboutStock Market*

By

Aparna T A A beginner

*For the Beginners





Foreword

Stock Market - The word everyone looks up to - to make great fortune. But, often people are scared because of the Myth "It's Risky". Let's break it down. Is it Risky? Yes! But totally depends on how much risk one cantake.In general, Stock Market is prone to high volatility. One can become rich in a day or one can become a pauperthe next. But, if you are PREPARED, you can always walk through, without much tantrum.

The purpose of this book is simple. When I first wanted to know about stock market I did a lot of research onthe internet and talked to a few friends. Fortunately, there were many sites that could help me through theunderstanding of the market. But, i often got misguided by a too much of information. So, then i decided that iwould write a book - a simple one that would probably achieve the aim of introducing stock markets - the

basics. Because, as a beginner, I understand, what you are really looking for. I am sure there are millions of people who are exactly in the same position as I once was. So here, is the helping hand reaching out to suchkind of People.

Fact is - Stock Market is an ocean. Thousands of people have written volumes and volumes of pages about it.Imagine finding out the book out of those thousands that would fit a beginners' requirement would probablynot be an easy job.

"Practice makes the man perfect " - So, here is a disclaimer, even though, the contents of this book may be enoughfor a beginner to understand the overall idea of stock market, one has to really get your hands dirty and investso, that you can REALLY understand the stock Market.

Acknowledgements

Thanks to Venkatraman for introducing me to the concept of stock market and for breaking down bigconcepts to easy assimilation. Thanks to Balaji Veeraghavan for the valuable guidance provided duringinvesting and editing stage. Thanks to Srikanth for providing the right inputs on editing this book. Thanks toAmit, Gunjan and a few others who kept my interests on writing this book, despite my laziness.

For whom is the book written?

It's important for the readers to know, if this book fits their reading.

This book is for the Beginners .

So, who is a beginner? The one who has heard the words - "Stock market", "SENSEX", "bulls", "bears","squaring off", "DEMAT", "equity", etc. and has no idea or NOT sure of what goes on in it. After reading thisbook, you will be definitely acquainted with basic knowledge of stock market. This means, you can straightaway go for investing or start next level of reading to quench your thirst for knowledge.

If you fit this criteria ALONE go ahead, read the BOOK.





Having Said that,

This book is not to be followed if you want to get serious with number and figures (though basics will beintroduced).This book is not for those who are looking for stocks to invest – No pointers will be given to which stock isthe best buy or best sell.This book is not for those who are looking for higher-level Bidding like futures and Options or For-ExTrading.This book is definitely not for the brokers.

Credibility of the Author

I have been investing in for the past eight months only and has been finding fortunes here and then. Frankly, Iam not a professional. But, I am what I am, a Beginner. And I know exactly what a Beginner needs to know. Ipromise you this book would be the best start you can get. I have researched about markets for 6 monthsbefore starting to invest - reading books, blogs, attending lectures etc.

What I learnt the till now; you would learn it in a day or two. And what I am learning for the past 8 monthswith some a big gamble on the "real" money you will learn for a small amount of money you invested inbuying this book.

I don't claim that I know it all. I don't claim it's the best book on Stock market. But what I can claim is it surewill be easy read, easy understanding book for the beginners who are interested in investing in Stock Market.

So, c'mon, let's explore.

Table of Contents

A. STOCK MARKET 4B. TYPES OF STOCKS 5

C. MARKET INDICATORS 7

D. BUY OR SELL MODES 9

E. PROS AND CONS 10

F. TIPS 10





A. STOCK MARKET

"STOCK Market" - The word literally means - A market which Trades Stocks.So, what are Stocks?"Stocks" also Known as "shares" is a document given by a Company which entitles you to OWN a part of Company.Before Getting to know more, let's explore why "stocks market happened". For this we have to go to the story of Money.Many, Many years ago, our great ancestral traders traded with "what they had" for "What they didn't". In simple words,if I had excess Apples and I don't have Oranges (which I require); I would trade excess Apples for Oranges.The very next question I would ask for is - How many apples equal to how many Oranges. A logical Question - whoseanswer is dependent on the (you guessed it right!) - THE DEMAND. If Oranges are in Demand I might have to givemore apples to buy it, if the apples are in demand, I might probably just need one apple to buy two oranges. Hope yougot the idea .The identified problem here is Valuation.Next question is what happens when I don't have apples but I have Bananas but I also want Oranges. Again I have to dothe above math. It might seem to be an easy two-step process where I compare oranges to bananas, but with the varietyof goods that are traded every day, it becomes pretty difficult.So, there is a need for standardization. And thus the Money was born. One Gold Coin - you can buy 3 apples or 4oranges or 5 bananas. This is the basic concept.

Now, let's imagine a typical "market" where goods are bought and sold. What could the goods be? Anything! Fruits, vegetables, cycles, gold, silver, etc. Well, what you see here is the exchange of Money for a "physical" Object. What happens in a stock Market is that,instead of that Object - it's a virtual but almost real "share" that makes you an Owner - a part of a Company.Let me explain it clearly, Usually, When a company is formed - it can be of Sole Proprietary ,Partnership, family owned,Public Ltd, Private Ltd. Sole Proprietary - A corporation has a single Owner. Partnership - is when 2-10 people own acompany. Partnership - a corporation with more than one owner. Family Owned - a corporation which is passed onthrough generations. The above types of corporations are usually small-sized or mid-sized. But, when it comes to largecorporations it becomes unimaginable to get the capital from just a few people. So, again using the concept of money -the company which ever may be - a steel company or a cotton company can be represented by a chosen amount of shares which is worth a certain amount of money. This is one of the means to raise capital for a company (called ShareCapital). A private limited company thus- is that where in shares are held privately among the directors. A publicLimited company can choose to give the shares to the Public - This process of letting out the shares to the public is

often called as Initial Public Offering (IPO). And this is how, Shares, or Stocks Came into the market. Thus, Sharesusually belong to a company which is publicly listed or a public limited company. [Limited usually refers to limitedLiability i.e. the amount invested in the company. If a company is sued, then owners and investors are not "liable" to payback the debts as they are pretty much considered as a separate entity from that of a company but sure, the profits maytake a dip.] So, when you buy a stock or a share of a company you actually become an "owner" of the company. To whatextent depends on how much percentage of stocks of that company you own.Again relating it to the typical "Market" - a place where we exchange goods for money - A STOCK EXCHANGE is aplatform where you exchange - Buy/Sell Stocks for money.

Now, you know why "shares" came in to the market and what it has got to do with the companies. Now, you will findout how!





When a company wants to go public - mostly to raise capital, the company would list a certain amount of shares for thepublic. A share has two values - Face Value/Par Value and Issue Price. Face/par value is of a share of any company is justRs.10 [in India for any company] and then, there is Issue Price. Let us find out the difference.Face Value of any share of any company is Rs.10. What does this mean? In case, a company wants to raise a share capitalof Rs.10, 000,000. With the face value of Rs.10 per share, the company can issue maximum of number of 1000,000 shares.This face value will be reflected in the share document ( It’s nothing but a sheet of paper that denotes the number of shares issued by the company for public offering).

When, the company goes to the public for the first time - the value at which it enters the market is called Issue Price .

That is, if the company is worth 250 per share, then that will be the initial issue price. This price is not decided just likethat, with a bit of market research and the performance of the company underwriters [ let’s say the experienced fellas ;)]decide on the price value.

Why should Issue Price be determined? Let's say a company is actually worth 240Rs per share, but the market worth isonly Rs.200, then obviously not all the shares will be sold as the value is costlier than expected, and hence the companycannot receive the whole money it quoted for say Rs10, 000,000. Hence, there is a council which decides on the IssuePrice.

Now that, the stock is in to the market [after going through the Initial Public Offering]. It gets listed in to the StockExchange. Stock Exchange typically is a place where we trade stocks. Some of the well-known stock exchanges in Indiaare National Stock Exchange (NSE) and Bombay Stock Exchange. Besides these there are many more Stock Exchanges likeMadras Stock Exchange, Delhi Stock Exchange etc. which are regional based. What is the main difference between all

these stock exchanges?The main difference being - the number of companies listed in the exchange. National Stock Exchange however, has themaximum number of stocks listed. A question might arise. Can one stock be listed in more than one Exchange?

Yes. If you start following the rates, you will see that BSE and NSE typically are in the same range i.e. if the stock value is300 in NSE it will be 299-301 in BSE.So, said that, can you buy in NSE and sell in BSE? Yes and why? Simple reason is you are trading the "stock" so, theexchange doesn't matter. It's like buying apple in one shop and selling it in another. You pay for the value of the apple infirst shop and sell it for the value of the apple in the second shop.

The Indian Stock Market opens at 9.30 AM and closes by 3.30 PM. It is said over a billion and more amount of currency

is being traded every single day! What really happens during this time? Let’s find out.

Consider a company XYZ and its Market share at the starting of the day is 250Rs. What can happen during the day is

almost dependent on the news related to XYZ. Yes! For this you have to pay close attention to the news! But, here is

catch, if there is news – It can be good or bad! But, can you tell it as soon as the news comes out? Definitely not! What

you think the effect of the news on the market price of the share might be totally contradictory to the actually HOW the

market REACTS to the news!

So, here are the two chances – the market might react positively – Resulting in increase in the price of the share – often

termed as Bull ; the market might react negatively – resulting in decrease in price of the share – often termed as Bear .

Often, the markets react vigorously to Quarter Results or some global economic crisis. So, it’s not only the local news

but also the world news that you will have to watch out for. The increase/Decrease of share price is based on demand-

supply. If there is a lot of demand, the value increases, else it decreases.

B. TYPES OF STOCKS

Now, that you have an idea about stock markets and how its functions. Let’s get to the business.

You can buy stocks in various modes. Firstly, you can directly buy a company’s shares. That’s generally called equity

trading or Share trading. This is the basic means with which the market literally works. Said, that this is not the “only”

thing with which it works. There are other types of investments one could make in share market like mutual funds,

commodities, ETFs, Futures and options, For-Ex etc.

Before going to that let’s look at some of the terms related to it – Sensex 50, Nifty 50, Sensex 300 etc. We often hear

this in the news that Nifty fell X number of points, Sensex fell Y number of points. Well, What Sensex, Nifty and many





other indexes tells you are how the market has moved. For a good approximation, these indexes consider the list of

major companies present in the exchange. Thus, indexes are used to indicate the performance of the market. Sensex is

indexed for BSE stocks and Nifty for NSE. If you take a close look, at the companies affecting the share market you will

know why, Sensex reflects only a few major companies. And remember, Sensex and Nifty are an index that’s why they

are denoted by “Points” and not by rupees.

Apart from this there are sectors. Just like in any business, the sectors here are Auto, Oil and petrol, software industry,

steel, cements, FMCG etc… Even here, if you look at it, the industrial performance follows the rise or fall of the majorcompanies. So, here is a thing you can watch out for, if the say a major bank is losing, but other stocks are showing a

reverse indication, they are more likely to follow the lead sooner or later.

Other way you can buy stock is by investing in mutual funds. Mutual fund is a collection of equities under one name.

Simply put, it’s like the Cadbury – Celebrations. It has little bit of everything. Mostly little bit of those stocks that’s doing

well in market. So, you don’t have the trouble of picking up which stocks are performing well etc. But, it might be tricky,

in the sense there is not one mutual fund but there are many, so you really have to look in to each portfolio and view

their past performance to really buy. One good thing about mutual fund is that you can do is opt for SIP (Systematic

investment Process) – this is like your RD (recurring deposit). With SIP you can invest a constant amount of money in

fund(s) every month. Please note that, both equities and some mutual funds are taxable depending on duration you hold

them. However, most of the mutual funds can be used for tax exemption. So, you can consider this also while investing.

Mutual funds also offer another way of investing called lump sum, which is similar to fixed deposit; you invest once for acertain amount of money for a certain period of time.

Even in mutual funds there are many types, Equity – Diversified, Debt, Growth fund etc. These are basically where or

what kind of stocks the mutual funds houses (a body which design the mutual fund portfolio) have invested in. Debt

funds usually deals with debt money. The found house say has given some money to a company as debt, the return of

that debt will be shared by the investors of that particular fund. But, most popular among Mutual fund is primarily

Equity Growth funds (which take in companies which show a growth in stock price) and equity diversified funds. Lately,

there has been an increasing interest among the investors in Top 100/200 types of funds which basically just takes in

companies that are top the market charts in terms of performance.

Most important thing however, is that Mutual funds are also risky but, not as risky as equity. And how are mutual funds

rated. Just like Nifty, Sensex it has a different term. It is called NAV – Net Asset Value. In financial terms any asset to acompany is that which brings in money. Funds houses are a sort-of-company as it literally buys stocks of other company.

In that case the best way to asses it would be to measure its total asset. And that net asset is directly proportional to

their portfolio management i.e. the number of companies and the number of stocks of each of those companies they

have invested in.

Often, asked question do Mutual funds give better return than FD (which is currently around 7.25% pa) or RD? Yes, and

No. Unlike, FD and RD whose rate is constant for the year, Mutual funds and equities depend on the market, so they are

can give you 30% a year or -10% a year! Your discretion and research would help you ebb out of market volatility to

some extent.

Other than directly investing in stock market and mutual funds, you could also buy commodities like Metals, grains,

energy, etc. This is same as buying the stock. You would actually the commodities “Physically” but yes you will own thequantity though!

The current trend however, has been ETFs (or Exchange Traded Funds). Exchange traded fund is a hybrid of

commodities and Stocks. While in commodities you will still be buying X kgs of ABC for Y Rs, in ETFs you will buy same

ABC for N NAV (not Kgs) for M Rs . The values of ETFs will be stock exchange dependent and it need not reflect the

value of ABC in the Physical/Commodity Market. As much as ETF represents stocks, it’s managed as funds than as a

stock.

So, how do you get in to the Stock Market? De-Mat account. That’s how you represent yourself to the stock exchange.

It’s quite simple. Like a bank account which is unique to each and every customer, you have something called De-mat

account for accessing the stock market. Just like how you use the bank facilities like locker, online trading, credit card,





etc. using a bank account, using De-mat account you will be able to buy stocks, invest in mutual funds, buy commodities

and other array of things that the market supports.

So, De-Mat is basically dematerialized account. Hanging on the concept called nothing is physical well, that’s how it got

its name De-Mat – De-Materialized account. So, that’s the electronic proof to your possession of certificates that

indicated you buying/selling a particular stock. That means, you definitely have to get a de-mat account before you could

trade in the share market. But, fortunately if you are looking at mutual funds alone, you don’t require de-mat account.

But, it’s preferable that you have it, because you can look at the charts whenever you want, now that online and mobiletrading are catching up!

So, is there anything else you can do in the stock market? Yes! There are loads and loads of stuff you can do. But, trust

me as a beginner this knowledge should be enough to leverage you to the next step. Nonetheless, I will define few more

terms so that you get an idea about them.

Futures and options they are nothing but those types where in you are simply bidding the future. You can opt for

futures and options if you like to take a big leap of faith determining the value of stock say Y days from now and buy a

contract to buy the stock on Yth day! In options you have an option to opt out before the contract term closes. In

futures you cannot cancel the deal.

For-Ex is another interesting part of stock market. World has become flat, so everything is interconnected to everything

else. And there rise in Oil price affects America, the value of USD increases, and the value of rupee against USD

increases. So, the yesterday’s 100 Rs is not equivalent to today’s 100 Rs due to the change in economy every single day .

Hope you get the idea. If you gamble against the rapid fluctuation of the various currencies that’s for-ex (Foreign

Exchange)! For-Ex trading is also a boomer as the risk is high, but the returns are flaunting!

C. MARKET INDICATORS

Here are some of the things that will help you understand where the stock stands and will it be worthy investment

(mostly for a long term basis). But, it’s not necessary that you have to know them and understand them all. Since the

purpose of this book is only for the beginners, I just want to introduce you to a few jargons so that when you are going

for further reading (newspapers, etc.), it might help you then!

Outstanding Shares:

They are basically total number of shares available. It included the number of shares listed in the stock exchange and

also the restricted shares held by the company (generally, called preferred stock).

Dividends:

It is the way of a company chooses to share the profit with the shareholders. Please note that, the company doesn’t

HAVE to give dividends and not all the profits will be shared with the investors (for obvious reasons that some of the

money has to be pooled back for business expansion). It is usually paid to keep the trust of the shareholders that their

investment is worthy and the company is having great future prospects. So, dividends do lure investments as it’s not thatrisky.

Earnings Per Share (EPS):

This is by far the most important parameter in valuation of the stock price. Because, it directly indicates the “earnings

per share” which is the very reason a person invests in a company.

Earnings Per Share = Net Income – Dividends on Preferred Stock / Average Outstanding Shares

Please remember that dividends on Preferred Stock (those held by the company) is given before the general public

dividend. It’s average outstanding share because, the number of shares can vary in a given period of time.





So supposing Net income is 100 Million and Dividends on preferred stock(company owned stocks) is 20 Million. And say

there are 10 Million stocks for 6 months and 20 million the next six months. Then, EPS would be 5.3= (100 M – 20

M)/(.5*10 M + .5*20 M). Always remember, that just like in division 10/20 is same as 40/80. So the profits don’t have to

be same if the EPS of two companies are same. EPS depends on profits and number of shares alike.

Quarterly Results:

One of the biggest indications of the future prospects of the company is their quarterly results. Every publicly listed

company has to post their quarterly results in the national newspaper and a regional one. There are four quarters in a

year April – June, July – September, October- December and January to March. So, what would quarterly results tell

you? Net Expenses, net income, profit, EPS, etc. for the current and previous financial year quarter, for cumulative

current and previous financial year quarter and previous financial year numbers. This would probably enough for you to

gauge where the company is headed next few months. Many of us have and impression these charts are for CA’s. No, it

simple math number growing up or down. So, do not fear the numbers. Fact is, if you start observing, the market reacts

as much to these results as the global financial meltdown.

Jargons related to mutual funds are NAV – Net Asset Value and AUM – Asset under Management among others.

NAV:Net Asset Value is similar to stock price. Since it’s a Fund, you cannot use stock price so they use Net Asset Value. So in

case you are buying any mutual fund plan then, the price of it will be determined by its NAV. Said that, unlike stockmarket where the value of the stock price changes every minute, the value of NAV is SET only once a day.

Open – End funds:Open ended funds are basically those mutual funds which are ready to issue any number of shares of the fundsdepending on the demand.

Close – End Funds:The number of stocks under it is constant. That is, there will be no change in the number of shares issued.

Closed Funds: When the fund house decides to freeze the number of shares may be because it’s getting too large, then such a type of fund is called closed fund. In such a case, no new investor can invest in it. But, those who are already holding a closed

fund shares can buy and sell.

AUM:Asset Under Management – It’s basically the market value of the stocks the asset management companies (fund houses)are investing in on behalf of their investors.

D. BUY OR SELL MODES

Now, that you have a DeMat account and you have decided on what company to invest in, let’s see in what ways can youbuy or sell a stock or a fund.

Day Trading:As the name suggests, you buy a share in a day and sell it on the same day! That’s called Day trading. It has happened to

all of us, a guy puts in some money doubles it in just one day! And we think, God I also want such kind of easy money!May be that’s what brought your attention to stock market. Can you also create such kind of wealth? Yes, you can earngood money, but not always in fact, very rarely ! If you have observed the market you would know, on an average, notmany stocks show a great hike/dip in the value in just a day! And some of such hikes are more a play of big investorsthan a real market movement! By the way, are the profits taxable? Not only the profits but the capital is also taxable.

Short term investment: What is called a short term investment is that wherein you buy a share and sell it within one year. Again, here also tax isapplicable, same as day trading. But, it’s a lot less risky than day trading. Again, we can only hope a good future, no – one can really say how will market be in a week now, leave alone in a month! Please note here, that for mutual funds,there is something called entry load and exit load. Entry load is a concept where you pay to the fund house a certainamount of money for buying their funds. In the same way, exit load is for selling their funds. Usually, most of the fund





houses charge 0% entry load and exit load is 1% for a short term investment which is less than 6months! There are,however, no exit loads for long term investments!

Long term Investment:If you are holding a stock or equity for more than a year it’s called long term investment. If you have been reading up

works of Warren Buffet or his Guru Benjamin Graham’s books you would know how much they give importance to longterm investments! Not only these people but, may other giants in stock market also recommend this kind of investment!Simple, reason is a chance if you take could give you unimaginable projects! That’s how those people grew!

Margin Trading:Most of the asset management companies like ICICI direct, HDFC give an option called Margin trading. Margin tradinghappens in a Day- trading mode, where in if you have 20,000 , you can invest in twice or thrice the amount but youhave to sell it in the same day! If you don’t, it automatically squares off (sells) the transaction by considering the latestprice for the day.

Limit Order:Limit – Order, you limit the value of the stock you are going to buy, that is called limit order. Say, a stock is at 250, andthat you are willing to buy the stock if its 240, then you place a Limit order of 240 for that stock. So, whenever thestock reaches 240, only then the transaction will be processed.

Stop Loss:

Stop Loss is a very important concept that would help you save from losing a lot of money! Say, you have bought a stockat 120, while buying it you keep the stop loss at 80 then, if the stock goes below 80, then automatically, the stock will besold if the stop loss is kept at 80. So, what could determine the stop loss? Simply put, the amount of money you are

willing to lose, you can very well keep the stop loss at 110 also! And, another important thing is, stop loss value is notconstant, you can always change the value, if the value of the stock rises from 120 to 140, you can increase the stop lossto 130, so that way, you end up having a profit any way!

Brokerage:It is to be noted that, there is a middle man (called as broker) between you and the stock exchange, so well, there is acertain amount of money you will have to pay every time you make a transaction. That, amount however is quitemeager. And also, not everyone can become a broker, there are quite stringent rules to become one, like the person hasto be a sub-broker first, should have handled certain huge amount of money and should have cleared exams. So, it

basically takes 10+ years of becoming bald to become a broker. So, you choose what you want to do! So, if you arethinking of saving money by becoming a broker, know its not an easy job!

Brokerage houses:Ok! All said, if you are not ready to do all the work, then you can definitely register with brokerage houses, where they

will assign you a broker who will be doing all the transactions on behalf of you and sometimes even guide you throughthe HOT PICKS of the day! Even though this is what actually happens, while doing online transactions you are not awareof the broker in the middle, but here you would be directly communicating with them. Some of the few brokeragehouses are IIFL, Sharekhan, Stockezy, Angel Broking etc. [I am not recommending any of these brokerage houses, it’s justFYI]

E. PROS AND CONSSo, what’s the difference between stock market investment and other investments such as LIC insurance, Fixed deposit,recurring deposit or ULIP etc.

For one, there is no guarantee in stock market, like in any other investments, that you could get your money back. Otherinvestments usually promise a small amount of interest on the money invested. But, one thing about stock market is, if

you invest intelligently, ditching your emotions aside, you can reap more money than you could imagine.

While there is very less risk in other investments such as insurance etc., stock market carries a huge volatility in its tail,so it’s very much risky! So, the investment totally depends on the amount of risk you are ready to take. Said that, what’sthe joy of being in the comfort zone?

Other investments are usually long term and the short term investments aren’t that candid whereas, in stock market youcan definitely hope for a short term gain.

Taxes – that’s the big word every person in this world has nightmare about! Well, insurances are mostly exempted,investments such as postal, ULIPs are also tax exempted. Where are in stock market, capital + profit are taxed for short





term and for long term, profits are taxed. So, if you are looking for evading tax, try mutual funds if you want to stick with stock market.

That’s the overall picture I can draw for you. If you would like to know more, learn more, you should tr y investing littleamount and see. The next session, I will share some of the things I learnt while investing in the stocks. Some tips canreally save you a lot of money if followed!

F. TIPS

Here are some of the things I learnt during these few months of investing.1. Long term: Always invest in long term. Short term can look spicy and promising but, if you have eye on the

long term you can be safer and also, you can always sell when think you should.2. Do not diversify: Most of the newbies usually try to invest in a lot of stocks! Just so that you can understand the

market. But, you usually end up losing more than you should! Let me explain how, say you have 10,000 Rs toinvest, if you invest in two stocks say one for 250 each stock and other for 500 Rs each stock (let’s assume forthe same amount 5000).Stock 1: 250 each for 5000 ie 20 StocksStock 2: 500 each for 5000 ie 10 StocksIf Stock 1 raises for 50 Rs(20% rise) say and stock 2 loses 100 Rs(same 20% fall) then 600(profit from first)-

1000 (loss from second leaves you with a loss of 400. So, instead of gaining 2000(50*40) by investing in juststock 1, you are losing 400 Rs. I hope you got the idea. So, do not diversify! If you still wish to diversify, invest

in mutual funds, at least experienced fellas would do the job of protecting your money.3. Research research and research: Well, stock market is not a child’s play! At least in the beginning till you get

used to it! So, do your Homework! Luckily, our generation is not devoid of sources, there is newspaper, forums,media, dedicated TV channels, websites, just so many resources! Don’t just invest, know the company you areinvesting in, what their current projects are, what they are eying for in the future, what kind of profits havethey shown before, how is their track record, how are the stock prices in the last 3-5 years, would it be the besttime to buy or would you rather sell it. Go talk to the brokers, or those people who are already in to investing!It’s your hard earned money! So, you better invest it intelligently so that, it can do the work for you!

4. Newspapers and magazines: There are many financial newspapers, some are really good. They give you clearidea of what’s happening in the business world. That’s where your money is going to be some day! Start readingheadlines first, and then in to the articles, slowly and slowly you can become good at deriving things, findingout, what kind of news is impacting what kind of sectors, etc. Not only that, it will also give you an edge if you

would like to invest in commodities and for-exs. Magazine like Dalal Street is definitely a good place to start

with.5. Do not blindly invest: Never invest in a stock because your friend said so, even though he might be investing for years and has made good profit. And do not blindly take the suggestions given in the newspapers and TVchannels, they are experts and they have done some research, yes, but it’s your money not theirs!

6. Timing is not everything: “Timing is everything” is a popular myth! Timing is not everything, thing is you canalways invest in a stock get back the money or get profit only thing is it might take time some time a weeksome time a year sometimes 20 years! But, the bottom line is, what’s your financial goal? What are you ready toinvest and how much would you like in return in a given period? Be very clear with these two. This will help

you avoid confusions and apprehensions!7. Be careful WHEN you buy: Say you are investing in stock X, its value is 1250 now and it’s track is declining, wait

for it to go further down, and then buy if you see the future in it and that this decline period is just a smallhiccup. And always ask the question why is it declining or rising! That will again help you save a few extrabucks and put money in your pocket!

8. Handling your finances: Handling your finances is really important. Always invest a certain amount of moneyevery month that way you can insure your future. Mutual funds – SIP (Systematic Investment Planning) is agood idea that way.

9. Stop Loss: Always have a stop loss, no matter that you are ready to wait for the price to rise after 6 months, 20– 30 % loss will definitely take more than a year generally to give you profit on the same stock.

10. Do not be over enthusiastic: What’s important is don’t be over enthusiastic. Yes, concentrating on a fewnumbers of stocks is good, but do not gamble! And if you have reached your financial target, wait for it to go 2-5% above it, and then sell it! Because, it’s really easy to get greedy, but it will not help you gain wealth!

11. Sector Performance: If you are investing in any company, do not only watch out for the track record of thatcompany but also, that of the sector it belongs to. Say, you are planning to invest in X bank if the stock value of

X bank is increasing but the in general banking sector is decreasing, then it’s more likely that X bank will alsodecrease in some time.




Last, but not least, before you actually trade, try out some online applications, that imitate the markets and provide youa heads up to what’s happening and gear you up for real rat race!

Sanity is Saintly!

All the very best for your first investment!

References 1. www.investopedia.com2. www.moneycontrol.com3. www.rediff.com4. Gene Marcial’s 7 commandments of stock investing by Mario Gabelli5. The Intelligent Investor by Benjamin Graham6. Buffetology by Mary Buffett

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