Friday, January 28, 2011

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Tuesday, January 25, 2011

Type of Investments

Once you make your decision to save some money from your monthly expenses, your first challenge is how to keep that money saved for longer period of time and keep it going up over time.  For that you need to plan your investment strategy. Before drafting any plans for your investment, you need to be aware of types of investments available there.
Life Insurance: Life Insurance policies are kind of investment which is very popular. It is a way to ensure income for your family when you die. It allows you a sense of security and provides a valuable tax deduction. There are many insurance companies which provide wealth and insurance in same plan. But read the offer documents very carefully.  
Stocks: Stocks are a unique kind of investment because they allow you to take partial ownership in a company. Because of this, the returns are potentially bigger. There are certain risks as Share Markets are usually volatile; but consult some experts first before investing and you should be fine most of the time.
Bonds: A bond is basically a promise note from the government or a private company. You agree to give them a set amount of money as a loan and they keep it for a set number of years with a predetermined amount of interest. This is typically a safe bet and one that is a good investment for a first time investor because there is little risk of losing your money.
Fixed Deposits: FD’s as they are called. This is safest option for anyone. In this you keep your money in bank for certain amount of time period and will be paid interest on it. The interest will be lot better than the saving bank account interest.
Mutual Funds: Mutual funds are a kind of investment that are based on the gains and losses of a shareholder. Basically one institution manages the money of several or many investors and invests in a list of various stocks to lessen the effect of any losses that may occur.
Real Estate: If you have real big money and can invest in one go then Real Estate is very good option. Returns from this investment can be huge.
GOLD: In India, investing in gold is traditional options. Indians are investing in gold for ages. It’s very lucrative option.

Wednesday, January 19, 2011

Share MArket's History

The Stock Market of India was set up in 1875. In 1875 there were only 22 brokers who met and established the Bombay Stock Exchange. From that time onwards the Indian Stock market has grown to what it is now. It has certainly become a forceful and competent stock market in the world. It is equal to any international market in the world. It has the same level of efficiency and organizational ability. The market caters to the huge population of India and gives them investment opportunities. It also provides the institutions and organizations with funds. The unpredictable nature of the Indian stock market has made it very difficult for the common man to understand it. So prior to investing in the stock market everyone has to research it properly.

When it was started the Bombay Stock Exchange had only a few hundred people taking membership in Stock Broker Association and Native Share. In 1965 BSE was recognized permanently by the Government of India, The BSE and National stock exchange are both the main stock exchange of Indian stock market. Government of India gave permanent identification to the BSE. BSE along with National Stock Exchange both are main part of Indian Share Market and are the two national stock exchanges of India. BSE has about 5000 listings at the starting.

The stock and shares are issued to the public for investing in various companies. The revenue generated from the stocks and shares is used for business expansion or any government projects. The profit of the company is then shared by the public, which has invested in the company. The share market allows for public trading of companies and has become an important source of raising fund for the companies. The government has also formed the Securities and Exchange Board of India (SEBI) which controls the functioning of stock exchanges, investment advisors, portfolio managers, brokers and sub-brokers. The sensex is made on the basis of the performance of the stocks of 30 sound financial companies.

The Indian stock market is basically divided in two parts; the first is the primary part and the secondary part. In the primary market the shares are issued directly by the company are dealt by share brokers appointed by the companies. In the secondary market the stocks of various companies are listed in the stock exchange and are represented by the share brokers, the investors invest in companies through these share brokers.

Friday, January 14, 2011

Demat Account

If you want to trade in Share Market. De-mat account is must. The market regulator, the Securities and Exchange Board of India (SEBI), has made it compulsory to open the De-mat account if you want to buy and sell shares in Indian share market.
So a demat account is a must for trading and investing in share market.
To open new De-mat account you have to approach a Depository Participant (DP) to open a De-mat account. Most banks are DP participants. A broker is a member of the stock exchange, who buys and sells shares on his behalf and also on behalf of his customers.
A broker can also be a DP.
Following are the documents required to open De-mat account:
When you approach any DP, you will be guided through the formalities for opening a De-mat account. The DP will ask to provide some documents as proof of your identity and address. Below is a list of documents out of which you have to submit one or two.
PAN card, Voter’s ID, Passport, Ration card, Driver’s license, Photo credit card Employee ID card, IT returns, Electricity/ Land-line phone bill etc.
Now you must be wondering, do you need any shares to open a De-mat account? Answer is, NO. You need not have to have any shares to open a De-mat account. A De-mat account can be opened with no balance of shares.
And also there is no restriction to maintain any minimum shares. You can have a zero balance (shares) in your account.
How much it cost to open a De-mat account?
The charges for Demat account opening varies from broker to broker of from DP to DP.
Generally some broker charge one time account opening fees but currently due to high competition they are offering free account.
After successfully opening the De-mat account you are ready to do buying and selling of shares in share market exchanges like BSE and NSE.
Important points to remember while opening on line De-mat account
1) Do multiple inquiries with various brokers or DP’s and try getting low brokerage charges.
2) Also discuss about the margin they provide for day trading.
3) Discuss about fund transfer facility. The fund transfer should be reliable and easy. Fund transfer from your bank account to trading account and fund payout from your trading account back to your bank savings account. Some on line share trading account has integrated savings account which makes easy for you to transfer funds from your saving account to trading account.
4) Very important is about service they provide, the research calls, Intraday or daily trading tips.
5) Also inquire about their services charges and any other hidden fees if any.
6) Check how reliable and easy is to contact them in case of any emergency, like buying and selling of shares on immediate basis or in case of any technical or other problems at your side while trading yourself.
7) You can also request to broker for demonstration of the trading terminal software and check how comfortable it is for you.

Monday, January 10, 2011

Do's and Don'ts in Share Market

What you must not do..

1. The market is volatile. Accept that. It will be unpredictable and keep on fluctuating. Don’t panic.
If the prices of your shares have tumbled, there is no reason to want to get rid of them in a hurry. Stay invested if nothing fundamental about your company has changed.
Same is true for your mutual fund. Does the Net Asset Value (NAV) going down and then rising slightly? Hold on. Don’t sell unnecessarily.

2. Don’t make huge investments: When the market dips, go ahead and buy some stocks. But don’t invest huge amounts. Pick up the shares in stages. Keep some money aside and zero in on a few companies you believe in. When the market dips, buy them. When the market dips again, you can pick up some more. Keep buying the shares periodically.
Everyone knows that they should buy when the market has reached its lowest and sell the shares when the market peaks. It is impossible for an individual to state when the share price has reached rock bottom. Instead, buy shares periodically, this way you will average your costs.
Pick a few stocks and invest in them gradually. Same with a mutual fund. Invest small amounts gradually via a Systematic Investment Plan. Here, you invest a fixed amount every month into your fund and you get units allocated to you.

3. Don’t chase performance: A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop hugely. Same with a mutual fund. Every fund will show a great return in the bull run. That does not make it a good fund. Track the performance of the fund over a bull and bear market; only then make your choice.

4. Never ignore expenses: When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits especially if you are selling for small gains (where the price of stock has risen by a few rupees). With mutual funds, if you have already paid an entry load, then you most probably won’t have to pay an exit load. Entry loads and exit loads are fees levied on the Net Asset Value (price of a unit of a fund). Entry load is levied when you buy units and an exit load when you sell them.
If you sell your shares of equity funds within a year of buying, you end up paying a short-term capital gains tax of 10% on your profit. If you sell after a year, you pay no tax (long-term capital gains tax is nil).

Wednesday, January 5, 2011

Process of Share Market

To learn about how you can earn on the stock market, one has to understand how it works. When a person want to buy/sell shares in the share market then he has to first place the order with a broker or can do themselves using online trading systems.
When you place the buy order, the message is transferred to the exchange [either NSE {National Stock Exchange} or BSE {Bombay Stock Exchange}] and the order stays in the queue of exchange’s other orders and gets executed if the price of that share comes to that value. Once you get the confirmation of this transaction, the shares purchased, will be sent to your demat account. The shares will be stored in demat account in electronic format.

Rolling Settlement Cycle: (RSC)
RSC means when you will get your shares in your demat account. In a rolling settlement, each trading day(T) is considered as a trading period and trades executed during the trading day(T) are settled on a T+2 basis i.e. trading day plus two working days. So the conclusion is on forth working day you will get the shares in your demat account.

What is Demat account and why it is required?
Securities and Exchange Board of India (SEBI) is a board of India appointed by the Government of India in 1992 with its head office at Mumbai.
Its one of the function is helping the business in stock exchanges and in other security markets. In another word it is the regulator for stock exchanges. It monitors and regulates both stock exchanges in India.
Read more in Economics
a) Demat (short form of Dematerialization) is the process by which an investor can get shares (also called as physical certificates) converted into electronic form maintained in an account with the Depository Participant (DP).
b) DP could be organizations involved in the business of providing financial services like banks, brokers, financial institutions etc. DP’s are like agents of Depository.
c) Depository is an organization responsible to maintain investor’s securities (securities can be shares or any other form of investments) in the electronic form. In India there are two such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services India Ltd.)
d) Investor’s wishing to open Demat account has to go DP and open the account.
e) Opening the Demat account is as simple as opening the saving bank account with any bank.
As you need bank account to save money, deposit cheques etc, likewise you need to have a demat account to buy and sell stocks in share market and to hold the shares.
f) All shares what you own will show in your demat account, so you don’t have to possess any physical certificates. All your shares are all held electronically in your demat account.
As you buy and sell the shares, accordingly, your shares will get adjusted in your demat account.