November 3rd, 2010
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Many times you would have come across a term Margin trading. What is trading on margin and how is it different from normal trading is what is explicated here.
‘Margin” means borrowing money from your broker to buy a stock. Now the question is why would you borrow? Investors generally go for trading on margin so to increase their purchasing power so that they can own more stock without fully paying for it. That means you will pay a part of the buy price and the broker will lend you the difference.
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Categories: Investing Trends, Trading Basics, Your Money
Tags: Broker, Buying Selling, Getting Started, Investing Tips, New to Investing, Share Market Trading, Stock Market Basics
November 3rd, 2010
Alpha and Beta of Stocks
Every investment involves two important aspects – returns and risk. And every investor wants to get the maximum returns with minimum risk. In this post is described the significance of Alpha and beta parameters of the stock portfolio that are used to describe the two main risks inherent in investing in stocks. Alpha relates to factors affecting the performance of an individual stock or the fund manager’s skill in selecting the stocks while beta relates to market risks.
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Categories: Investing Trends, Trading Basics, Your Money
Tags: Alpha Stocks, Beta of Stocks, Getting Started, New to Investing, Share Market Trading, Share Market Wisdom, stock, Stock Market Basics
July 28th, 2010
There is no denying the fact that earning from stock market is an art, not just speculation, forecasting and analysis. Whether you are a retail investor or a big fund, one question you should ask yourself is “what is your trading cost”?. How much part of your earning are you passing on to your broker in the form of commissions because it really affects your “profit margin”.
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Categories: Trading Basics, Your Money
Tags: Broker, brokerage, Mutual Funds on Stock Exchanges, Rates of brokerage, Share Market Trading, Share Market Wisdom, Stock Market Basics, Sub-Broker, Trading Cost
May 4th, 2010
One of the interesting phenomena of stock markets that tend to be catchy is the movement of stock prices at the blink of eyes. At one instant, you may find your portfolio in “green’ while in next couple of minutes it may turn “red”. This battle between bulls and bears may prove devastating for the traders if they do not exercise caution in tracking their stocks portfolio. While making a buy/sell decision of a specific stock, if you have ever got a chance to see the stock chart, there is a lesser probability that you haven’t come across “support” and “resistance” levels of the stock. What are support and resistance levels and how are these significant for stocks and for entire index in general is what we would see here!!
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Categories: Trading Basics, Your Money
Tags: Bear Market Tips, Buying Selling, Getting Started, Investing Tips, Share Market Trading, Share Market Wisdom, Stock Market Basics, Volatility of Stock Markets
March 10th, 2010
ONLINE TRADING – Do’s and Don’ts
Trading online has become very popular in today’s time when you just need a trading account and after that you can trade comfortably while sitting at your home. Apart from comfort of trade it provides various facilities like:
• Ease of buying and selling of shares.
• Online receipt of contract notes/ trade statement for the transactions.
• Direct deposits of dividends/ bonus amount etc to account.
• Various trading tools for ease of making investment decision.
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Categories: Trading Basics, Your Money
Tags: Broker, Buying Selling, Day Trading, Getting Started, New to Investing, Online Trading, Share Market Trading, Stock Market Basics, Volatility of Stock Markets
March 10th, 2010
What is Forex Trading ?
Wikipedia defines Forex Trading as “The foreign exchange market (currency, forex, or FX) trades currencies. It lets banks and other institutions easily buy and sell currencies.”
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Categories: Global Economy, Investing Trends, Trading Basics, Your Money
Tags: Buying Selling, Forex Trading, Getting Started, Share Market Wisdom
January 18th, 2010
Facts about Initial Public Offering (IPO) you should know
An initial public offering (IPO) is the initial sale of shares by a company to the public.
Broadly speaking, companies are either private or public. Going public stands for a company is changing from private ownership to public ownership.
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Categories: Trading Basics, Your Money
Tags: Initial Public Offering, IPO
December 7th, 2009
Trading Mutual Funds on Stock Exchanges – What the Investor needs to Know
SEBI has recently allowed allowed registered stockbrokers to transact mutual fund units on behalf of their clients through the stock exchange mechanism. When the systems are in place there are a few points the investor has to consider while investing in mutual funds through Stock Exchanges (NSE and BSE)
- Existing mutual fund investors who intend to buy more units will also benefit as this system will allow them to keep track of all investments under a single statement.
- The SEBI circular on Friday also said that investors can hold units of mutual fund schemes in dematerialised form, and that the demat statement given by the depository participants would be deemed adequate compliance with SEBI norms. Buying and selling will become more efficient and transparent , particularly if investors choose to transact through a demat account.
- Though cost seems to be a factor for those who do not have a demat account, the impact will be minimal for those who already are demat account holders.
- End-users can use the convenience of their neighbouring broker’s office for their mutual fund transactions. However, once the broker starts acting as a distributor, there is an issue about what commission he might ask for and whether the client would be ready to pay that or not.
- In terms of convenience, the advantages are similar to investing online through the AMC’s website — reducing the clutter of paperwork and speedy execution.
- Investing in SIPs (systematic investment plans) – A reading of the SEBI circular on entry loads suggests that the entry load will continue to apply on instalments of SIPs registered before August 2009. As long as this loophole remains unplugged, existing SIPs will be at a disadvantage to the ones registered after August 1. The only way out is to stop the existing SIPs and start afresh in the same scheme.For those with SIPs, the only way to benefit from the entry load waiver is to stop them and start new ones in the same scheme.
- Switching from one scheme to another within the same fund house – As per the new guidelines, no entry load will be charged for purchases, additional purchases and switch-in accepted by any fund house with effect from August 1, 2009.Similarly, no entry load will be charged with respect to applications for registration under systematic transfer plans.
Source : ET and Hindu Businessline
Categories: Investing Trends, Mutual Funds, Trading Basics
Tags: Buying Selling, Getting Started, Mutual Fund, Mutual Funds on Stock Exchanges, New to Investing
November 30th, 2009
Earning million pennies from your penny stocks
Penny stocks are designated as penny in terms of their market capitalization.
These might be low priced due to some reason such as these are of the companies looking for a way to raise capital. These might have good management, better future prospects but with insufficient funds due to which their share is low-priced. It is a matter of fact that a smaller company tends to grow faster and thus their stock tend to move at faster pace. With this Optimism in mind, don’t forget Penny stocks could be worth millions as well. So before underestimating them; keep it in your mind that it might be great opportunity turning your small capital into big amount
Penny stocks are considered more risky investments due to greater volatility factor. Secondly, these are generally traded in lots of 1000. So even if the price goes down by 1 buck, you will loose 1000 bucks in fraction of seconds. Thirdly, penny stocks might not be so frequently traded on stock exchanges. Suppose some rumor broke out and you just wish to exit the stock. But since the stock’s trading volume is low, you do not find buyers to buy your stock. Keeping aside all these factors, a well planned strategy might take you to diamonds hidden inside a coal mine. But before you really enter into the arena ask yourself few questions:
What is there in that penny stock attracting you to buy it?
What is the price at which you must exit the stock?
Once decided upon the stock to buy, exercise your mind to know is it really worth buying? Below are the three criterion helping you take a final decision.
Company fundamentals: Good cash flow is the most important consideration in choosing a penny stock. Spare sometime in knowing company fundamentals in addition to its goodwill and future projects. If a company has a good chance of success, please go for it.
PE and PEG ratio examine the PE ratio of the stock you and compare it with its peers doing well in the market. A safer way however is to find out the Price/Earnings/Growth (PEG) ratio (PE ratio divided by the projected growth in the next 3-5 years). Remember you will choose a stock with higher PE but lower PEG.
Trading volume: Assume yourself in a situation when you want to sell your stock but no one is ready to buy it. Stocks with low liquidity are difficult to buy or sell for the prices you want. So think twice before you buy such stock.
That was all about the reasons for you to buy a penny stock and considerations while deciding which one to buy? But the story does not end here due to associated risks. The best strategy to minimize the risk is to plan your exit having decided your expected profits. Do not just pump and dump the stock for reason that it costs you less than other stocks and will reach very high levels one day.
All The Best
- Renuka Kinger
Categories: Trading Basics, Your Money
Tags: Buying Selling, Investing Tips, Penny Stocks, Volatility of Stock Markets
November 14th, 2009
Getting Started in Share Market Trading. Things you should know
It is very interesting to invest in shares, though most of the people would like to start with small money.
First of all, you need to know a little bit in detail about the stock market, then about the shares and the mode of their trading. What are the risks involved and how to be smart in dealing with shares?
- Stock Market – It is the place where the shares of listed companies are bought and sold. In India, you have BSE and NSE as two big stock exchanges.
- Shares are bought and sold by you and me only through approved brokers.
- Approved brokers are mostly banks like the ICICI, HDFC, IDBI, UTI Bank, SHCI, are to name a few.
- First you need to open an account with a bank, that has the Demat account facility.
- Go to the respective bank and open a Savings account with deposit of around Rs. 10,000.
- Tell the bank that you want to deal in shares and ask them to open a Demat account. It will be done automatically after signing a few forms.
- A Demat account is nothing, but the account where the shares bought by you will be kept separately.
- Only you could operate that account online, through Internet.
- You could open the online facility offered by the ICICI, HDFC or ShareKhan or others and buy shares you wish and decide the quantity and the price.
- Here the bank will act as a broker. You online order for purchase would be carried out by the bank. They charge broker commission, much less compared to private brokers.
- It is very important for you to have enough balance to your credit in your savings account.
- As and when you buy on line, your Demat account will be credited with those shares. The money for the purchase will be automatically deducted from your account by the bank.
- You also have to keep looking for opportunities to sell the shares that you have already bought and kept in your Demat account.
- For buying and selling, it is necessary to familiarize which shares to be bought at what prices and sell them at what price.
- As and when you decide to sell (depending on the price quoted in the market) you could sell them through online trading system.
- The moment you sell your Demat account will be debited with the number of shares sold by you.
- Your account will be credited with the amount for which you have sold.
- Depending on the amount of profit earned, tax will also be deducted by the bank (TDS). The bank will give you a TDS certificate by the year end, i.e., March 31, of that year which you could attach with the return to justify the tax payment.
- When the shares could be bought or sold?
Always sell the shares when the price is up and buy when the price is down. Every body had to adapt to this formula.
- What profit should it give you?
You buy a share for a particular price. Take the amount as investment. Any bank will lend you at ten per cent interest. It will give you 24 per cent return if the share price rises in such a way. Do not wait for the market to crash and start searching for buyers for the price you quote.
After selling, never look back and repent for what profit you have earned, had you delayed the sale. Be happy that it did not happen otherwise. This is the best way, to sell.
- You cannot take profit in the buys. Losses do occur as long as you are at decent surplus for which you have no reason to be unhappy.
Happy Investing
Categories: Trading Basics, Your Money
Tags: Broker, Getting Started, Investing Rules, New to Investing
