Insight about Investments

Different classes of investments

Why do people invest
Criteria of choosing assets for investments
What makes investment profitable one
How does stock market operates
How can you deal in stock market



Short term:
Mid term:
Long term:
(Be specific with amount and nature of a
Goal) for example I want to buy Rs. 5 lakhs
Maruti car after a year or may be 2 years etc.
By increasing my Income
By spending less or saving more with given
income


(OR is there any other way out) to achieve my
finacial goals.


What is Investment
Investment is defined as a
sacrifice made now to obtain a
return later
(It is current consumption that is
sacrificed to obtain more money
later)





Time
ExpectedReturn
Risk
(you start a business with sum of Rs.100000
with expectation of earning p.a 10% profit on
it, due to lack of demand for goods, your
business could get you return of 8% on it)
wealth period - of - beginning
wealth period - of - beginning wealth period - of - end
Return
--

0
V
1
V
0
0 1
V
V V
r

Initial value of investment

Final value of investment
Return is
Or as a percentage
100
0
0 1

V
V V
r
Example 1
An initial investment of 10,000 is made. One
year later, the value of the investment has
risen to 12,500. The return on the investment
is

Example 2
An investment initially costs 5,000. Three
months later, the investment is sold for
6,000. The return on the investment per
three months is





% 25 100
10000
10000 12500

r
% 20 100
5000
5000 6000

r
Risk is the variability, or the uncertainty, of its
return that is expected from securities


( Business Risk, Exchange Rate Risk, Credit
risk)
Broadly speaking Investments can be
classified into two categories




Real
Investment Financial
Investment

Life Insurance
General Insurance
FDRS
RDS etc

Ruby
Diamonds etc
Residential
Commerical
Ornaments
Bars etc.
Gold Properties
Insurance
& Banking
Precious
Stones
Money Market
Securities
Capital Market
Securities

Treasurey
Bills
Commerical
Papers
Certificate
of Deposits
Money
market
Mutual
Funds
Stocks
Blue chip stock
Income stocks
Cyclical stocks
Defensive stocks
Growth stocks
Speculative stocks
Penny stocks
Bonds
Govt Bonds(
Infrastructure Bonds)
Corporate Bonds
(Debentures)

Mutual Fundsand
Derivative Instruments
Growth Funds
Balance Funds
Income Funds
Future
Forward contracts
Options
Hedge Funds
Fund of Funds
Stock Exchange
operations & Equity
Trading Strategies
ECONOMY STOCK EXCHANGE
AUSTRALIA AUSTRALIAN SECURITIES EXCHANGE
GERMANY DEUTSCHE BORSE
SWITZERLAND SIX SWISS EXCHANGE
CHINA SHENZHEN STOCK EXCHANGE
SPAIN BME SPANISH EXCHANGES
INDIA BOMBAY STOCK EXCHANGE
SOUTH KOREA KOREA EXCHANGE
INDIA NATIONAL STOCK EXCHNGE
RUSSIA MICEX RTS
SOUTH AFRICA JSE LIMITED
ECONOMY STOCK EXCHANGE
US & EUROPE NYSE
US & EUROPE (NORTH) NASDAQ
JAPAN TOKYO STOCK EXCHANGE
UNITED KINGDOM LONDON STOCK EXCHANGE
EUROPE EURONEXT
CHINA SHANGHAI STOCK EXCHANGE
HONG KONG HONGKONG STOCK EXCHANGE
CANADA TORONTO STOCK EXCHANGE
BRAZIL BM&F BOVESPA
EXCHANGE
BOMBAY STOCK EXCHANGE
NATIONAL STOCK EXCHANGE
JAIPUR STOCK EXCHANGE
UP STOCK EXCHANGE ASSOCIATION
MADRAS STOCK EXCHANGE
COCHIN STOCK EXCHANGE
BANGLORE STOCK EXCHANGE
GAUHATI STOCK EXCHANGE
LUDHIANA STOCK EXCHANGE
CALCUTTA STOCK EXCHANGE
LOCATION
MUMBAI
MUMBAI
JAIPUR
KANPUR
CHENNAI
COCHIN
BENGULURU
GAUHATHI
LUDHIANA
KOLKATA
BSE Limited formerly known as Bombay
Stock Exchange (BSE) , is the oldest stock
exchange in Asia. It is situated at Dalal Street
Mumbai.
No of listed Companies as of March 2014 :
5133
No of Scrips(Shares): 8196
BSE 30 (index) : sensex
Total market capitalization: app. USD
1.32trillion
Rolling clearance and settlement: T+2 days
Timings: Opening- 9:15 am Closing-3:30 pm
Mon to Friday




The National Stock Exchange (NSE) is stock
exchange located at Mumbai, India.
NSE (index 50): S&P CNX Nifty
No of listed Companies 1635

Total market capitalization US $ 989 Billion
Rolling clearance and settlement: T+2 days
Timings: Opening- 9:15 am Closing-3:30 pm Mon
to Friday


.
The index is an aggregate of the market
capitalization of all of the industrial equities
listed in the market.

Computation of the NSE index

Current Market Value of Companies X
Preceding Index Value /Preceding Market
Value of Companies
(It may be price weighted or value weighted)

Stock Broker
An agent that charges a fee or
commission for executing buy and sell
orders submitted by an investor
Demat account
A dematerialised account holds
shares in electronic form like a banks
saving account holds cash of its
customer.

CDSL and NSDL: are Depositaries that keeps
scrips in their custody
Depositary participants: are Bank, Financial
Institutions, clearing houses, brokers and
broking houses
To open a Depositary account one must submitt
1. Account opening fee
2. Annual maintenance fee
3. Transaction fee
(Besides the above, depository participants also
charge service tax as applicable.)
For opening a demat account one needs to
provide a set of documents to the agent.
They are:
1.Duly completed account opening form and
passportsize photos;
2.A copy of PAN card as proof of identity;
3.Personalised cheque/Copy of the bank
passbook
4.A copy of passport/voter ID/ ration card as
a proof of address
5.Signing of the DP-investor agreement.

To start with trading you need
to have two a/c

A trading account -with the broker and
2.A de-mat account you may choose a
bank/financial institution or a stock broker
who could provide you the DP services.

For Buying and Selling
shares
For depositing the shares
Purchased
Amount for trading is
known as Margin
Day order
Open order
Market order
Limit order
Stop loss order

Means the transaction or trade is to be done on a
particular day
Trade can be done several time in a day
At the end of the day all trade should be square off
Means the transaction or trade is done on a
particular day and shares are credited in demat
account
Shares can be sold any time i.e. day, months and
years later
Benefits on buying shares :- Dividend, Bonus etc
Types of Investors in equity market
1. Arbitragers
2. Speculators
3. Hedgers

An outlook of a Market
Bull Bear and Stags

Fundamental Analysis
( P/E ratio, EPS, DPS, Dividend pay out,
Market Capitalization, Industry and company
life cycle, Goodwill, Asset Valuation, Current
strategies)


Technical Analysis
( Price pattern, volume of trade, Advance
declines, Low-high, market information

Value investors look
for undervalued
stock
Value
Investing
Growth investors
look for price
momentum
Growth
Investing
Columns 1 & 2: 52-Week High and Low - These are the highest and lowest prices at which a stock has traded over the previous 52 weeks
(one year). This typically does not include the previous day's trading.

Column 3: Company Name & Type of Stock - This column lists the name of the company. If there are no special symbols or letters
following the name, it is common stock. Different symbols imply different classes of shares. For example, "pf" means the shares
are preferred stock.

Column 4: Ticker Symbol - This is the unique alphabetic name which identifies the stock. If you watch financial TV, you have seen
the ticker tape move across the screen, quoting the latest prices alongside this symbol. If you are looking for stock quotes online, you
always search for a company by the ticker symbol. If you don't know what a particular company's ticker is you can search for it
at: http://finance.yahoo.com/l.

Column 5: Dividend Per Share - This indicates the annual dividend payment per share. If this space is blank, the company does not
currently pay out dividends.

Column 6: Dividend Yield - The percentage return on the dividend. Calculated as annual dividends per share divided by price per share.

Column 7: Price/Earnings Ratio - This is calculated by dividing the current stock price by earnings per share from the last four quarters.
For more detail on how to interpret this, see our P/E Ratio tutorial.

Column 8: Trading Volume - This figure shows the total number of shares traded for the day, listed in hundreds. To get the actual
number traded, add "00" to the end of the number listed.

Column 9 & 10: Day High and Low - This indicates the price range at which the stock has traded at throughout the day. In other words,
these are the maximum and the minimum prices that people have paid for the stock.

Column 11: Close - The close is the last trading price recorded when the market closed on the day. If the closing price is up or down
more than 5% than the previous day's close, the entire listing for that stock is bold-faced. Keep in mind, you are not guaranteed to get
this price if you buy the stock the next day because the price is constantly changing (even after the exchange is closed for the day). The
close is merely an indicator of past performance and except in extreme circumstances serves as a ballpark of what you should expect to
pay.

Column 12: Net Change - This is the dollar value change in the stock price from the previous day's closing price. When you hear about a
stock being "up for the day," it means the net change was positive.
Figure 7.12: The Tech Boom
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500
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1500
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3000
3500
4000
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5000
N
A
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D
A
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Internet Index NASDAQ

Broker of
Mr. X
Broker of
Mr. Y
Mr. X
Want to buy a Share
Mr. Y
Want to sell a Share
Stock
Exchange
Margin
Rs.
10000
Price of
a share
Rs. 100
Shares can
be purchased
100
shares
Price
102
shares
Profit Earned
Per share Rs.2 * 100 shares =
Rs. 200 Profit