Why should you start stock investing early?

Most of the people are confused between saving and investment. Saving is usually for a small duration and is for short-term goals. Investment is for long-term goals and is usually for more than five years with the future plan like education, home, retirement, etc.

investment

In savings, there is hardly any risk as you are insured by the government if something goes with the banks. While in investments you may lose some or all your money you invest. Better use surplus money that is with you.

You earn interest on your savings which are very limited, sometimes not even beating inflation. Investments, on the other hand, have the potential to give you returns which even you may not imagine, as your investments may go up in value (appreciation) over a period of time. This indirectly improves your net worth and change lifestyle.

Investing is growing money over period of time

Always remember greater the risk of your investment, higher potential return or loss of money. But by taking the calculated risk you tilt the balance in your favor. You have to maintain the fine balance and our tips are there to help you out.

The main idea behind investing is to grow your money over a period of time. You can invest in stocks, bonds, real estate, etc.

Creating corpus for the future

As you all know, India is one of the fastest growing economies of the world and every year there are thousands people who enter the workforce. As the population increases, this situation is bound to worsen. This will dramatically increase the cost of living, decreasing income sources, job competition, and you will need extra funds to cope up with the situation.

It is observed that today’s youth spend all their earnings without thinking of the future cost of living, family expenses, and medical expenses that they will have to bear. Even if they instill the habit of saving it will not be sufficient. They have to invest thereby making their money work. Most of these youth are holding a private job which is no guarantee for how many years or months they will be on rolls. There are corporate honchos who were relieved of their duty suddenly when the economy took a downturn.

A way out for costly future lifestyle

Investing in stocks is a way out from this situation. It is a myth that you should have a huge amount to invest in shares. You can start with a small amount too. Investing in stocks is virtually liquid, that is to say in the hour of need you can sell the required number of shares to tide over the tight financial situation.

Compounding your money

When you see the graph of stock indices in a long-term (in decades) it is gradually increasing. Naturally, there are up and down cycles in every business and stock market is no exception.

Investing regularly and at an early stage means there are fewer burdens on saving/investment each month for the required corpus for the ‘costly’ future.  Many youths are unaware of the power of compounding which is a simple concept of finance. Compounding of your investments in stocks will create an unimaginable return over a long period of time. Growth in stock is on two fronts, price change and reinvesting dividends that make compounding curve more exponential.

To know which will be the best stocks that will give you better returns with a reduced the risk factors contact us or fill the form for a free trial to make a beginning.

Happy investing . . . . . . .

How much money do you need to invest in stocks market?

The Indian stock market is basically divided into two stock exchanges. National Stock Exchange (around 2000 companies listed) and Bombay Stock Exchange (around 5000 companies listed).

The companies listed and traded on the stock exchange have a price range from low of Re. 1 to the high of Rs. 74000 per share. Now the question is how many numbers of shares you wish to purchase and of which company? Also, note the broker will charge you brokerage charges and certain mandatory government taxes.

indian rupees

Investors are often confused about how much minimum amount they can invest in the stock market. There is no rule as to what minimum and maximum amount one can invest in stocks. Though this question has been asked by those who wish to start investing in the stock market, it might have crossed others’ mind too who are sitting on the fence, and who have small regular savings.

Technically your bare minimum amount required depends upon the requirements of the brokerage firm to open an account and operating it. Operating or maintaining charges have to be paid on yearly basis. There are many online brokers where you can open an account free that is no requirement of minimum account balance. Even to purchase shares your invested capital should be a bit more than (Number of shares x share price plus brokerage charges plus taxes).

One should note that brokerage commission for buying and selling stocks increase significantly on a percentage basis.  In other words, a higher amount of transaction negligible amount, it will be per transaction. Usually, it is ‘economics of scale’ which counts in your realized returns.

Apart from the cost of buying/selling, you have to think about how many different companies’ share you will buy/sell. It is suggested that you buy minimum shares of 15 to 20 different companies representing different sectors/industries so that you build up a diversified portfolio. By diversifying your portfolio you are actually minimizing (spreading) the risk that you can take, as share market is volatile.

There is a number of shares that are priced below Rs. 10 each. You do not have to put in thousands and lakhs of rupees to start trading in India.

If you are new to the stock market and are in a learning phase it is recommended to start with low. Anything between Rs. 100 to Rs.1000 will be good. Provided your sole intention is of learning. Even if you lose it will not hurt your financial standing.

If your intention is to earn as for your ‘day to day pocket expenses’ you can start with Rs.50000.

Buy shares of those companies that are traded actively. Have a disciplined approach, that is, do not get carried away by rumors (they are very frequent in the stock market). Keep an eye on your trading expense. Purchase sufficient amount of shares as the purchase of stocks in small amounts leads to higher acquiring cost. See to it that brokerage charges are the minimum. Opening a trading account can be free but for the transaction, you will have to pay brokerage fee for each and every transaction. Check if the trading platform is seamless and has various advanced tools or not, as they help you to come to form your decision.

In case you need any tips on which stocks you should select and which to leave contact us or take a free trial by filling up the online form.

MCX Trading – A Good Investment Option to Better Return

As BSE or NSE shares of the companies are traded similarly at MCX (Multi Commodity Exchange) or NCDEX (National Commodity and Derivative Exchange) commodities are traded. MCX was set up in Nov. 2003 under FMC which was merged with SEBI and now comes under the regulatory preview of SEBI.

mcx trading

One can start commodity trading with a low amount as INR 5000/-. Since you will be investing your time and capital it is better to start with around INR 50,000/- in your pocket. It is a sufficient amount for beginners to start trading. Before we move further let me tell you not to trade with borrowed money, trade with the surplus amount so that even if you lose it should not make any dent in your financial standing. Remember that your invested capital will be at risk and there is no guarantee that you will only profit from it.

Investing in commodities without understanding is a risk and a bad idea to lose hard earned money. So first understand what commodities are and how they work.

Commodities markets throughout the world are the foundation of the global trade system. Profits can be made if the trader has a good knowledge of the issues that drive commodity prices and understands the underlining facts how one should trade on it.

A commodity is a raw material or basic goods that individual or institution buy and sell. They are the foundation blocks for more complex goods or services.

A commodity trade takes place either in the spot market or futures market. As the name implies, in spot market trade is in exchange for cash or commodities and happens immediately. In futures, market trade is based on standardized contract. It is not necessary to accept deliveries of goods. Trade happens in electronically and contracts can be settled in cash.

Generally speaking, commodities can be divided into four categories and are further subdivided. The categories are agriculture, metals, energy and environmental.

Agriculture includes food crops (cotton, soya beans, corn, etc.), livestock (pork bellies, hog, cattle, etc.), and industrial crops (wool, lumber, rubber, etc.).

Metals include precious metals (gold, silver, platinum, etc.), base metals (iron, aluminum, copper, nickel, steel, lead, zinc, etc.)

Energy includes petroleum products (crude oil, heating oil etc.), natural gas, uranium, ethanol, electricity, etc.

Environmental includes renewable energy certificates, carbon emissions, mining, etc.

As with any other investment options, commodity market also carries risk. To reduce and spread risk it is better to invest in various commodities in the same category, that is diversification of your portfolio. If you get right guidance and accurate tips from the experienced analyst you are bound to gain. It should be noted that stock and commodity market function differently. In commodities, there is a lot which one buys, no such thing in the stock market.

It should be noted that MCX has higher volume compared to NCDEX. MCX specializes in precious metals; NCDEX specializes in agriculture and other categories. Online trading can be done on both the exchanges. Your trades can be accessed on laptop, computers, and smartphones. That is you can trade from anywhere, from home, office, during your journey or on a holiday. The transactions are seamless and the complete process of transfer of funds without any error and within a short duration.

To avail tips on commodity trading, you can contact us or fill out the online form…. Happy Trading…..

Should you buy shares issued at the premium price?

The shares available in Indian share market of any company have a par value or Face Value (FV). The face value of shares is usually Rs. 1, Rs. 2, Rs. 5, Rs. 10 etc. The FV has to be a positive integer whole number. It cannot have a fractional value like Rs. 1.50 or Rs. 2.25. The shares which are issued in the market are usually issued at a premium price.

premium shares

Let us take an example to understand what shares issued/offered at premium price means.

ABC Company’s share has a face value of Rs. 2 per share. During its public launching (IPO) the company decides to issue shares at Rs. 50 per share in the market. The shares are issued at a premium. That is more than its face value. You can calculate the premium thus.

Premium per share = issue price – face value

As per our example of ABC Company, the premium per share can be calculated as follows

Premium per share = 50 (Issue price) – 2 (face value) = 48

In other words, the face value per share is Rs. 2, Premium is Rs. 48, and the issue price is Rs. 50.

Let us go deeper to understand the concept of why companies issue shares on the premium price and not the face value.

Equity financing

When any company plans for expansion or additions to the existing line of business and grow big the individual owners or partners require funds or the company requires funds for further modernization and expansion. They can get funds through banks, NBFI, or the general public or it can raise funds through equity route or debit route.

When the promoters take the equity route that is called equity financing, the company or its promoters sell a portion of their holding to the public. The number of shares which can be issued to the public is limited by authorized capital. AC is the capital that can be raised which is a total number of shares multiplied by its face value. The authorized capital is mentioned in the company’s MoA (Memorandum of Association). MoA is prepared by the company at the time of its registration and is a legal document which has to be submitted to SEBI (Securities and Exchange Board of India) along with other documents.

It should be noted that the company cannot issue more shares than the number indicated in its MoA. It can raise more capital by issuing shares at a premium.

The reason why the shares are issued at a premium

As stated above the company needs cash for the modernization and expansion plans of its business. As the company wishes to go public that is promoters are ready to dilute their shareholding. Since the company is in businesses for the last several years it develops goodwill among the public, an established brand of product, and a reputation in its line of business earning sufficient profit. When it issues shares at a premium it has two advantages, firstly short term that is higher the premium, less is the number of shares that it has to issue in the market and promoters holding remains higher. Secondly, the long-term benefit is that if shares issued are less the dividend per share is higher. In other words, the existing shareholders will get a better dividend yield. Since promoters’ holding percentage is more, a number of shares held by them are more and they get a larger share of the dividend.

If the premium is higher it has twin advantage for the company and its promoters. They are able to generate the required capital for their expansion plan and holding a larger portion of shares of the company. In future, they can buy-back shares from the public to further strengthen their hold on the company.

It is seen from time to time the company buy-back its shares from the share market when the promoters feel that the share price is undervalued in the market and increase their holding. Promoters know the functioning of the company so they buy their undervalued shares and when in future their share price increases they sell it and book profit. On the other hand just to fool investors and drive up the share price of their company the promoters go in for a buy-back.

If you are undecided that shares should be purchased at the premium price they are offered at or not, you can contact us and we will be glad to solve your query.

Online Trading Tips to Secure Better Returns on Your Investment

Share trading is buying and selling of shares in the stock exchange. When this trading takes place through computers and the internet it is called online trading. For trading, you need two accounts, demat account, and trading account. Traders/investors who wish to trade on their own prefer this type of trading facility.

Online Trading Tips

Discussed here are few online trading tips to secure better returns on your investment.

Start with small capital

Those who are the newbie in stock trading should start with small amount of capital in the beginning. Human beings make mistakes and so even if you suffer loss during your first few trades your trading spirit will not be broken as you would have not lost much right in the beginning. You will gain experience of how the website works and what are the options that are available.

Study stock market

Before entering into the field of trading, one should study the basics of the stock market and features of an online trading website. You should be aware of how stock markets work, its basic terminologies, and types of trades available. If you do not study and observe you may end up buying/selling wrong orders.

Do your own research

One should gain some understanding of fundamental and technical analysis of the company to choose the right stocks for investment. For this you can rely on your own research and mathematical calculations or take help from experienced people in the field. If your trades are based only on impulse, the outcome of the trade will be unpredictable.

Trade only in a few sectors

One can trade in many sectors but it is advisable to stick to those sectors of whom you have knowledge about. By selecting a few sectors you can stay updated about all the occurrences in those selected sectors and that will be beneficial. You can search about news, related articles, financial reports of the companies in those sectors through the internet, business newspapers, magazines etc. in which you are interested. Company news helps in planning strategy and trade execution.

Using trading tools

There are many tools available to help you come to a decision when and what to buy/sell. Few of the tools are charting tools, stock watch list, SMS/email alerts, charts, graphs, high and low, etc. These resources will help you in taking right decisions. These tools give you information whereby you do not trade on impulse or intuition.

Trade from anywhere

Being online and registered you can trade from wherever you are from home, from office, while traveling or even in some remote location provided you have an internet connection!

Choose a good online brokerage firm

While choosing an online broker see to it that his web speed is good and has a good reputation. The available services for an online trading platform can make a difference between financial success/failure. Check for online broker pricing especially if you are a day trader as in the long run it will make a lot of difference in your profits. A good broker will offer resources for education and research.

Online trading will provide you the convenience of trading and few other benefits. We provide trading tips regarding which shares to purchase/sell so as to derive maximum returns. You can contact us on phone, email or by filling up the details which appear on our webpage.