Saturday, 2 July 2016

Stock market & trading for beginners

National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are two types of companies listed and there is 50 paisa to Re 1 difference between these two types of companies.

Demat covers equity, bonds, derivatives, Initial Public Offer (IPO), Mutual Fund or Systematic Investment Plan (SIP). Trading is buying and selling.

In equity, equity shares are purchased and sold and this trading depends on daily market. One has to observe the daily market to see if there are changes in the market. One can watch for companies shares values on TV, mobile etc. In equity shares, shares can be purchased from companies when shares are down and sold when shares are up.The time limit is Intraday or delivery. In Intraday shares are purchased and sold on that same day and in delivery shares can be sold any day.

Derivatives is buying and selling of a lot (land) which is for a fixed time that is 3-6 months. It starts with Rs 25,000/- investment.

IPO: In IPO, shares are purchased and sold and there is interest given that varies with companies. It requires initial investment of Rs 5 lakhs. Sensex NIFTY and Sensex Exchange ETF are two examples of IPO companies.

Bond: Bond is long term investment which is 1 year up and one does not need to show Income tax but for others under Demat below 2 lakhs profit, one need not show income tax. Bond is a long term investment and there is annual rate of interest given and again rate of interest may vary from company to company. If the investment is for 3-5 years then may be there may be a locking period also involved meaning money cannot be withdrawn during that period of locking.

Mutual Fund or SIP: In Mutual Fund or SIP, one has to deposit money for a year for a particular amount but if one needs the money urgently, one can also withdraw at the same interest, but the minimum time that one has to keep the money is for 3 months. For Mutual Fund, Net Asset Value (NAV) or interest is decided by the companies which may increase or decrease for a company where one has made the investment. The advantage with Mutual Fund is that after taking out the money whenever needed, one can either furnish that withdrawn amount or need not furnish the withdrawn amount and one can continue depositing that particular amount from the next month because at the time of taking out the money, money is withdrawn along with the interest for that entire period and one can proceed with the next month investment but the minimum period to keep the money is 3 months.

When a share is purchased or sold, then there is company brockerage of about 0.075% on both the shares purchased and the shares sold.

If an individual has already purchased a share from a company and then wants to go for IPO,  then the individual cannot go for IPO but will go for FPO that is Follow Public Offer.

NSE, BSE, NIFTY etc are all under Security Exchange Board of India (SEBI) Guidelines.

In saving accounts in Banks, Banks follow RBI Guidelines, and the rate of interest is same for all the banks.

According to a professional, for Demat, a mix of investment should be made. If a person has time and experience, then only he/she should go for equity shares trading because it involves high risks.

According to a housewife who is involved in equity shares trading, buying and selling of equity shares gets better after experience. Mutual Fund is a better option as it involves less risks.

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