INVESTMENT : It is when we buy shares as the purpose of investment that is we buy shares and get them transfer by our name to our demate account . It is usually done to gain long term gains and grow ur capital with growth of company and get regular dividents. It may be short term (1-3 months) mid term (6-12 months) and long term (more then 1 year) .It is mostly considered safe .Just be careful while selecting ur portfolio and profile.
TRADING : Trading is done usually to to gain fastly . It is considered to be of high risk as we all know the funda (HIGH RISK HIGH GAIN ) , So u could end up a day gaining some good amount as well may be loosing (bad luk that wat we say when we loose) .
So wat is TRADING ?
It is done at the market time say we buy some shares of bajaja auto @ 2300 rs ..after and after some time say within the same day and market hours it has gained 50 rs ..now priced at 2350 , so now we can sell them .how much we gained say for 100 shares 100X50= 5000 rs. For trading usually the broker charge us very low , and for saome reason say if the market price got lowered then our buy price we have to book the loss.
We can also carry our deal that is buy deal for selling say tommorrow or some other day but that will cause the shares as to be delievered, so we may have to pay some good amount of commision to our broker so that will too add up in our buy price.
Trading within same day i.e buying and sellingh with in same day is usually called as intrady trading .
i.e we have to buy and sell at the same day.
For this we get some limit from our brokerage after giving them some deposit and we can buy and sell within that much of amount , for eg after giving them a deposit of 30,000 we get the limit of 200000 so we can buy and sell within that limit only .
FEW TERMS USED in MARKETS .
CMP : Current Market Price (Termed as price on whicg the share of a company is trading ).
.
BTST : Buy Today Sell Tommorow ( when u buy something for today for selling tommorow also called overnight positions)
.
STBT : When u sell something today to buy tommorrow. same as BTST but opposite.
Wednesday, October 31, 2007
FUTURE AND OPTIONS (F&O)
Future trading is something considered to be of highest risk .Needless to say highest return too..
so first of all wat is future? In future trading we buy and sell similar way as of trading but here the style and game is different.
Futures trading consist of lots of a company . These lots depends upon various aspects , markets capitalization , current market price of share. Lots may be of 1000,2000, 7000, 14000..as hogh and as low as 500,200.150 , 100 in case of infy.
SO when u buy a Futrs lot u seems to be have bought that much shares virtually , usually people do that on the margin they have got with their brokerage house.
It not some thing u have to pay for these many quantity .U just buy them with a fixed amount of security required as per the norms with ur brokerage house that may be 1 lac, 2 lac, 5 lac . Depends upon the capital required and value of futrs.
For eg : if one buys a Fut lot of Infosys @ 2000 he has done a buy of 2000X100 (100 as lot size) so = 200000 comes out to be 2 lac .
so for that the brokerage may ask for 1 lac for security.
Similarly prices of futrs lot varies as the prices varies in cash buy ..Why Risky ?Simple if the price falls , and u are holding a future lot of 5000 shares , every rupee fall will make ur wealth less by 5000 so a 10 rs fall in market means 50,000 loss.
But similarly a 10 Rs gain means 50,000 rs profit . and that happens within minutes .
Futrs u can buy any time in the month but u need to sell it on or nefore last thursday as it is termed as F&O Expiry day . If u dont sell Exchange will sell it on ur behalf at the closing on curent market price.
There is also a term called market rollover . Which is nothing but when u continue holding ur future lot of shares to next month and that is done by selling the current month Future and buying the next month future.so in the end u are having same company share for next month also .
so first of all wat is future? In future trading we buy and sell similar way as of trading but here the style and game is different.
Futures trading consist of lots of a company . These lots depends upon various aspects , markets capitalization , current market price of share. Lots may be of 1000,2000, 7000, 14000..as hogh and as low as 500,200.150 , 100 in case of infy.
SO when u buy a Futrs lot u seems to be have bought that much shares virtually , usually people do that on the margin they have got with their brokerage house.
It not some thing u have to pay for these many quantity .U just buy them with a fixed amount of security required as per the norms with ur brokerage house that may be 1 lac, 2 lac, 5 lac . Depends upon the capital required and value of futrs.
For eg : if one buys a Fut lot of Infosys @ 2000 he has done a buy of 2000X100 (100 as lot size) so = 200000 comes out to be 2 lac .
so for that the brokerage may ask for 1 lac for security.
Similarly prices of futrs lot varies as the prices varies in cash buy ..Why Risky ?Simple if the price falls , and u are holding a future lot of 5000 shares , every rupee fall will make ur wealth less by 5000 so a 10 rs fall in market means 50,000 loss.
But similarly a 10 Rs gain means 50,000 rs profit . and that happens within minutes .
Futrs u can buy any time in the month but u need to sell it on or nefore last thursday as it is termed as F&O Expiry day . If u dont sell Exchange will sell it on ur behalf at the closing on curent market price.
There is also a term called market rollover . Which is nothing but when u continue holding ur future lot of shares to next month and that is done by selling the current month Future and buying the next month future.so in the end u are having same company share for next month also .
SHORT SELLING :
Short Selling is something that keeps market regulated and on track . It is useful in certain cases say :when markets are moving more than what was expected and when a certain share is trading higher than wat is expected .SO in these cases and many more short selling is done . It a highly risky trade.
SO what exactly short selling is ?
Short selling is nothing but when a person sells the stock before buying it .Strange : yes..but here how it goes..SAY Mr X thinks that th current market price of a script eg : infosys is highand he thiks that it can fell from cmp of 2000 to 1800 rs .so he sells the infosys @ 2000 and if surely infosys fells to 1800 he can buy (also called recover)in market @ 1800 rs ..so by doing above actually he had made a buy at 1800 and sold at 2000 so a profit of 200 rs per share.
but in the worst case if Mr x sold infosys at 2000 and the share price rises further to 2100 after selling and he thinks its not coming down and it does'nt so he will buy at 2100 rs now .. which is same as buying at 2100 and selling at 2000so a loss of 100 rs per share.
SO what exactly short selling is ?
Short selling is nothing but when a person sells the stock before buying it .Strange : yes..but here how it goes..SAY Mr X thinks that th current market price of a script eg : infosys is highand he thiks that it can fell from cmp of 2000 to 1800 rs .so he sells the infosys @ 2000 and if surely infosys fells to 1800 he can buy (also called recover)in market @ 1800 rs ..so by doing above actually he had made a buy at 1800 and sold at 2000 so a profit of 200 rs per share.
but in the worst case if Mr x sold infosys at 2000 and the share price rises further to 2100 after selling and he thinks its not coming down and it does'nt so he will buy at 2100 rs now .. which is same as buying at 2100 and selling at 2000so a loss of 100 rs per share.
Tuesday, August 28, 2007
BASIC QUESTIONS.....
You must have heard stories of the fabulous returns made in the stock markets in recent months. And you longed wishfully for a piece of the action.
But you could also have heard horror stories of how a friend lost his shirt in the stock market.
And were promptly thankful that you didn't lose yours.
Let's set the record straight.
Wisely chosen (those are the key words), stocks are a must for any serious investor.
They add that extra zing to your collection of investments.
Study after study has revealed that over the long term, stocks outperform all other assets. That means you can expect to earn more from shares than from bonds, fixed deposits or gold.
No doubt the risk is higher with shares. But if you are in for the long haul, so are the potential returns.
But before you take the plunge and invest in the stock market, get your basics right.
This series will tell you about the basics of investing in stocks.
1. Stocks are not only for the brilliant
Stocks are far from being rocket science.
The strategies you need to know to maximise your wealth and the pitfalls you need to avoid are not beyond comprehension.
Even if you feel that you don't have the time, and prefer to entrust your money to a portfolio manager or mutual fund, the least you need to know is which funds are better, how to choose your fund manager, and keep a tab on his performance.
2. So what is a share?
Any business has a lot of assets: The machinery, buildings, furniture, stock-in-trade, cash, etc.
It will also have liabilities. This is what the company owes other people. Bank loans, money owed to people from whom things have been bought on credit, are examples of liabilities.
Take away the liabilities from the total assets, and you are left with the capital.
Assets - Liabilities = Capital.
Capital is the amount that the owner has in the business. As the business grows and makes profits, it adds to its capital.
This capital is subdivided into shares (or stocks).
So if a company's capital is Rs 10 crore (Rs 100 million), that could be divided into 1 crore (10 million) shares of Rs 10 each.
Part of this capital, or some of the shares, is held by the people who started the business, called the promoters.
The other shares are held by investors. These investors could be people like you and me or mutual funds and other institutional investors.
3. What does this mean for me?
You must have realised by now that owning a share means owning a share in the business.
When you invest in stocks, you do not invest in the market. You invest in the equity shares in a company. That makes you a shareholder or part owner in the company.
Since you own part of the assets of the company, you are entitled to the profits those assets generate. Or bear the loss.
So, if you own 100 shares of Gujarat Ambuja Cement, for example, you own a very small part -- since Gujarat Ambuja has millions of shares -- of the company. You own a share of its assets, its liabilities, its profits, its losses, and so on.
Owning shares, therefore, means having a share of a business without the headache of managing it.
Your Gujarat Ambuja shares, for instance, will rise in value if the company makes good profits, or may do badly if people stop building houses and demand for cement falls.
4. What do mean by rise in value?
If the company has divided its capital into shares of Rs 10 each, then Rs 10 is called the face value of the share.
When the share is traded in the stock market, however, this value may go up or down depending on supply and demand for the stock.
If everyone wants to buy the shares, the price will go up. If nobody wants to buy them, and many want to sell the shares, the price will fall.
The value of a share in the market at any point of time is called the price of the share or the market value of a stock. So the share with a face value of Rs 10, may be quoted at Rs 55 (higher than the face value), or even Rs 9 (lower than the face value).
If the number of shares in a company is multiplied by its market value, the result is market capitalisation.
For instance, a company having 10 million shares of a face value Rs 10 and a market value of Rs 30 as on November 1, 2004, will have a market capitalisation of Rs 300 million as on November 1, 2004.
5. So how does one buy shares?
Alright, you have decided you want part of the action. Shares are bought and sold on the stock exchanges -- the two main ones in India are the National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE).
You can use three different routes to buy shares: Through your broker, trade directly online, or buy shares when a company comes out with a fresh issue of shares. This is called an initial public offering (IPO).
Now that we have demystified the key words -- shares, face value, market value and market capitalisation -- in the subsequent articles, we will explore how to buy and sell stocks, and how to subscribe to a new issue.
Stay tuned!
DON'T MISS!Make money with shares (Source: rediff.com)
But you could also have heard horror stories of how a friend lost his shirt in the stock market.
And were promptly thankful that you didn't lose yours.
Let's set the record straight.
Wisely chosen (those are the key words), stocks are a must for any serious investor.
They add that extra zing to your collection of investments.
Study after study has revealed that over the long term, stocks outperform all other assets. That means you can expect to earn more from shares than from bonds, fixed deposits or gold.
No doubt the risk is higher with shares. But if you are in for the long haul, so are the potential returns.
But before you take the plunge and invest in the stock market, get your basics right.
This series will tell you about the basics of investing in stocks.
1. Stocks are not only for the brilliant
Stocks are far from being rocket science.
The strategies you need to know to maximise your wealth and the pitfalls you need to avoid are not beyond comprehension.
Even if you feel that you don't have the time, and prefer to entrust your money to a portfolio manager or mutual fund, the least you need to know is which funds are better, how to choose your fund manager, and keep a tab on his performance.
2. So what is a share?
Any business has a lot of assets: The machinery, buildings, furniture, stock-in-trade, cash, etc.
It will also have liabilities. This is what the company owes other people. Bank loans, money owed to people from whom things have been bought on credit, are examples of liabilities.
Take away the liabilities from the total assets, and you are left with the capital.
Assets - Liabilities = Capital.
Capital is the amount that the owner has in the business. As the business grows and makes profits, it adds to its capital.
This capital is subdivided into shares (or stocks).
So if a company's capital is Rs 10 crore (Rs 100 million), that could be divided into 1 crore (10 million) shares of Rs 10 each.
Part of this capital, or some of the shares, is held by the people who started the business, called the promoters.
The other shares are held by investors. These investors could be people like you and me or mutual funds and other institutional investors.
3. What does this mean for me?
You must have realised by now that owning a share means owning a share in the business.
When you invest in stocks, you do not invest in the market. You invest in the equity shares in a company. That makes you a shareholder or part owner in the company.
Since you own part of the assets of the company, you are entitled to the profits those assets generate. Or bear the loss.
So, if you own 100 shares of Gujarat Ambuja Cement, for example, you own a very small part -- since Gujarat Ambuja has millions of shares -- of the company. You own a share of its assets, its liabilities, its profits, its losses, and so on.
Owning shares, therefore, means having a share of a business without the headache of managing it.
Your Gujarat Ambuja shares, for instance, will rise in value if the company makes good profits, or may do badly if people stop building houses and demand for cement falls.
4. What do mean by rise in value?
If the company has divided its capital into shares of Rs 10 each, then Rs 10 is called the face value of the share.
When the share is traded in the stock market, however, this value may go up or down depending on supply and demand for the stock.
If everyone wants to buy the shares, the price will go up. If nobody wants to buy them, and many want to sell the shares, the price will fall.
The value of a share in the market at any point of time is called the price of the share or the market value of a stock. So the share with a face value of Rs 10, may be quoted at Rs 55 (higher than the face value), or even Rs 9 (lower than the face value).
If the number of shares in a company is multiplied by its market value, the result is market capitalisation.
For instance, a company having 10 million shares of a face value Rs 10 and a market value of Rs 30 as on November 1, 2004, will have a market capitalisation of Rs 300 million as on November 1, 2004.
5. So how does one buy shares?
Alright, you have decided you want part of the action. Shares are bought and sold on the stock exchanges -- the two main ones in India are the National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE).
You can use three different routes to buy shares: Through your broker, trade directly online, or buy shares when a company comes out with a fresh issue of shares. This is called an initial public offering (IPO).
Now that we have demystified the key words -- shares, face value, market value and market capitalisation -- in the subsequent articles, we will explore how to buy and sell stocks, and how to subscribe to a new issue.
Stay tuned!
DON'T MISS!Make money with shares (Source: rediff.com)
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