How much to invest?

My suggestion is to start with minimal amount. Dont look at the amount you will get as profit as it will naturally be less given the fact that you have invested less capital. What is important is your percentage profit,your stock picks,are you buying and selling at the right time? All these are important points to keep in mind when you start. Gradually you can increase the capital.

How much money can we make?

At present stock markets are giving great returns. Some stocks have returned even 100% in one month time. However you should be happy if you get 25% returns per annum. Contentment is important and if you try to make fast bucks remember that you can loose money also quickly.

Many investors would like their investment to become 10 times in one year. Remember that this kind of returns are rarely possible and so one should have contentment and should be happy with a set target of 25% or something similar to this.

When to Buy and Sell? Concept of Zero Cost Portfolio

We cannot predict the exact top and bottom for a stock. However the best method is to try making your portfolio zero cost. Apply this strategy for all stocks and then you can be risk free. However you need good amount of money for this.

Example : You buy a stock A of 100 shares at 100 Rs. If stock moves to 125 Rs, you can sell 80 shares to get back your capital. The remaining 20 shares will be zero cost for you. If you build your portfolio in this, you can enjoy good returns and it will be risk free for you.

However you should try to read the situation and then sell. You can sell the same stock at 200 Rs and make 50 shares free of cost. However see the market conditions and then sell.

You should also select stocks which have good growth story for long term and then keep making zero cost shares in those at every fall and rise.

The first steps towards trading

Buy and Sell.Primary and Secondary Markets

Shares which are bought in IPO are called primary market shares. Once IPO is over and shares are listed in stock exchange and if you buy them, they are called secondary market shares.

Opening a Demat Account :

A person should open a demat account ( dematerialised account) with any of the brokers available so that trading can be started. ICICI direct, Reliance Money etc.

Is Pan Card mandatory?

Pan Card is must for opening demat account.

My Preference for Demat Account and Broker:

Reliance Money has flat amount as brokerage which will be useful for those who trade in huge volumes.

How to do Trading? Buy and Sell.

Once you get your account, you can login to your account and the menu you see their should be easy to navigate. You can click on "Buy" option to buy shares. You will be required to enter stock code, the quantity you want to purchase and the price you want to pay.

You need to allocate money from your account to the trading account. Most of the brokers have some feature called modify allocation or allocate amount for trading purpose.

If you do not know stock code, you can search for the code by entering first few letters of the company.

Some trading Concepts:

There are two types of prices, limit price and market price. Market price is the price that is prevailing when your order reaches the exchange and is executed.

Limit price is the maximum price you are willing to pay to buy a stock.

Example : Reliance is quoting at 2400 and you want to pay only 2390. If you put limit price as 2390, your order will be executed only if the price reaches 2390. If you put market price then the price prevailing at the time your order reaches will be taken. If the price moves to 2420 by the time your order reaches, you will get at 2420 or if the price moves down to 2380 you will get at 2380. Market orders are risky for high fluctuating stocks. Always put comfortable price limit price for executing orders.

You can check your limit available for trading after each transaction that you make.You can sell the stocks in the same way by selecting "Sell" option.

So as you can see, its not that difficult to start trading and earn smart money!

What are Shares?

Shares are the number of units that indicate the ownership you own in a company.
If you and your freind together would have started a business then you would have 50% partnership in the business as you both are equal partners. Here since there are only two persons involved the number would be in terms of percentage. The profits earned would be divided equally. If there are 4 partners then the percentage would be 25% each. If there are 10 partners then the percentage would be 10%. If there are say 100 partners then each one would get 1%. Imagine the case where the number of partners involved is say 1 crore. It will be difficult to give the partnership in terms of percentage. For this sake, shares or stocks are created in units. Each Stock has a face value with 10 Rs as being the common. Face value of a stock will be useful for calculation of dividend and for stock splits.

Now a company ABC wants to raise say 1 crore. It will then issue 10 lakh shares of 10 Rs face value. The issuing price can be different depending on the company financials.The company floats an IPO ( initial public offer) where common public can participate and acquire shares in IPO market. If some one is alloted 100 shares then the person becomes the owner of 100 shares. These shares are in Dematerialised form ( or Demat as it is simply called) and they will be traded in Secondary market.In olden days the share certificates used to b issued in form of paper indicating the owner name, number of shares held etc but we have almost all the stocks moved to Demat form.

Stock Market Basic

Hi all !

Through this blog i am planning to put together some Stock Market basic stuff as in when i can.

Thanks.