There are two ways to describe the general conditions of the stock market: it can be a bull market or a bear market. A bear market indicates the continuous downward movement of the stock market. Conversely, a bull market indicates the constant upward movement of the stock market. A particular stock that seems to be increasing in value is described to be bullish while a stock that seems to be decreasing in value is described to be bearish.
The bull and bear terms do not refer to the short term fluctuations in the stock market. A bear market is the stock market wherein the prices of the key stocks have fallen by 20% or more over a period of at least two months. Prices, even during a bear market, may temporarily increase. Bull markets, being the opposite of bear markets, indicate a rise in the prices of the key stocks over a certain period of time.
The economical state of a country is usually reflected through the stock market conditions. The stock market of an economy with reasonable interest rates and low unemployment rates is considered to be bullish since it is doing just well. Bear markets, on the other hand, usually occur during a slowdown in an economy. The investors tend to lose their confidence and the companies begin to lay off their workers. An exaggerated bear market will eventually lead to a crash that is brought on by panic selling while an exaggerated bull market will actually result to a market bubble that is brought on by investor over-enthusiasm.
Even if most money can be made during bull markets, bear markets also present a lot of financial opportunities. Investors use their knowledge of the characteristics of each type of market as an investment strategy. It is expected that a bullish market will generate a huge number of investors who wish to buy some stocks. Because a bullish market could also mean that the economy is doing well, there will be a lot of people interested in buying stocks since they have the extra money to spend. This kind of situation will cause an increase in the prices of the stocks because there will be a shortage in the supply of stocks. During bear markets, it is expected that a lot of investors will have the desire to unload their stocks and put their money in fixed-return instruments like bonds due to the continuous decrease in the prices of the stocks. Supply tends to exceed demand as money is withdrawn from the stock market. This causes the prices of the stocks to lower even further.
It is easier to make money during bull markets. In a bull market, all dips are temporary and they are going to be corrected any time soon. Since the upward rising of the prices cannot go on forever, the investors need to sell their stocks when the market reaches its peak.
Bear markets are considered to be opportunities of picking up stocks at bargain prices. Approaching the end of a bear market will offer the greatest chance to generate some profit. Since the prices will most likely fall before they recover, the investors have to be prepared for some short-term loss. One investment strategy used during bear markets is short selling. It involves the selling of the stocks that they do not own in the anticipation of further decrease in prices. This strategy gives the investors a chance to buy the stocks for a price that is lower than their previous selling price.
During bear markets, fixed-return investments such as CAs and bonds can also be used to generate income. Defensive stocks, which include government-owned utilities that provide necessities despite the current economic state, are also safe to buy even during bear markets.
Showing posts with label Share Market. Show all posts
Showing posts with label Share Market. Show all posts
Wednesday, 5 October 2011
Diferance between Stocks and Mutual Funds
Mutual funds are diverse stock holdings which are managed on behalf of the investors who buy into the fund. Mutual funds allow investors to take advantage of a diversified portfolio without the need of investing a large sum of money.
A diversified portfolio carries the advantage of offering protection against the rapid market losses of any particular stock. If stocks lose their value, the effect will be less if they belong to a portfolio that is spread across twenty stocks than if they belong to a portfolio that is consist of a single stock.
Diversification is always a good idea in making investments. The problem for small investors is that usually don’t have enough funds to buy a variety of stocks. Despite their limited funds, small investors benefit from diversification through mutual funds.
Mutual funds, aside from stocks, can be consisted of a variety of holdings that include bonds and money market instruments. Mutual funds are actually the companies and the investors are really the company share buyers. The shares in a mutual fund are either directly bought from the fund itself or indirectly bought from the brokers who represent the fund. Selling them back to the fund is a way of redeeming shares.
There are some funds which are managed by investment professionals who decide on which securities to include in the fund. Non-managed funds are also available. Indexes, such as the Dow Jones Industrial Average, usually serve as the bases for the funds. The funds, which simply duplicate the holdings of the index where they are based on, rise by a percentage that is the same as that of the chosen index. Non-managed funds often perform well and they sometimes perform even better than managed funds.
Mutual funds also carry some downsides. Aside from paying some fees no matter what the performance of the funds is, individual investors also have no say in which securities have to be included in the funds or not. In addition to this, the actual value of a mutual fund share is not as precise as that of the stocks on the stock market.
For small investors, a mutual fund is still considered to be a better choice than either stocks or bonds because they offer the diversity that provides cushion against unpredictable stock market movements. They also provide a greater return than bonds. Mutual funds can also lose value especially in the short term. Short-term investors are better off with bonds that offer a set rate of return.
The three main types of mutual funds are money market funds, bond funds, and stock funds. The type that offers the lowest risk, money market funds consist solely of high quality investments like those which are issued by the US government and blue chip corporations. Although they rarely lose money, money market funds also pay a low rate of return.
The aim of bond funds to produce higher yields than money market funds caused them to carry a correspondingly higher risk. The risks that are associated with bonds, such as company bankruptcy and falling interest rates, are also applicable to bond funds.
The types of funds that carry both the greatest potential for profitable investment and the greatest risk for losses are stock funds. The risk in stock funds is mostly for short-term mutual fund holders because stocks have traditionally outperformed other investment instruments in the long run.
There are different types of stock funds including ‘growth funds’ that attempt to maximize capital gain and ‘income funds’ that concentrate on stocks that pay regular dividends.
Those with limited funds or investment experiences are recommended to invest on mutual funds. When choosing the right fund, investors have to consider how much risk they are willing to take against their expected investment returns.
A diversified portfolio carries the advantage of offering protection against the rapid market losses of any particular stock. If stocks lose their value, the effect will be less if they belong to a portfolio that is spread across twenty stocks than if they belong to a portfolio that is consist of a single stock.
Diversification is always a good idea in making investments. The problem for small investors is that usually don’t have enough funds to buy a variety of stocks. Despite their limited funds, small investors benefit from diversification through mutual funds.
Mutual funds, aside from stocks, can be consisted of a variety of holdings that include bonds and money market instruments. Mutual funds are actually the companies and the investors are really the company share buyers. The shares in a mutual fund are either directly bought from the fund itself or indirectly bought from the brokers who represent the fund. Selling them back to the fund is a way of redeeming shares.
There are some funds which are managed by investment professionals who decide on which securities to include in the fund. Non-managed funds are also available. Indexes, such as the Dow Jones Industrial Average, usually serve as the bases for the funds. The funds, which simply duplicate the holdings of the index where they are based on, rise by a percentage that is the same as that of the chosen index. Non-managed funds often perform well and they sometimes perform even better than managed funds.
Mutual funds also carry some downsides. Aside from paying some fees no matter what the performance of the funds is, individual investors also have no say in which securities have to be included in the funds or not. In addition to this, the actual value of a mutual fund share is not as precise as that of the stocks on the stock market.
For small investors, a mutual fund is still considered to be a better choice than either stocks or bonds because they offer the diversity that provides cushion against unpredictable stock market movements. They also provide a greater return than bonds. Mutual funds can also lose value especially in the short term. Short-term investors are better off with bonds that offer a set rate of return.
The three main types of mutual funds are money market funds, bond funds, and stock funds. The type that offers the lowest risk, money market funds consist solely of high quality investments like those which are issued by the US government and blue chip corporations. Although they rarely lose money, money market funds also pay a low rate of return.
The aim of bond funds to produce higher yields than money market funds caused them to carry a correspondingly higher risk. The risks that are associated with bonds, such as company bankruptcy and falling interest rates, are also applicable to bond funds.
The types of funds that carry both the greatest potential for profitable investment and the greatest risk for losses are stock funds. The risk in stock funds is mostly for short-term mutual fund holders because stocks have traditionally outperformed other investment instruments in the long run.
There are different types of stock funds including ‘growth funds’ that attempt to maximize capital gain and ‘income funds’ that concentrate on stocks that pay regular dividends.
Those with limited funds or investment experiences are recommended to invest on mutual funds. When choosing the right fund, investors have to consider how much risk they are willing to take against their expected investment returns.
Getting Started with Stock Market in shares
Stocks can be bought and sold by anybody who has money. Knowing the basics will help people understand how stock trading works despite the process’s own specialized vocabulary. People who have knowledge about stock trading are the ones who are most likely to be successful in the investment industry.
Most stock trading activities are done through an intermediary called a broker. Brokers, who take and execute orders from the investors, can also offer investment advices and analyses to their clients.
The types of brokers that do not offer investment advices to their clients are called discount brokers. Investors who wish to save more money usually hire discount brokers because they charge less commission.
Online trading and broker-assisted trading are two of the most commonly offered services by brokers. There are some brokers who use an Interactive Voice Response System for placing orders via telephones and a Wireless Trading System for making orders via web-enabled cellular phones or other handheld devices.
There are some brokers who use their own proprietary software for placing online orders while some give their website passwords for accessing order departments.
Brokers allow their clients to track the stock market movements by offering a variety of charting options. The analysis software provided by brokers may be included in their services either for free or for an extra fee.
Types of Orders
The orders made when buying or selling stocks can be classified into different types. An instruction to buy or sell a stock at the current market price is called a “market order.”
This order is usually executed near the quoted price at the time of the order was made. There may be a difference between the actual transaction and the quote if there is some inactive trading of stocks or rapid fluctuation of prices.
An expectation of stock price movements that leads to the interest of buying or selling stocks at a certain price above or below the current price initiates the placing of either a “stop order” or a “limit order.”
Stop orders, which help in limiting losses and protecting profits, become effective when the market hits the stop price. Because the stocks are traded at market price after they become active, brokers who are given stop orders are allowed to trade above or below the stop price.
For example, an investor buys a share of Bell Canada Enterprises (BCE) at $50 and put in a stop order of $45. If the BCE stock price falls to $45, the stop order will become effective and the stock will become available at market price.
If the price doesn’t fall to the limit buy price, however, the investor cannot buy that stock.
All orders can be placed as either “good ‘til canceled” (GTC) or “day order.” A GTC order will remain in effect until it is canceled but a day order will remain in effect only until the end of the current trading day.
Stocks are commonly traded in multiples of 100 that are called “round lots.” Trading other amounts of stocks, which is called an “odd lot,” is also possible. Trading software can handle either type of orders but odd lot orders are considered to be more difficult to fill than round lot orders.
Most stock trading activities are done through an intermediary called a broker. Brokers, who take and execute orders from the investors, can also offer investment advices and analyses to their clients.
The types of brokers that do not offer investment advices to their clients are called discount brokers. Investors who wish to save more money usually hire discount brokers because they charge less commission.
Online trading and broker-assisted trading are two of the most commonly offered services by brokers. There are some brokers who use an Interactive Voice Response System for placing orders via telephones and a Wireless Trading System for making orders via web-enabled cellular phones or other handheld devices.
There are some brokers who use their own proprietary software for placing online orders while some give their website passwords for accessing order departments.
Brokers allow their clients to track the stock market movements by offering a variety of charting options. The analysis software provided by brokers may be included in their services either for free or for an extra fee.
Types of Orders
The orders made when buying or selling stocks can be classified into different types. An instruction to buy or sell a stock at the current market price is called a “market order.”
This order is usually executed near the quoted price at the time of the order was made. There may be a difference between the actual transaction and the quote if there is some inactive trading of stocks or rapid fluctuation of prices.
An expectation of stock price movements that leads to the interest of buying or selling stocks at a certain price above or below the current price initiates the placing of either a “stop order” or a “limit order.”
Stop orders, which help in limiting losses and protecting profits, become effective when the market hits the stop price. Because the stocks are traded at market price after they become active, brokers who are given stop orders are allowed to trade above or below the stop price.
For example, an investor buys a share of Bell Canada Enterprises (BCE) at $50 and put in a stop order of $45. If the BCE stock price falls to $45, the stop order will become effective and the stock will become available at market price.
If the price doesn’t fall to the limit buy price, however, the investor cannot buy that stock.
All orders can be placed as either “good ‘til canceled” (GTC) or “day order.” A GTC order will remain in effect until it is canceled but a day order will remain in effect only until the end of the current trading day.
Stocks are commonly traded in multiples of 100 that are called “round lots.” Trading other amounts of stocks, which is called an “odd lot,” is also possible. Trading software can handle either type of orders but odd lot orders are considered to be more difficult to fill than round lot orders.
Monday, 19 September 2011
Markets and Financial Instruments
This is a basic level programme for those who wish to either begin a career in the financial markets in India or simply learn the fundamentals of capital markets. The course is structured to help understand the basic concepts relating to different avenues of investment, the primary and the secondary market, the derivatives market and financial statement analysis.
Why should one take this course?
•To get a basic understanding of the products, players and functioning of financial markets, particularly the capital market.
•To understand the terms and jargons used in the financial newspapers and periodicals.
Who will benefit from this course?
•Students
•Teachers
•Investors
•Employees of BPOs/IT Companies
•Employees of Brokers/Sub-Brokers
•Housewives
•Anybody having interest in the Indian securities market
Test details
Duration: 120 minutes
No. of questions: 60
Maximum marks: 100, Passing marks: 50 (50%); There is no negative marking in this module.
Certificate validity: For successful candidates, certificates are valid for 5 years from the test date.
Fees
1,500/- (Rupees One Thousand Five Hundred Only).
Course outline
•Markets and Financial Instruments
Types of Markets: Equity, Debt, Derivatives, Commodities; Meaning and features of private, public companies; Types of investment avenues.
•Primary Market
Initial Public Offer (IPO); Book Building through Online IPO; Eligibility to issue securities; Pricing of Issues; Fixed versus Book Building issues; Allotment of Shares; Basis of Allotment; Private Placement.
•Secondary Market
Role and functions of Securities and Exchange Board of India (SEBI); Depositories; Stock exchanges; Intermediaries in the Indian stock market; Listing; Membership; Trading; Clearing and settlement and risk management; Investor protection fund (IPF); and Do's and Don'ts for investors, Equity and debt investment.
•Derivatives
Types of derivatives; Commodity and commodity exchanges; Commodity versus financial derivatives.
•Financial Statement Analysis
Balance sheet; Profit & loss account; Stock market related ratios; Simple analysis before investing in the shares; understanding annual report; Director's report etc.
Why should one take this course?
•To get a basic understanding of the products, players and functioning of financial markets, particularly the capital market.
•To understand the terms and jargons used in the financial newspapers and periodicals.
Who will benefit from this course?
•Students
•Teachers
•Investors
•Employees of BPOs/IT Companies
•Employees of Brokers/Sub-Brokers
•Housewives
•Anybody having interest in the Indian securities market
Test details
Duration: 120 minutes
No. of questions: 60
Maximum marks: 100, Passing marks: 50 (50%); There is no negative marking in this module.
Certificate validity: For successful candidates, certificates are valid for 5 years from the test date.
Fees
1,500/- (Rupees One Thousand Five Hundred Only).
Course outline
•Markets and Financial Instruments
Types of Markets: Equity, Debt, Derivatives, Commodities; Meaning and features of private, public companies; Types of investment avenues.
•Primary Market
Initial Public Offer (IPO); Book Building through Online IPO; Eligibility to issue securities; Pricing of Issues; Fixed versus Book Building issues; Allotment of Shares; Basis of Allotment; Private Placement.
•Secondary Market
Role and functions of Securities and Exchange Board of India (SEBI); Depositories; Stock exchanges; Intermediaries in the Indian stock market; Listing; Membership; Trading; Clearing and settlement and risk management; Investor protection fund (IPF); and Do's and Don'ts for investors, Equity and debt investment.
•Derivatives
Types of derivatives; Commodity and commodity exchanges; Commodity versus financial derivatives.
•Financial Statement Analysis
Balance sheet; Profit & loss account; Stock market related ratios; Simple analysis before investing in the shares; understanding annual report; Director's report etc.
Monday, 21 March 2011
Share market investment tipps
Are you a person crazy about shares and how it functions? Are you an individual who looks at others as genius when they discuss about shares and stock market investments? Don’t get frightened about that!
In this site our main aim is to help beginners with interest in shares and stock market investments with fundamentals. This will be a good guide to help you reach the pinnacle from where you are.
We will provide you theory about share market, how it functions, how to invest, what’s mutual funds, when and how to buy etc. as day progresses and your knowledge progresses.
In this site our main aim is to help beginners with interest in shares and stock market investments with fundamentals. This will be a good guide to help you reach the pinnacle from where you are.
We will provide you theory about share market, how it functions, how to invest, what’s mutual funds, when and how to buy etc. as day progresses and your knowledge progresses.
Introduction for share market beginners
Share market is an area which fascinates each and every individual who is craving for more money. Some common phrases are “If we want to earn just try with share markets; my friend has made lot of money in that “.
As beginners we should understand one thing. If we are planning to invest in share market, first we have to categorize our self.
Are we a long term investor?
Are we a short term investor? (Daily trading).
Note:
In share market we are 95% secured if we are ready to wait (provided company fundamentals are good. Exclude cases like enron, worldcom.etc) .The problem comes when we have invested in a bank we can withdraw same amount with interests till date for any of our emergency.
Assume our money is in form of stocks we got an emergency by today evening 7 pm of 1 lakh. We have seen our stock’s worth in today’s closing was our investment 1 lakh+ whatever market price added to it. We think we have more than required and sell it tomorrow. But tomorrow fate decided the other way market falls our stock value becomes 90 thousand. If we sell that’s where the problem comes.
It may even go upto 1.25 laks next week /next month. Can we wait? That’s the million dollar question.
Case1 – short term investor (Risky)
Remember its here we play not invest.
1.Make investment break ups: If we have “x” Rs in our hand don’t get carried away to buy shares for all “x” Rs. Always we should have fifty percent in our hand.
2.Reinvest only when profits: Make the profits what we earn on the first trade if daily trader (if so happens) to buy extra shares. Suppose if 0ur stock didn’t go up after first investment wait till (may be months) till our holding goes up.
3.Capital maintain: Always ensure that our capital is maintained with till date interest rate of banks. Though depository participants suggests us its always better we should have basic ideas of the company. We have lot of information sources (net, softwares).
4.In case of IPO: Buy and sell within max 1 week of IPOS. Invest in established stocks. If we feel trend of IPO is good come back and invest.
5.Sell well ahead of your expected need: Suppose we have a marriage and we wanted money for that. If we feel that today our investment + return (m-cap) is good may be 30 days ahead of marraige.sell it today. We are secured.
The very simple formula will be if we crave for more we have more chances to lose more.
Case 2 – Long term investor
It’s here we invest. We are most secured in this case because we don’t consider money invested to be used for emergency. Any company will one day have a growth curve. Even a sick company value can be raised by psychological factors of investors.
As beginners we should understand one thing. If we are planning to invest in share market, first we have to categorize our self.
Are we a long term investor?
Are we a short term investor? (Daily trading).
Note:
In share market we are 95% secured if we are ready to wait (provided company fundamentals are good. Exclude cases like enron, worldcom.etc) .The problem comes when we have invested in a bank we can withdraw same amount with interests till date for any of our emergency.
Assume our money is in form of stocks we got an emergency by today evening 7 pm of 1 lakh. We have seen our stock’s worth in today’s closing was our investment 1 lakh+ whatever market price added to it. We think we have more than required and sell it tomorrow. But tomorrow fate decided the other way market falls our stock value becomes 90 thousand. If we sell that’s where the problem comes.
It may even go upto 1.25 laks next week /next month. Can we wait? That’s the million dollar question.
Case1 – short term investor (Risky)
Remember its here we play not invest.
1.Make investment break ups: If we have “x” Rs in our hand don’t get carried away to buy shares for all “x” Rs. Always we should have fifty percent in our hand.
2.Reinvest only when profits: Make the profits what we earn on the first trade if daily trader (if so happens) to buy extra shares. Suppose if 0ur stock didn’t go up after first investment wait till (may be months) till our holding goes up.
3.Capital maintain: Always ensure that our capital is maintained with till date interest rate of banks. Though depository participants suggests us its always better we should have basic ideas of the company. We have lot of information sources (net, softwares).
4.In case of IPO: Buy and sell within max 1 week of IPOS. Invest in established stocks. If we feel trend of IPO is good come back and invest.
5.Sell well ahead of your expected need: Suppose we have a marriage and we wanted money for that. If we feel that today our investment + return (m-cap) is good may be 30 days ahead of marraige.sell it today. We are secured.
The very simple formula will be if we crave for more we have more chances to lose more.
Case 2 – Long term investor
It’s here we invest. We are most secured in this case because we don’t consider money invested to be used for emergency. Any company will one day have a growth curve. Even a sick company value can be raised by psychological factors of investors.
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