Investment in shares

Investment is major requirement for everybody in today's world. But if you are planning to invest in shares, then you must have proper knowledge regarding the same.

Investing in shares is undoubtedly a risky venture but you can get very smart returns if inverted wisely. Here are some explanations of the queries that usually arise in the mind of a layman while investing in shares.

Can a layman invest in shares?

With the reach of computer and internet, we can connect with stock market on a single mouse click. We can sale purchase the shares through it. Also, the numbers of stock brokers are increasing day by day in even small cities. With the help of stock brokers, anyone can easily invest in shares.
Mainly you are required to have a DEMAT account, trading account and bank account to invest in shares. Generally everybody have bank account. So only DEMAT account and trading account are required to education opened. It can be opened at the same place or at different places. Normally, trading account is opened with broker and DEMAT account is opened with the authorized agents of National Security Depository Limited and Central Depository Security Limited.
You have to present your PAN card, address proof and ID proof to open an account.
Brokers don't charge money for opening and operating trading account. However, you may have to spend up to Rs. 1000 for opening DEMAT account. Its annual maintenance charge could be between RS. 250 to Rs. 600. However, nowadays many institutions offer free opening of DEMAT account.
Many operators like ICICI, Kotak Mahindra etc. provide all facilities under one roof. Online facility is also available now so that you can sell or purchase shares on a single mouse click.

How appropriate is to invest in stock of government co.?

Normally, a person considers two facts while investing in a particular share. One is 'good return' and other is 'money security'. It is believed that shares of government companies are more secure because there are leas chances of fraud in them. As far as returns are concerned then it depends up on company's performance.
Many private companies like Infosys, Reliance, TATA etc. are believed to be good just like government companies in relation to money security.

Is there any benefit in sale-purchase or it is just waste of time?

Transactions are mainly of two types: Trading and Investing.
Under trading, huge number of shares are sold and purchased everyday while in investing; shares are purchased for a long period of time say, 3, 5 or 10 years. Normally, it is not advised to trade the shares daily because this does not give good profits. A layman should invest in good companies for a long period of time. Investors have earned smart returns who had invested in companies like Infosys, SBI, Reliance in just 15-20 years.

Advice given in T.V. is objective or it's just ad game?

First of all, an investor should consider that how is giving the advice and it is meant to whom- Trader (short term investor) or Investor (long term investor)? The advice can be cross checked with the company's performance and other reports available.
Actually, the advice given on T.V. is neither useless nor a stone line. Their analysis can be useful some times. The only thing required is to use your own intelligence after hearing those advices.

How to know about the genuineness of the company?

The basic financial condition of the company can be known with the help of its Profit and Loss sheet and other financial performances. This information is easily available on company's website or website of National Stock Exchange and Bombay Stock Exchange. Your expertise is in this field is not required. Some simple information like whether the company is running in profits or not, what is the nature of company's business, how much return the company has given in the last 5 years, whether it is leading towards growth or not, what are its future plans, who are company's clients, can be known by a layman so as to take a right decision.
Not only this, we can also know the company's condition through its market capitalization. By this, we can know that whether the scale of company is large or small, eg. If there are 1 thousand listed shares of the company in the market, and per share market price is Rs. 100, then the market capitalization of the company will be: 1000 X 100= 1 lakh rupees. The companies' with market capitalization of more than Rs. 5 crores are called Blue Chip/ Standard Company. Whereas the companies' with market capitalization between Rs. 500 crores to Rs. 5000 crores are called Middle Cap and the companies' with market capitalization of less than Rs. 500 crores are called Small Cap.

Investors should try to invest only in Blue Chip/ Standard Companies.

What happens if a layman get trapped into a mesh?

Listen to others, but don't follow them blindly. Gather all the information yourself. Use your commonsense. Consider the company's performance of at least last 5 years and then come to a conclusion. It is like a gamble if you invest in an unknown company, you may earn or you may lose. If anytime you feel that the company in which you have invested is not genuine, then sell all the shares immediately. And if you feel that you are cheated then complaint in SEBI. You can register a complaint regarding this in consumer forum also.

Should a layman invest his savings into shares?

First of all a person must keep some spare money with him for fulfilling the future requirements of day to day life. Then he can invest his spare savings in the shares.

A layman should invest his savings into shares or mutual fund?

People who have less knowledge about share market should invest in mutual fund as it is safe for them. Mutual fund is nothing but it is investment in share market through an expert. The risk is equal in both of them. But mutual fund agencies absorb some risk themselves.

What is SIP?

SIP is the abbreviation of Systematic Investment Plan. Under 'SIP investment', investment is done in mutual fund in monthly installments for a specific period of time. The whole is not to be deposited at a single time. The risk of purchasing mutual fund at a high rate also cuts down through SIP.

Can ladies invest their savings into shares?

If ladies have any spare money then she can definitely invest in small amounts in share market.

Article by Nidhi
Nidhi is a freelance content writer with 7+ years experience. She has great passion to write on valuable topics so as to provide accurate information to her readers. She is also keen to provide employment to all Indians and so posts various job openings too in this website.

Follow Nidhi or read 372 articles authored by Nidhi

Related Articles

Have you made a Systematic Investment Plan?

SIP - Systematic Investment Plan, is one of the best ways to invest in Mutual funds and at the same time hedge the risk of market to a marginal extent. This article explains how Mutual funds and SIP works and how SIP hedges the risk of a volatile market.

What are the benefits of sectoral mutual funds?

What is a sectoral mutual funds? How to get in to that and what are the benefits of sectoral mutual funds? Benefits and risk involved in sectoral mutual funds? What strategy should you follow before investing in sectoral mutual funds to face less diversified and less volatility

Why PPF should always be a part of your investment portfolio

In this article, I will explain the nitty gritty of PPF which may be quite handy for those who wants to enjoy safety, profitability and tax saving elements in their investments. PPF (Public Provident Fund ) works wonder when used as an investment tool for a longer maturity period, especially as a part of retirement planning. The account is packed with number of features like income tax rebate and exemption, loan and withdrawal facility and convenient operating of account.

How to buy an apartment for investment

Buying property has always been considered a good investment. Buying an apartment is a good investment option. You can get monthly returns and your investment will grow and give you long term returns. In this article I discuss how to buy an apartment for investment purpose.

More articles: Investment


Author: Shravan09 Jan 2014 Member Level: Silver   Points : 0

Thanks a lot Nidhi for sharing this article with readers of ISC. This article will help me and other members in clearing our doubts regarding investing in shares.

Author: Pravat Kumar Das04 Sep 2014 Member Level: Gold   Points : 5

This is a nice article presentation for them who are in search of resources and content before they start Investing in share market.

No a layman should not enter and start trading in share market because it does not work with your luck, it needs technical knowledge , learning skill, patience.

To become a successful share trader you need to learn first how and why the price fluctuate?

Then you need to learn about the money management so that you can know your risk taking capacity and profit booking level.

And for young trader and who can take risk they should trade intra day, swing and positional all together so that they can get chance to earn more money, but low risk traders always stick with one or two particular share and do average and invest in a SIP mode to get long term and compounding benefit.

  • Do not include your name, "with regards" etc in the comment. Write detailed comment, relevant to the topic.
  • No HTML formatting and links to other web sites are allowed.
  • This is a strictly moderated site. Absolutely no spam allowed.
  • Name: