Investment in Stock Markets 1

Investment in Stock Markets

Stock markets are very promising arena for investments.The reason is that markets have the potential to offer you smart returns on your capital.Having a long term investment view along with some basic knowledge about the markets and the stocks,you can see yourself moving towards a goal of wealth creation.Before going for an investment,it is always good to have an idea about the various aspects of investing in stock markets.

Market Indices

If you are totally new to stock markets,you might be wondering if what is Sensex and what is Nifty.Both Sensex and Nifty are stock markets indices at two stock exchanges of India.Sensex is stock movement indicator for stocks traded at Bombay stock exchange while Nifty is same for stocks traded at National stock exchange,both situated at Mumbai.

Nifty is a well diversified index consisting of 50 large cap company stocks.Similarly,Sensex involves 30 large cap company stocks.The average of price rise or fall in these stocks,according to their weighted average,on a particular day,leads to rise and fall in Sensex and Nifty.
Share By definition a share or a stock means a share in a company so that after buying a share of a company,the shareholder becomes partner in company,s profits and losses.But that doesn’t mean you have a say in how to run a company.Only an investor who invests large amounts of money in a particular company can have a say in the functioning of that company.Stock markets

How to Choose a Stock

Choosing a stock is an important aspect of the investment in markets.Before buying the shares of any company,gather as much information about the company as you can,its business history,future prospectus,its profits etc. Keep updated yourself with the latest news concerned with that particular company that can affect its business and other corporate affairs.
It requires Fundamental Analysis to choose a stock for investment.That includes checking balance sheets of the company,tracking the its quarterly results and other important aspects like Price to Earnings Ratio (P/E Ratio).For an average market investor,it is going to quite cumbersome and confusing.You may choose a stock by looking at its P/E Ratio if it is near 10 or below that.Not relying solely on P/E,you would need to ascertain that the concerned company has a sound business and doing well recently.

How Much Money to be Invested in Stocks

Remember, invest only that much of money in stocks which you is surplus with you and you would not need in in near future.Never invest huge sums in first attempt.Start with small amounts and see the turn around.If you suffer some loss,don’t loose heart.Try again and learn lessons from previous mistakes.You’ll definitely make profits too if you move carefully.When you get some experience you can invest more money.
Investments in equity should be made according to your age.Young people can make up to 70% of their income to equity markets because they can cover the losses if they suffer as they have sufficient time as compared to old age people.It is said that 100-your age=%age of your income one should invest in equity markets.

Profit Booking

When you have made reasonable profit in your stocks,take out your money and get out of the market immediately as nobody knows when markets can turn their way.DON’T BE GREEDY.Wait for the next chance and get into the market when appropriate levels are their for buying.Don’t do anything in haste,be patient when selling or buying the stocks.If you are not sure about which share to buy and which to leave,sit aside and see what other are doing.Think and then enter the market.
Frequent and unnecessary selling and buying should be avoided as you loose sufficient amounts in brokerage.Don’t follow expert views blindly as they are sometimes being awarded by some companies to promote their company share or they some other hidden motives although all are not same.Listen and think what they say and do what your brain says.Following these basic facts you can easily make money by investing in stock markets.

 Golden Rules Not To Forget

1. Put your money only on winning horse (fundamentally strong company shares)
2.Invest only your surplus money which you can afford to loose.
3. Don’t be greedy,take your profits and get out of the market immediately.

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