Investment v/s Savings:

You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments. Investments have the potential for higher return than a regular savings account. ... Note: Remember: the greater the risk of an investment, the higher potential return or loss of your money.

When to start investing?

• Start investing early- Start early and retire rich..
• Invest regularly- Invest regularly and methodically and let the magic of compounding work for you.
• Never time the market- Be a smart investor.
• Be patient- For long-term wealth creation, you need to be patient.

Short term and long term investment:

Short Term Investments. A short-term investment, also called a temporaryinvestment or marketable security, is a debt or equity security that is expected to be sold or converted into cash in the next 3 to 12 months. ... Take a stock investmentin a publicly traded company for

Long-term investments:

allow you to invest for a longer period, say five years or more. These are preferred by people for meeting their long-termneed.

how stock markets work:

The market is the vast array of investors and traders who buy and sell the stock, pushing the price up or down. ... The ultimate goal of buying shares is to make money by buying stocks in companies you expect to do well, those whose perceived value (in the form of the share price) will rise

Concept of Compounding:

Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.

Types of Investments

Think of the various types of investments as tools that can help you achieve your financial goals. Each broad investment type—from bank products to stocks and bonds—has its own general set of features, risk factors and ways in which they can be used by investors. Learn more about the various types of investments below.

DIFFERENT TYPES OF STOCKS:

Growth stocks:

Not all stocks pay high dividends. This is because, companies prefer to reinvest their earnings for company operations. This usually helps the company grow at a faster rate. As a result, such stocks are often called growth stocks.

Income stocks:

These are stocks that distribute a higher dividend in relation to their share price. They are also called dividend-yield or dog stocks. So, a higher dividend means larger income. This is why these stocks are also called income stocks.

Blue-chip stocks:

These are stocks that distribute a higher dividend in relation to their share price. They are also called dividend-yield or dog stocks. So, a higher dividend means larger income. This is why these stocks are also called income stocks.

Beta stocks:

Analysts measure risk – called beta – by calculating the volatility in its price. Beta values can have positive or negative values. The sign merely denotes if the stock is likely to move in sync with the market or against the market. What really matters is the absolute value of beta. Higher the beta, greater the volatility and thus more the risk. A beta value over 1 means the stock is more volatile than the market. Thus, high beta stocks are riskier. However, a smart investor can use this to make greater profits.

Cyclical stocks:

Some companies are more affected by economic trends. Their growth moderates in a slow economy, or fastens in a booming economy. As a result, prices of such stocks tend to fluctuate more as economic conditions change. They rise during economic booms, and fall as the economy slows down. Stocks of automobile companies are the best example of cyclical stocks.

Defensive stocks:

Unlike cyclical stocks, defensive stocks are issued by companies relatively unmoved by economic conditions. Best examples are stocks of companies in the food, beverages, drugs and insurance sectors. Such stocks are typically preferred when economic conditions are poor, while cyclical stocks are preferred when the economy is booming.

HOW TO BUY STOCKS ?

Stocks can be classified into multiple categories on various parameters – size of the company, dividend payment, industry, risk, volatility, as well as fundamentals.

Step 1

Open demat and trading accounts. Without these two accounts, you cannot trade in the stock markets. Read how to open a demat account here, and a trading account

Step 2

First, analysis stocks and select ones that fit your investment profile. Read how to conduct stock market analysis.

Step 3

Once you have selected your stock, monitor it for a while. This is to ensure you buy at the lowest price possible in the near-term. Understand how the stock price moves.First, analysis stocks and select ones that fit your investment profile.how to conduct stock market analysis.

Step 4

Decide when you want to place your order – during market times or after markets. This depends on the share price you are targeting. If you want to buy a stock at a fixed price, and the stock closed at that price, place the order after markets. If you feel you are likely to get a lower price during market hours, place it when the market is open for trading.

Step 5

Decide the kind of order you want to place. There are three kinds of orders – a limit order, a market order and a stop loss order, IOC (Immediate or cancel). A market order is the simplest of the lot – you simply place an order without any other specifications. In a limit order, you set an upper price limit. Suppose you have placed a limit order for 10 shares with a limit price of Rs. 100 when the share price is Rs. 99. You trade will be processed as long as shares are available at Rs. 100 or below. So, if only 8 shares are available, only 8 out of the 10 requested will be purchased. This ensures you don’t pay more than a specified amount.

Step 6

Once you have decided the specifics of your order, you either go online to your trading account to place the order, or call your broker. Give your bank account details so that the purchase money can be deducted from your account.

The Winning techniques to buy good stocks:

EPS: EPS tells you how much money the company is making in profits per every outstanding share of stock. The higher the EPS is, the more money your shares ofstock will be worth because investors are willing to pay more for higher profits. PE ratio: PE ratio is one of the most widely used tools for stock selection. It is calculated by dividing the current market price of the stock by its earning per share (EPS). It shows the sum of money you are ready to pay for each rupee worth of the earnings of the company. PE = Market price .

Dividend Yields: Dividend yields are a measure of an investment’s productivity, and some even view it like an "interest rate" earned on an investment.

Book Value:Book value of an asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation. Book value is also the net asset value of a company, calculated as total assets minus intangible assets (patents, goodwill) and liabilities. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges and so on.

Return on equity (ROE) :is a measure of profitability that calculates how many dollars of profit a company generates with each dollar of shareholders' equity. The formula for ROE is: ROE = Net Income/Shareholders' Equity. ROE is sometimes called "return on net worth."

Debt to Equity Ratio: Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company's total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity.

Price Volatility: Definition: It is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time.

General Mistakes Even By Smart Investors:
• Acting on tips. • Getting sentimental
• Forgetting taxes and commission
• Failing to Diversity
• Loosing patience
• Preferance to a penny and micro cap stocks.

Capital Market: A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. Capital markets are defined as markets in which money is provided for periods longer than a year

Primary and Secondary Market: In the primary capital market, investors buy directly from the issuing company. In the secondary market, investors trade securities among themselves. When a company goes public, it sells new stocks and bonds for the first time. Usually, that sale takes the form of an initial public offering.

KEYWORDS:

BSE: The Bombay Stock Exchange is an Indian stock exchange located at Dalal Street, Kala Ghoda, Mumbai, Maharashtra, India
NSE : The National Stock Exchange of India Limited is the leading stock exchange of India, located in Mumbai. The NSE was established in 1992 as the first demutualized electronic exchange in the country.
MCX : Multi Commodity Exchange of India Ltd is an independent commodity exchange based in India. It was established in 2003 and is based in Mumbai.
NCDEX : National Commodity & Derivatives Exchange Limited is an online commodity exchange based in India. It has an independent board of directors and professional management, who have interest in commodity markets
NSDL : National Securities Depository Limited is an Indian central securities depository based in Mumbai. It was established on 8 November 1996 as the first electronic securities depository in India
CDSL : Central Depository Services Ltd, is the second Indian central securities depository based in Mumbai. Its main function is the holding securities either in certificated or uncertificated form, to enable book entry transfer of securities.
SEBI : The Securities and Exchange Board of India is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 30 January 1992 through the SEBI Act, 1992.

Bull Market:

A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies and commodities.

Bear Market:

A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases. Although figures vary, a downturn of 20% or more from a peak in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over a two-month period is considered an entry into a bear market.

Intraday:

Intraday is another way of saying "within the day." Intraday price movements are particularly important to short-term traders looking to make many trades over the course of a single trading session. The term intraday is occasionally used to describe securities that trade on the markets during regular business hours, such as stocks and ETFs, as opposed to mutual funds, which must be bought from a dealer.

Delivery:

Delivery is the action by which a commodity, a currency, a security, cash or another instrument that is the subject of a sales contract is tendered to and received by the buyer. Delivery can occur in spot, option or forward contracts. However, in many instances, a contract is closed out before settlement and no delivery occurs

Short Selling:

Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit. Short selling may be prompted by speculation, or by the desire to hedge the downside risk of a long position in the same security or a related one. Since the risk of loss on a short sale is theoretically infinite, short selling should only be used by experienced traders who are familiar with its risks.

Stop Loss:

An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor’s loss on a position in a security. Although most investors associate a stop-loss order only with a long position, it can also be used for a short position, in which case the security would be bought if it trades above a defined price. A stop-loss order takes the emotion out of trading decisions and can be especially handy when one is on vacation or cannot watch his/her position. However, execution is not guaranteed, particularly in situations where trading in the stock is halted or gaps down (or up) in price. Also known as a “stop order” or “stop-market order.

Portfolio :

A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, as well as their funds counterparts, including mutual, exchange-traded and closed funds. Portfolios are held directly by investors and/or managed by financial professionals. Prudence suggests that investors should construct an investment portfolio in accordance with risk tolerance and investing

Tick Size :

Tick sizes dictate the minimum standards at which the price of a particular security can move. If a stock had a tick size of $0.50 and a current price of $20, the associated price can move to $20.50, but cannot move to $20.25. Tick sizes can be increments that do not exist in physical currency, such as notes and coins. For example, the New York Stock Exchange (NYSE) had a set tick size of $0.0625 in the year 1997.

Circuit :

A trading curb, sometimes referred to as a circuit breaker is a financial regulatory instrument that is in place to prevent stock market crashes from occurring. Since their inception, circuit breakers have been modified to prevent both speculative gains and dramatic losses within a small time frame.

Right Issue :

A rights issue is a dividend of subscription rights to buy additional securities in a company made to the company's existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a non-dilutive pro rata way to raise capital.

Stock Bonus :

After all, they are getting extra shares of the company for free. A bonus share issue shows that the company is confident about the business's capacity to generate value for a larger number of investors. It also helps boost trading of the shares in the stock market as more number of shares is traded.

Stock Splits :

All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision by the company's board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders. ... A stock's price is also affected by a stock split

Margin :

Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally. To trade on margin, you need a margin account.

Premium :

Premium has multiple meanings in finance: (1) it's the total cost to buy an option, which gives the holder the right but not the obligation to buy or sell the underlying financial instrument at a specified strike price; (2) it's the difference between the higher price paid for a fixed-income security and the security's .

Discounting :

Discounting is a financial mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee. Essentially, the party that owes money in the present purchases the right to delay the payment until some future date.

Market Lot :

In terms of stocks, the lot is the number of shares you purchase in one transaction. In terms of options, a lot represents the number of contracts contained in one derivative security. The concept of lots allows the financial markets to standardize price quotes

Roll Over :

Derivatives is popularly known as "F&O" in Indian stock markets. Whatever position you have taken in "futures" will be squared off at the end of the "futures" end date. Instead you square off the position in near month and initiate a fresh position in "mid month" or "far month" in futures, is "Roll over"

Option :

After all, options can be used to bet on the direction of a stock's price, just like thestock itself. However, options have different characteristics than stocks, and there is a lot of terminology beginning option traders must learn. SEE: Options Basics.Options 101. Two types of options are calls and puts..

Call :

A call option is an agreement that gives an investor the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a specified price within a specific time period. It may help you to remember that a call option gives you the right to call in, or buy, an asset. You profit on a call when the underlying asset increases in price.

Put :

A put option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.

Long Position :

A long (or long position) is the buying of a security such as a stock, commodity or currency with the expectation that the asset will rise in value. In the context of options, long is the buying of an options contract

Expire :

CNX Nifty futures contracts expire on the last Thursday of the expiry month. If the last Thursday is a trading holiday, the contracts expire on the previous trading day.

Beta :

A beta of less than 1 means that the security is theoretically less volatile than the market. A beta of greater than 1 indicates that the security's price is theoretically more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.

Divercification :

In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towardsdiversification is to reduce risk or volatility by investing in a variety of assets.

Divident :

A dividend is defined as a payment made by a corporation to its shareholders. Usually these payouts are made in cash (called “cash dividends”), but sometimes companies will also distribute stock dividends, whereby additional stock shares are distributed to shareholders. Stock dividends are also known as stock