Stock Education

Stock Education Definition

A unit of ownership that represents an equal proportion of a company's capital. It entitles its holder (the shareholder) to an equal claim on the company's profits and an equal obligation for the company's debts and losses.

Two major types of shares are (1) ordinary shares (common stock), which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings, and (2) preference shares (preferred stock) which entitle the shareholder to a fixed periodic income (interest) but generally do not give him or her voting rights.

Benefits of owning shares

What are the benefits if you own shares? There are many other benefits as we have explained in the following paragraphs:

EARN DIVIDENDS.

Dividends are nothing but a part of company’s profits distributed to its share holders. The company’s management may declare dividends either in between a financial year (called interim dividends) or at the end of the financial year (called final dividends).However, it is not mandatory for the companies to pay dividends. It can use the profits for alternative uses like expansion. The decision to pay or not to pay dividends is taken at the annual meeting by the majority voting of the shareholders. Blue-chip companies (large companies) generally are consistent dividend payers.

CAPITAL APPRECIATION.

As the company expands and grows, it acquires more assets and makes more profit. As a result, the value of its business increases. This, in turn, drives up the value of the stock. So when you sell, you will receive a premium over what you paid. This is known as capital gain and this is the main reason why people invest in stocks. They aim capital appreciation.

RECEIVE BONUS SHARES

For the time being, let us understand that bonus shares are – Free shares are given to you .Later on we will discuss about bonus shares in detail.

RIGHTS ISSUE

A company may require more funds to expand it’s business and for that, it may need more funds. I such cases, the company can issue further shares to the public. However, before approaching the public, the existing shareholders will be given a chance to subscribe to more shares if they want. That’s called a rights issue. This is done in order to ensure that the existing shareholders maintain the same degree of control in the company. Thus you can maintain the participation in the company profits.

SHARES CAN BE PLEDGED

Shares are considered as assets and hence, banks accept shares as security for raising loans. Should there be an an emergency, shares can quickly pledged to raise funds. Apart from that, Brokerage firms allow you to borrow money from their account based on the current share holding you have in your demat account maintained with them. If you want to utilize a sudden surprise opportunity in markets, but if you don’t have the cash right now, you can adopt this route.

HIGH LIQUIDITY

Shares are highly liquid. It can be converted into cash in no time. With online trading, all it takes is the click of button to sell you holdings. You can receive your cash in two days.

CAPITAL APPRECIATION OR DIVIDENDS?

The above mentioned income sources may not be present in every company you buy. For example- if you’re buying company that has a huge potential to grow, it may not pay it’s surplus as dividends. Instead, it will be used for further growth. In such cases, huge capital appreciation may happen. So depending upon your investment strategy, you’ll have to choose what you want. It’s always wise to go for capital appreciation rather than dividends.

Basic charcteristics of shares:

SHARES OR STOCKS?

That’s right. The first step is to clarify that point.  ‘Shares’ and ‘stocks’ mean the same thing. Shares are collectively called stocks. So if your friend says that he owns stocks, what he means to say is that he has bought shares in many companies. But if he says he owns shares, he’s being specific there. What he means to say is that he has bought shares of a particular company.

CHARACTERISTICS OF SHARES

Shares have these following distinctive characteristics:

Ownership rights.

When you buy a share, you are buying a piece of that company – you become its part owner. That ownership gives you certain rights, including voting on important matters of the company and participating in the profits.

High profit potential.

When you buy stocks, you become the owner to that extent and when the company makes more and more profits and expands, the demand for its shares will also rise. As a result, the share prices also move up. As an owner, you already have rights in its profits. Now, as the demand for the shares goes up, a second benefit in the form from of appreciation in capital invested opens up.

For example: Many of the early employees of Infosys are millionaires because their stock has gone up dramatically.

Risk

However what if the company dint make profits as expected? There won’t be much demand for it’s shares nor it will carry a high rate of profit share. Hence, along with the potential for extraordinary gain comes the potential for high loss. These two go hand in hand. If you are not careful in choosing a company, you can lose money by investing in stocks. Not only in stocks, in fact, have even the safest savings deposits carried unseen risks. When you account for inflation and taxes, you’ll find that most of the so called risk free investments are not so safe.

Source of Income

We have already explained that. Since share holders are part owners of the company, they are entitled to get a part of the annual profits of the company. Shareholders get income by way of dividends and bonus shares.

KNOW IT

• Shares and stocks mean the same thing. Shares are collectively called stocks.
• Shares give you right to ownership, voting, decision making and profits in a company.
• Investment in shares can be risky if recklessly done.
• Share investments have the potential to make you millionaires.
• It gives you income in the form of dividends and bonuses.

DEMAT Account

DEMAT Account Meaning:

In India’s banking terminology, the term DEMAT Account refers to a deposit made at an Indian financial institution that can be used for investing in shares of stocks and other financial assets. Securities are held electronically in a DEMAT Account, thereby eliminating the need for physical paper certificates.

DEMAT Account Example:

For example, a DEMAT Account became available after India adopted the DEMAT system for the electronic storing of stock shares and other securities in 1996. DEMAT is short for “Dematerialized” and such accounts require that an investor open an account with an investment broker linked to a savings or other funded account. Access to a DEMAT Account requires both an Internet and transaction password, and such accounts allow for the transfer of securities without any physical certificates changing hands. This feature helps prevent problems such as: loss, forgery or theft of the certificates and makes the process of buying and selling securities much more efficient.

The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai. NSE was established in 1992 as the first demutualized electronic exchange in the country. NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered easy trading facility to the investors spread across the length and breadth of the country.

NSE has a market capitalization of more than US$1.65 trillion, making it the world’s 12th-largest stock exchange as of 23 January 2015.^[1] NSE's flagship index, the CNX Nifty,the 50 stock index, is used extensively by investors in India and around the world as a barometer of the Indian capital markets.

NSE was set up by a group of leading Indian financial institutions at the behest of the government of India to bring transparency to the Indian capital market. Based on the recommendations laid out by the government committee, NSE has been established with a diversified shareholding comprising domestic and global investors. The key domestic investors include Life Insurance Corporation of India, State Bank of India, IFCI Limited IDFC Limited and Stock Holding Corporation of India Limited. And the key global investors are Gagil FDI Limited, GS Strategic Investments Limited, SAIF II SE Investments Mauritius Limited, Aranda Investments (Mauritius) Pte Limited and PI Opportunities Fund I.

NSE offers trading, clearing and settlement services in equity, equity derivatives, debt and currency derivatives segments. It is the first exchange in India to introduce electronic trading facility thus connecting together the investor base of the entire country. NSE has 2500 VSATs and 3000 leased lines spread over more than 2000 cities across India.

The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock exchange in 1993 under theSecurities Contracts (Regulation) Act, 1956 404, when P. V. Narasimha Rao was the Prime Minister of India and Manmohan Singh was the Finance Minister. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The capital market (equities) segment of the NSE commenced operations in November 1994, while operations in the derivatives segment commenced in June 2000.

How NSE brought about a paradigm shift in Financial market

NSE was mainly set up to bring in transparency in the markets. Instead of trading membership being confined to a group of brokers, NSE ensured that anyone who was qualified, experienced and met minimum financial requirements was allowed to trade. In this context, NSE was ahead of its times when it separated ownership and management in the exchange under SEBI's supervision. The price information which could earlier be accessed only by a handful of people could now be seen by a client in a remote location with the same ease. The paper-based settlement was replaced by electronic depository-based accounts and settlement of trades was always done on time. One of the most critical changes was that a robust risk management system was set in place, so that settlement guarantees could protect investors against broker defaults.

NSE was also instrumental in creating the National Securities Depository Limited (NSDL) which allows investors to securely hold and transfer their shares and bonds electronically. It also allows investors to hold and trade in as few as one share or bond. This not only made holding financial instruments convenient, but more importantly eliminated the need for paper certificates and greatly reduced the incidents of forged or fake certificates and fraudulent transactions that had plagued the Indian stock market. The NSDL's security, combined with the transparency, lower transaction prices and efficiency that NSE offered, greatly increased the attractiveness of the Indian stock market to domestic and international investors.

Markets

NSE offers trading in the following segments:

Equities

• Equities
• Indices
• Mutual Funds
• Exchange Traded Funds
• Initial Public Offerings
• Security Lending and Borrowing Scheme

Derivatives

• Equity Derivatives (including Global Indices like CNX 500, Dow Jones and FTSE )
• Currency Derivatives
• Interest Rate Futures

Debt

• Corporate Bonds

Equity Derivatives

The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the launch of index futures on 12 June 2000. The futures and options segment of NSE has made a global mark. In the Futures and Options segment, trading in CNX Nifty Index, CNX IT index, Bank Nifty Index, Nifty Midcap 50 index and single stock futures are available. Trading in Mini Nifty Futures & Options and Long term Options on CNX Nifty are also available. The average daily turnover in the F&O Segment of the Exchange during the financial year April 2013 to March 2014 stood at Rs 1,52,236 crore.

On 29 August 2011, National Stock Exchange launched derivative contracts on the world’s most followed equity indices, the S&P 500 and the Dow Jones Industrial Average. NSE is the first Indian exchange to launch global indices. This is also the first time in the world that futures contracts on the S&P 500 index were introduced and listed on an exchange outside of their home country, USA. The new contracts include futures on both the DJIA and the S&P 500, and options on the S&P 500.

On 3 May 2012, the National Stock exchange launched derivative contracts (futures and options) on FTSE 100, the widely tracked index of the UK equity stock market. This was the first of its kind of an index of the UK equity stock market launched in India. FTSE 100 includes 100 largest UK listed blue chip companies and has given returns of 17.8 per cent on investment over three years. The index constitutes 85.6 per cent of UK’s equity market cap.

On 10 January 2013, the National Stock Exchange signed a letter of intent with the Japan Exchange Group, Inc. (JPX) on preparing for the launch of CNX Nifty Index futures, a representative stock price index of India, on the Osaka Securities Exchange Co., Ltd. (OSE), a subsidiary of JPX.^[4]

Moving forward, both parties will make preparations for the listing of yen-denominated CNX Nifty Index futures by March 2014, the integration date of the derivatives markets of OSE and Tokyo Stock Exchange, Inc. (TSE), a subsidiary of JPX. This is the first time that retail and institutional investors in Japan will be able to take a view on the Indian markets, in addition to current ETFs, in their own currency and in their own time zone. Investors will therefore not face any currency risk, because they will not have to invest in dollar denominated or rupee denominated contracts.

Currency Derivatives

In August 2008, currency derivatives were introduced in India with the launch of Currency Futures in USD INR by NSE. It also added currency futures in Euros, Pounds and Yen. The average daily turnover in the F&O Segment of the Exchange on 20 June 2013 stood at Rs 41,926.16 crore in futures and Rs 27,397.70 crore in options, respectively.

Interest Rate Futures

In December 2013, exchanges in India received approval from market regulator SEBI for launching interest rate futures (IRFs) on a single GOI bond or a basket of bonds that will be cash settled. Market participants have been in favour of the product being cash settled and being available on a single bond. NSE will launch the NSE Bond Futures on 21 January on highly liquid 7.16 percent and 8.83 percent 10-year GOI bonds. Interest Rate Futures were introduced for the first time in India by NSE on 31 August 2009, exactly one year after the launch of Currency Futures. NSE became the first stock exchange to get an approval for interest-rate futures, as recommended by the SEBI-RBI committee.

Debt Market

On 13 May 2013, NSE launched India's first dedicated debt platform to provide a liquid and transparent trading platform or debt related products.

The Debt segment provides an opportunity to retail investors to invest in corporate bonds on a liquid and transparent exchange platform. It also helps institutions who are holders of corporate bonds. It is an ideal platform to buy and sell at optimum prices and help Corporates to get adequate demand, when they are issuing the bonds.

Trading schedule

Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the equities segment are:

• (1) Pre-open session
  • Order entry & modification Open: 09:00 hrs
  • Order entry & modification Close: 09:08 hrs^*

^*with random closure in last one minute. Pre-open order matching starts immediately after close of pre-open order entry.

• (2) Regular trading session
  • Normal/Retail Debt/Limited Physical Market Open: 09:15 hrs
  • Normal/Retail Debt/Limited Physical Market Close: 15:30 hrs.

Exchange Traded Funds and Derivatives on NSE

The following products are trading on CNX Nifty Index in the Indian and international Market:

• 7 Asset Management Companies have launched exchange-traded funds on CNX Nifty Index which are listed on NSE
• 15 index funds have been launched on CNX Nifty Index
• Unit linked products have been launched on CNX Nifty Index by several insurance companies in India
• World Indices

Derivatives Trading on CNX Nifty Index:

• Futures and Options trading on CNX Nifty Index
• Trading in CNX Nifty Index Futures on Singapore Stock Exchange(SGX)
• Trading in CNX Nifty Index Futures on Chicago Mercantile Exchange(CME)

An investor is a person who allocates capital with the expectation of a future financial return. Types of investments include: equity,debt securities, real estate, currency, commodity, derivatives such as put and call options, etc. This definition makes no distinction between those in the primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. An investor who owns a stock is a shareholder.

Definition of trader:

An individual who engages in the transfer of financial assets in any financial market, either for themselves, or on behalf of a someone else. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.

The Five Pillars Of Success As An Investor

From my eight years of experience as a stock market analyst and investor, and from my readings of the world’s greatest investors, I have learnt that successful investing (that makes you rich while keeping you sane) depends on just a few factors.

In fact, there are five key factors – I call them ‘pillars of investing’ – that define successful investing.

Value Investing for Smart People, as a course, is a series that works through these five pillars, systematically introducing you to the most important concepts I think every stock market investor must know about.

These are the cornerstones of how to sensibly invest in stocks, using everything I’ve learned over the years. Ready?

Pillar 1: The Business
A stock is a share in a business. Repeat it! A stock is a share in a business.

A stock is not a piece of paper like speculators and traders treat it as. A stock represents part ownership in a business. Benjamin Graham, the father of value investing, wrote that ‘investment is most intelligent when it is most businesslike’.

This is a statement which Warren Buffett has regarded as the most important words about investing ever written. Value Investing for Smart People will show exactly what this means for you as an investor.

Pillar 2: Circle of competence
‘Do what you are best at’ is one important advice that every teacher gives her students. This is exactly what the teachers of value investing will tell you – never stray outside your circle of competence…outside what you know.

In simpler terms, you must invest in a company whose business you can understand with ease. Great investors have become great by following this very principle of ‘circle of competence’. And those who did not give a heed to this, their poor stock market returns speak for themselves.

Value Investing for Smart People will show you the relevance of this key pillar of investing, and how it matters so much to the way you invest in stocks.

Pillar 3: Intrinsic value
“Price is what you pay, value is what you receive,” goes the famous saying. We employ this in everything we buy. And we almost never pay a price that we believe is higher than the value a thing provides.

But this principle is rarely used when it comes to investing in the stock markets. Value is rarely considered a determinant of the price most people pay for stocks they buy.

Value Investing for Smart People will show exactly why it is a bad policy to not consider the value of a business before buying its stock.

Pillar 4: Mr. Market
Stock prices fluctuate, sometimes wildly. Some of these fluctuations aren’t bad! In fact, these provide the sensible, value investor a good hunting ground to identify quality stocks at throwaway prices.

As Buffett once said, “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”

Value Investing for Smart People will show you precisely how you can deal with Mr. Market to your advantage.

Pillar 5: Margin of safety
These are considered the three most important words in investing.

Margin of safety is simply the difference between the intrinsic value of a stock (or the core value of its underlying business) and its market price. It suggests that one should buy a stock only when its intrinsic value is worth more than its price in the stock market.

The key advantage of using margin of safety while investing is that it minimizes the chances of permanent loss of capital. Value Investing for Smart People will explain you in a simple manner how you can include the margin of safety principle in your investing to preserve your capital.

Trading psychology is the single most important aspect determining a Trader's success. Whilst this may surprise many, specifically those who are new to Trading, the psychological makeup of a Trader is more important than their market knowledge, market analysis, and even their money management.

One of the reasons why psychology is so important is that even the best information can be distorted or abused by a poor mindset.

Infact, trading errors are commonly induced by emotions experienced from previous trades, lack of judgement, fear of greed, fear of missing out, or even fear of success.

Sixty points to success

1. As a new investor, be prepared to take some small losses. 
2. Always cut your losses at 8% below your purchase price. 
3. Persistence is key when learning to invest. Don’t get discouraged.
4. Learning to invest doesn’t happen overnight. It takes time and effort to become successful at it.
5. When getting started, it is important that you pick the right full service or discount brokerage. If you use a broker, make sure he or she has a good track record.
6. As a beginner, set up a cash account, not a margin account.
7. It only takes Rs.25,000 to get started. Experience is a great teacher. 
8. Avoid more volatile types of investments, such as futures, options, and foreign stocks.
9. Concentrate on a few, high-quality stocks. There’s no need to own twenty or more stocks.
10. Don’t get emotionally involved with your stocks. Follow a set of buying and selling rules, and don’t let your emotions change your mind.
11. Don’t buy a stock under Rs.15 a share. The best companies that are leaders in their fields simply do not come at Rs.15 or Rs.20 per share.
12. Learning from the best stock market winners can guide you to tomorrow’s leaders. (navigate our stock chart examples archives)
13. Always do a post-analysis of your stock market trades so that you can learn from your successes and mistakes.
14. A combination of fundamental and technical investment styles is essential to picking winning stocks.
15. Fundamental analysis looks at a company’s earnings, earnings growth, sales, profit margins, and return on equity among other things. It helps narrow down your choices so that you are only dealing with quality stocks.
16. Technical analysis involves learning to read a stock’s price and volume chart and timing your decisions properly.
17. To make big money, you have got to buy the very best companies at the right time.
18. Strong sales and earnings are amongst the most important characteristics of winning stocks.
19. Buying a stock as it is coming out of a price consolidation area or base is crucial to making large gains.
20. Always pick stocks from the leading industry groups or sectors. The majority of past market leaders were in the top industry groups and sectors.
21. Many big winning stocks come from sectors such as drugs and medical, computers, communications technology, software, specialty retail, and leisure and entertainment.
22. Volume is the actual number of shares traded by a stock .
23. Stocks never go up by accident. There must be large buying, typically from big investors such as mutual funds and pension funds.
24. In studying the greatest stock market winners over the past 45 years, bases formed just before the stock broke out into new high ground in price and then went on to make their biggest gains.
25. The most common pattern is a “cup with handle” names so because it resembles a coffee cup when viewed from the side.
26. The optimal buying point of any stock is the “pivot point”.
27. On the day a stock breaks out, volume should increase by 50% or more above its average.
28. A decrease in price on decreased volume indicates no significant selling.
29. Replace the old adage, “buy low and sell high” with “buy high and sell a lot higher.”
30. You want to buy a stock at its pivot point. Don’t chase a stock up more than 5% past its pivot.
31. Chart price and volume action frequently can help you recognize when a stock has reached its top and should be sold.
32. History always repeats itself in the stock market.
33. Most big stock market leaders breaking out of a sound base will go up 20% in eight weeks or less from the pivot point. Never sell a stock that does this in four weeks or less, you may have a big winner.
34. The general market is represented by leading market indices like Nifty and S&T500. Tracking the general market is key because most stocks follow the trend of the general market.
35. Ignore personal opinions about the market.
36. A typical bear market will decline 20% to 25% from its peak price. A negative political or economic environment could cause a more severe decline.
37. Knowing when to both buy a sell a stock is key for success.
38. three out of four stocks , regardless of how “good’ will eventually follow the trend of the overall market.
39. After four or five days of distribution within a two to three week period, the general market will normally trend downwards.
40. Bear markets create fear and uncertainty. When stocks hit bottom and turn up to begin the next bull market loaded with opportunities, most people simply don’t believe it.
41. At some point on the way down, the indices will attempt to rebound or rally. A rally is an attempt by a stock or the general market to turn up and advance in price after a period of decline.
42. Most technical market indicators are of little value. Psychological indicators like the Put-Call ratio can help confirm changes in the market’s direction.
43. Once you determine you are operating in an uptrending general market, you need to pick superior stocks.
44. Potential winners will have strong earnings and sales growth, increasing profit margins and high return on equity (17% or more). They should also be in a leading industry group.
45. Using a chart service can help you determine if the timing is right to buy a stock.
46. There are two basic types of investors: growth stock investors and value investors.
47. Growth investors seek companies with strong earnings and sales growth, superior profit margins, and a return on equity of over 17%.
48. Value investors search for stocks that are undervalued and have low P/E ratios.
49. When starting to invest, keep it simple. Only invest in domestic stocks or mutual funds.
50. You get what you pay for in the market. Low-priced stocks are usually cheap for a good reason.
51. Options are risky because investors do not only have to be right about the direction of the stock but also about the time frame in which they believe the price will go up or down.
52. Futures, due to their highly speculative nature, should be attempted only be people with several years of successful investment experience.
53. Wide diversification and asset allocation are not necessary. Concentrate your eggs in fewer basket, know them well and watch them carefully.
54. If you have less than Rs.50,000 to invest, only own one or two stocks. If you have Rs.1,00,000-two or three stocks; Rs.1,50,000-three or four stocks; Rs.50,000-four or five stocks; and, Rs.2,00,000 or more-own no more than six stocks.
55. If you already own the maximum number of stocks buy want to add a new stock to your portfolio, force yourself to sell the least profitable stock to get money for the new name.
56. When purchasing a stock, only buy half of your desired position at the initial buy point. Buy a small amount more if the price rises 2% or 3% above your first buy. Average up in price, never down.
57. Don’t let yourself lose money after you already had a reasonable profit.
58. 40% of stocks will pull back to their initial buy point-sometimes on big volume- for one or two days. Don’t let this shake you out of your stock.
59. stock if its Sell a  earnings per share shows a major deceleration in growth for two quarters in a row.
60. For detail please call, contact mobile No.+919581002911