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There are different types of investment stocks available in the stock market such as debt fund stocks, mid cap stocks, growth stocks and more.
Many investors invest in these stocks to get high returns with limited investments. However, there are other stocks too, that give investors regular payments against investment amounts. Such stocks are known as dividend-paying stocks.
Investing in dividend stocks is a great choice as it allows investors to meet their cash requirements as well as gives them a chance to see their stock value grow upward in the future.
Here, we will discuss everything about dividend-paying stocks and the rules you should follow while investing in them.
Before, getting started, let’s get acquainted with the term “Dividend”.
Dividends can be cash, reward or anything that a company gives to its shareholders against the shares they bought of a company.
Dividends can be issued in several forms such as cash payments, stocks or other forms.
A company’s dividend is decided by its board of directors and it requires the shareholders’ approval as well.
A company does not need to declare its dividend. It is a part of a company's profit that the company distributes to its shareholders.
Before investing in dividend stocks, it is important to do a stock market research and get detailed knowledge about a company and the sector in which it operates. This is because the potentiality of a dividend stock is highly dependent on the company’s fundamentals and the sector that it belongs to.
For instance, if the company operates in a volatile sector that is highly fluctuating in nature such as energy, it would affect the dividend price for sure.
Therefore, be careful before investing in these stocks. Also, don't forget to check the basic details of a company (stock value, past performance) and the risks associated with it.
Investing in the companies that give consistent dividend payout is always considered a better option. Consistent dividend payments is a sign of a strong company. This means, the company is constantly growing and has a strong background with long term stability.
Dividend incomes generated by these companies are consistent. Even if the dividend increases by a small number per year, they can give you incremented results due to compounding effects.
It is important to check the debt ratio of a company before opting for dividend stocks. If a company pays a good dividend payment despite having a high debt; then check the company details carefully.
They do so just to keep their stocks valuable. Hence, always check the debt market ratio of a company as the lower the ratio is; the more stable the company is or vice versa.
If the debt market ratio of a company hasn’t decreased with the time despite paying a high dividend, it would be ideal to not invest in such stocks as the debt impacts the value of the stocks which also affect the dividend payments in the future.
Many of you might think the stocks that offer a high dividend yield can be great stock. However, this is not so true. Sometimes, a high dividend yield is a way to mislead you.
Companies that pay a high dividend yield may be a sign of underperforming security and therefore it is of no use. Therefore, don't make decisions that completely depend on high dividend yield. While doing so, kindly check other factors too (debt market cap ratio, stock’s value, performance, future growth etc).
The payout ratio tells the company’s ability to support dividend payouts. If the ratio exceeds 1 then the company pays more dividend to its shareholders than its earnings which makes it ambiguous about the company’s asset value and long term stability.
The following steps can be used to identify the potential dividend stocks:
Step1: Check out the profit and loss of a company.
Step2: Check the earnings per share of a company i.e. whether it has grown in the 5 years or not.
Step3: Measure the growth of dividends per share in the last 5 years.
Step4: Compare if EPS growth and dividend per share growth are similar.
If EPS and Dividends per share growth are similar then the company is trustworthy, know why?
Which is a better place to invest in; dividend yield stocks or Fixed Deposits? Many investors find FDs is the better place to invest while stock market lovers give preference to good dividend yield stocks than FDs.
Although both the instruments provide better returns to investors, the difference may depend on the investors.
Dividend stocks offer three benefits to the investors:
First: Although the starting yield on the dividend is slow compared to FD’s interest, it improves with time. Also, good dividend stocks provide stable yield income in the short term.
Second: Dividend stocks provide you with long term gain. Dividend per share will also improve yield on the dividend. Another advantage is: as the share price will also improve with time which provides a double profit for the investors.
If we talk about Fixed Deposits, then the interest rate is fixed. Also, it will never grow with time.
Dividend-paying stocks are the additional ones issued to the shareholders as a reward. Nevertheless, dividend-paying stocks provide consistent returns to their shareholders, one should not invest in such stocks without getting complete information about the company. Just because the company pays a high dividend doesn't necessarily mean it has good worth. Therefore, it would be ideal if you check the company’s annual report, earning growth, consistency of dividend payouts before investing in such stocks.
The rate of progress in AI has been very irregular and unpredictable. The global artificial intelligence market size was projected at USD 39.9 billion in 2019 and is expected to reach USD 62.3 billion in 2020, is probably to grow at a compound annual growth rate of 42.2% from 2020 to 2027 to reach USD 733.6 billion by 2027. Organizations are implementing AI for varied business applications.
The technology provides real-time data gathering, forecasting, and analysis for delivering greater insight in industry verticals, like automotive, healthcare, retail, finance, and manufacturing.
The banking, financial services and insurance industry have undergone a dynamic transformation because the industry requires improvement in areas like fraud detection, wealth management and insurance processing.
By implementing AI BFSI firms can meet strategic objectives like improving customer experience, cost and efficiency optimization, delivering personalized services and improving speed-to-market for offerings.
The manufacturing industry deals with vast quantities of knowledge due to the utilization of sensors and networks,93% of companies believes AI is going to be an essential technology so as to drive growth and innovation within the sector.
87% of manufacturers have adopted AI or planned while 83% hold that AI will make a tangible impact on manufacturing and management within the following 5 years.
Software led the synthetic intelligence market and accounted for quite a 39.0% share of the worldwide revenue in 2019, due to prudent improvements in information storage capacity, high computing power, and multiprocessing capabilities to deliver high-end AI software in dynamic end-use verticals.
Machine learning and Deep learning has led the market and accounted for quite a 39.0% share of the worldwide revenue in 2019, due to its complicated data-driven applications, including text/content or speech recognition.
As an example, in March 2018, NVIDIA Corporation announced a strategic partnership with Arm Limited to bring deep learning inference to the web of Things (IoT) and consumer electronics devices within the global marketplace.
The advertising and media segment led the market and accounted for quite a 20.0% share of the worldwide revenue in 2019. The healthcare sector is gaining a number one share supported use-cases, like robot-assisted surgery, dosage error reduction, and automatic image diagnosis. The BFSI segment includes financial analysis, risk assessment, and investment/portfolio management solicitations.
North America dominated the AI market and accounted for over 42.0% share of worldwide revenue in 2019. This is often due to the presence of leading players within the region, a strong technical adoption base, and the availability of state funding. The Asia Pacific is estimated to witness significant growth in the market for artificial intelligence.
In September 2019, IBM Watson Health signed an agreement with Guerbet, for the event of an AI software solution for cancer diagnostics and monitoring. Moreover, in January 2019, Intel Corporation announced its partnership with Alibaba Group Holding Limited (China), to co-develop AI-powered tracking technology to be deployed at the Olympic Games 2020.
Some key players operating within the AI market include Atom wise, Inc.; Life graph; Sense.ly, Inc.; Zebra Medical Vision, Inc.; Baidu, Inc, Google LLC; Intel Corporation; and Microsoft Corporation etc.
Globally there is a trend of startups growing in the market. Hence key players are taking several strategic initiatives, such as mergers and acquisitions, partnerships, and collaborations with other major companies so as to offer customized artificial intelligence solutions to fulfil the rising needs of the industries and to expand globally in order to enhance their offerings these players are acquiring startups.
Investments that are rising in research and development by leading players also will play an important role in increasing the uptake of AI technologies.
For example, the Chinese tech giant Alibaba's research institute Damo Academy has developed a diagnostic algorithm that can detect new coronavirus cases with the chest computed tomography (CT) scan. The AI model utilized in the system has been trained with the sample data from over 5,000 positive coronavirus cases.
In December 2019, Intel Corporation has completed the acquisition of Habana Labs Ltd., an Israel-based deep learning company. This acquisition is estimated to strengthen Intel Corporation’s AI portfolio and encourage its efforts within the AI silicon market.
The retail industry is expected to grow significantly: the expectation is that 80% of executives will adopt AI-powered intelligent automation. It is because of customer changing habits. Artificial intelligence technology in retail offers various benefits such as predictive merchandising, programmatic advertising, market forecasting, in-store visual monitoring & surveillance, and location-based marketing.
This is likely to boost cloud adoption. On-premises has led to gain maximum shares. Owing to less implementation expense cloud deployment is gaining traction. Eg is amazon which offers easy image recognition, chatbots, etc. so cloud deployment would be in demand in few years.
Use of machine learning, NLP and computer vision: machine learning is gaining popularity because of precision in analysis. Which the increasing application for chatbots and virtual assistant is boosting demand for NLP technology. Ml technology is required mostly in healthcare sectors computer vision is another one.
The fusion of air and cloud computing can help to grow market segments. Companies with fewer funds can rely on cloud computing for the services. For eg.veritone has use cloud computing for building it AI operating system. Startups are using fusion to expand globally.
Increasing use of AI will increase chances in the service market: three components of the market are taken into account they are: hardware, services and AI software. Hardware will grow because of semiconductor companies.
Enterprises will be enabled to increase the use of AI of network optimization to optimize their inventory by making orders that supported the estimated demand, current inventory level, and time interval.
Al can help telecom providers to create self-optimizing networks (SONs), which may provide network operators with the power to automatically optimize their network quality counting on traffic information by zone and region. Poor availability of skilled workforce and high cost of implementing AI.
A major challenge for the expansion of Al within the telecommunication industry is that the shortage of technical expertise among the workforce.
Enterprises implementing Al are required to possess sound knowledge on working with Al software platforms and periodic servicing necessities to make sure smooth operations.
Investing wisely is key to building wealth over time, but one common question that many investors have is: "When is the best time to invest?" Understanding market timing can help you make informed decisions and potentially enhance your investment returns. In this blog, we'll break down what market timing is, why it's important, and how you can approach it in a simple and straightforward way.
Market timing refers to the strategy of making investment decisions based on predicting the future movements of the market. The goal is to buy low and sell high, or to avoid buying when you expect the market to fall. Essentially, it's about finding the optimal times to enter or exit investments to maximize profits or minimize losses.
While market timing sounds appealing, it comes with significant challenges:
While perfect market timing is elusive, you can use several strategies to improve your investment decisions:
The best time to invest is not about pinpointing the perfect moment but about adopting a strategic approach that aligns with your financial goals and risk tolerance. While market timing can offer potential benefits, it also comes with challenges and risks. By focusing on long-term investing, dollar-cost averaging, and keeping up-to-date, you can make more insightful decisions and improve your chances of achieving your investment goals. Remember, successful investing is often more about strategy and discipline than trying to time the market perfectly.
Recently, fantasy sports has become the talk in the world of virtual gaming. This is because playing fantasy games is one of the most popular hobbies of sports fans around the world. There are people who love to play virtual gaming while there are other people who have no clue about it.
It is currentlyIn recent years, fantasy sports have gained massive popularity, with millions of people participating globally. The excitement of creating virtual teams and earning rewards based on real-life performances of athletes makes it appealing to sports enthusiasts. Given its growth, you might think that investing in the fantasy sports business is a great idea. However, despite its rapid expansion, investing in fantasy sports comes with significant risks that make it a less-than-ideal option.
In this blog, we will explore why fantasy sports businesses might not be the best choice for investment, focusing on market uncertainties, regulatory challenges, financial risks, and ethical concerns.
One of the biggest challenges the fantasy sports industry faces is regulatory uncertainty. Fantasy sports often operate in a grey area of the law, particularly when it comes to gambling regulations. In many countries, fantasy sports are still under scrutiny, with debates about whether they should be classified as a game of skill or a form of gambling.
This legal ambiguity can lead to sudden changes in regulations, making it difficult for companies to operate smoothly. Governments can impose restrictions or even ban fantasy sports platforms, which can cause significant financial losses for investors. For example, countries like India have state-specific laws that either allow or restrict fantasy sports, adding to the complexity for businesses and investors alike.
The fantasy sports market has become highly competitive. Several major platforms dominate the industry, making it difficult for new or smaller businesses to gain a foothold. These established companies have massive marketing budgets and user bases, creating significant barriers to entry for new businesses.
For investors, this means that entering the market is risky because the chances of competing successfully with these big players are slim. With established platforms like DraftKings and Dream11 already capturing a large share of the market, new entrants face an uphill battle for visibility and user acquisition.
Attracting and retaining users in the fantasy sports market can be very expensive. Companies often spend large sums on marketing, advertising, and promotions to build their user base. The cost of acquiring a single customer can be high, and many users tend to participate in fantasy sports only for a short period.
This high user acquisition cost means that businesses need a large volume of users to stay profitable. However, given the intense competition and the short lifespan of customer engagement, maintaining profitability can be difficult. For investors, this presents a significant financial risk, as it requires a continuous flow of capital to sustain growth.
Fantasy sports businesses typically rely on user participation fees or advertising for revenue. However, the revenue model is not always consistent, as it depends heavily on user engagement and the overall interest in sports. For example, if a popular sports league experiences a decline in viewership or faces disruptions (like during the COVID-19 pandemic), fantasy sports platforms could see a significant drop in participation.
Moreover, many users are not willing to pay large sums to participate in fantasy sports. This makes it challenging for platforms to generate consistent revenue without offering substantial prizes or incentives, which can further reduce profitability.
Fantasy sports, especially those that involve betting or monetary rewards, can lead to addictive behavior. Many users get hooked on the thrill of winning and end up spending more money than they can afford. This can lead to financial problems for users and raise ethical concerns for businesses that profit from this behavior.
From an investor’s perspective, supporting a business model that may contribute to addictive behavior and financial hardship for users can be ethically problematic. Negative publicity around addiction and financial irresponsibility can harm the brand’s reputation and reduce the platform’s long-term success.
Fantasy sports platforms are heavily dependent on technology, including mobile apps, data feeds, and online payment systems. Any disruption in these technologies can negatively impact the user experience and lead to financial losses. For example, if a platform’s data feed (which provides real-time sports data) malfunctions or experiences delays, it could cause frustration for users and damage the platform’s credibility.
Additionally, cybersecurity threats are a real concern in the digital space. If a platform is hacked or experiences data breaches, it could result in legal liabilities, loss of user trust, and financial losses for the business and its investors.
Fantasy sports participation often depends on the schedules of major sports leagues. This makes the business highly seasonal. For example, fantasy football platforms see a spike in activity during the football season but may experience a significant decline in user engagement during the offseason.
This seasonality means that businesses and investors cannot rely on steady year-round revenue, which makes it harder to maintain consistent cash flow. The fluctuating nature of user engagement adds to the risk for investors, as businesses may struggle to stay afloat during off-peak periods.
Although many fantasy sports companies argue that their games are based on skill, the lines between fantasy sports and gambling are often blurred. Some countries and states view fantasy sports as a form of gambling, subjecting these platforms to stringent regulations or outright bans.
Investors in these businesses face potential legal risks if the fantasy sports industry is reclassified as gambling in their region. Legal battles and compliance costs can significantly impact the business’s profitability and reputation, further increasing the risks involved in investing in this space.
While the fantasy sports industry may seem like a lucrative opportunity given its rapid growth, it comes with a host of risks that make it less than ideal for investors. Regulatory uncertainty, high competition, costly user acquisition, and ethical concerns are just a few of the challenges that can make this industry a risky bet.
For investors, it’s crucial to carefully consider these risks and explore alternative sectors with more stable revenue models and fewer legal and ethical complications. If you’re looking for safer, more predictable investment opportunities, the fantasy sports business might not be the right choice for your portfolio.
estimated that more than 75 million people will participate in fantasy sports this year, and that number is only going to continue to grow in the future. While fantasy sports or virtual gaming is a great way to spend your free time, there are also some issues with this popular activity.
Well, today, we are going to remove all your doubts about fantasy cricket and we will also try to provide a brief of the risks associated with it.
People nowadays show a great interest in fantasy sports as they find it a great way to stay close with their friends. Also, they find it a great chance of winning money without putting in any effort.
Well, the bitter truth is that these gaming sports are not reliable. Fantasy sports is a part of gambling that can become very addictive if you are not careful. Using your sports knowledge to win money is a huge rush which makes people get addicted to it.
If someone, even if he has adequate knowledge about a sport let's say cricket, there are huge chances that he/she may lose money.
Now, many sports-loving persons find it hard to digest the fact that fantasy sport is gambling. They consider these sports as a game of skills not a game of chance. However, this is not so true. Firstly, try to understand the terms investment and gambling.
We heard many people saying they don’t put their money in share or mutual funds as they don’t like to gamble. However, investing and gambling are two different things.
Gamblers are those who do anything for the winning amount; they are not afraid of taking risks and eventually lose all the money and go empty-handed. Investors, on the other hand, is a well-researched process.
Here are the fundamental difference between investing and gambling:
Gambling is an uncertain event. Investing is an activity that requires much knowledge, research and skills. Gambling on the other hand is an uncertain event that solely depends on emotions.
If someone wants to invest in the right asset, he first needs to do enough research, understands their goals, and financial information. Gambling doesn't require any such information. In the case of fantasy sport, if your money goes, there is no other way to buy it back.
In gambling, the result is dependent on the outcome of throwing a dice i.e. only one participant will win.
While in the stock market, if ten investors hold the shares of the same company and if the price goes up, all of them will make a profit.
Investing is done for the long term. Let’s say for 5 years or it could be extended for 10 years or more. Gambling is done for a shorter period such as for hours, or sometimes it can be stretched to a couple of weeks or months but not for a year.
Investing in share trading, mutual funds or any other assets gives investors ownership of the asset. In gambling, if you put money into it, either you will get more money or no money. There is no ownership assigned to participants at the end of gambling transactions.
Investing can happen with a specific goal in life. The goal could be anything like retirement planning, education, house planning, vehicle planning etc. While batting is done in pleasure to earn more money. One can also plan its future goals based on gambling but the risk is comparatively too high.
Several organizations identify gambling as addictive and lead to severe mental problems. While there are no such cases associated with investing. Instead, investing is a financial practice that is done for a healthy economic life.
It is extremely important to learn the thin line between investing and gambling.
Gambling is quite riskier than investing. The risk tolerance level of gamblers is slightly higher than investors. Gambling is a risk taken under certainty while investing involves risk under uncertain conditions. Gambling mainly depends on luck while investing on the other hand purely depends on practice, patience and knowledge.
Many people think putting money into the stock market is gambling. However, this is not so true. Share market trading in the stock market is not like a dice game.
In fact, trading is one of the best ways of investment as it involves examining past information of stock aka stock market research, analyzing its past performance and predicting its future growth with the help of fundamental analysis and technical analysis and other methods.
To invest in the right stocks, traders analyze their past trades, and then plan out their strategy such as which stocks to buy, at how much quantity and how much amount need to spend. Investors are well known before spending a single penny into it. These are the prerequisite for stock market trading.
Recently, fantasy sports sites were banned in 7 states of India including Tamil Nadu, Telangana, Andhra Pradesh, Odisha, Assam, Nagaland and Sikkim.
Fantasy sports apps is another example of gambling and therefore it is suggested to stay away from such sites. Instead, spend your time investing in different sectors. When it comes to investment, the stock market comes second to none. Investing in the right stocks with adequate knowledge leads to huge gains.
A merchant banker is your one-stop shop for complex financial needs. They're financial specialists who cater to the big leagues of finance, specifically businesses and wealthy individuals. Here's what they do:
Think of them as financial architects, building customized solutions to help your business grow.
Category I Merchant Bankers, certified by SEBI, perform vital functions such as:
Merchant bankers are like financial powerhouses, offering specialized services to fuel the growth of large corporations and high-net-worth individuals. While they may not be as common as commercial banks, their expertise is crucial for complex financial needs.
Immediate Reaction: Corporate actions often cause immediate fluctuations in stock prices. For instance, a dividend announcement can lead to a temporary drop in stock price on the ex-dividend date.
Long-Term Effects: The long-term impact depends on how the corporate action affects the company's overall financial health and future prospects. Successful mergers or strategic stock splits can lead to increased stock prices if they create value and growth opportunities.
Corporate actions are significant events that can influence stock prices in various ways. By understanding these actions—such as dividends, stock splits, bonus shares, mergers, and rights issues—investors can better navigate the stock market. Monitoring these events helps investors make informed decisions and anticipate market reactions, allowing them to align their strategies accordingly.
During volatile times, new investors get disturbed and start to question their own investment strategies. This holds true for new investors who get easily affected by the stock market volatility and wait for the right time until it seems safe for them to dive back into the market.
One thing that investors must be aware of the fact that the stock market volatility can’t be ignored. The basic nature of the stock market is to have highs and lows over the short term. During tough times of volatility, the one-stop solution is "to go for long-term investment and ignore the short-term market fluctuations and gains".
Many experienced investors must be aware of this strategy but also at the same time, they need to have a clear understanding of the volatile market which helps them to overcome any losses.
Before taking a dig deep into investment strategies for investors, let’s have a clear understanding of stock market volatility and its causes:
Stock market volatility is simply a statistical measure of the tendency of a stock market that may rise or fall short at a specific point in time. Volatility occurs due to heavy fluctuations in stock prices and heavy share market trading. Such a situation occurs due to a heavy imbalance of trade orders that happens only in one direction.
Also, the stock market volatility occurs when there are many ups and downs in economic activities.
Other reasons behind the stock market volatility are intraday trading, institutional investors, short-sellers for the high volatility in the stock market.
Besides the above reasons, there is also a behavioral approach that says volatility also depends on the change of mind of the investors. Generally, upward volatility is often considered good by investors, while on the flip side, downward volatility makes investors panic which in turn leads them to radical decision making.
Stock market volatility is usually measured by the standard deviation of the return on investment.
One of the best strategies implemented by investors to deal with the stock market volatility is to stay invested and ignore short term market fluctuations. Implementation of such things can be harder than anyone can imagine as, during a bear market, one’s portfolio can show a loss of at least 50%.
Traders also need to understand the misconception on the buy and hold strategy as such types of investments require a lot of study and understanding how the markets are handled by the fundamentals of a company.
If you have made investments in those stocks in a company that has a strong balance sheet and consistent returns, then your portfolio won’t necessarily get affected by the short-term fluctuations. In fact, such a downfall of the stock market is a good opportunity for the investors as they can buy more potential stocks at a lower price.
A volatile market often seeks a high volume of trading which in turn causes a delay in the execution of orders. Also, due to stock market volatility, the execution of orders occurs at a different price than the market price quoted.
Traders also face slight difficulty in executing trades due to the limited availability of systems and internet access. Even when traders do online trading, one can experience difficulty in accessing the account and hence alternate methods such as calling your broker or faxing them are to be considered.
When the markets are not moving in the predicted direction or deviating from their usual patterns, investors need to be cautious about the stocks they select. In such cases, placing orders with specific instructions can help minimize potential losses due to incorrect quotes.
Diversifying the portfolio can turn out to be a successful stock trading strategy. Diversifying simply means the proper mixing of stocks from different sectors. This strategy can help the best in eliminating the associated risks of the stocks.
A portfolio having stocks from different sectors such as the steel sector, the technology sector, pharma sector will diversify your risk to a greater extent. In case, if there is any fall in one particular sector, you are blessed with other sectors that will help you to regain profit. While selecting a portfolio, it is always suggested to use technical tools for stock analysis and only make a diversified portfolio.
Risk management can turn out to be one of the most efficient strategies, especially during stock market volatility. Being aware of such situations can help you to protect your losses. Also, volatility causes the downfall of stock prices which acts as a good opportunity for the investors to add more stocks to their portfolio. If you have high beta stocks, you can easily manage the risks by swapping the risky stocks with safe stocks.
It’s not necessary to keep all your money invested in the stock market. Keep some money in hand so that you can grab the opportunity if volatility hits the stock market. As volatility occurs in the stock market, the stock price falls drastically and this is the time when cash in hand comes handy.
Purchasing shares during such times when prices are at the bottom can help you make high profits in the long run.
Stock market volatility is inevitable and therefore whenever you enter a stock market, come with the acceptance that every day would not be a good day for a portfolio and when the volatility strikes, it can get worse.
By reading the above points, you can handle the situation in a much better way.
It can be said that investors have to be aware of any potential risks that can occur during stock market volatility. Hence, the experts suggest staying invested, if you are confident about your investment strategy. If you have decided to trade in a volatile market, it is important to be aware of how sudden fluctuations can affect your trades.
If you are a beginner who has just started stock market trading, chances are there you have come with the same confusion. How many stocks should you own in your portfolio in order to make a desired level of diversification?
Well, investing in stock and curating a portfolio that meets your financial requirements is not as easy a task as it seems to be. The correct number of stocks to hold on your portfolio heavily depends on personal factors such as market condition, time horizon and risk appetite and your tendency for reading market news and keeping up to date on your stock holdings.
When it comes to holding the ideal number of stocks in your portfolio, diversification is the main thing that you should focus on. A systematic diversification in your portfolio minimizes investment risks and can increase your chances of yielding huge returns. Also, experts said that diversification is the best way to invest assets in a variety of assets across different sectors.
Let’s discuss the approach at the value of diversification that helps you to identify long term and short term goals that lead to different investment options. The below points will help you to reach a satisfactory conclusion.
For any investor, it would be ideal to maintain a stock that captures 5-6% of the entire portfolio, said Seth Klarman, a successful investor. As said above, the exact number of stocks in your portfolio is a personal choice based on your knowledge skills, risk appetite and time horizon.
Financial experts mostly said that 20 to 30 stocks are an ideal range for any portfolio. Generally speaking, many sources say 20 to 30 stocks is an ideal range for most portfolios. It’s important to maintain a balance between investing in a diverse range of assets and ensuring that you have the time and resources to manage these investments.
As there is no exact answer to this question, many experts believe that somewhere between 20 to 30 stocks are necessary to create a strong portfolio.
Diversification enables you to capitalize on potential growth in one area without losing out too much if another plunges since not all of your money is concentrated in that field.
Diversification plays an important role in creating a portfolio. This is because diversifying your money in multiple sectors ensures your money stays safe. If one or few stocks fell down, the other industries from different sectors can compensate for the losses that occurred from the former stocks.
In the beginning, you can start with stocks, bonds and mutual funds. As long as you get experience further in diversification, you can increase investments which can vary by sector, company size, geographic location and more.
Here are the factors to consider while opting for the ideal number of stocks in the portfolio:
1. Risk tolerance
This is one of the best risk tolerance factors one needs to be accounted for. Once you know your own risk appetite, you can easily select an industry, stocks and sector. Let’s understand with a suitable example. If the stock of one company under performs, the impact on your overall portfolio is negligible.
2. Return Expectation
It should be noted that as the number of stocks in your portfolio increases, the overall returns on your portfolio decreases. This is because some stocks in the stock market outperform the other stocks while many stocks give average returns. So, the higher returns of a few potential stocks might down due to the performance of weak stocks, which in turn heavily impacts the overall portfolio.
Hence, for better returns, it is advisable to lower the number of stocks and diversify so that you can concentrate on specific companies in which you have confidence in them.
3. Research Capability and Bandwidth
Before making a portfolio, it is important to do a stock market research and quality of information as it helps you to make a successful portfolio. Also, it helps to know how many stocks you should buy.
There is a number of aspects you need to figure for your research:
(i) The company’s fundamentals
Before selecting any stock, it is suggested to analyze the fundamentals of a stock. This is because knowing the fundamentals of a stock will provide you with detailed insight into a company. This will help you to opt for a company that will give you maximum returns in the future.
The fundamentals of the accompanying include earnings, profitability, cash flow statements, annual reports, the performance of a stock and operating margins. Picking a stock is just like marrying a company. You need to be 100 per cent confident in the growth proposition of a company. The higher the operating margin, the higher will be the efficiency of a company.
(ii) Capital Structure
The capital structure of a company is another important parameter as it provides stability and liquidity so that the company’s dependence on long term debt is low.
(iii) Management:
Management is a major performance indicator of the company and a stock performs well only if management is focused and growth-oriented. Hence, it is advisable to research management which is of utmost importance.
4. The time horizon of investment
Many investors think that stocks give them overnight returns. However, this is not the case. If you create a healthy stock portfolio, then it would be better if you should not depend on overnight returns. Do remember that equity is a long term investment and most people use the buy and hold strategy for the same.
The ideal stocks one should have in its portfolio should be between 15 to 25. Also, it depends on everyone’s investment strategy. The investment strategy also suggests how many stocks you should own in a portfolio.
Whether you want a concentrated portfolio of high dividend-yielding blue-chip stocks or if you are investing in small-cap stocks or put a large number of stocks to minimize the overall risk of investment. The choice is completely yours.
A stock broker acts as an intermediary, facilitating the buying and selling of stocks and securities in a stock exchange on behalf of financial institutions and firms. Investors cannot directly trade in stock exchanges; hence, the role of a stock broker is crucial.
To successfully carry the transaction of stocks trading, you are required with an intermediary who helps you in purchasing and selling the stocks in a much better way. This intermediary can be a person or a company that is authorized to do the transaction of stocks on your behalf. Such a company or person is known as a stock broker in India.
A stock broker in India can be either a stockbroking firm or an independent entity, providing stockbroking services to customers. The primary role of a stock broker is to execute buy and sell orders for clients, and to offer insights that help investors make insightful decisions.
Before we step into the importance of stock broker, let’s figure out how to choose the best online stock broker:
How to Choose the Best Online Stock Broker?
Selecting the right online stock broker is crucial for successful investing. A good stock broker not only helps you identify potential stocks but also guides you in choosing the best ones for generating returns.
If you are a newbie who wants to invest in stock market trading, it is suggested to pick the best online stock broker, as with the help of it, you can handle all the stock market operations at a fingertips.
Here are some tips to select the best online stock broker:
1. Understand Your Basics
Know your investment needs. Opt for a stock broker who understands your expectations from stock trading. Many online stock brokers charge high brokerage fees, which may not suit new investors. Look for brokers like Swastika Investmart that offer excellent trading services at affordable rates.
2. Stock Market Pricing
It is important to check the pricing of a stock broker before deciding to move further. Try to find out the AMC annual maintenance charges. These charges vary from broker to broker. Some brokers charge very high amounts, while others, like Swastika Investmart, offer competitive and transparent pricing.
3. Range of Trading Segments
Different investors have different priorities in trading financial products such as Equity, commodities, IPOs, FDs and more. Go for the stock broker who has different financial products.
4. Fund Transfer Process
Select a stock broker which comes with 3 in 1 Demat account as the stock broker provides seamless fund transfer services which allow investors to trade with ease. This feature, offered by Swastika Investmart, allows you to trade with ease without constantly transferring money.
5. Expertise of Research Team
While selecting a stock broker, it would be ideal to check the research team provided by the stock broker first. This is because the research reports generated by the stock broker help investors in picking the best stocks that would give them high returns.
In share trading, margin trading refers to the process where individual investors buy more stocks than they can afford. Also known as intraday trading, margin trading allows all the transaction of stocks (buying and selling) in a single day.
Now Intraday’s stock brokers are well capitalized. Here, stock broker lends capital to the traders who want to leverage their positions. A margin amount is to be paid by traders after which they are allowed to take positions in the stock market. Generally, the margin amount is 50%.
Mostly, a broker deals in all types of securities. The stock brokers suggests the best deals to its clients such as when to buy or sell a stock. Majorly suggest the stocks on the basis of advisory, and research reports suggested by them.
A stock broker receives orders from multiple traders and places those orders on a stock exchange. Once the order is successfully placed, trades will get to know about it. However, this is the case with full-service stock broker of India, online brokers facilitate trades with trading platforms where traders can place their orders on their own.
All the orders are automatically visible in your Demat account once they are successfully placed and executed.
Full-service stock brokers charge commissions in the form of brokerage for the services they provide to traders. This charge is some percentage of the trader they provide to clients. Discount brokers charge a flat commission which is pre-decided on every executed order.
Now, many of you have acknowledged the fact that how share trading can play a valuable role in your life. Yes, you heard it right. Investing in online share trading gives you bundles of opportunities to invest in different types of stocks.
Once you gain appropriate knowledge about stock trading, you can easily perform transactions with such ease and book a significant amount of profit. In case you need any help, you can easily connect with an online stock broker, during the initial days. Once you become a thorough expert in buying and selling shares then you can try to do it on your own.
Things you need to know:
PAN Card
For the Demat account opening process, you must require the important document as proof i.e PAN Card. It is a valid ID proof that is issued by the government of India.
Depository Participants
NSDL (National Securities Depository Limited) and CSDL (Central Security Depositories Limited) are the primary depository participants of India that help you to store the shares you hold. They provide you with a unique account pertaining to the same.
Many people often get confused with the term Demat and Trading account. Demat Account shows the number of shares you hold. Trading account, on the other hand, allows you to buy and sell shares that you currently have.
Picking the right Stock Broker
If you are a beginner then it is suggested to consult a full-service trusted broker. This is because the full-service broker gives you guidance on the day to day aspects of share trading. These stock brokers are SEBI (Security and Exchange Board of India) certified and given licence to act as a broker. In other words, a broker is an intermediary between an independent stock broking firm and share trader.
Ways to Perform Buying and Selling of Shares
This is how you perform in buying and selling shares. For instance, you have bought shares of Rs 890 with the assistance of a broker, the broker will ensure you regarding the purchase order or stop order. Also, they help you to execute the stop order if you want to stop the transactions during the day.
How are the Stock Brokers in India regulated?
Stock brokers in India are regulated under the Securities and Exchange Board of India Act 1992, Securities Contract Regulations Act, 1956, and also the Securities and Exchange Board of India (Stockbrokers and sub-brokers Regulations), 1992.
In addition to this, stock brokers are also regulated under other regulations and bylaws that SEBI may issue from time to time.
Important Note:
Every stockbroker in India needs to be a member of stock exchanges and also requires to be registered with SEBI. Stockbrokers display their registration details on their websites and even on official documents. To get any inquiry about registration, one can also visit the SEBI website and find details of registered stockbrokers.
Now you all know about stock brokers and how they are regulated, let's take a quick tour of the types of stock brokers.
Based on the types of service provided, there are majorly two types of stockbrokers - full-service stock brokers and a discount stock broker.
Comprehensive Services: Offer full trading services and a wide range of add-ons to clients.
Advisory Services: Provide advisory services to help clients make good investment decisions.
Research Reports: Supply detailed research reports on various stocks and market trends.
Relationship Managers: Assign relationship managers to assist with client needs.
Variety of Services: Offer additional services such as IPOs, mutual funds, insurance, loans, etc.
Established Players: Often have a strong presence with branches across the country.
Client Convenience: Easier for clients to access services and get advice due to widespread branches.
Limited Services: Do not provide advisory services or research facilities.
Online Platform: Emerged due to the ease and accessibility of the internet.
Trading Platform: Offer an online trading platform for clients to execute trades.
Flat Brokerage Fees: Charge flat brokerage fees, typically a set fee per transaction.
Cost-Effective: Generally more cost-effective for clients who do not require additional services.
Online stockbroking services are faster than traditional ones because transactions can be done over the internet. They also allow stockbrokers to connect with clients via email and chat, providing real-time updates.
In addition to stockbrokers, it's useful to understand sub-brokers. A sub-broker works on behalf of a stockbroker to help investors trade financial securities. Unlike stockbrokers, sub-brokers are not directly members of the stock exchange and need to register with SEBI to trade.
Rights and Responsibilities of Stock Brokers, Clients, and Authorised Persons
All parties involved in trading services—whether clients, authorised persons, or stock brokers—are governed by SEBI regulations, which ensure clarity and transparency in all transactions and liabilities related to share trading.
Here is a summary of the rights and responsibilities for the top stock brokers in India:
Integrity:
A stock broker must uphold the highest standards of integrity, fairness, and promptness in all business activities.
Exercise of Due Skill and Care:
A stock broker is required to exercise care, diligence, and due skill in every aspect of their business operations.
Manipulation:
A stock broker must refrain from engaging in deceptive schemes, fraudulent transactions, or spreading rumours that could distort market equilibrium or lead to personal gains.
Malpractices:
A stock broker should not create or participate in the creation of a false market, whether individually or in collaboration with others. Additionally, they must avoid any actions that could harm investors' interests or disrupt the fair and smooth functioning of the market. Excessive speculative trading beyond reasonable business limits, especially if not aligned with the broker's financial stability, is strictly prohibited.
Compliance with Statutory Requirements:
A stock broker must adhere to all relevant provisions of the law, including rules and regulations issued by the government, the Securities and Exchange Board of India (SEBI), and the stock exchange as applicable.
Education:
While there are no specific educational prerequisites for becoming a stock broker, certain courses can provide valuable insights and advantages in the field. The minimum qualification is a bachelor's degree, coupled with at least two years of experience in a stock broking firm. Many stock brokers further enhance their expertise with a Master of Business Administration (MBA) in finance, which equips them with knowledge in mathematics, statistics, qualitative analysis, and more.
Experience:
Gaining experience in a stock broking firm is crucial for aspiring stock brokers. This hands-on experience provides a deep understanding of stock market regulations, financial markets, and accounting practices.
The Indian capital market is recognized as one of the most organised and regulated sectors, largely due to the efforts of SEBI. Whether you are an investor or a stock broker, it is essential to operate within the guidelines set by SEBI to avoid potential challenges.
Stock trading can be both exciting and intimidating. For many, the thought of putting hard-earned money into the stock market brings up fears—fear of losing money, fear of making the wrong decisions, and fear of the unknown. However, overcoming these fears is crucial for anyone looking to succeed in trading. Sometimes even experienced investors can become scared of putting their money in the stock market. Their bad decisions regarding stock trading, emotions and inconsistency are some of the situations that go out of their control.
The most reliable solution to conquer fear is “exposure”. For instance, when someone is afraid of swimming, the best possible way to overcome that fear is to face them. Exposure lets you achieve the goal that once you were scared of. Although it is not as easy as it seems to be, it’s worth trying.
Here’s a simple guide to help you manage and overcome fear in stock trading.
Knowledge is power. One of the main reasons people fear stock trading is because they don't fully understand how it works. By educating yourself about the basics of the stock market, how different types of stocks work, and the factors that influence stock prices, you can gain the confidence needed to make educated decisions.
It's normal to feel anxious about trading when large sums of money are at stake. To reduce this, start with a small investment. By investing a smaller amount, you reduce the pressure and potential stress.
A well-thought-out trading plan can be your best friend in the stock market. It helps you stay focused and avoid making impulsive decisions driven by fear.
Diversification means spreading your investments across different types of assets to reduce risk. This strategy can help ease the fear of losing everything if one stock performs poorly.
Fear is a natural emotion, but it can lead to poor decision-making in trading. Learning to manage your emotions is key to overcoming fear.
No trader wins all the time. Losses are a natural part of the stock trading journey, and accepting this fact can help you manage fear.
Keeping up with market news is important, but too much information can lead to confusion and fear.
It’s important to set realistic expectations for your trading activities. Expecting to become a millionaire overnight is unrealistic and can lead to unnecessary stress.
If you’re still feeling unsure, seeking advice from a financial advisor or a mentor who has experience in stock trading can be beneficial.
Maintaining a trading journal where you record your trades, the reasons behind them, and your emotions at the time can be incredibly helpful.
Overcoming fear in stock trading is a journey, but with the right strategies, you can turn that fear into confidence. By educating yourself, starting small, having a plan, diversifying your portfolio, managing emotions, accepting losses, staying updated, setting realistic expectations, seeking professional advice, and keeping a trading journal, you can approach the stock market with a calm and focused mindset. Remember, fear is natural, but it doesn’t have to control your trading decisions.
Mergers and acquisition is a common term you must have heard before. Even if you are surfing the internet, you must have heard about the news of many companies which are going through a process of mergers and acquisition. It happens when two companies decide to combine and form a stronger company. But the question is what is merger and acquisition and how does it affect the stock prices.
As there are several ways in which two companies can combine, one of the most common processes is Mergers and Acquisitions. If two companies want to combine to form a big company, there are numerous reasons behind it: increasing market share, minimizing competition, increasing geographical reach and more.
Although, there are many companies who go into the merger and acquisition process, yet they are still not recognized. This is because either these companies are not big enough to catch the fresh headlines of the news.
Today we will talk about mergers and acquisition and how does it impact stock prices:
Mergers is an act where two companies of similar sizes and structure combine to form a new company. It is important to note that mergers usually happen between the companies which are considered equal in many ways.
There are different types of mergers:
A horizontal merger refers to a business consolidation between two companies operating in the same sector and selling similar products. A horizontal merger can be done to reduce competition, make more market control and benefit from the economy from the sale.
When two companies provide different supply chain functions including product development/selling cycle for a common good service, then it is known as a vertical merger. For instance, a manufacturing company can vertically merge with a raw material provider to create a bigger company.
When two or more companies in unrelated business activities merge and create synergy to enhance value, boost performance and save cost. In simpler terms, conglomerates consist of companies that don't have much in common.
In the product extension merger, two companies operating in the same sector and having a similar target audience with the aim of creating a new company with a huge range of products.
When two companies operate in the same sector but different markets come together to form a big company with an objective of a bigger client base and the wider market.
As mergers are all about the amalgamation of two companies, Acquisitions is, however, initiated by a larger company to absorb the smaller ones. It is a process where one company purchases more than 50 per cent of another company’s shares to gain control of that company.
If a company purchases more than 50% of a target firm’s stock, then the acquirer has a full right to make decisions about the newly acquired assets without the approval of the company’s other shareholders.
The primary reason for the acquisitions of smaller companies by large companies are:
When a large company that has reached its full limit of operations, resources, logistics. Then it might start looking at young and promising companies to acquire and incorporate into its revenue stream.
In order to get benefits from new technologies, a large company acquires a young and technologically driven one to benefit from new technologies. This is a cost-efficient way to implement new technology in any organization.
When a company tries to expand its operations, it acquires a small company rather than setting up a new business. By doing so, companies can save a lot of hassle and cost associated with setting up a new business.
Every merger or acquisition marks a great impact on the stock prices of the participating companies. Here, we will highlight the effects of mergers and acquisitions:
You may notice high volatility in the stock prices of the companies who are getting involved in mergers and acquisition.
The process of merger and acquisition is quite a long term process where several things need to be taken care of before signing the merger agreement. Many traders and analysts predict the outcome of a company and assess whether the new company post-acquisition will be stronger than the previous one or not. This gives a lot of information to the investors regarding the stock market volatility.
Therefore as an investor, if you invested in the stocks of the companies that are undergoing merger and acquisition, then expect the stock prices to be volatile during the process.
Stock prices make a huge impact on the companies that are going through the process of mergers and acquisition as it depends on the wide range of factors like macroeconomic factors, market capitalization and more. Usually, when the merging companies are similar in size, profitability and achieve an advantage, experience a hike in the stock prices.
The volatility in stock prices tends to increase in its trading volume which further increases the stock market prices. Once the merger process is complete, the stock prices of the company are generally higher than the price of each underlying company.
In the case of acquisition, the stock price of the target company increases. The main reason behind this belief is that in an acquisition, the acquiring company pays a premium to acquire the target company.
Here, the investor made a belief that an acquisition takes place only when both the acquirer and acquire benefit from the deal. The acquirer agrees to make a deal if it sees potential in it and the targeted company accepts the deal if the purchased price offered is greater than its current market price.
In an acquisition, the market tends to choose favorites. In other words, investors tend to look for winners and losers in the proposed deal. Since the acquiring company is making the purchase, unless the profitability of the deal is not evident to the investors, the stock price of the acquiring company tends to get affected negatively.
Earnings per share is an important metric which is used to identify a company's earnings. It is calculated by dividing a company's profit by its common stock’s outstanding shares. This is considered to be a significant factor as it provides a brief insight into the company’s profitability.
In simple terms, EPS tells how much money a company makes for each share and is primarily used to measure the company's financial health. Increasing EPS reflects higher profitability and vice versa.
Here is how EPS is calculated:
EPS = Net Income - Preferred Dividends / End-of-period common shares outstanding
For instance, a company ABC Ltd has a net income of Rs 12 lakh and announces 2 lakh as preferred dividends and has 5 lakh common shares outstanding (weighted average).
Hence the EPS of the company ABC ltd as per earnings per share formula would be:
EPS = Rs (1000000 - 200000)/ 500000
= Rs 2 per share.
You may not know but the company’s balance sheet and income statement are based on EPS calculations. It is recommended to use a weighted average number of outstanding shares as the actual number of shares may vary over a period of time.
It should be noted that the dividends earned on cumulative preferred stocks and non-cumulative preferred stocks affect the EPS results differently. For example, the dividend on cumulative preferred stock for the current period is subtracted from the net income.
The EPS is considered as one of the important factors to identify a stock’s price. It is also an essential component used for calculating price to earnings P/E ratio, which measures a company’s value as a factor of its current share price relative to its EPS.
In P/E ratio, the E stands for EPS. If you divide a company’s stock price by its EPS, investors can calculate the share value in terms of how much the stock market can afford to pay for each earned Rupee.
Earnings Per Share (EPS) is a key financial metric that indicates a company's profitability on a per-share basis. It is calculated by dividing the net income of the company by the number of outstanding shares. EPS can provide valuable insights for investors and analysts regarding a company’s financial health. Here are the main types of EPS:
Basic EPS is the simplest form of EPS calculation. It is determined by dividing the net income available to common shareholders by the weighted average number of outstanding shares during a specific period.
Key Points:
Diluted EPS provides a more conservative view of a company’s earnings per share by accounting for the potential dilution that could occur if all convertible securities were exercised. This includes stock options, convertible bonds, and preferred shares.
Key Points:
Adjusted EPS is calculated by taking the basic or diluted EPS and adjusting it for one-time items, non-recurring expenses, or extraordinary gains/losses. This provides a clearer picture of ongoing profitability by eliminating noise from irregular items.
Key Points:
Earnings Per Share is an important indicator for investors and analysts, providing insights into a company's profitability and financial performance. Here are some key reasons why EPS is significant:
EPS serves as a direct measure of a company's profitability on a per-share basis. It allows investors to assess how effectively a company is generating profit relative to its outstanding shares. A higher EPS indicates a more profitable company, which can be attractive to investors.
EPS is commonly used to compare the profitability of companies within the same industry. Investors often look at the EPS of competing firms to determine which company is more financially robust. This comparison can help in making investment decisions and identifying potential investment opportunities.
EPS plays a crucial role in calculating other important financial ratios, such as the Price-to-Earnings (P/E) ratio. The P/E ratio is calculated by dividing the market price per share by the EPS. This ratio helps investors determine whether a stock is overvalued or undervalued compared to its earnings potential, assisting in making smart investment choices.
Many companies use EPS as a basis for determining dividend payouts. A company with a stable or growing EPS is often more likely to pay dividends, making it attractive for income-focused investors. EPS growth can indicate a company’s ability to return value to its shareholders through dividends and share buybacks.
Investors and analysts closely monitor EPS as it can significantly influence a company's stock price. Positive earnings reports that show an increase in EPS can lead to a rise in stock price, as they may indicate strong financial health and future growth potential. Conversely, a decline in EPS can lead to negative sentiment and a drop in stock prices.
Trends in EPS over time can provide insights into a company's growth trajectory. Consistent growth in EPS is often viewed as a sign of a company’s ability to generate profits and sustain its business model, making it a key indicator for long-term investors.
Although earnings per share are known to be a potential financial tool, investors need to understand that EPS has its share of drawbacks.
Here are the limitations of earnings per share:
Earnings Per Share is a vital financial metric that provides valuable insights into a company’s profitability and financial performance. Understanding the different types of EPS, such as basic, diluted, and adjusted EPS, is crucial for investors when evaluating a company's financial health. Additionally, EPS serves as an essential tool for comparative analysis, investment valuation, and forecasting future performance, making it a key component in the decision-making process for investors.
Investing in the stock market has long been a popular way for individuals to grow their wealth. While it comes with its risks, the potential rewards can be significant, making it an attractive option for both new and seasoned investors. In this blog, we'll explore the advantages of investing in stock trading in simple language, helping you understand why so many people choose this path to achieve their financial goals.
One of the biggest advantages of investing in the stock market is the potential for high returns. Over time, stocks have historically outperformed other types of investments, such as bonds or savings accounts. While not every stock will be a winner, with careful research and smart investing strategies, you can achieve significant growth in your investment portfolio.
When you buy a stock, you're purchasing a small piece of a company. This means that as a shareholder, you have partial ownership in the company and can benefit from its success. If the company performs well, the value of your shares can increase, and you may also receive dividends, which are a portion of the company's profits paid out to shareholders.
Stocks are considered liquid assets, which means they can be easily bought and sold in the stock market. This provides investors with the flexibility to enter and exit investments relatively quickly. If you need access to your money, you can sell your stocks and typically receive the funds within a few days.
The stock market offers a wide range of investment opportunities across different sectors and industries. This allows you to diversify your investment portfolio, which can help reduce risk. By spreading your investments across various companies and industries, you're less likely to be severely impacted by the poor performance of a single stock.
Many companies pay dividends to their shareholders, providing a source of regular income. While not all stocks pay dividends, those that do can offer a steady stream of income, which can be particularly appealing for retirees or investors looking for a passive income stream. Dividends can also be reinvested to purchase more shares, potentially increasing your overall returns over time.
Inflation erodes the purchasing power of money over time, but investing in stocks can help protect against inflation. As companies raise prices to keep up with inflation, their earnings—and by extension, their stock prices—can increase. This means that the value of your investments may grow alongside or even outpace inflation, helping to preserve your wealth.
When you invest in stocks, you're essentially betting on the growth of the economy. As the economy expands, companies typically experience higher profits, which can lead to increased stock prices. By investing in the stock market, you can benefit from the overall growth of the economy.
Investing in the stock market requires you to stay informed about financial markets, economic trends, and company performance. This can lead to a greater understanding of how businesses operate and how global events impact economies. The knowledge and experience gained from stock trading can be valuable not just for your investments but also for making informed financial decisions in other areas of your life.
Unlike some other investments, stock trading gives you direct control over your investment decisions. You can choose which companies to invest in, how much to invest, and when to buy or sell. This level of control allows you to tailor your investment strategy to your specific goals, risk tolerance, and time horizon.
Investing in stock trading offers numerous advantages, from the potential for high returns to the ability to diversify your portfolio and generate passive income through dividends. While it does come with risks, the flexibility, liquidity, and opportunities for learning and growth make it a compelling option for those looking to build wealth over time. Whether you're a seasoned investor or just starting, understanding these advantages can help you make informed decisions and take full advantage of the stock market's potential.
Stock market timings play an important role in helping investors to know about the market opening and market closing to ensure easy yet fast transactions. Also, it helps investors to take advantage of stock movements in the market and hence it becomes easier for them to make easy money.
It is important to know that the stock market opening time and stock market closing time vary for different countries in different time zones. Indian stock markets enable investors to trade only during a fixed timing of the day.
There are two major exchanges in the country namely Bombay stock exchange and National Stock Exchange in which the investors can trade through. Now, we will cover the stock market opening and stock marketing closing timings of the leading indices in India BSE and NSE.
The pre-opening timings start from 9.00 am and end at 9.15 am. The session is also known as order entry session. Here, investors can buy or sell any securities during this time.
The session is classified into three sub-sessions.
9.00 am - 9.08 am - This session is also known as order entry sessions where orders for any transactions can be placed. In other words, you can easily place the orders for transactions of any stock. Moreover, you can also modify or cancel orders during the time.
9.08 am - 9.12 am - The segment is used for price determination of security as it is used to calculate the opening price of the regular session. Also, this session is used for matching orders as it is done by corresponding demand and supply prices to ensure accurate transactions among investors who want to purchase or sell a security.
Price matching orders help investors in determining the price at which security is transacted during the Indian stock market timings.
9.12 am - 9.15 am - This session is used as a transition period between the pre-opening session and normal Indian share market timings. Also, no such transactions can be placed during this time.
This is the fundamental Indian share market timing that lasts from 9.15 am to 3.30 pm. Transactions processed during this time follow a bilateral order matching system, whereas price determination is done through demand and supply. Bilateral order machine systems are highly volatile in nature and hence there are multiple market fluctuations which can be reflected at any time in security prices.
This is one of the busiest sessions as in this trading session, mostly buying and selling of shares takes place. Hence, it is also known as primary share market timings. The continuous trading session starts from 9.15 am and ends at 3.30 pm. During this period, trades continue as orders match at time priority.
There are few things, which investors need to consider while trading during the session:
The closing price of the stock is measured as the weighted average of the stock prices between 3.00 - 3.30 pm. The closing price for BSE and NSE is calculated as the weighted average of the stock for the last 30 minutes or between 3.00 pm -3.30 pm.
Post Closing Session
The stock market timing in India is marked at 3.30 pm. It is held between 3.30 pm to 04.00 pm. During this time period, you are allowed to bid for the following day’s trade. If there are enough buyers and sellers, bids placed during this period are confirmed. It should be noted that the bids placed during 3.30 pm - 4.00 pm are not affected by the opening price of the stock market. Hence, if the closing price exceeds the opening price, then bids can be cancelled by the investors.
After Market Order (AMO)
AMO in which you can place orders to buy or sell the stock for the next trading day. This is apt for investors who are unable to monitor the market during the opening and trading session.
The overall stock market timings in India can be described as follow:
S.NoNameTime1Pre-opening 9.00 am -9.15 am2Normal Session9.15 am - 3.30 pm3Closing Session3.30 pm - 4.00 pm
Needless to say, the stock market is a great place where investors can grow their wealth. Strategic trading on the stock market can help you increase your income, also well-managed trading helps you to get constant returns which can be more than your income.
Investing can be a great way to grow your money, but it comes with risks. One way to manage those risks is by diversifying your portfolio. But what does that mean, and why is it important? Let’s break it down.
Diversification means spreading your investments across different types of assets. Instead of putting all your money into one stock or investment, you invest in various stocks, bonds, real estate, or other assets. This way, if one investment doesn’t perform well, you have others that might do better.
The main reason to diversify is to reduce risk. If you invest all your money in one stock and that company faces trouble, you could lose a lot of money. However, if you have a mix of investments and one does poorly, the others may still perform well. This can help protect your overall investment.
Investing is often unpredictable. Some investments may perform well at certain times, while others may struggle. By diversifying, you can achieve more stable returns over time. When one investment is down, another might be up, balancing things out and leading to less volatility in your portfolio.
Different assets perform better in different market conditions. For example, during a booming economy, stocks may rise, while during a recession, bonds may offer more stability. By diversifying, you can take advantage of opportunities in various markets, increasing your chances of earning a profit.
While diversification helps manage risk, it can also enhance your potential returns. By including different types of assets in your portfolio, you can access various growth opportunities. For example, if you invest in stocks, bonds, and real estate, you might find that some of these assets provide strong returns at different times.
The market can change quickly due to economic shifts, political events, or changes in consumer behavior. By diversifying your portfolio, you can protect yourself against sudden market changes. If one sector is hit hard, having investments in other sectors can help cushion the blow.
Diversification is a key part of a long-term investment strategy. It encourages you to think about your investments holistically rather than focusing on individual stocks or assets. This approach can lead to better decision-making and ultimately help you achieve your financial goals over time.
Now that you understand why diversification is important, here are some tips on how to do it:
Consider investing in a mix of asset classes like stocks, bonds, mutual funds, and real estate. Each asset class behaves differently in various market conditions.
Within the stock portion of your portfolio, invest in different sectors such as technology, healthcare, finance, and consumer goods. This way, you’re not relying on one sector to drive your returns.
Look beyond your local market. Investing in international stocks and funds can provide additional opportunities and reduce your reliance on your home country's economy.
Mix growth and value investments. Growth stocks may offer higher potential returns, while value stocks can be more stable and provide dividends.
Your investment needs and market conditions will change over time. Regularly review your portfolio to ensure you maintain a good balance and make adjustments as necessary.
Diversifying your portfolio is a crucial strategy for managing risk and enhancing potential returns. By spreading your investments across different asset classes, sectors, and regions, you can protect yourself against market fluctuations and take advantage of various growth opportunities. Remember, the goal is to create a well-rounded portfolio that aligns with your financial goals and risk tolerance. Taking the time to diversify can lead to more stable and successful investing in the long run.
Intraday trading is considered as quite riskier than other trading strategies as it involves buying and selling of stocks on the very same day. This is because, in intraday trading, a large number of stocks are bought and sold with the intention of booking profit. Here, the objective is plain and simple: to buy and sell shares within the same day. Before we begin, let's understand what exactly is Intraday trading and what are the strategies investors need to apply while intraday trading.
Needless to say, intraday trading means purchasing and selling of stocks on the very same day. However, with intraday trading, traders can short sell their shares and then buy back during the rolling settlement period. Experienced traders always recommend selecting the shares which are highly liquid.
It is important to determine the entry-level and target price before placing the buy order. It’s quite understandable for a person’s psychology to change post buying of shares. Hence, many traders may sell shares even if the price experiences high growth. As a result, they may lose the best chance of achieving gains because the price goes upward.
Stop loss is defined as an advanced order placed with the assistance of a broker to buy or sell a specific stock once it reaches a price point. It is generally used to restrict the loss or gain in a trade. This is beneficial in limiting the potential loss for investors due to downfall in a stock.
Stop-loss also works great in short selling. Investors who short sell their shares, stop loss acts a boon by minimizing the losses if the price goes up beyond their expectations.
There is a famous quote saying “ As long as greed is stronger than compassion, there will always be suffering”. Many investors suffer from greed or fear in terms of high earning. With the help of stop-loss, investors not only minimize their losses but also book their profits once the target is achieved.
Successful traders advised to include 10-12 shares in their wish-list and research all the stocks in depth. For instance, do fundamental analysis and technical analysis of stock and try to understand the trend such as the history of a stock, merger, present return and more.
Experienced professionals fail to predict the exact market movement. There are many times when all the technical indicators depict a bull market; there is still a decline. However, these factors do not provide any guarantee. If the market does not move according to your expectation, then it is important to exit your position to avoid huge losses.
Introduction:
Bonds are one of the most essential financial instruments available to investors. They are popular for their stability and predictable returns, making them a key component in a balanced investment portfolio..
Bonds are debt securities issued by various entities such as governments, municipalities, and corporations to raise capital. When you purchase a bond, you're essentially lending money to the issuer. In return, the issuer promises to pay you periodic interest (known as the coupon) and return the bond’s face value (or principal) when it matures.
Did you know The concept of bonds dates back to ancient Mesopotamia, where they were used to record debts and obligations. Fast forward to today, and bonds remain a cornerstone of modern finance!
Let's dive into the various types of bonds available in the market, with examples relevant to Indian investors:
Government bonds are issued by national governments and are considered one of the safest investments. In India, these are known as Government Securities (G-Secs). They are backed by the government’s ability to tax its citizens, which minimizes the risk of default.
Example: The 10-year Government of India Bond is a common benchmark bond that many investors in India consider for long-term stability.
Did you know Did you know that India’s first-ever bond issue dates back to 1811? It was issued by the East India Company to fund its operations in the country.
Corporate bonds are issued by companies to fund their operations or expansion. These bonds typically offer higher interest rates than government bonds due to the increased risk associated with the issuer's financial health.
Example: HDFC, a leading financial services company in India, frequently issues corporate bonds that offer attractive returns compared to government bonds.
Municipal bonds are issued by state governments, cities, or other local government entities. In India, these bonds are not as prevalent as in some other countries, but they do exist. The interest from these bonds is often exempt from certain taxes, making them appealing to investors in higher tax brackets.
Example: Some Indian states have issued municipal bonds to fund infrastructure projects like the development of smart cities.
Zero-coupon bonds do not pay periodic interest. Instead, they are issued at a discount to their face value, and the investor receives the full face value at maturity. This type of bond can be useful for long-term financial goals.
Example: The Reserve Bank of India has issued zero-coupon bonds in the past, which are sold at a deep discount and redeemed at face value upon maturity.
Convertible bonds are hybrid securities that can be converted into a predetermined number of the issuing company’s shares. These bonds offer the potential for equity-like returns while providing the safety of a bond.
Example: Tata Motors has issued convertible bonds that can be converted into equity shares, offering investors both stability and potential for growth.
High-yield bonds, also known as junk bonds, are bonds with a lower credit rating, which means they carry a higher risk of default. To compensate for this risk, they offer higher interest rates.
Example: Some smaller Indian companies, particularly in the infrastructure and real estate sectors, may issue high-yield bonds to attract investors willing to take on more risk for higher returns.
Understanding the key features of bonds is crucial for making informed investment decisions. Here are some important aspects to consider:
The face value, or par value, is the amount the bondholder receives when the bond matures. In India, corporate bonds typically have a face value of ₹1,000.
The coupon rate is the interest rate the bond pays, usually expressed as an annual percentage of the face value. In India, interest payments on bonds are often made semi-annually.
Example: A corporate bond from Infosys might offer a coupon rate of 8%, meaning the investor would receive ₹80 per ₹1,000 bond each year.
The maturity date is when the bond’s principal amount is repaid to the bondholder. Bonds can have short-term, medium-term, or long-term maturities, depending on the issuer's needs and the investor's preferences.
Example: A 5-year bond issued by Reliance Industries would return the principal amount after five years, along with the final interest payment.
Did you know The longest-maturity bond ever issued was a 100-year bond, sometimes referred to as a "century bond." In 2020, India’s largest steelmaker, Tata Steel, issued such a bond!
Yield represents the bond’s return on investment. It can vary based on factors like the bond’s price, coupon rate, and remaining time to maturity. Yield is an important measure for comparing the potential returns of different bonds.
Bonds are rated by agencies like CRISIL, ICRA, and CARE in India, which assess the issuer’s creditworthiness. Higher ratings (like AAA) indicate lower risk, while lower ratings (like BB or lower) suggest higher risk.
Example: A bond issued by the State Bank of India (SBI) might have a AAA rating, indicating a very low risk of default.
Did you know India’s bond market was largely developed after the 1991 economic reforms, and today it’s one of the fastest-growing bond markets in Asia!
Callable bonds can be redeemed by the issuer before the maturity date, usually at a premium. This feature benefits the issuer if interest rates drop, allowing them to refinance at a lower cost.
Example: Some bonds issued by Indian corporations like ICICI Bank are callable, giving the issuer flexibility to manage their debt efficiently.
Bonds are a versatile investment option that can offer varying degrees of risk and return. By understanding the different types and features of bonds, Indian investors can make informed decisions that align with their financial goals, whether they're seeking safety, income, or growth potential.
Crude Oil is one of the most popular trading instruments among commodity traders. But before doing trade on any instrument every trader must know about the news related to that instrument, fundamental outlook, demand & supply factor, technical outlook.
Some important inventory data needs to keep in focus while analyzing crude oil inventory:
These are the important crude oil reports released in the United States among these all U.S. API Weekly Crude Oil Stock and U.S. Crude Oil Inventories are the two main important crude oil inventory reports.
API inventory report is released by the American Petroleum Institute (API) and other one U.S. Crude Oil Inventory is released by the Energy Information Administration (EIA).
API provides the information of all segments of America’s oil and natural gas industry. They have more than 600 members who produce, process and distribute most of the nation’s energy. The industry supports more than ten million U.S. jobs and is backed by a growing grassroots movement of millions of Americans.
API was established in 1919 as a Standards Setting Organization. EIA is an agency of the United States Federal Statistical System and also a part of the US energy department. The U.S. Energy Information Administration (EIA) collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.
EIA provides a wide range of information and data products covering energy production, stocks, demand, imports, exports, and prices and prepares analyses and special reports on topics of current interest.
U.S. API Weekly Crude Oil Stock inventor is released on Tuesday Night at 02:00 AM (IST), which gives a glimpse of the movement of the crude oil for the day trading session on Wednesday before releasing US Crude Oil inventory data, whereas US crude oil inventory data is released on Wednesday night between (08:00 PM to 09:00 PM). In case of any holiday in the US are any other factors, release date and time may vary.
Other important data like U.S. Gasoline Inventories, U.S. EIA Weekly Distillates Stocks, U.S. EIA Weekly Distillates Stocks are also released at the same time with US Crude oil inventory (EIA) on Wednesday.
Gasoline is generally used as fuel in vehicles and it is made from crude oil and other petroleum products.
Oil refineries companies and blending facilities produce motor gasoline to sell it at retail fuel stations.
Now the question is how it affects the crude oil price so simply to understand this logic we have a case here.
Case - US crude oil inventory fell and in numbers, it is less as compared to forecast so it means the price should move upside according to US crude oil inventory data but at the same time, gasoline inventory data rose which is a ready fuel to use in-vehicle engines it means supply is more than expectation, which will cap the upside movement of the crude oil price.
You can check all these data and can keep yourself updated regularly by following the website: Investing.com under “Economic Calendar”.
The conclusion is that while analyzing US crude oil inventory data we have to analyze all other related inventory reports at the same time. If all the reports provide clear indications of demand and supply then we can decide whether we have to buy or sell. If data is mixed so it means that price will move in a range.
Corporate actions are decisions made by publicly listed companies that can have a significant impact on their shareholders. These actions are approved by the company’s Board of Directors, shareholders, or both.
Corporate actions can affect the company’s stock price, ownership structure, or financial position, and sometimes all three. The nature and type of the action determine the extent of these changes.
These are actions where investors don’t have a choice—they happen automatically, and all shareholders are affected.
These are actions where investors have a choice to participate or not.
In short, mandatory actions happen automatically for all shareholders, while voluntary actions require investors to decide if they want to participate.
After paying taxes, a company's remaining profits belong to the shareholders. The company can either keep these profits or distribute them among the shareholders, which is known as declaring a dividend. A company can declare an Interim Dividend during the year and a Final Dividend at the end of the financial year. Once declared, the company must distribute the dividend within 30 days.
A bonus issue is an alternative to a cash dividend, where a company issues additional shares (bonus shares) to its existing shareholders. The number of bonus shares each shareholder receives depends on their current shareholding.
In a stock split, the face value of existing shares is reduced in a specific ratio. Companies may split their shares if the stock price becomes too high, which can limit investor participation. After a split, the price per share decreases, increasing the stock's liquidity in the market.
Share consolidation is the opposite of a stock split. The company increases the par value of its shares in a specific ratio and reduces the number of shares accordingly. This action is taken when the share price is perceived to be too low, which can negatively affect investor perception. Post-consolidation, the share price increases, potentially improving the market’s view of the company.
Mergers, acquisitions, and consolidations are corporate actions that change a company's ownership structure. In a merger, one company absorbs another, and the acquired company ceases to exist. In an acquisition, one company buys a substantial portion of another company's stock, and both companies typically continue to exist. In a consolidation, two companies combine to form a new entity, and the original companies cease to exist.
A buyback occurs when a company repurchases its own shares using its reserves and surplus. These repurchased shares are canceled, reducing the company’s share capital. For a company to be eligible for a buyback, it must not have defaulted on payments such as interest, principal on debts, or dividends.
Delisting refers to the removal of a company's shares from a stock exchange. This can be either compulsory or voluntary. In a compulsory delisting, shares are removed due to the company’s non-compliance with regulations. In voluntary delisting, the company chooses to remove its shares from the exchange and go private.
Here's how these actions can influence investors, especially in the Indian stock market:
Dividends:
When a company pays dividends, investors receive regular income. For example, if a company declares a dividend of ₹10 per share, an investor holding 100 shares will receive ₹1,000.
Stock Splits and Bonus Issues:
These actions increase the number of shares an investor owns without changing the total value of the investment. For instance, in a 2-for-1 stock split, if you own 100 shares priced at ₹500 each, after the split, you'll have 200 shares priced at ₹250 each.
Mergers and Acquisitions:
If a company merges with another or is acquired, the stock price may change significantly. For example, if Company A acquires Company B, the share price of both companies might rise or fall, leading to potential gains or losses for investors.
Rights Issues:
When a company offers new shares to existing shareholders at a discount, it can dilute voting power. If an investor doesn't buy the new shares, their voting influence decreases. For example, if you own 5% of a company, but new shares are issued and you don't buy them, your ownership percentage and voting power may drop.
Spin-Offs:
When a company creates a new independent company from one of its divisions, investors receive shares in the new company. This allows them to diversify their investments. For example if Reliance Industries spins off its telecom business, you might end up owning shares in both Reliance and the new telecom company, each with different growth prospects.
Share Buybacks:
When a company buys back its own shares, it might signal that the management believes the stock is undervalued. For example, if TCS announces a buyback, it could indicate confidence in its future performance, which might positively impact the stock price.
Corporate actions can have a big effect on a company’s future and its stock price, so it’s important for shareholders and investors to stay updated. These actions usually need approval from the board of directors and sometimes from shareholders as well.
Corporate actions can be either mandatory or voluntary and can have positive or negative effects. Generally, actions like paying dividends, buying back shares, or other moves to increase shareholder value are seen positively, unless investors believe the company could have used its resources better. On the other hand, rights issues and liquidations are usually disliked by investors.
"We were not taught financial literacy in school. It takes a lot of work & time to change your thinking and to become financially literate" Robert Kiyosaki.
We all sent our children to school & colleges to learn new things which make them better as per today's scenario. But we never try to go through what they are learning; are they just mugging up with the book & notes or going through any new skills, will they be able to handle any situation which demands any special skill, in Indian we generally pamper our children while they are attending school till 12th standard and then, later on, we guide them to colleges there also we help them in every aspect, like pocket money, clothing, etc.
"A normal college graduate spent 16 years gaining skills that will help them command a higher salary; yet little or no time is spent helping them save, invest, and grow their money."
In the Indian educational system, we will find all kinds of course curriculum with lots of books and references, but we never found any sort of practical training for it as in the educational system we mainly focus on marks & grades, not on skills & talents.
One of the major things which we miss in the educational system is the knowledge of Financial Literacy, Basically, it is an ability to understand and effectively use various financial skills, including personal financial management, budgeting & investing. The lack of these skills is termed financial illiteracy.
The main benefit of financial literacy is that it empowers us to make smart financial decisions. It provides the knowledge and skills we need to manage money effectively budgeting, saving, borrowing, and investing. This means that we're better equipped to reach our financial goals and achieve financial stability.
Financial literacy is important because it equips us with the knowledge & skills we need to manage money effectively. Without it, our financial decisions and the actions we take- or don't take- lack a solid foundation for success.
In Indian families decisions regarding investments & savings are generally done by senior members of the family, who are actually following the same old pattern for the same, which is not suitable as per the current demands. This is one of the major reasons why much young age person lack starting there at the early age of their job.
Organizing financial literacy drives in colleges and schools with live practical case studies & situation analysis so that they actually learn and understand about it.
Making them understand about this will help them in the early days of the job, which actually tries to control their spent over earning habits. Organizing games & quiz contest which make them take real and practical decisions for the same.
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