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What are Stocks and should you invest in Stocks?

12 April 2007 2 Comments

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When you buy a share of a company you become a shareholder in that company. Shares are also known as Equities. Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term

This may be illustrated with the help of following examples:
a) Over a 15 year period between 1990 to 2005, Nifty has given an annualised return of 17%.

b) Mr. Raj invests in Nifty on January 1, 2000 (index value 1592.90).The Nifty value as of end December 2005 was 2836.55. Holding this investment over this period Jan 2000 to Dec 2005 he gets a return of 78.07%. Investment in shares of ONGC Ltd for the same period gave a return of 465.86%, SBI 301.17% and Reliance 281.42%

Therefore, Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment.

What precautions must one take before investing in the stock markets? Here are some useful pointers to bear in mind before you invest in the markets:

  • All investments carry risk of some kind. Investors should always know the risk that they are taking and invest in a manner that matches their risk tolerance.
  • Do not be misled by market rumours, luring advertisement or ‘hot tips’ of the day.
  • Take informed decisions by studying the fundamentals of the company. Find out the business the company is into, its future prospects, quality of management, past track record etc
  • Sources of knowing about a company are through annual reports, economic magazines, databases available with vendors or your financial advisor.
  • If your financial advisor or broker advises you to invest in a company you have never heard of, be cautious. Spend some time checking out about the company before investing.
  • Do not be attracted by announcements of fantastic results/news reports, about a company. Do your own research before investing in any stock.
  • Do not be attracted to stocks based on what an internet website promotes, unless you have done adequate study of the company.
  • Investing in very low priced stocks or what are known as penny stocks does not guarantee high returns.
  • Be cautious about stocks which show a sudden spurt in price or trading activity.
  • Any advise or tip that claims that there are huge returns expected, especially for acting quickly, may be risky and may to lead to losing some, most, or all of your money.

    • Though direct stocks have the ability to give the best returns, please see the time and effort required to be able to get the best out of it.

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    2 Comments »

    • raghunath.madhav said:

      You should surely get in touch with smart traders of RPL but beware of fraud. You might want to read the whole description below

      Reliance Industries announced last Friday sale of 4% equity in Reliance Petroleum Ltd. at an average price of Rs.223 per share.

      These sales were made between November 10 and November 23,2007.

      Interestingly just one week prior to RIL (owned by Mukesh Ambani) selling the shares, an unknown group of people bet their shirts on a fall in Reliance Petroleum’s share price, in a magnitude never seen before in Indian stock markets.

      Between November 1 and November 6, 2007, this group made short sales of 10crore shares of Reliance Petroleum in the futures segment of National Stock Exchange.

      These short sales were made at prices between Rs.275 and Rs. 295 per share.

      These numbers are based on official data published by NSE.

      The value of these short sales is an unprecedented Rs.3,000 crores approximately.

      This group of persons has made a cool profit of approx. Rs 1,000 crores in less than a month, because the Reliance Petroleum shares have now crashed from Rs.295 to Rs 195 per share!. These guys have made Rs.100 per share.

      Who are these super smart traders?

      What is the connection of these people with Mukesh Ambani, RIL and connected people?
      And who has suffered the corresponding loss of Rs. 1000 crores? Its innocent small investors who bought Reliance Petroleum shares at the high prices, not knowing that this unholy alliance was indulging in insider trading and making illegal profits while Mukesh Ambani’s own company RIL was selling shares without disclosing this to investors!!

      YOu should be this invenstor

      # 27 November 2007 at 6:36 pm
    • Eric said:

      Eric…

      I really agree with you….

      # 16 June 2008 at 11:17 am

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