Stock market guidelines for layman- Part I


People around the globe are now worried about less returns for their capital. If they have money , they can invest in business, stock market, gold, securities like bonds, banks etc. But riskier investment options like stock market, business are all mostly disliked by many people because they have burnt their fingers .Even then some people want to have more return than a bank’s interest.

From my point of view, investment is stock market securities/currencies etc. with some skillfulness can yield better returns in the long run. But any one dealing in securities should not go as per some expert comments shown in TV or elsewhere. The person should study fundamentals of the stock before investing. If he is not aware of analysing, then he has to approach some financial consultants to guide them. Some financial consultants are ready to operate High Net Worth individual portfolio with very meagre commission. The undersigned can help any one to find out the one for them in india as India is becoming the investment hub in the world due to its economic progress and liberation rules in commerce.

Herd Mentality

The first and foremost rule one investor in stock market follow is avoid herd mentality. We have seen people investing in stock which is going up without knowing the fundamentals of stock. Recent example is RNRL in india where many people burnt their fingers. Another example is Suzlon which is the favourite of speculators which is heavily debted and facing financial problems. So without having herd mentality, investor has to analyse the shares and invest. Atleast the share should have book value 75% of price prevailing and it has growth potential. Many people are buying stocks on the advice of friends, some brokers who have very meagre knowledge about shares . There are times at which we stop purchasing shares. One intellectual quoted that when his illiterate barber suggested him to purchase a particular share, he stopped purchasing shares. Some shares jumps getting some news but after the news, again it goes down and hence the share lying idle without creating any revenue. Shares which is quoting heavily and daily is the ones one should prefer.

Anchoring

Many investors think that when the shares they have reached 52 week high, it is time to sell. But those investors lost money as the said share was having good growth potential and it is a dividend giving company. One share coming to my mind is HDFC which has surpassed many times its 52 week high but some investors in it did not believe it would go high further and lost some money though they had golden share.

Recently buy back offer of Binani cements hit the market at Rs.90 per share when the ruling market price was Rs.82/-. But many missed the bus as they fear that their shares will be accepted or not. Also many investors are not aware how to apply for buyback offer. So taking expert help who charge cheaply and take care of our money will be helpful to grow the money for our future needs.

C . R. Venkata Ramani

(AICWA)

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