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Stock Market Investment

By: ARINDAM CHATTOPADHYAY

Buying and selling of shares happen in Stock market. A share of stock is the smallest unit of ownership in a company. If you own a share of a company's stock, you are a part owner of the company.
If the company loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock becomes worthless. The creditors can't come after your personal assets.
There are two types of stock: Common stock , Preferred stock . Most of the stock held by individuals is common stock . NYSE, NSE, BSE etc..are few places where trading of stock happens.

Why Investing In Stock Market?
Investing is the proactive use of your money to make more money or, to say it another way, it is your money working for you. Investing is different from saving.
Saving is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal (the amount you start out with) and less concerned with return.

Investing in stocks means you are partial owner of a business. Whenever management distributes profit as dividend you will get it. This is called dividend income - a best strategy for passive income. This is best suited for retirement income planning.

As per history, if you compare Return of Investment of stock market to that of high yield bond investment i.e. "junk" in every decade for last 100 years, investing in stock market outperforms others 8 out of 10 times by a fair margin. If your investment horizon is 20 years, statistically return of your stock portfolio will at least beat inflation.

How you Should Invest in Share Market?

Budgeting eats your time. Instead of following complex and boring expense tracking, you simply follow the financial strategies of pay your self first. You should investment at least 30% of your savings in blue chip companies and 20% to high dividend yielding stocks. On Line Investing in stock market is the best way to invest.

How to do Portfolio Management in stock Market?

You should carefully look around your daily life. You will notice what you use daily and what other people are using. This observation will give you fair amount knowledge to those products and companies. Try to understand business model of those companies. Gather more knowledge on those companies.

Understand company's balance sheet & Profit- loss statement. Look for Profitability in business, cash in hand, auditor's report, director report of the company. Try to understand the business model of the company and management team. Check return on asset. price/earning, return on equity and credit management of the company for last 5 years. Check analyst report on forward p/e.

If all these are satisfactory, invest in the company. Like these you need to find 6 to 9 companies from 5 sectors like Energy, Oil and Gas, FMCG, Service Sector, Biotech. Pharmaceutical, Bank, entertainment, IT industry and Insurance.

Your investment philosophy is to own a small part of the company for 20 years. This ownership mentality will really give you money in the long run.
In the high bull market do partial profit book regularly. If market sentiment is strong bull, buy option. If market sentiment is strong bear buy put option. Use 5% of your money in option trading. Option trading basically used to hedge your asset and also make some speculative gain.

In strong bear market, your blue chip companies can generate good income if you use covered call option regularly. It's not difficult to get 40% p.a. ROI by writing Covered Call Option.

Money Management tricks for you to ride Bear - Bull of Stock Market

1. Never investment more than 50% of your savings in stock market
2. It is necessary to invest in speculative investment for big money but never invest more than 10% of your portfolio.
3. Get out of loss making investment. It will protect you from bigger loss and the loss you can offset against your profit in your tax return.
4. Do not make buy decision out of greed.
5. Do not take sell decision under panic
6. Understand the market and where you investment with clear objective why you are investing.

Article Source: http://www.articlesinsight.com

Author is a wealth Advisor. He helped people to accumulate wealth under different challenging market situation.Please visit his website www.financial-planning-retirement.com for some more free but interesting information.

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