Investing in Equities – Basics

As a practice, making the right investments requires the nack of picking the right options that the market has to offer. In one of my my earlier posts, I have spoken about the various options one can look at cialis price for investments in India.

When it comes to equity investments, I have seen people with various lines of thoughts. Many have lost a lot to the stock market while others have gained from it. Some call it a big gamble while others feel it’s the place to build long term capital. It is important to draw a line on how much you want to invest in equities and with what purpose.

Few prefer short term investments based on their research about the market.

Others go for long term capital appreciation and are willing to hold on to their investments for years together. And then there are people who go for intraday trading (typically are the one who loose as they often fail to time the market). There are few who would follow the ‘Hybrid’ approach by putting majority of the stock in the long term investments bucket and few in the short term profit making bucket. It all comes down to how much money you have at your disposal to invest and how much risk you want to take with it. Risk again needs to be defined. Investing in a poor performing company based on tips and hoping to give good return is a bad decision and not risk appetite.

Here are a few points that have helped me in my journey in the stock market in the past few months

    • Telecom – biggest players are Reliance Communication and Bharati Airtel with established track record and are growing.
    • Infrastructure – GMR, IVRCL, L&T, Nagarjuna Constructions are a few good names in this arena.
    • Banking – The biggest players are ICICI Bank and SBI. However many other players are also doing good like Yes Bank, HDFC Bank, Centurion Bank of Punjab and many more.
    • IT / Software – Infosys and TCS are bigger players. The recent rise in rupee and fall in dollar have given a test to many companies including Satyam, Wipro and many more.
  • Identify the sectors that you want to focus on and then identify the winning player. Now, this is easier said than done. You can get sector-wise reports in sites like myiris.com and indiaearnings.com. Next, we need to pick the growing and proven companies in each sector and then invest. Some of the sectors and top stocks are mentioned below:

 

  • Pick the performing companies with proven track record: This requires some time to do research. Some of the sites that I found useful are Indiaearnings.com, poweryourtrade.com, moneycontrol.com, myiris.com and kotaksecurities.com

  • Broker advice / market tips are good to know but not to be followed blindly. If you have a tip on a company, check its performance and see if it is convincing. No one in the world can tell you the price of a stock one month in advance. Whoever is doing so, is also taking a calculated or random guess based on his/her research and may not be correct. I typically avoid tips as they always point to short term / intraday trading.
  • Number of shares / amount invested paradox: Lot of people say that a given share is expensive as it is priced high (say Rs 1500). It is a myth, it does not matter how many shares you hold (numbers), what would matter is how much you have invested and what return you have received. Buying 1000 shares of Rs 10 versus buying 20 shares of Rs. 500 should not make a difference in your decision making. End of the day you would invest Rs.10,000 and would look forward to good returns.

  • While there are many other points to be considered, I have tried to keep this short and simple. Do share your comments and views.

2 Responses to “Investing in Equities – Basics”

  1. Anand Surana says:

    In your last few posts i have observed that you have touched upon subjects that can go into endless discussions but i must say that you have the uncanny ability to say what you want to say without feeling the need to write a book on it and bring the article to a logical finish.

    Another good thing is that you are getting the mental peace to word your thoughts and publish them at regular intervals. Keep it up.

  2. Chanda Sikaria says:

    Now you are getting into areas that have so many more points to consider. Must be difficult to keep it short and yet comprehensive – this short blog does not do justice to a big category.

Leave a Reply

You must be logged in to post a comment.