• Some facts about investing in share market
Welcome to investing in share market of India.
We receive lot of emails asking about how to invest in share market so we are writing this page.
Let’s first understand some facts about investing in share market before proceeding with other factors.
Basically two important factors are essential for investing in share market
a) Some knowledge and
b) Some patience - to hold shares for long term.
Investing in share market will provide excellent returns if you hold for long term with low risk.
If you want to invest for short term then you should have excellent knowledge about Indian markets, global markets, technical knowledge and other various aspects of the financial world and on top of this it carries heavy risk because in short term lot of global factors impact our Indian markets.
So if you want low risk and excellent returns then prefer investing in share market for long term - minimum 2 to 5 years.
If you are looking to invest in share market and expect excellent returns then you should invest in good fundamental companies and hold for minimum 2 to 5 years.
Our Indian financial history always said and proved that the returns from share market always exceeded other financial method but in long term and not in short term. Short term investing is not at all recommended for new comers to share market.
Patience of holding your stocks for minimum 2 to 5 years is another important factor in share market so that your risk will be minimized.
Important factor -
Most people come to share market to become rich overnight. If you are looking for overnight rich method in share market then it is not possible and even if anybody recommends then it is highly risky and you can lose all your money. It’s totally risk job to expect becoming overnight rich in share market.
Selecting right company to invest is another important factor -
Before investing, investor should choose strong fundamental company instead of regretting later.
Most of the people invest in shares based on hot tips without even understanding what the company does or what its business is. So before putting your hard money in share market look for company, its business, how long company exists, how the share price moved in last 5 to 10 years, etc.
These steps ensure that your money is safe and you will get excellent returns in next 2 to 5 years.
Another point is even after doing all these research is sometimes the share price comes down, below your buying price, then you can average it means buy few more shares to average your buying price and this is possible if you bought shares of strong fundamental companies after small analysis.
Now let’s see in other sub sections what all the things are required for investing in share market.
Opening the Demat and trading account
If you want to invest your money in share market then you should have demat and trading account without this account it is not possible to invest in shares.
How to open Demat and trading account
Important points to be considered while opening the demat and trading account -
1) Talk to multiple brokers and banks offering demat and trading account and understand the features and benefits they are offering with their account.
Zerodha - https://zerodha.com/
RKSV - http://rksv.in/
SAS only- http://sasonline.in/
Full Service Brokers
ICICI Bank (ICICI direct)
HDFC Bank (HDFC Security)
Kotak Bank (Kotak Security)
SBI Bank (SBI securities)
Please note - These brokers we have found on internet and we have not verified these brokers. So it’s your responsibility to verify and apply to these brokers. We are not responsible for any type of damage.
2) Short list 2 to 3 brokers and ask them to provide the demonstration of their trading and demat account like how to place orders, checking the balance amount, fund transfer, checking pending orders, reading account statement, verifying shares in demat account and so on.
3) Try to get low brokerage rates and get explanation of all charges involved for opening the account and charges applicable for buying and selling shares.
4) Don’t fall victim for free accounts, choose reliable broker offering good services.
5) Full service or discount broker : The main difference among them is full service broker would charge you brokerage as a percentage of your trade value and it varies from 0.3% to 0.5% per trade. while discount broker are much cheaper charging you based on the number of trade. Most of the discount brokers charges between Rs 20 to Rs 40 per trade irrespective of the trade amount.
6) Online trading OR Offline trading: Most of the brokers have started to provide online trading services to their customers. Some of them also provide trading on phone. Talk to them and decide what would be a good for you.
7) Are you trader or investor: Whether you are a trader or investor? If you are an investor then brokerage generally won’t make a big difference because you won’t buy and sell frequently while if you are a trader (buying and selling shares very frequently), brokerage can mean a lot to your profits. Less brokerage for traders means extra addition to their profits.
8) Will you require advice to trade: Would you need financial adviser/broker to trade or would you be trading on your own? If you need adviser, remember to get some historical data of how good the adviser/broker is and would you be comfortable on trading or investing on their recommendations. Full service broker generally provide recommendations about stocks.
9) Internet awareness: Newer generation people are fully aware with internet and don’t mind to trade completely online without anybodies assistance. If you are like them then discount brokers would be a good fit and if you are someone who prefers to take recommendations then full broker service is recommended. Suggestion is to compare their brokerages with some of the new discount brokers to see how much money you are losing in the form of higher brokerage.
Suggestion is to read there reviews before finalizing your brokers. And as far as safety of discount brokers are concerned, most of the brokers have a robust risk management in place and follow stringent SEBI rules.
• Difference between investing and trading in share market
Investing is for long term and trading is for short term.
An investor does good analysis of the company and buys its shares and holds it for minimum 1 to 5 years for excellent returns.
A trader buys shares of a company seeking short term opportunities to make money. A trader can sell shares on same day after few weeks or after
few months. Trader is not concerned how good the company is.
Facts about Investing/Investor
a) Investing is one time activity. Investing doesn’t require you to be in front of the computer (for investing in shares) throughout the day.
b) As the investing doesn’t require you to be in front of the computer whole day, the investing can be considered as part time job or part time
c) Investing can be done from one year to couple of years.
d) Please note that “Our Indian History” shows that investing in share market for long years have always provided excellent returns compared to any
other investment option. So people knowing this fact stay invested in share market for long term and get benefited. No any other investing method
provides returns that can be matched with share market returns over longer duration.
e) Investing in share market is low risky and high returns method while trading is high risky method.
Please note - We do research and provide strong fundamental companies for investment free of cost on our website at Investment section or you
can also write to us at firstname.lastname@example.org for free guidance.
Who is the trader?
Trader who does buying and selling of shares is called share trader at very frequent rates without knowing company fundamentals.
a) Trader do buying and selling of shares without concern of company’s performance.
b) Trader is not interested to know how well the company is doing as he buys and sells the stock immediately once he gets profits.
c) Trader’s are basically opportunity finder - Opportunity can be of any good news or bad news or any government declaration or any company’s
announcement, any opportunity that makes the movement in the share price interests traders and they take respective positions and make profit.
b) Traders keep themselves updated all the time and hence the trading has considered as full time business/job. They have to be in front of the
computer all the time.
e) Trader do very frequent buying and selling of shares on daily basis, weekly basis and on monthly basis and look for very small profits.
• Should you invest or trade
Whether you want to trade or invest is based on few factors like
1. Risk taking - If want low risk then investing is best and if you are willing to high risk then trading suits you.
2. Investing can be done with little knowledge while trading requires lots of knowledge.
3. If you don’t have time on daily basis and want to get returns from share market then investing in shares is recommended and if you have time (4
to 6 hours) on daily basis then you can choose trading.
4.Trading requires excellent market knowledge including Indian and a global market while investing in shares doesn’t require having much information
about global or Indian markets. Investor gathers information about particular company and buys shares and holds it for few years.
• Advantages of investing
1. Investing in shares requires doesn’t require you to be available throughout the day.
2. It can be considered part time job or business
3. It is low risky and high returns method if invested in good fundamental companies for longer duration
4. Investing can be done through SIP (systematic investment plan) - Like every month buy few shares of good company
5. Investing in shares provides excellent returns in long term compared to any other investment option
When to invest in shares
Basically there is no any fixed criterion or rule for when to invest in shares but below are few methods used as opportunity and timing to invest in shares.
So investment in shares can be done anytime throughout the year provided you find good fundamental company.
It is recommended to invest in shares when markets are near years lows (52 week low shares)
Few Links to 52 week (one year) low shares - you can do search and find more links
At below link you will find shares touched 52 week low
http://www.hdfcsec.com/Market/Nearing-52week-Low.aspx - Here you can select different sector and shares will get listed accordingly.
Shares Nearing 52 week low - So that you can prepare in advance which shares you want to buy
Check this link as well
http://www.moneycontrol.com/stocks/marketinfo/off_lows/nse/homebody.php?indcode=0&sortcode=1 - - Here you can select different sector and shares will get listed accordingly.
When market (Nifty and Sensex) or good fundamental company share is below 200 DMA (daily moving average).
Currently (10 June 2015) Nifty and Sensex and most of the good fundamental companies are below 200 DMA so you can plan to invest in these shares based on below strategies.
Why slipping below 200 day moving averages indicates likely bounce back for markets
For investors wanting to time their purchases of shares after a sharp fall, keeping a close watch on the 200-day moving averages (DMA) of the Sensex and the Nifty would be helpful.
Data for the past 20 years show the Nifty bounced back sharply on 12 out of 14 instances when the index fell below the 200-DMA. A fall below this technical level means a new buyer of the index or stock is willing to pay less than the average price paid in the last 200 consecutive days. But, many investors, in recent years, have considered this as a level to start buying.
Shares breaking above 200 DMA
Shares breaking below 200 DMA
Check this link for other technical details
One more opportunity to invest in shares is - Apply to buy shares during IPO (initial public offering). Analysis of the company is must before buying its IPO.
Please check below link for open and upcoming IPOs and even recently closed ones
Low valuation shares -
The low valuation shares in Sensex with highest dividend yield, lowest price-earnings ratio (P/E) and lowest price. All these parameters are relative to other stocks in the Sensex. Lowest price and P/E bring out the cheap valuations of these companies while the dividend yield shows the dividend income that they generate for shareholders.
At below link you will find such shares
Some more methods like -
Distressed shares - This is a list of companies with market cap>100 crore and stock prices near their 52 week low. This low signifies that these stocks are trading close to the lowest price level over a 52 week rolling period. There could be some bargains here after due evaluation of the reasons for these lows.
Medium and Large Cap Stocks with high dividend yield but low P/E ratios.-
Dividend yield is the income from dividend that companies generate for shareholders. This ratio shows how much a company pays out in dividends each year relative to its share price. It is calculated as annual dividend per share / price per share. The higher the dividend yield the better. At the same time these companies are trading at a low P/E which could signify some value here.
Top Profitable Companies
List of those companies with highest growth % in profit over the previous year.
Highest - yielding Stocks in Sensex
A list of Sensex stocks with the highest dividend yield. Dividend yield is the income from dividend that these companies generate for shareholders. This ratio shows how much a company pays out in dividends each year relative to its share price. It is calculated as annual dividend per share / price per share. The higher the dividend yield, the better.
You will find all such shares at below link
How to start investing in share market
We will explain investing in share market in very easy method.
Few questions need to ask to self before buying any company shares and those are :-
1. Whether people will stop going to bank in future? If your answer is no then buy top banking shares if you answer is yes then don’t buy banking shares.
Top banking shares like State bank of India, HDFC bank, ICICI bank, Axis Bank.
2. Whether people will stop using bikes and cars in future ? If your answer is no then buy top bike and car manufacturing shares and if you answer is yes then don’t buy such shares.
Top manufacturing company shares like - Hero Honda, Bajaj, Maruti Suzuki, Mahindra and Mahindra,
3. Whether people will stop using biscuits, soaps, oil, shampoo etc ? If your answer is no then buy top companies involved in such business and if you answer is yes then don’t buy such shares.
Top companies involved in such business are - ITC, Hindustan Uniliver, Godrej, Nestle
4. Whether people will stop using paints? If your answer is no then buy top paint manufacturing companies and if you answer is yes then don’t buy such shares.
Top companies involved in manufacturing paints are Asian Paints, Berger Paints
5. Whether people will stop using medicines? If your answer is no then buy top medicine manufacturing companies and if you answer is yes then don’t buy such shares.
Top companies involved in manufacturing medicines are - Dr Reddy, Cipla, Sun pharma, Galxo Smith, Lupin, Aurobindo Pharm.
Likewise there are other sectors like Oil sector, Auto part manufacturing sector and lot more sectors can be found at below link
www.daytradingshares.com and look for Live Gainers & Losers - Sectorwise
You can also find at
Note - If you are looking to invest in any other sector or share or if you need any guidance then please write to us at email@example.com for free guidance.
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Earning money in share maket requires appropriate knowledge and experience, so it is highly advisable to gain adequate knowledge before start trading and investing in share market.