(IMT) INSTITUTE OF MANAGEMENT TECHNOLOGY

Centre for Distance Learning

(Recognized by Distance Education Council)

SYNOPSIS
ON
SHARE MARKET AN OVERVIEW
Submitted B
H!"#im!"$ K!u"
E$"%&&me$t N%' ()*+*,--
T%
(IMT) INSTITUTE OF MANAGEMENT TECHNOLOGY
Centre for Distance Learning
(Recognized by Distance Education Council)
PROFORMA FOR SYNOPSIS OF PRO.ECT WORK
N!me: Harsimran kaur
E$"%&&me$t N%.: 4!"!#$$
Add"e## /%" 0%""e#1%$de$0e: House no. $"% &'eetal ()artments% &ector * !4%
Ro'ini%
Del'i+!!""$,.
M%bi&e $%.: -.!.!#-,.
P2%$e N%' : "!!+/.!,4!!
M!3%" A"e! %/ S1e0i!&i4!ti%$ : 0inance
5ue#ti%$$!i"e Att!02ed * yes
Re#ume %/ P"%3e0t Guide Att!02ed * 1es
C%$#e$t Lette" %/ P"%3e0t Guide * 1es
P2%$e $%' P"%3e0t Guide : -.!!!,#
6!te %/ Submi##i%$ 7
STATEMENT ABOUT THE PROBLEM

2'e ob3ecti4e of t'e 1"%3e0t is to find t'e sales )otential of Demat (ccount
in Del'i and 5CR regions. 2'e researc' 6ill 'el) 6'at t'e current trends are in
t'e market and t'e com)etitors )roduct offering are relates to s'are market and
recommendations to increase t'e market s'are. &)ecifically% t'e researc'
ob3ecti4e is to:
2o study t'e 7utual funds industry in detail8 2'is 6ill done by managing
2'e 8arious client relations'i) and educating t'em about t'e 4arious
benefits t'at 7utual fund offer as com)ared to bank 0D9s% 5ational
sa4ing certificate etc. t'is also in4ol4es studying in de)t' about t'e 4arious
sc'emes offered by :R;5C;:(L :5< (sset 7anagement Com)any.
2o study about t'e in4estment :rocedure in 7utual funds
2o study t'e in4estor9s )reference in mutual funds by 6ay of =uestionnaire

(nd :ersonal 4isits to clients.
2o generate sales for t'e com)any
(6areness of t'e com)etitor9s )roduct among in4estors.
Determine t'e ty)e of ser4ices needed by t'e in4estors.
>at'er and analyze t'e future as)irations of t'e in4estors 6it' res)ect to
t'e demat account.
Rank and e4aluate t'e relati4e im)ortance t'e &'are 7arket )arameter
associated 6it' t'e Demat (ccount.
Com)arati4e analysis of 4arious mutual funds sc'emes of :R;5C;:(L
6it' t'at ?f t'e ot'er on t'e bases of (l)'a% beta% stander De4iation%

&'ar) ratio and 2enor ratio
WHY IS THIS PARTICULAR TOPIC CHOSEN
2'e )ur)ose of t'e undergone study is to study t'e Demat (ccount ser4ices of
t'e different bank @ ot'er securities com)anies @ e4aluates t'e com)etiti4e
)osition of &tandard c'artered so as to suggest 6ay to increase its market s'are.
2'e main )roblem faced by t'e com)any 6as t'at it 'ad a 4ery less customer
base. 2'e com)any9s o6n )roduct 'ad 4ery less market as com)are to it9s t'ird
)arty selling. 2'e com)any does a t'ird )arty selling for all t'e in4estment
)roducts.
T2e #tud t2u# /%0u#e# %$ /%&&%9i$: dime$#i%$#7
*' 2o identify t'e critical factors t'at influences t'e buying be'a4ior of
;n4estors.
)' 2o kno6 t'e in4estor acce)tance of t'e ser4ices of &tandard c'artered
;' bank in Del'i @ 5CR regions.
(' (ccording to current scenario it is a 4ery rele4ant 2o)ic.

<' 2o assess t'e )roblem 4olume of future sales
.
,' 7any big com)any are dealing in t'is market.
WHAT CONTRIBUTION WOUL6 THE PRO.ECT MAKE
0or t'e )ur)ose of t'e researc' it is absolutely im)erati4e for me to find out 6'at
t'e in4estor 6ant from t'eir com)any. ;t is also necessary to find out t'e
;n4estor9s )rofile i.e. 'isA'er age% mont'ly income% occu)ation and seB and also
t'e current com)any 6it' 6'ic' 'eAs'e is in4esting. 2'is 6ill re=uire me to get a
details =uestionnaire filled by t'e concern )erson. (ll t'e analysis in t'e re)ort
6ill be dra6n out of t'is =uestionnaire. 0or carrying out t'e com)etitor analysis
0urt'er 'el) 6ill be taken from com)any 6ebsites and 3ournals.

2'is researc' 6ill )ro4ide &tandard c'artered bank 6it' information like current
7arket s'are of &ecurities Com)any and also a detailed analysis of t'e ser4ices
?ffered by stock @ securities broker and stock @ &ecurities Com)any and 6'at
are t'e most im)ortant criteria for selecting a )articular securities com)any. 2'e
com)any can also get data on )ros)ecti4e customer by designing its )roduct
offering and marketing strategy in a 6ay so as to attract more clients in t'e near
future.
OB.ECTIVE AN6 SCOPE OF THE STU6Y
2'e study is t'e )art of academic curriculum of . years 7<( t'erefore t'e
)rimary ob3ecti4e of t'is study is to fulfill t'e re=uirement for t'e a6ard of 7<(
degree of (IMT) INSTITUTE OF MANAGEMENT TECHNOLOGY'
2'e )resent study 6as carried out 6it' t'e ob3ecti4e to kno6 &co)e of s'are
market and its 4arious catc'ments areas of :un3ab current securities com)any.
&o as to kno6 strengt' and 6eakness of s'are sc'emes of securities com)any%
&o t'at strengt's can be increased and 6eaknesses can be made Ct'e bestD in
securities ;ndustry.
2o study t'e i$=e#te" 1e"0e1ti%$# about 4arious securities com)any.
2o kno6 t'e le4el of a6areness among consumers about S2!"e M!">et'
2o make )eo)le kno6 !b%ut t2e =!"i%u# 1"%du0t# offered by securities
com)any.
2o kno6 t'e i$te"e#t &e=e& %/ t2e 0%$#ume"# to get associated 6it'
s'are market.
2o collect 4arious #u::e#ti%$# /"%m t2e 0%$#ume"# to make s'are
market better one.
T% #tud t2e Mutu!& /u$d# i$du#t" i$ det!i&8 2'is 6ill done by

managing t'e 8arious client relations'i) and educating t'em about t'e
4arious benefits t'at 7utual fund offer as com)ared to bank 0D9s% 5ational
sa4ing certificate etc. t'is also in4ol4es studying in de)t' about t'e 4arious
sc'emes offered by :R;5C;:(L of &ecurities 7anagement Com)any.
!. 2o study about t'e in4estment :rocedure in 7utual funds.
. 2o study t'e in4estor9s )reference in mutual funds by 6ay of
Euestionnaire and :ersonal 4isits to clients.
METHO6OLOGY
Researc' is a systemic and ob3ecti4e )rocess of gat'ering recording and
analyzing data for aid of making decision regarding a )articular )roblem.
*' RESEARCH 6ESIGN
2'e researc' design is a master )lan s)ecifying t'e met'ods and )rocedures
for collecting and analyzing t'e needed information t'e researc' design of my
dissertation is
6ESCRIPTIVE RESEARCH
Descri)ti4e researc' includes sur4eys and facts findings in=uiries of different
kinds.
)' 6ATA COLLECTION
PRIMARY DATA )rimary data is gat'ered t'roug' a sur4ey 6it' t'e 'el) of
=uestionnaire.
&EC?5D(R1 D(2( secondary data sources includes
<ooks
Fournals
4arious 6ebsites
; RESEARCH INSTRUMENTS
EGE&2;?55(;RE
( SAMPLE 6ESIGN
target )o)ulation )eo)le of industries .
sam)le size !"" )eo)le .
sam)ling tec'ni=ue con4enience and 3udgmental .
T1e %/ Re#e!"02
Researc' met'odology is a 6ay to systematic sol4e t'e researc' )roblem. ;t is a
)rocedure% 6'ic' is follo6ed ste) by ste) to sol4e a )articular researc' )roblem.
2'ere are basically four ty)es of researc'es
EH:L?R(2;8E RE&E(RCH
DE&CR;:2;8E RE&E(RCH
D;(>5?&2;C RE&E(RCH
H1:?2HE&;& 2E&2;5> RE&E(RCH
H1%t2e#i# Te#ti$: Re#e!"02'
2o test a 'y)ot'esis of casual relations'i) bet6een 4ariables.
2'e )resent )ro3ect is Descri)ti4e in nature. ;t is done to )oetry accurately t'e
c'aracteristic of a )articular indi4idual situation or a grou). 2'e ma3or )ur)ose is
descri)ti4e researc' is t'e descri)tion of t'e state of t'e affairs as it eBits at
)resents. 2'e main c'aracteristics of t'is met'od are t'at t'e researc'er 'as no
control o4er t'e 4ariablesI 'e can only re)ort 6'at 'as 'a))ened or 6'at is
'a))ening.
CHAPTERISATION SCHEME
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5UESTIONNAIRE
5ame: JJJJJJJJJJJ ?ccu)ation:JJJJJJJJJJ..
;n4estment :resently Held:+
:lease list t'e 4alue t'e assets in your total in4estments )ortfolio (in Rs):
&tocks:KKKKKKKKK 7utual 0unds:KKKKKKKKKKKKKKK
<onds:KKKKKKKKKKKKK >o4t. &ecurities:KKKKKKKKKKKKK
?)tions:KKKKKKKKKKKK <ank De)osits:KKKKKKKKKKKKK
Real estate:KKKKKKKKKKKK
*'O=e" t2e $eAt ;8< e!"#B d% %u eA1e0t %u" !$$u!& i$0%me t% 02!$:eC
;ncrease Decrease Remain t'e same
)'6% %u i$=e#t i$ Mutu!& Fu$d#C
1es 5o Earlier% no6 sto))ed
;'W2!t i# %u" eA1e"ie$0e i$ t2e m!">etC
Less t'an a year !+4 years 7ore t'an 4 years
('W2!t i# %u" T"!di$: P"e/e"e$0eC
&)eculation ;n4estment <ot'
<'W2!t i# %u" A=e"!:e i$=e#tme$t 1e"i%dC
Less t'an . mont's . to - mont's
- mont's to years 7ore t'an years
,'F!0t%"# i$/&ue$0i$: t2e i$=e#tme$t de0i#i%$#C
(d4ice from <roker Current ne6s
Re4ie6s in 0inancial 7agazines (d4ice from 0riends
&elf E4aluation ?t'ers
@'H%9 mu02 Ri#># !"e %u 9i&&i$: t% t!>eC
Hig' Lo6 7oderate
-'W2!t i# %u" 1"e/e"e$0e i$ Mutu!& Fu$d#C
E=uity ;ncome
7oney 7arket 0unds EL&&
<alanced 0unds &;:
?t'ers
D'H%9 mu02 A11"e0i!ti%$ d% %u eA1e0t /"%m %u" i$=e#tme$t#C
G) to !,L !,+,L ,+.,L 7ore t'an .,L
*+'H%9 mu02 &%## !"e %u 9i&&i$: t% t!>eC
Less t'an ,L ,+!"L more t'an !"L
**'W2i02 t1e %/ Mutu!& /u$d# d% %u 1"e/e"C
?)en ended sc'emes Closed ended sc'emes
*)'6% %u :et i$/&ue$0ed b t2e $!me %/ C%m1!$ 1"%m%ti$: Mutu!&
Fu$d#C
1es 5?
*;'6% %u :et i$/&ue$0e b t2e $!me %/ "etu"$# :i=e$ b ! /u$d %" b t2e
0u""e$t NAV %/ ! /u$d#C
<y 5(8 <y Returns <ot'
*('A/te" 2%9 m!$ e!"# d% %u eA1e0t t% "edeem %u" i$=e#tme$tC
"+ 1ears
.+, 1ears
#+!" 1ears
!!+!, 1ears
?4er!, 1ears
*<'H%9 m!$ 1e%1&e !"e /i$!$0i!&& de1e$de$t u1%$ %uC
7ore t'an 4 )ersons
2'ree )eo)le
26o )eo)le
?ne )eo)le
; only need to take care of myself

TITLE OF THE PRO.ECT
SHARE MARKET AN OVERVIEW
CONTENTS
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LIST OF GRAPHS E CHARTS
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LIST OF TABLE
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PREFACE
2'e introduction and a))lication of t'e conce)t of customer ser4ices entered in a
6elcoming 6ay in ;ndia only after inde)endence. 2'e s'are market in ;ndia 'as
come a long 6ay during t'e last t6o centuries. ;ts gro6t' 6as faster and t'e
co4erage 6ider since and ma3or )osition of securities sector 6as entrusted to t'e
)ublic sector. 2'is )rocess continued and embraced fe6 )ri4ate banks in !-$".
2'e transfer of o6ners'i) of banks from t'e )ublic to )ri4ate 6as aimed
at entrusting t'e banks 6it' greater res)onsibilities for t'e economic
de4elo)ment of ;ndia by taking securities ser4ices to t'e masses and taking
s)ecial care of t'e 6eaker section of t'e society and t'e )riority sector of t'e
economy. 2'oug' t'e number of securities com)any magnitude and t'e 4ariety
of t'eir o)erations 'as gro6n considerably during t'e )eriod of near about t'ree
decades% but it a))ears t'at t'e securities sector 'as entered into serious among
customers.
For overcoming this problem, securities industry should seek introspection and adopt
refined management techniques. It has been endeavor of this study to analyze the present
state of various company keeping in view the primary data has been collected regarding
the present state of invest schemes in various company by using a questionnaire.
ACKNOWLE6 GMENT
C:eo)le must 'a4e guidance in doing t'eir 6ork kno6 6'ere to turn
0or 'el) guidanceD
;t is said t'at C5o learning is )ossible 6it'out any )ro)er guidance and no
researc' is )ossible 6it'out any )ro)er guidance % some contribution is
)erformed by 4arious indi4idual
2'is )ro3ect 6ork% 6'ic' is my ste) in t'e field of )rofessinalisation% 'as been
successfully accom)lis'ed only because of time su))ort of my 6ell+6is'er. ;
6ould like to )ay my sincere and t'ank to t'ose% 6'o directed me at e4ery ste) in
my )ro3ect 6ork.
; eB)ress my gratitude to my esteemed guide% for t'eir 4aluable assistance and
encouragement% 6'ic' enable me to carry on t'e )ro3ect successfully. 2'ey ga4e
me 6onderful o))ortunity to 6ork on t'e )ro3ect. 2'ere time+to+time guidance
and incessant su))ort 'el)ed me to broaden my outlook on t'e )ro3ect. ; am
'ig'ly obliged for t'eir su))ort t'roug'out t'e interns'i).
; also 'ad t'e )ri4ilege of meeting many com)any officials including marketing
c'ief manager and discussing )articular as)ect of 4arious in4estment o)tions.
2'e )ro3ect also in4ol4ed constant interaction 6it' my friends in t'e college. (
4ote of t'ank also goes to t'em. (t last t'is ackno6ledgement can only be
com)leted after being to my )arent and A&mi:2t G%d'
6ECLARATION
; H!"#im"!$ K!u" Enrollment 5o: 4!"!#$$ of class 7<( of (IMT)
INSTITUTE OF MANAGEMENT TECHNOLOGY 'ere by declare t'e
)ro3ect entitled FSHARE MARKET AN OVERVIEWG is an original
6ork and same 'as not been submitted to any ot'er institution for
a6ards of any ot'er degree )artially or 6'olly.
(Si:$!tu"e %/ C!$did!te)
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B!#i0# %/ I$di!$ S2!"e M!">et
S2!"e
&'are is not'ing but t'e ?6ners'i) of t'e com)any di4ided into small )arts and
eac' )art is called as &'are or &tock.
( )erson carrying a s'are of a com)any 'olds t'at )art of o6ners'i) in t'at
com)any.
( )erson 'olding maBimum s'ares 'as maBimum o6ners'i) like directors%
c'airman etc.
S2!"e M!">et
( &'are market is t'e )lace 6'ere buying and selling of s'ares takes )lace.
5o6 days due to internet and ad4anced tec'nology t'ere is no need to be
)'ysical )resent in eBc'anges like 5&E and <&E but t'e buying and selling of
s'ares takes )lace from any6'ere in ;ndia and also from foreign country. ?ne
s'ould need t'e demat account% com)uter and internet connection and 'eAs'e
can start trading.
S2!"e m!">et !$d it# !$!&#i#
0inancial markets like 5&E (5ational &tock EBc'ange) and <&E (<ombay &tock
EBc'ange) are countries economic barometer (a guide to economic gro6t').
&tock markets like 5&E and <&E are t'e stock eBc'anges 6'ere t'e trading of a
com)anyMs stock takes )lace.
Fi"#t &et u# u$de"#t!$d t2e W%">i$: %/ ! #2!"e (#t%0>) m!">et
2o learn about 'o6 you can earn on t'e stock market% one 'as to understand
'o6 it 6orks.
N'en a )erson 6ant to buyAsell s'ares in t'e s'are market t'en 'e 'as to first
)lace t'e order 6it' a broker or can do t'emsel4es using online trading systems
(t'is 6ill be discussed later).
N'en you )lace t'e buy order% t'e message is transferred to t'e eBc'ange
Oeit'er 5&E P5ational &tock EBc'angeQ or <&E P<ombay &tock EBc'angeQR and
t'e order stays in t'e =ueue of eBc'angeMs ot'er orders and gets eBecuted if t'e
)rice of t'at s'are comes to t'at 4alue. ?nce you get t'e confirmation of t'is
transcation%t'e s'ares )urc'ased% 6ill be sent to your demat account.2'e s'ares
6ill be in electronic format in demat account.
R%&&i$: Sett&eme$t C0&e7 (RSC)
R&C means 6'en you 6ill get your s'ares in your demat account.
;n a rolling settlement% eac' trading day(2) is considered as a trading )eriod and
trades eBecuted during t'e trading day(2) are settled on a 2S basis i.e. trading
day )lus t6o 6orking days. &o on fort' 6orking day you can see t'e s'ares in
your demat account
W2!t i# 6em!t !00%u$t !$d 92 it i# "eHui"edC
&ecurities and EBc'ange <oard of ;ndia (&E<;) is a board (cor)orate body)
a))ointed by t'e >o4ernment of ;ndia in !-- 6it' its 'ead office at 7umbai. ;ts
one of t'e function is 'el)ing t'e business in stock eBc'anges and any ot'er
securities markets. ;n anot'er 6ord it is t'e regulator for stock eBc'anges.
T Demat (s'ort form of Dematerialization) is t'e )rocess by 6'ic' an in4estor
can get s'ares (also called as )'ysical certificates) con4erted into electronic form
maintained in an account 6it' t'e De)ository :artici)ant (D:).
T D: could be organizations in4ol4ed in t'e business of )ro4iding financial
ser4ices like banks% brokers% financial institutions etc. D:9s are like agents of
De)ository.
T De)ository is an organization res)onsible to maintain in4estorMs securities
(securities can be s'ares or any ot'er form of in4estments) in t'e electronic form.
;n ;ndia t'ere are t6o suc' organizations called 5&DL (5ational &ecurities
De)ository Ltd.)
and CD&L (Central De)ository &er4ices ;ndia Ltd.)
T ;n4estor9s 6is'ing to o)en Demat account 'as to go D: and o)en t'e account.
T ?)ening t'e Demat account is as sim)le as o)ening t'e bank account 6it' any
bank. (s you need bank account to sa4e your money% make c'e=ue )ayments
etc% like6ise you need to o)en a demat account if you 6ant to buy and sell stocks
in s'are market.
T (ll s'ares 6'at you )ossess 6ill s'o6 in your demat account% so you donMt
'a4e to )ossess any )'ysical certificates. 2'ey are all 'eld electronically in your
demat account. (s you buy and sell t'e s'ares accordingly your s'ares 6ill get
ad3usted in your demat account.
I# ! dem!t !00%u$t ! mu#tC
1E&. 2'e market regulator% t'e &ecurities and EBc'ange <oard of ;ndia (&E<;)%
'as made it com)ulsory to o)en t'e demat account if you 6ant to buy and sell
s'ares in s'are market.
&o a demat account is a must for trading and in4esting in s'are market.
H%9 t% %1e$ ! 6em!t !00%u$tC
1ou 'a4e to a))roac' a D: to o)en a Demat account.
7ost banks are D: )artici)ants so you may a))roac' t'em or else you can
contact us.
2o 'a4e latest list of registered D: )lease 4isit 6ebsites 666.nsdl.co.in and
666.cdslindia.com.
( broker and a D: are t6o different )eo)le. ( broker is a member of t'e stock
eBc'ange% 6'o buys and sells s'ares on 'is be'alf and also on be'alf of 'is
customers.
F%&&%9i$: !"e t2e d%0ume$t# "eHui"ed t% %1e$ 6em!t !00%u$t
N'en you a))roac' any D:% you 6ill be guided t'roug' t'e formalities for
o)ening a demat account.
2'e D: 6ill ask to )ro4ide some documents as )roof of your identity and
address.
<elo6 is a list but you may not re=uire all of t'em.
:(5 card% 8oter9s ;D% :ass)ort% Ration card% Dri4er9s license% :'oto credit card
Em)loyee ;D card% ;2 returns% ElectricityA Landline )'one bill etc.
6% %u $eed !$ #2!"e# t% %1e$ ! 6em!t !00%u$tC
5?. 1ou need not 'a4e to 'a4e any s'ares to o)en a demat account. ( demat
account can be o)ened 6it' no balance of s'ares.
(nd t'ere is no minimum balance to be maintained eit'er. 1ou can 'a4e a zero
balance (s'ares) in your account.
H%9 mu02 it 0%#t t% %1e$ ! 6em!t !00%u$tC
2'e c'arges for demat account o)ening% annual account maintenance fees and
transaction c'arges 4aries bet6een 4arious D:9s.
2o 'a4e latest c'arges )lease 4isit 6ebsites of 666.nsdl.co.in and
666.cdslindia.com or else you need to contact t'e s)ecific broker.
Fi$!&&
(fter successfully o)ening t'e demat account you are ready to do buy and sell
s'ares in s'are market eBc'anges like <&E and 5&E.
Im1%"t!$t 1%i$t# t% "emembe" 92i&e %1e$i$: %$&i$e !00%u$t
Do multi)le en=uiries and try get lo6 brokerage trading account.
(lso discuss about t'e margin t'ey )ro4ide for day trading.
Discuss about fund transfer. 2'e fund transfer s'ould be reliable and easy.
0und transfer from your bank account to trading account
and 4isa 4ersa. &ome online s'are trading account 'as integrated sa4ings
account 6'ic' makes easy for you to transfer funds from
your sa4ing account to trading account.
8ery im)ortant is about ser4ice t'ey )ro4ide% t'e researc' calls% intraday or
daily trading ti)s.
(lso en=uire about t'eir ser4ices c'arges and any ot'er 'idden fees if any.
(nd also see 'o6 reliable and easy is to contact t'em in case if any
emergency.
Emergency like buying and selling of s'ares on immediate basis or in case of
any tec'nical or ot'er )roblems at your side 6'ile
doing trading yourself.
I$=e#ti$:II W2!tJ# t2!t
Fudging by t'e fact t'at youM4e taken t'e trouble to na4igate to t'is )age my
guess is t'at you donMt need muc' con4incing about t'e 9i#d%m %/ i$=e#ti$:.
Ho6e4er% ; 'o)e t'at your =uest for kno6ledgeAinformation about t'e artAscience
of in4esting ends 'ere. Read on. Uno6ledge is )o6er. ;t is common kno6ledge
t'at m%$e 2!# t% be i$=e#ted 9i#e&. ;f you are a no4ice at in4esting% terms
suc' as stocks% bonds% futures% o)tions% ?)en interest% yield% :AE ratio may sound
>reek and Latin. RelaB. ;t takes years to understand t'e !"t %/ i$=e#ti$:. 1ouMre
not alone in t'e =uest to crack t'e 3argon. 2o start 6it'% take your i$=e#tme$t
de0i#i%$# 6it' as many facts as you can assimilate. <ut% understand t'at you
can ne4er kno6 e4eryt'ing. Learning to li4e 6it' t'e anBiety of t'e unkno6n is
)art of in4esting. <eing ent'usiastic about getting started is t'e first ste)% t'oug'
daunting at t'e first instance. 2'atMs 6'y my i$=e#tme$t 0%u"#e begins 6it' a
dose of encouragement: Nit' enoug' time and a little disci)line% you are all but
guaranteed to make t'e rig't mo4es in t'e market. :atience and t'e 6illingness
to in4est your sa4ings across a )ortfolio of securities tailored to suit your age and
risk )rofile 6ill )ro)el your re4enues and cus'ion you against any ma3or losses.
;n4esting is not about )utting all your money into t'e V5eBt big t'ing%V 'o)ing to
make a killing. I$=e#ti$: i#$Jt :!mb&i$: %" #1e0u&!ti%$I itMs about taking
reasonable risks to rea) steady re6ards.
I$=e#ti$: i# ! met2%d %/ 1u"02!#i$: !##et# i$ %"de" t% :!i$ 1"%/it i$ t2e
/%"m %/ "e!#%$!b& 1"edi0t!b&e i$0%me (di=ide$d#B i$te"e#tB %" "e$t!&#) !$d
!11"e0i!ti%$ %=e" t2e &%$: te"m'
W2 #2%u&d %u i$=e#tC
&im)ly )ut% you s'ould in4est so t'at your money gro6s and s'ields you against
rising inflation. 2'e rate of "etu"$ %$ i$=e#tme$t# s'ould be greater t'an t'e
rate of inflation% lea4ing you 6it' a nice sur)lus o4er a )eriod of time. N'et'er
your money is in4ested in stocks% bonds% mutual funds or certificates of de)osit
(CD)% t'e end result is to create 6ealt' for retirement% marriage% college fees%
4acations% better standard of li4ing or to 3ust )ass on t'e money to t'e neBt
generation or maybe 'a4e some fun in your life and do t'ings you 'ad al6ays
dreamed of doing 6it' a little eBtra cas' in your )ocket. (lso% itMs eBciting to
re4ie6 your in4estment returns and to see 'o6 t'ey are accumulating at a faster
rate t'an your salary.
W2e$ t% I$=e#tC
2'e sooner t'e better. <y i$=e#ti$: i$t% t2e m!">et rig't a6ay you allo6 your
in4estments more time to gro6% 6'ereby t'e conce)t of com)ounding interest
s6ells your income by accumulating your earnings and di4idends. Considering
t'e un)redictability of t'e markets% researc' and 'istory indicates t'ese t'ree
:%&de$ "u&e# /%" !&& i$=e#t%"#
!. ;n4est early
)' I$=e#t "e:u&!"&
;' I$=e#t /%" &%$: te"m !$d $%t #2%"t te"m
N'ile it9s tem)ting to 6ait for t'e Cbe#t timeG t% i$=e#t% es)ecially in a rising
market% remember t'at t'e risk of 6aiting may be muc' greater t'an t'e )otential
re6ards of )artici)ating. 2rust in t'e )o6er of com)ounding. Com)ounding is
gro6t' 4ia rein4estment of returns earned on your sa4ings. Com)ounding 'as a
sno6balling effect because you earn income not only on t'e original in4estment
but also on t'e rein4estment of di4idendAinterest accumulated o4er t'e years.
2'e )o6er of com)ounding is one of t'e most com)elling reasons for in4esting
as soon as )ossible. 2'e earlier you start in4esting and continue to do so
consistently t'e more money you 6ill make. 2'e longer you lea4e your money
in4ested and t'e 'ig'er t'e interest rates% t'e faster your money 6ill gro6. 2'atMs
6'y stocks are t'e be#t &%$:8te"m i$=e#tme$t t%%&. 2'e general u)6ard
momentum of t'e economy mitigates t'e stock market 4olatility and t'e risk of
losses. 2'at9s t'e reasoning be'ind in4esting for long term rat'er t'an s'ort
term.
H%9 mu02 t% i$=e#tC
2'ere is no statutory amount t'at an in4estor needs to in4est in order to generate
ade=uate returns from 'is sa4ings. 2'e amount t'at you in4est 6ill e4entually
de)end on factors suc' as:
! 1our risk )rofile . 1our 2ime 'orizon .. &a4ings made
Remember t'at no amount is too small to make a beginning. N'ate4er amount
of money you can s)are to begin 6it' is good enoug'. 1ou can kee) increasing
t'e amount you in4est o4er a )eriod of time as you kee) gro6ing in confidence
and understanding of t'e in4estment o)tions a4ailable and &o instead of 3ust
dreaming about t'ose 6ads of money do somet'ing concrete about it and start
in4esting soon as you can 6it' 6'ate4er amount of money you can s)are.
I$=e#tme$t is a term 6it' se4eral closely+related meanings in finance and
economics.
;t refers to t'e accumulation of some kind of asset in 'o)es of getting a future
return from it.
(ssets suc' as e=uity s'ares or bonds 'eld for t'eir financial return
(interest% di4idends or ca)ital a))reciation)% rat'er t'an for t'eir use in t'e
organization9s o)erations.
Retu"$ %$ I$=e#tme$t#
2'e money you earn or lose on your in4estment% eB)ressed as a )ercentage
of your original in4estment.
;n &im)le 6ords% ;t is t'e amount recei4ed as a result of in4esting in )articular
4entures.
C%&&e0ti=e I$=e#tme$t# S02eme#
0unds 6'ic' manage money for a number of in4estors and )ool it toget'er. 2'is
enables in4estors to benefit from a larger number of indi4idual in4estments and
cost efficiencies.
S2%"t8Te"m I$=e#tme$t#
&'ort+2erm ;n4estments are generally in4estments 6it' maturities of less t'an
one year.
C!1it!& I$=e#tme$t#
;n4estments into t'e fiBed ca)ital (ca)ital assets)% including costs for t'e ne6
construction% eB)ansion% reconstruction and tec'nical ree=ui)ment of t'e
o)erating enter)rises% )urc'ase of mac'inery% e=ui)ment% tools% accessories%
)ro3ect and in4estigation 6orks and ot'er costs and eB)enditures.
2'ere are t6o 6ays for in4estors to get s'ares from t'e 1"im!" !$d #e0%$d!"
m!">et#. ;n 1"im!" m!">et#% securities are boug't by 6ay of )ublic issue
directly from t'e com)any. ;n Se0%$d!" m!">et s'are are traded bet6een t6o
in4estors.
;n finance a #2!"e is a unit of account for =!"i%u# /i$!$0i!& i$#t"ume$t#
including stocks% mutual funds% limited )artners'i)s% and RE;2Ms. ;n <ritis'
Englis'% t'e usage of t'e 6ord s'are alone to refer solely to stocks is so common
t'at it almost re)laces t'e 6ord stock itself.
;n sim)le Nords% a #2!"e %" #t%0> is a document issued by a com)any% 6'ic'
entitles its 'older to be one of t'e o6ners of t'e com)any. ( s'are is issued by a
com)any or can be )urc'ased from t'e stock market.
<y o6ning a s'are you can earn a )ortion and #e&&i$: #2!"e# you get ca)ital
gain. &o% your return is t'e di4idend )lus t'e ca)ital gain. Ho6e4er% you also run
a risk of making a ca)ital loss if you 'a4e sold t'e #2!"e at a )rice belo6 your
buying )rice.
( 0%m1!$J# #t%0> 1"i0e reflects 6'at in4estors t'ink about t'e stock% not
necessarily 6'at t'e com)any is V6ort'.V 0or eBam)le% com)anies t'at are
gro6ing =uickly often trade at a 'ig'er )rice t'an t'e com)any mig't currently be
V6ort'.V &tock )rices are also affected by all forms of com)any and market ne6s.
:ublicly traded com)anies are re=uired to re)ort =uarterly on t'eir financial
status and earnings. 7arket forces and general in4estor o)inions can also affect
s'are )rice.
5ui0> F!0t# %$ St%0># !$d S2!"e#
?6ning a stock or a s'are means you are a )artial o6ner of t'e com)any%
and you get 4oting rig'ts in certain com)any issues
?4er t'e long run% stocks 'a4e 'istorically a4eraged about !"L annual
returns Ho6e4er% stocks offer no guarantee of any returns and can lose
%
4alue e4en in t'e long run
;n4estments in stocks can generate returns t'roug' di4idends% e4en if t'e
)rice
H%9 d%e# %$e t"!de i$ #2!"e# C
E4ery transaction in t'e #t%0> eA02!$:e is carried out t'roug' licensed
members called brokers.
2o trade in s'ares% you 'a4e to a))roac' a broker Ho6e4er% since most #t%0>
eA02!$:e b"%>e"# deal in 4ery 'ig' 4olumes% t'ey generally do not entertain
small in4estors. 2'ese b"%>e"# 2!=e ! $et9%"> %/ #ub8b"%>e"# 6'o )ro4ide
t'em 6it' orders.
T2e general in4estors s'ould identify a sub+broker for regular trading in s'ares
and )alce
'is order for )urc'ase and sale t'roug' t'e sub+broker. 2'e subAbroker 6ill
transmit t'e
order to 'is broker 6'o 6ill t'en eBecute it .
What are active Shares ?
S2!"e# in 6'ic' t'ere are fre=uent and day+to+day dealings% as distinguis'ed
from )artly acti4e s'ares in 6'ic' dealings are not so fre=uent. 7ost #2!"e# %/
&e!di$: 0%m1!$ie# 6ould be acti4e% )articularly t'ose 6'ic' are sensiti4e to
economic and )olitical e4ents and are% t'erefore% sub3ect to sudden )rice
mo4ements. &ome market analysts 6ould define active shares as those which
are bought and sold at least three times a week.
6em!t refers to a dem!te"i!&i#ed !00%u$t .
2'oug' t'e com)any is under obligation to offer t'e securities in bot' )'ysical
and dem!t m%de% you 'a4e t'e c'oice to recei4e t'e securities in eit'er mode.
;f you 6is' to 'a4e securities in dem!t m%de% you need to indicate t'e name of
t'e de)ository and also of t'e de1%#it%" 1!"ti0i1!$t 6it' 6'om you 'a4e
de)ository account in your a))lication.
;t is% 'o6e4er de#i"!b&e t'at you 'old securities in dem!t /%"m as )'ysical
securities carry t'e risk of being fake% forged or stolen.
Fust as you 'a4e to o)en an account 6it' a bank if you 6ant to sa4e your money%
make c'e=ue )ayments etc% 5o6adays% you need to o)en a dem!t !00%u$t i/
%u 9!$t t% bu %" #e&& #t%0>#.
&o it is 3ust like a bank account 6'ere actual money is re)laced by #2!"e#. 1ou
'a4e to a))roac' t'e 6P# (remember% t'ey are like bank branc'es)% to o)en
your dem!t !00%u$t. LetMs say your )ortfolio of s'ares looks like t'is: !," of
;nfosys% ," of Ni)ro% "" of HLL and !"" of (CC. (ll t'ese 6ill s'o6 in your
dem!t !00%u$t. &o you donMt 'a4e to )ossess any )'ysical certificates s'o6ing
t'at you o6n t'ese s'ares. T2e !"e !&& 2e&d e&e0t"%$i0!&& i$ %u" !00%u$t.
(s you bu !$d #e&& t2e #2!"e#% t'ey are ad3usted in your account. Fust like a
b!$> 1!##b%%> %" #t!teme$t% t'e D: 6ill )ro4ide you 6it' )eriodic statements
of 'oldings and transactions.
I# ! dem!t !00%u$t ! mu#tC 5o6adays% )ractically all trades 'a4e to be settled
in dematerialised form. (lt'oug' t'e market regulator% t'e &ecurities and
EBc'ange <oard of ;ndia (&E<;)% 'as allo6ed trades of u)to ,"" s'ares to be
settled in )'ysical form% nobody 6ants )'ysical s'ares any more.
&o a dem!t !00%u$t is a must for trading and in4esting.
7ost banks are also D: )artici)ants% as are many brokers.
1ou can c'oose your 4ery o6n D:.
2o get a list% 4isit t'e 5&DL and CD&L 6ebsites and see 6'o t'e registered D:s
are.
( broker is se)arate from a D:. ( broker is a member of t'e #t%0> eA02!$:e%
6'o buys and sells s'ares on 'is be'alf and on be'alf of 'is clients.
)' Lite"!tu"e Su11%"t
( #t%0> %1ti%$ is a s)ecific ty)e of o)tion 6it' a stock as t'e underlying
instrument (t'e security t'at t'e 4alue of t'e o)tion is based on). 2'us it is a
contract to buy (kno6n as a VcallV contract) or sell (kno6n as a V)utV contract)
s'ares of stock% at a )redetermined or calculable (from a formula in t'e contract)
)rice.
;t is Ha4ing t'e Rights to purchase a corporation's stock at a s)ecified )rice.
;nfact 2'ere are t6o definitions of stock o)tions.
!. 2'e rig't to )urc'ase or sell a #t%0> at a s)ecified )rice 6it'in a stated )eriod.
O1ti%$# are a )o)ular in4estment medium% offering an o))ortunity to 'edge
)ositions in ot'er securities% to s)eculate on stocks 6it' relati4ely little
in4estment% and to ca)italize on c'anges in t'e market 4alue of o)tions contracts
t'emsel4es t'roug' a 4ariety of o)tions strategies.
. ( 6idely used form of em)loyee incenti4e and com)ensation.;n some
Com)anies% St%0> %1ti%$# constitute )art of remuneration.
Em1&%ee #t%0> %1ti%$# are stock o)tions for t'e com)anyMs o6n stock t'at are
often offered to u))er+le4el em)loyees as )art of t'e eBecuti4e com)ensation
)ackage. (n em)loyee stock o)tion is identical to a call o)tion on t'e com)anyMs
stock% 6it' some eBtra restrictions.
Pe"/%"m!$0e St%0> O1ti%$# are ?)tions t'at 4est if )re+determined
)erformance measures are ac'ie4ed. 2'e )erformance goal (re4enue gro6t'%
stock+)rice increasesJ) must be reac'ed for t'e o)tions to be eBercisable or for
t'e 4esting to be accelerated
1ou can buy any stock and sell any stock and it doesn9t take muc' to get started.
(ll you need is a b"%>e"!:e !00%u$t. ( broker t'at ; use is &cottrade
'tt):AA666.scottrade.comA and you can start an account 6it' t'em for W,"" and
t'eir commissions are only W/% so t'ey are not eB)ensi4e at all.
?nce you 'a4e setu) a brokerage account you t'en need to c'oose an
in4estment met'od and t'en researc' different com)anies and t'en buy stock
in .t'e ones t'at you feel 6ill go u) because t'ey are good sound com)anies.
&o as you can see t'ere are se4eral benefits to %$&i$e #t%0> t"!di$: but let9s
reca).
Nit' o$&i$e #t%0> t"!di$: all you need is W,"" to o)en a brokerage account% t'e
brokerage commissions are lo6 at &cottrade t'ey9re only W/ and you can buy
and sell your stocks from your 'ome com)uter anytime t'at t'e stock market is
o)en.
Nell no6 t'at you kno6 t'at you can do %$&i$e #t%0> t"!di$: 6it' a minimal
in4estment you s'ould get started today and t'en start learning about t'e #t%0>
m!">et and c'oose t'e #t%0># you 6ant to in4est in.
W2!t i# NET ASSET VALUE C
2'e 2erm Net A##et V!&ue (NAV) is used by in4estment com)anies to measure
$et !##et#. ;t is calculated by subtracting liabilities from t'e 4alue of a fundMs
securities and ot'er items of 4alue and di4iding t'is by t'e number of outstanding
s'ares. Net !##et =!&ue is )o)ularly used in ne6s)a)er mutual fund tables to
designate t'e )rice )er s'are for t'e fund.
2'e 4alue of a collecti4e in4estment fund based on t'e market )rice of securities
'eld in its )ortfolio. Gnits in o)en ended funds are 4alued using t'is measure.
Closed ended in4estment trusts 'a4e a net asset 4alue but 'a4e a se)arate
market 4alue. NAV )er s'are is calculated by di4iding t'is figure by t'e number
of ordinary s'ares. ;n4estments trusts can trade at $et !##et =!&ue or t'eir )rice
can be at a )remium or discount to NAV.
8alue or )urc'ase )rice of a s'are of stock in a mutual fund. NAV is calculated
eac' day by taking t'e closing market 4alue of all securities o6ned )lus all ot'er
.assets suc' as cas'% subtracting all liabilities% t'en di4iding t'e result (total net
assets) by t'e total number of s'ares outstanding.
C!&0u&!ti$: NAV# + Calculating mutual fund $et !##et =!&ue# is easy. &im)ly
take t'e current market 4alue of t'e fundMs net assets (securities 'eld by t'e fund
.minus any liabilities) and di4ide by t'e number of s'ares outstanding. &o if a .
fund 'ad net assets of Rs.," lak' and t'ere are one lak' s'ares of t'e fund% t'en
t'e )rice )er s'are (or NAV) is Rs.,"."".
2'ese days% you canMt retire 6it'out using t'e "etu"$# /"%m i$=e#tme$t#. 1ou
canMt count on your social security c'ecks to co4er your eB)enses 6'en you
retire. ;tMs barely enoug' for )eo)le 6'o are recei4ing it no6 to 'a4e food% s'elter
and utilities. 2'at doesnMt account for any care you may need or in t'e e4en t'at
you need to take ad4antage of suc' funds muc' earlier in life. ;t is im)ortant to
'a4e your o6n financial )lan. 2'ere are many >i$d# %/ i$=e#tme$t# you can
make t'at 6ill make your life muc' easier do6n t'e road.
2'e follo6ing are brief descri)tions for be:i$$i$: i$=e#t%"# to familiarize
t'emsel4es 6it' different kinds of i$=e#tme$t %1ti%$#:
(+*K P&!$#
2'e easiest and most )o)ular kind of i$=e#tme$t is a 4"!U )lan. 2'is is due to
t'e fact t'at most 3obs offer t'is sa4ings )rogram 6'ere t'e money can be
automatically deducted from your )ayroll c'eck and you ne4er realize it is
missing.
Li/e I$#u"!$0e
Life ;nsurance )olicies are anot'er kind of in4estment t'at is fairly )o)ular. ;t is a
6ay to ensure income for your family 6'en you die. ;t allo6s you a sense of
security and )ro4ides a 4aluable taB deduction.
St%0>#
&tocks are a uni=ue kind of in4estment because t'ey allo6 you to take )artial
o6ners'i) in a com)any. <ecause of t'is% t'e returns are )otentially bigger and
t'ey 'a4e a 'istory of being a 6ise 6ay to in4est your money.
B%$d#
( bond is basically a )romise note from t'e go4ernment or a )ri4ate com)any.
1ou agree to gi4e t'em a set amount of money as a loan and t'ey kee) it for a
set number of years 6it' a )redetermined amount of interest. 2'is is ty)ically a
safe bet and one t'at is a good in4estment for a first time in4estor because t'ere
is little risk of losing your money.
Mutu!& Fu$d#
7utual funds are a kind of in4estment t'at are based on t'e gains and losses of
a s'are'older. <asically one )erson manages t'e money of se4eral or many
in4estors and in4ests in a list of 4arious stocks to lessen t'e effect of any losses
t'at may occur.
M%$e M!">et Fu$d#
( good s'ort+term in4estment is a 7oney 7arket 0und. Nit' t'is kind of
in4estment you can earn interest as an inde)endent s'are'older.
A$$uitie#
;f you are interested in taB+deferred income% t'en annuities may be t'e rig't kind
of in4estment for you. 2'is is an agreement bet6een you and t'e insurer. ;t
6orks to )roduce income for you and )rotect your earning )otential.
B"%>e"ed Ce"ti/i0!te# %/ 6e1%#it (C6#)
CDs are a kind of in4estment 6'ere you de)osit money for a set amount of time.
2'e good t'ing about CDs is t'at you can take t'e money out at any time 6it'out
)aying a )enalty fee. Ne all kno6 life isnMt )redictable% so t'is is a nice feature to
.'a4e in your o)tion.
Re!& E#t!te
Re!& E#t!te is a tangible kind of in4estment. ;t includes your land and anyt'ing
)ermanently attac'ed to your )iece of )ro)erty. 2'is may include your 'ome%
rental )ro)erties% your com)any or em)ty )ieces of land. Real estate is ty)ically a
smart and can make you a lot of money o4er time
2'e &ecurities and EBc'ange <oard of ;ndia (&E<;)% t'e ca)ital market
6atc'dog% 2'ursday cracked do6n on some of t'e to) brokerage firms and
banks for t'eir alleged in4ol4ement in an initial )ublic offering (;:?) scam.
&E<; conducted in4estigations in res)ect of all t'e ;:?s from Fanuary "". to
December "",.
2'e findings of in4estigations% )rima facie% re4ealed 4iolations of serious nature
by se4eral key o)erators% t'eir financiers% concerned de)ository )artici)ants and
t'e de)ositories.
;n its order% &E<; 'as barred brokerage firms like Uar4y &tockbroking and
;ndia<ulls from t'e market. ;t 'as also directed HD0C <ank and ;D<; <ank not to
o)en ne6 demat accounts for s'are transactions. SEBIJ# O"de" /!&&%ut7
4 entities banned from )rimary and secondary market% including ;ndiabulls%
Uar4y &ecurities
X Euasi+3udicial )roceedings against Uar4y D: and :ratik D:% banned from t'e
market
X ! D:s can9t o)en fres' demat accounts% including HD0C <ank% ;D<; <ank%
Central <ank% ;5> 8ysya <ank% ;L@0& and 7otilal ?s6alI !, more under
scrutiny% including ;C;C; <ank% Citibank% &tanc'art
X $, 0inanciers barred from t'e market.
&E<; said certain entities 'ad cornered s'ares reser4ed for retail a))licants in
t'e name of fictitious entities in t'e initial )ublic offerings of 1es <ank and
;nfrastructure De4elo)ment 0inance Com)any (;D0C).
Eac' of t'e fictitious a))lication 6as of small 4alue so as to be eligible for
allotment under t'e retail category% it added.
(fter t'e allotment% t'ese fictitious beneficiaries transferred t'ese s'ares to t'eir
)rinci)als 6'o in turn transferred t'e s'ares to t'eir financiers.
2'e financiers in turn sold most of t'ese s'ares on t'e first day of listing% t'ereby
realizing t'e 6indfall gain of t'e )rice difference bet6een ;:? )rice and t'e
listing )rice.
>enerally% most s'ares 'a4e a face 4alue (i.e. t'e 4alue as in a balance s'eet) of
Rs.!" t'oug' not al6ays offered to t'e )ublic at t'is )rice. C%m1!$ie# 0!$ %//e"
! #2!"e 9it2 ! /!0e =!&ue %/ R#'*+ t% t2e 1ub&i0 !t ! 2i:2e" 1"i0e'
2'e di//e"e$0e bet6een t'e %//e" 1"i0e and t'e /!0e =!&ue is called t'e
1"emium. (s )er t'e &E<; guidelines% ne6 com)anies can offer s'ares to t'e
)ublic at a )remium )ro4ided :
!.2'e )romoter com)any 'as a . years consistent record of )rofitable 6orking.
.2'e )romoter takes u) at least ," )er cent of t'e s'ares in t'e issue.
..(ll )arties a))lying to t'e issue s'ould be offered t'e same instrument at t'e
same terms% es)ecially regarding t'e 1"emium.
4.2'e )ro)ectus s'ould )ro4ide 3ustification for t'e )ro)ose )remium. ?n t'e
ot'er 'and% eBisiting com)anies can make a 1"emium i##ue 6it'out t'e abo4e
restrictions.
( com)any9s aim is to "!i#e m%$e and simultaneously ser4e t'e e=uity ca)ital.
(s far as accounting is concerned% 1"emium i# 0"edited to reser4es and sur)lus
and it does not increase t'e e=uity. 2'erefore% a com)any 6'ic' raises Rs.!""
crores by 6ay of s'ares at say Rs.-" 1"emium 1e" #2!"e increases its e=uity by
only Rs.!" crores% 6'ic' is easier to ser4ice 6it' an in4estment of Rs.!"" crores.
2'us t'e com)anies seek to make 1"emium i##ue#. (s 6ell s'all see later% a
1"emium i##ue can increase t'e book 4alue 6it'out decreasing t'e E:&. ;n a
buoyant stock market 6'en good s'ares trade at 4ery 'ig' )rices% com)anies
realize t'at it9s easy to command a 2i:2 1"emium.
7any )eo)le confuse trading 6it' in4esting. 2'ey are not t'e same.
2'e biggest difference bet6een t'em is t'e lengt' of time you 'old onto t'e
assets. (n i$=e#t%r is more interested in t'e &%$:8te"m !11"e0i!ti%$ of 'is
assets% counting on t'at 'istorical rise in m!">et eHuit.
He9s not generally concerned about #2%"t8te"m /&u0tu!ti%$# in )rices% because
'e9ll ride t'em out o4er t'e long 'aul.
(n i$=e#t%" relies mostly on Fu$d!me$t!& A$!&#i#% 6'ic' is t'e analytical
met'od of )redicting long+term )ros)ects of a )articular asset. 7ost in4estors
ado)t a Fbu !$d 2%&dG a))roac' to assets% 6'ic' sim)ly means t'ey buy
s'ares of some com)any and 'old onto t'em for a long time. 2'is a))roac' can
be d!$:e"%u#B e=e$ de=!#t!ti$:% in an eBtremely 4olatile market suc' as
today9s <&E or 5&E ;ndeBs &'o6.
Let9s consider someone 6'o boug't s'ares of H1Y Com)any at t'eir )eak 4alue
of around Rs.#," )er s'are at t'e beginning of t'e year """. 26o years later%
t'ose s'ares are 6ort' Rs.!"" eac'. ;f t'at in4estor 'ad s)ent Rs. #,%"""A+% 'is
net loss 6ould be Rs.,,"""A+ Z ; don9t kno6 about you% but losing 0ifty 0i4e
2'ousand Ru)ees 6ould be a relati4ely big loss for me.
7any in4estors suffer suc' losses regularly% 'o)ing t'at in fi4e or ten or fifteen
years t'e market 6ill rebound% and t'ey9ll recou) t'eir losses and ac'ie4e an
o4erall gain.
N'at most i$=e#t%"# need to remember is t'is: in4esting is not about 6eat'ering
storms 6it' your Cbelo4edD com)any * it9s about making money.
T"!de"#% on t'e ot'er 'and% are attem)ting to )rofit on 3ust t'ose #2%"t8te"m
1"i0e /&u0tu!ti%$#. 2'e amount of time an !0ti=e t"!de" 'olds onto an asset is
4ery s'ort: in many cases minutes% or sometimes seconds. ;f you can catc' 3ust
t6o indeB )oints on an a4erage day% you can make a comfortable li4ing as an
2rader.
2o 'el) make t'eir decisions% 2raders rely on Te02$i0!& A$!&#i#% a form of
marketing analysis t'at attem)ts to )redict s'ort+term )rice fluctuations.
2'e #t%0> m!">et# are at all time 'ig's and 3ust like t'e last time around 6'en
t'e market 6as at its )re4ious 'ig' e4ery one t'inks t'at not'ing can go 6rong
and t'ere is 3ust one 6ay 6'ere t'e market can go 6'ic' is G:. 5ot'ing could be
fart'er from t'e trut' and t'is 6ill be clear from t'e 6ay t'e market be'a4es in
t'e neBt fe6 mont's. Here are a /e9 ti1# t'at 6ould 'o)efully sa4e you from
losing a lot of cas' in t'e current frenzy.
2ime and again i$=e#t%"# 'a4e burnt t'eir fingers in t'e markets and 'ere are
#%me ti1# to you so t'at you do not end u) burning your fingers in t'is market.
2'e $umbe" %$e ti1 at t'is )oint 6ould be to sell if you 'a4e stocks and not to
buy t'em if you 'a4e cas'. 2'e golden )rinci)le in t'e markets is C<uy 6'en
e4eryone else sells and sell 6'en e4eryone else buysD. &im)le enoug' rig't[ 5ot
really.
N'y[ <ecause of )eer )ressure )ure and sim)le. N'en e4eryone else around
you seems to be 'a4ing a ball at t'e markets you 6ould feel like a fool if you
didn9t )artici)ate no6.
?U so you can9t resist buying at t'is time t'en at least do yourself a fa4or and
stay a6ay from unkno6n Pe$$ St%0> and 2%t ti1# t'at your barber ga4e you.
2rue t'at t'e stock 'as tri)led in t'e last fifteen days but t'at 6as before )eo)le
like your barber started buying t'e stock. C'ances are t'at t'e :romoter of t'e
com)any 'a4e started buying into t'e stock and 'a4e s)read rumors like
ac=uisition or a big eB)ort order to fool in4estors and sell out to t'em at a later
date.
A$%t2e" ti1 t'at 6ould ser4e useful is to 4alue a stock based on its future gro6t'
and not its )ast )erformance. 0or instance many i$=e#t%"# say t'at ; 6ill not buy
stocks of H com)any because it 'as doubled in t'e last year. Nell it may 'a4e
doubled in t'e last year but t'at s'ould not be t'e t'ing you s'ould be telling
yourself. Rat'er you s'ould ask yourself 6'y 'as t'is doubled in t'e last year
and can it do so again[ 2'ere s'ould be a solid ans6er to your =uestion like t'e
launc' of a ne6 )roduct or reduction in t'e )rices of ra6 material. (nd indeed if
t'e ans6er is in t'e )ositi4e t'en by all means go a'ead and buy t'at stock
regardless of 6'at 'as 'a))ened in t'e last year.
A$%t2e" ti1 6ould be to remember 6'at you are buying. Euite sim)ly in4estors
often forget t'at 6'en buying a stock t'ey are sim)ly buying o6ners'i) in t'e
com)anies. 7ost of you 6ould kno6 t'at not'ing s)ectacular 6ould 'a))en in
t'e com)any t'at you 6ork for% in a mont'% t'ey are not going to double t'eir
re4enues and certainly not double your salary e4ery mont'. 2'en 6'y eB)ect
anyt'ing different from t'e com)anies t'at you are in4esting in. N'y eB)ect t'e
)rices to double in a mont' or t6o. >i4e time to your in4estmentsI don9t reduce it
to a gamble. ?nly 6'en you in4est in fundamentally sound com)anies and t'en
gi4e t'e in4estments sufficient time to gro6 6ill you see some 'ealt'y returns on
your in4estments. ;deally a minimum 'orizon of one year is a good time.
Ho)e t2e#e ti1# 6ill )ro4e 'el)ful and you 6ill make a lot more in t'e #t%0>
m!">et# t'an you 'a4e already been making. Ha))y I$=e#ti$:Z
!. 1ou can tell if a St%0> i# 02e!1 or eB)ensi4e by t'e P"i0e t% E!"$i$:# R!ti%.
0alse: PE "!ti%# are easy to calculate% t'at is 6'y t'ey are listed in ne6s)a)ers
etc. <ut you cannot com)are :E9s on com)anies from different industries% as t'e
4ariables t'ose com)anies and industries 'a4e are different. E4en com)aring
6it'in an industry% :E9s don9t tell you about many financial fundamentals and
not'ing about a stock9s 4alue.
. 2o make 7oney in t'e St%0> M!">et% you must assume Hig' Risks.
0alse: 2i)s to Lo6er your Risk:
\: Do not )ut more t'an !"L of your money into any one stock
\:Do not o6n more t'an +. stocks in any industry
<uy your stocks o4er time% not all at once\ <uy stocks 6it' consistent and
)redictable earnings gro6t'
\:<uy stocks 6it' gro6t' rates greater t'an t'e total of inflation and interest rates
\: Gse sto)+loss orders to limit your risk
.. Bu St%0># %$ t2e W! 6%9$ !$d Se&& %$ t2e W! U1.
0alse: :eo)le belie4e t'at a falling stock is c'ea) and a rising stock is too
eB)ensi4e. <ut on t'e 6ay do6n% you 'a4e no idea 'o6 muc' furt'er it may fall.
;f a stock is rising% es)ecially if it 'as broken )re4ious 'ig's% t'ere are no
un'a))y o6ners 6'o 6ant to dum) it. ;f t'e stock is fairly 4alued% it s'ould
continue to rise.
4. Y%u 0!$ Hed:e I$/&!ti%$ 9it2 St%0>#.
0alse: N'en interest rates rise% )eo)le start to )ull money out of t'e market and
into bonds% so t'at )us'es )rices do6n. :lus t'e cost of business goes u)% so
cor)orate earnings go do6n% along 6it' t'e stock )rices.
,. Y%u$: Pe%1&e 0!$ !//%"d t% t!>e Hi:2 Ri#>.
0alse: 2'e only t'ing true about t'is is t'at young )eo)le 'a4e time on t'eir side
if t'ey lose all t'eir money. <ut young )eo)le 'a4e little dis)osable income to risk
losing. ;f t'ey follo6 t'e ti)s abo4e% t'ey can make money o4er many years.
1oung )eo)le 'a4e t'e time to be )atient.
T"!diti%$!&&B #!=i$: 2!# bee$ =ie9ed !# Huite di//e"e$t /"%m i$=e#ti$:' I$
m%#t #!=i$:# !&te"$!ti=e#B t2e i$iti!& !m%u$t %/ 0!1it!& %" 0!#2 "em!i$#
0%$#t!$tB e!"$i$: :u!"!$teed "!te# %/ i$te"e#t'
2'e ca)ital 4alue of in4estments can go u) or do6n. Returns are not guaranteed.
Ho6e4er% creation of money market funds and deregulation of t'e banking
industry 'a4e resulted in a 4ariety of sa4ings o)tions t'at earn 4ariable rates of
return.
&a4ings )ro4ide funds for emergencies and for making s)ecific )urc'ases in t'e
relati4ely near future (generally 6it'in t6o years). 2'e )rimary goal is to store
funds and kee) t'em safe. 2'is is 6'y sa4ings are generally )laced in interest+
bearing accounts t'at are safe (suc' as t'ose insured or guaranteed by t'e
federal go4ernment) and li=uid (t'ose in t'e form of cas' or easily c'anged into
cas' on s'ort notice 6it' minimal or no loss). Ho6e4er% t'ese generally 'a4e lo6
yields. <ecause of t'e o))ortunities for earning a 'ig'er return 6it' a relati4ely
small )ool of funds% some financial eB)erts suggest t'at sa4ers consider slig'tly
'ig'er risk (but li=uid) alternati4es for at least )art of t'eir sa4ings.
&a4ed money is insurance. ;t is insurance against risk% against losing your 3ob%
against 'a4ing a ma3or uneB)ected re)air bill or medical eB)ense in t'e family. ;t
is t'e backbone of you and your family9s financial 6ell+being. &a4ed money
grants you financial security. (nd t'e more you sa4e% t'e more financial secure
and inde)endent you 6ill be.
2'e goal of in4esting is generally to increase net 6ort' and 6ork to6ard long+
term goals. ;n4esting in4ol4es risk. Risk of your stocks losing money% or e4en
going bankru)t (Enron% 7C;% t'e airlines% etc. etc.). Risk of interest rates rising%
and bond )rices falling. Risks of your broker s6indled you% or coerced you
t'oug' 'is sales )itc' to buy s)eculati4e in4estments. Risks of t'e economy.
Risks of a )articular industry. Risk of losing your )rinci)al. Risk of losing it all%
and t'en some (suc' as 6it' margin calls).
2rying to 6in in t'e stock market 6it'out a trading )lan is like trying to build a
'ouse 6it'out blue)rints + costly mistakes are ine4itable.
W2 d% %u $eed ! T"!di$: P&!$[
! + During trading 'ours% emotions 6ill turn smart )eo)le into idiots. 2'erefore%
you 'a4e to a4oid 'a4ing to make decisions during t'ose 'ours. 0or e4ery action
you take during trading 'ours% t'e reason s'ould not be greed or fear. 2'e
reason s'ould be because it is in t'e )lan. Nit' a good )lan% your task becomes
one of )atience and disci)line.
+ Consistent results re=uire consistent actions + consistent actions can only be
ac'ie4ed t'roug' a detailed )lan.
W2!t #2%u&d be i$ %u" t"!di$: 1&!$C
! + 1our strategy to enter and eBit trades
1ou 'a4e to describe t'e conditions t'at 'a4e to be met before you enter a trade.
1ou also 'a4e to describe t'e conditions under 6'ic' you 6ill close a )osition.
2'ese conditions may include tec'nical analysis% fundamental analysis% or a
combination of bot'. 2'ey may also include market conditions% )ublic sentiment%
etc...
+ 1our 7oney management rules to kee) losses small + t'e goal of money
management is to ensure your sur4i4al by a4oiding risks t'at could take you out
of business. 1our money management rules s'ould include t'e follo6ing:
+ 7aBimum amount at risk for eac' trade.
+ 7aBimum amount at risk for all your o)ened )ositions.
+ 7aBimum daily and 6eekly amount lost before you sto) trading
. + 1our daily routine + after t'e market closes% before it o)ens% etc...
4 + (cti4ities you carry out during t'e 6eekend.
, + ; also like to include reminders t'at ; read e4ery day
; 6ill follo6 a trading )lan to guide my trading + t'erefore my 3ob 6ill be one of
)atience and disci)line.
+ ; 6ill al6ays kee) my trading )lan sim)le.
+ ; 6ill take actions according to my trading )lan% not because of greed% fear% or
'o)e.
+ ; 6ill not decei4e myself 6'en ; de4iate from my trading )lan. ;nstead ; 6ill
admit t'e error and correct it.
; 6ill 'a4e a 6inning attitude.
+ 2ake res)onsibility for all your actions * don9t blame t'e market or 6orld e4ents.
+ 2rade to trade 6ell and for t'e lo4e of trading% not to trade often and not for t'e
money.
+ Don9t be influenced by t'e o)inions of ot'ers.
+ 5e4er t'ink t'at taking money from t'e market is easy.
+ Don9t try to guess t'e future * trading is a game of )robabilities.
+ Gse your 'ead and stay calm * don9t get eBcited or de)ressed.
+ Handle trading as a serious intellectual )ursuit.
+ Don9t count 'o6 muc' money you 'a4e made or lost 6'ile you are in a trade *
focus on trading 6ell.
( trading )lan 6ill not guarantee you success in t'e stock market but not 'a4ing
one 6ill )retty muc' guarantee failure.
PRIMARYMARKET
7arket for ne6 issues of securities% as distinguis'ed from t'e Se0%$d!"
M!">et% 6'ere )re4iously issued securities are boug't and sold.
A market is primary if the proceeds of sales go to the issuer of the
securities sold.
2'is is )art of t'e financial market 6'ere enter)rises issue t'eir ne6 s'ares and
bonds. ;t is c'aracterised by being t'e only moment 6'en t'e enter)rise recei4es
money in eBc'ange for selling its financial assets.
SECON6ARY MARKET
2'e market 6'ere securities are traded after t'ey are initially offered in t'e
)rimary market. 7ost trading is done in t'e secondary market.
2o eB)lain furt'er% it is 2rading in )re4iously issued financial instruments. (n
organized market for used securities. EBam)les are t'e 5e6 1ork &tock
EBc'ange (51&E)% <ombay &tock EBc'ange (<&E)%5ational &tock EBc'ange
5&E% bond markets% o4er+t'e+counter markets% residential mortgage loans%
go4ernmental guaranteed loans etc.
( #t%0> b"%>e" is a )erson or a firm t'at trades on its clients be'alf% you tell
t'em 6'at you 6ant to in4est in and t'ey 6ill issue t'e buy or sell order. &ome
#t%0> b"%>e"# also gi4e out financial ad4ice t'at you a c'arged for.
;t 6asn9t too long ago and in4esting 6as 4ery eB)ensi4e because you 'ad to go
t'roug' a full ser4ice broker 6'ic' 6ould gi4e you ad4ice on 6'at to do and
6ould c'arge you a 'efty fee for it. 5o6 t'ere are a )let'ora of discount #t%0>
b"%>e"# suc' as &cottrade 'tt):AA666.scottrade.com no6 you can trade stocks
for a lo6 fee suc' as W/ total.
; can t'ink of t'ree different ty)es of stock brokers.
!. Fu&& Se"=i0e B"%>e" + ( full+ser4ice broker can )ro4ide a bunc' of ser4ices
suc' as in4estment researc' ad4ice% taB )lanning and retirement )lanning.
. 6i#0%u$t B"%>e" * ( discount broker let9s you buy and sell stocks at a lo6
rate but doesn9t )ro4ide any in4estment ad4ice.
.. 6i"e0t8A00e## B"%>e"+ ( direct access broker lets you trade directly 6it' t'e
electronic communication net6orks (EC59s) so you can trade faster. (cti4e
traders suc' as day traders tend to use Direct (ccess <rokers
&o as you can tell t'ere a fe6 o)tions for a stock broker and you really need to
)ick 6'ic' one suits you needs.
Reed 0loren runs a stock market forum 6'ere you can find ans6ers to all your
stock market =uestions register for your free members'i) at t'is stock market
forum
;n order to understand 6'at stocks are and 2%9 #t%0> m!">et# 9%">% 6e need
to di4e into 'istory++s)ecifically% t'e 'istory of 6'at 'as come to be kno6n as t'e
cor)oration% or sometimes t'e limited liability com)any (LLC). Cor)orations in
one form or anot'er 'a4e been around e4er since one guy con4inced a fe6
ot'ers to )ool t'eir resources for mutual benefit.
2'e first cor)orate c'arters 6ere created in <ritain as early as t'e siBteent'
century% but t'ese 6ere generally 6'at 6e mig't t'ink of today as a )ublic
cor)oration o6ned by t'e go4ernment% like t'e )ostal ser4ice.
P"i=!te& %9$ed 0%"1%"!ti%$# came into being gradually during t'e early !-t'
century in t'e Gnited &tates % Gnited Uingdom and 6estern Euro)e as t'e
go4ernments of t'ose countries started allo6ing anyone to create cor)orations.
;n order for a cor)oration to do business% it needs to get money from some6'ere.
2y)ically% one or more )eo)le contribute an initial in4estment to get t'e com)any
off t'e ground. 2'ese entre)reneurs may commit some of t'eir o6n money% but if
t'ey donMt 'a4e enoug'% t'ey 6ill need to )ersuade ot'er )eo)le% suc' as 4enture
ca)ital in4estors or banks% to in4est in t'eir business.
2'ey can do t'is in t6o 6ays: by issuing bonds% 6'ic' are basically a 6ay of
selling debt (or taking out a loan% de)ending on your )ers)ecti4e)% or by issuing
stock% t'at is% s'ares in t'e o6ners'i) of t'e com)any.
Long ago stock o6ners realized t'at it 6ould be con4enient if t'ere 6ere a
central )lace t'ey could go to trade stock 6it' one anot'er% and t'e )ublic stock
eBc'ange 6as born. E4entually% todayMs stock markets gre6 out of t'ese )ublic
)laces.
St%0>#
( cor)oration is generally entitled to create as many s'ares as it )leases. E!02
#2!"e i# ! #m!&& 1ie0e %/ %9$e"#2i1. 2'e more #2!"e# you o6n% t'e more of
t'e com)any you o6n% and t'e more control you 'a4e o4er t'e com)anyMs
o)erations. Com)anies sometimes issue different classes of s'ares% 6'ic' 'a4e
different )ri4ileges associated 6it' t'em.
&o a cor)oration creates some #2!"e#% and sells t'em to an in4estor for an
agreed u)on )rice% t'e cor)oration no6 'as money. ;n return% t'e in4estor 'as a
degree of o6ners'i) in t'e cor)oration% and can eBercise some control o4er it.
2'e cor)oration can continue to issue ne6 s'ares% as long as it can )ersuade
)eo)le to buy t'em. ;f t'e com)any makes a )rofit% it may decide to )lo6 t'e
money back into t'e business or use some of it to )ay di4idends on t'e s'ares.
Pub&i0 M!">et#
Ho6 eac' stock market 6orks is de)endent on its internal organization and
go4ernment regulation. 2'e NYSE (Ne9 Y%"> St%0> EA02!$:e) is a non+)rofit
cor)oration% 6'ile t'e NAS6A5 (N!ti%$!& A##%0i!ti%$ %/ Se0u"itie# 6e!&e"#
Aut%m!ted 5u%t!ti%$) and t'e 2&E (T%"%$t% St%0> EA02!$:e) are for+)rofit
businesses% earning money by )ro4iding trading ser4ices.
7ost com)anies t'at go 1ub&i0 'a4e been around for at least a little 6'ile. >oing
)ublic gi4es t'e com)any an o))ortunity for a )otentially 'uge 0!1it!& i$/u#i%$%
since millions of in4estors can no6 easily )urc'ase s'ares. ;t also eB)oses t'e
cor)oration to stricter regulatory control by go4ernment regulators.
N'en a cor)oration decides to go )ublic% after filing t'e necessary )a)er6ork
6it' t'e go4ernment and 6it' t'e eA02!$:e it 'as c'osen% it makes an initial
)ublic offering (;:?). 2'e com)any 6ill decide 'o6 many s'ares to issue on t'e
)ublic market and t'e )rice it 6ants to sell t'em for. N'en all t'e s'ares in t'e
IPO are sold% t'e com)any can use t'e )roceeds to invest in the business.
2'ere are t6o classic market ty)es used to c'aracterize t'e general direction of
t'e market. <ull markets are 6'en t'e market is generally rising% ty)ically t'e
result of a strong economy. ( bu&& m!">et is ty)ified by generally rising stock
)rices% 'ig' economic gro6t'% and strong in4estor confidence in t'e economy.
Be!" m!">et# are t'e o))osite. ( bear market is ty)ified by falling stock )rices%
bad economic ne6s% and lo6 in4estor confidence in t'e economy.
( bu&& m!">et is a financial market 6'ere )rices of instruments (e.g.% #t%0>#)
are% on a4erage% trending 'ig'er. 2'e bu&& m!">et tends to be associated 6it'
ri#i$: i$=e#t%" 0%$/ide$0e and eB)ectations of /u"t2e" 0!1it!& :!i$#.
( market in 6'ic' )rices are rising. ( market )artici)ant 6'o belie4es )rices 6ill
mo4e 'ig'er is called a Kbu&&K. ( ne6s item is considered bu&&i#2 if it is eB)ected
to result in 'ig'er )rices.(n ad4ancing trend in stock )rices t'at usually occurs
for a time )eriod of mont's or years. Bu&& m!">et# are generally c'aracterized
by 2i:2 t"!di$: =%&ume.
&im)ly )ut% bu&& m!">et# are mo4ements in t'e stock market in 6'ic' )rices are
rising and t'e consensus is t'at )rices 6ill continue mo4ing u)6ard. During t'is
time% economic )roduction is 'ig'% 3obs are )lentiful and inflation is lo6. Be!"
m!">et# are t'e o))osite++stock )rices are falling% and t'e 4ie6 is t'at t'ey 6ill
continue falling. 2'e economy 6ill slo6 do6n% cou)led 6it' a rise in
unem)loyment and inflation.
( key to #u00e##/u& i$=e#ti$: during a bu&& m!">et is to take ad4antage of t'e
rising )rices. 0or most% t'is means bui$: #e0u"itie# early% 6atc'ing t'em rise
in 4alue and t'en selling t'em 6'en t'ey reac' a 'ig'. Ho6e4er% as sim)le as it
sounds% t'is )ractice in4ol4es timing t'e market. &ince no one kno6s eBactly
6'en t'e market 6ill begin its climb or reac' its )eak% 4irtually no one can time
t'e market )erfectly. ;n4estors often attem)t to buy securities as t'ey
demonstrate a strong and steady rise and sell t'em as t'e market begins a
strong mo4e do6n6ard.
:ortfolios 6it' larger )ercentages of stocks can 6ork 6ell 6'en t'e market is
mo4ing u)6ard. ;n4estors 6'o belie4e in 6atc'ing t'e market 6ill buy and sell
accordingly to c'ange t'eir )ortfolios.&)eculators and risk+takers can fare
relati4ely 6ell in bull markets. 2'ey belie4e t'ey can make )rofits from rising
)rices% so t'ey buy stocks% o)tions% futures and currencies t'ey belie4e 6ill gain
4alue. >ro6t' is 6'at most bull in4estors seek.
W2!t i# ! Be!" M!">etC
2'e o))osite of a bu&& m!">et i# ! be!" m!">et 6'en )rices are falling in a
financial market for a )rolonged )eriod of time. ( bear market tends to be
accom)anied by 6ides)read )essimism.( bear market is slang for 6'en stock
)rices 'a4e decreased for an eBtended )eriod of time. ;f an in4estor is Vbearis'V
t'ey are referred to as a bear because t'ey belie4e a )articular com)any%
industry% sector% or market in general is going to go do6n.
Different i$=e#tme$t a4enues are a4ailable to in4estors. Mutu!& /u$d# also offer
good in4estment o))ortunities to t'e in4estors. Like all i$=e#tme$t#% Mutu!&
Fu$d# also carry certain risks. 2'e i$=e#t%"# s'ould com)are t'e risks and
eB)ected yields after ad3ustment of taB on 4arious instruments 6'ile taking
Mutu!& Fu$d i$=e#tme$t decisions. 2'e in4estors may seek ad4ice from
eB)erts and consultants including agents and distributors of mutu!& /u$d#
#02eme# 6'ile making in4estment decisions.
7utual 0unds are )ortfolio of stock market s'ares and ot'er financial instruments
built 6it' funds collected from (usually) small in4estors 6'ose )rimary concern is
security of in4estment. 2'ese funds are run by go4ernment trusts% banks% and
no6 )ri4ate financial institutions as 6ell. 2'ese funds can be P!" # $%"D!D
or &'(!D # !"D!D.
2'ere are different kinds of mutual funds to cater to 4aried in4estment ob3ecti4es:
>ro6t' 0unds% ;ncome 0unds% <alanced 0unds% and Li=uid (ssets 0unds% also
kno6n as 7oney 7arket 0unds.
N'at is kno6n in t'e Gnited &tates and ;ndia as mutu!& /u$d# is called a U$it
T"u#t in <ritain .
2'is site is an attem)t to make a6are <asics of Mutu!& Fu$d# from an ;n4ester
:oint of 8ie6. 2'e ;nformation )ro4ided 'ere is for learning )ur)ose only
;f youM4e e4er o6ned stocks or 'eld certain ot'er ty)es of in4estments% you mig't
already be familiar 6it' t'e conce)t of di=ide$d#.
E4en t'ose )eo)le 6'o 'a4e made in4estments t'at )aid di=ide$d# may still be
a little confused as to eBactly 92!t di=ide$d# !"e% 'o6e4erJ after all% 3ust
because a )erson 'as recei4ed a di4idend )ayment doesnMt mean t'at t'ey fully
a))reciate 6'ere t'e )ayment is coming from and 6'at its )ur)ose is.
;f you 'a4e e4er found yourself 6ondering eBactly 92!t di=ide$d# !"e and 6'y
t'eyMre issued% t'en t'e information belo6 mig't 3ust be 6'at youM4e been looking
for.
6e/i$i$: t2e 6i=ide$d
6i=ide$d# !"e 1!me$t# m!de b 0%m1!$ie# t% t2ei" #t%0>2%&de"# i$ %"de"
t% #2!"e ! 1%"ti%$ %/ t2e 1"%/it# from a )articular =uarter or year. 2'e amount
t'at any )articular stock'older recei4es is de)endent u)on 'o6 many s'ares of
stock t'ey o6n and 'o6 muc' t'e total amount being di4ided u) among t'e
stock'olders amounts to. 2'is means t'at after a )articularly )rofitable =uarter a
com)any mig't set aside a lum) sum to be di4ided u) amongst all of t'eir
stock'olders% t'oug' eac' indi4idual s'are mig't be 6ort' only a 4ery small
amount )otentially fractions of a cent% de)ending u)on t'e total number of s'ares
issued and t'e total amount being di4ided. ;ndi4iduals 6'o o6n large amounts of
stock recei4e muc' more from t'e di4idends t'an t'ose 6'o o6n only a little% but
t'e total )er+s'are amount is usually t'e same.
W2e$ 6i=ide$d# A"e P!id
Ho6 often di=ide$d# are )aid can 4ary from one com)any to t'e neBt% but in
general t'ey are )aid 6'ene4er t'e com)any re)orts a )rofit. &ince most
com)anies are re=uired to re)ort t'eir )rofits or losses =uarterly% t'is means t'at
most of t'em 'a4e t'e )otential to )ay di4idends u) to four times eac' year.
&ome com)anies )ay di4idends more often t'an t'is% 'o6e4er% and ot'ers may
)ay only once )er year. 2'e more time t'ere is bet6een di4idend )ayments can
indicate financial and )rofit )roblems 6it'in a com)any% but if t'e com)any
sim)ly c'ooses to )ay all of t'eir di4idends at once it may also lead to 'ig'er )er+
s'are )ayments on t'ose di=ide$d#.
W2 6i=ide$d# A"e P!id
6i=ide$d# are )aid by com)anies as a met'od of s'aring t'eir )rofitable times
6it' t'e stock'olders t'at 'a4e fait' in t'e com)any% as 6ell as a 6ay of luring
ot'er in4estors into )urc'asing stock in t'e com)any t'at is )aying t'e di4idends.
2'e more a )articular com)any )ays in di4idend )ayments% t'e more likely it is to
sell additional common stockJ after all% if t'e com)any is 6ell+kno6n for 'ig'
di4idend )ayments t'en more )eo)le 6ill 6ant to get in on t'e action. 2'is can
actually lead to increases in stock )rice and additional )rofit for t'e com)any
6'ic' can result in e4en more di4idend )ayments.
;n order to get t'e most out of t'e di4idends t'at you recei4e on your
in4estments% it is generally recommended t'at you rein4est t'e di4idends into t'e
com)anies t'at )ay t'em. N'ile t'is may seem as t'oug' youMre sim)ly gi4ing
t'em t'eir money back% youMre recei4ing additional s'ares of t'e com)anyMs stock
in eBc'ange for t'e di4idend. 2'is 6ill increase future di4idend )ayments (since
t'eyMre based u)on 'o6 muc' stock t'at you o6n)% and can set you u) to make a
lot more money t'an t'e !0tu!& di=ide$d 1!me$t 6as for since increases in
stock )rices 6ill affect t'e ne6ly+)urc'ased stock as 6ell.
INTRO!"TION A#O!T $!T!A% &!NS:
7utual fund is a trust t'at )ools money from a grou) of in4estors (s'aring
common financial goals) and in4est t'e money t'us collected into asset t'at
matc' t'e stated in4estment ob3ecti4es of t'e sc'eme. &ince t'e stated
in4estment ob3ecti4es of a mutual fund sc'eme generally forms t'e basis for an
in4estor9s decision to contribute money to t'e )ool% a mutual fund can not de4iate
from its stated ob3ecti4es at any )oint of time.
E4ery 7utual 0und is managed by a fund manager% 6'o using 'is
in4estment management skills and necessary researc' 6orks ensures muc'
better return t'an 6'at an in4estor can manage on 'is o6n. 2'e ca)ital
a))reciation and ot'er incomes earned from t'ese in4estments are )assed on
t'e in4estors (also kno6n as unit 'olders) in )ro)ortion of t'e number of units
t'ey o6n.
C%$0e1t %/ Mutu!& Fu$d
M!$ i$=e#t%" 9it2 0%mm%$ /i$!$0i!& %b3e0ti=e# 1%%& t2ei" m%$e
]
I$=e#t%"#B %$ ! 1"%1%"ti%$!te b!#i#B :et mutu!& /u$d u$it# /%" t2e #um
0%$t"ibuted t% t2e 1%%& ]
T2e m%$e 0%&&e0ted /"%m i$=e#t%"# i# i$=e#ted i$t% #2!"e#B debe$tu"e#
!$d %t2e" #e0u"itie# b t2e /u$d m!$:e" ]
T2e /u$d m!$!:e" "e!&i4e# :!i$# %" &%##e#B !$d 0%&&e0t# di=ide$d %"
i$te"e#t i$0%me
]
A$ 0!1it!& :!i$# %" &%##e# /"%m #u02 i$=e#tme$t# !"e 1!##ed %$ t% t2e
i$=e#t%"# 1"%1%"ti%$ %/ t2e $umbe" %/ u$it# 2e&d b t2em
N'en an in4estor subscribes for t'e units of a mutual fund% 'e becomes
)art of t'e assets of t'e mutual fund in t'e same )ro)ortion as 'is
contribution amount )ut u) 6it' t'e cor)us (t'e total amount of t'e mutual
fund). 7utual 0und in4estor is also kno6n as a fund s'are'older or a unit
'older.
(ny c'ange in t'e 4alue of t'e in4estments made into ca)ital
market instruments (suc' as s'ares% debentures etc) is reflected in t'e
5et (sset 8alue (5(8) of t'e sc'eme. 5(8 is defined as t'e market 4alue
of t'e 7utual 0und sc'eme9s assets net of its liabilities. 5(8 of a sc'eme
is calculated by di4iding t'e market 4alue of sc'eme9s assets by t'e total
number of units issued to t'e in4estors.
0or eBam)le:
(. ;f t'e market 4alue of t'e assets of a fund is Rs.!%""% """A+
<. 2'e total number of units issued to t'e in4estors is e=ual to
Rs.!"%"""A+
C. 2'en t'e 5(8 of t'is sc'eme^ (()A(<)% i.e. !%""%"""A!"%""" or !".""
D. 5o6 if an in4estor _H9 o6ns , units of t'is sc'eme
E. 2'en 'is total contribution to t'e fund is Rs.,"A+ (i.e. 5umber of units
'eld multi)lied by t'e 5(8 of t'e sc'eme)
E5UITY FUN6S
E=uity funds are considered to be t'e most risky funds as com)ared to ot'er
fund ty)es% but t'ey also )ro4ide 'ig'er returns t'an ot'er funds. ;t is ad4isable
t'at an in4estor looking to in4est in an e=uity fund s'ould in4est for a long term
i.e. for . years or more. 2'ere are different ty)es of e=uity fund eac' falling into
different risk bracket. ;n order of decreasing risk le4el% t'ere are follo6ing ty)es of
e=uity funds:
(ggressi4e >ro6t' 0unds: + ;n aggressi4e >ro6t' 0unds% fund managers
as)ire for maBimum ca)ital a))reciation and in4est in less researc'ed s'ares of
s)eculati4e nature. <ecause of t'ese s)eculati4e in4estments (ggressi4e 7utual
0uns become more 4olatile and t'us% are )rone to 'ig'er risk t'an ot'er e=uity
funds.
>ro6t' 0unds:+ >ro6t' 0unds also in4est for ca)ital a))reciation (6it' time
'orizon of .e to , years) but t'ey are different from (ggressi4e >ro6t' 0unds in
t'e sense t'at t'ey in4est in com)anies t'at are out)erform t'e market in t'e
future. Nit'out entirely ado)ting s)eculati4e strategies% >ro6t' 0unds in4est in
t'ose com)anies t'at are eB)ected to )ost abo4e a4erage earnings in future.
SPECIALITY FUN678 &)eciality 0unds 'a4e stated criteria for in4estments and
t'eir )ortfolio com)rises of only t'ose com)anies t'at meet t'eir criteria. Criteria
for some s)ecialty funds could be to in4estAnot to in4est in )articular
regionAcom)anies. &)eciality funds are concentrated and t'us% are com)arati4ely
riskier t'an di4ersified funds. 2'ere are follo6ing ty)es of &)eciality 0unds:


Se0t%" Fu$d#7 + E=uity 0unds t'at in4est in a )articular
sectorAindustry of t'e market are kno6n as &ector 0unds.
2'e eB)osure of t'ese funds is limited to a )articular sector
(say ;nformation 2ec'nology% (uto% <anking%
:'armaceuticals or 0ast 7o4ing Consumer >oods)
W2 t2e !"e m%"e "i#> t2!$ eHuit /u$d# t2!t i$=e#t i$
mu&ti1&e #e0t%"#'
F%"ei:$ Se0u"itie# Fu$d#78 0oreign &ecurities E=uities 0unds 'a4e t'e
o)tion to in4est in one or more foreign com)anies. 0oreign securities funds
ac'ie4e international di4ersification and 'ence t'ey are less risky t'an sector
funds. Ho6e4er% foreign securities funds are eB)osed to foreign eBc'ange rate
risk and country risk.
7id+Ca) or &mall+Ca) 0unds: + 0unds t'at in4est in com)anies 'a4ing lo6er
market ca)italization t'an large ca)italization com)anies are called 7id+Ca) or
&mall+Ca) 0unds. 7arket ca)italization of 7id+Ca) com)anies is less t'an t'at
of big% blue c'i) com)anies (less t'an Rs.,""A+crores but more t'an Rs.,""A+
crores) and &mall+Ca) com)anies 'a4e market ca)italization of less t'an
Rs.,""A+crores. 7arket Ca)italization of a com)any can be calculated by
multi)lying t'e market )rice of t'e com)any9s s'are by t'e total number of its
outstanding s'are in t'e market. 2'e s'are of 7id+Ca) or &mall+Ca) Com)anies
is not as li=uid as of Large+Ca) Com)anies 6'ic' gi4es rise to 4olatility in s'are
)rices of t'ese com)anies and conse=uently% in4estment gets risky.
?)tion ;ncome 0unds:+ N'ile not yet a4ailable in ;ndia% ?)tion ;ncome 0unds
6rite o)tions on a large fraction of t'eir )ortfolio. :ro)er use of o)tions can 'el)
to reduce 4olatility% 6'ic' is ot'er6ise considered as a risky instrument. 2'ese
funds in big% 'ig' di4idend yielding com)anies% and t'en sell o)tions against t'eir
stock.
Di4ersified E=uity 0unds:+ EBce)t for a small )otion of in4estment in li=uid
money market% di4ersified e=uity funds in4est mainly in e=uities 6it'out any
concentration on a )articular sector(s). 2'ese funds are 6ell di4ersified and
reduce sector+s)ecific risk. Ho6e4er% like all ot'er funds di4ersified e=uity funds
too are eB)osed to e=uity market risk. ?ne )rominent ty)e of di4ersified e=uity
fund in ;ndia is E=uity Linked &a4ings &c'eme (EL&&). (s )er t'e mandate% a
minimum of -"L of in4estments by EL&& s'ould be in e=uities at all times. EL&&
in4estors are eligible to claim deduction from taBable income (u) to Rs.! lak') at
t'e time of filling t'e income taB return. EL&& usually 'as a lock+in )eriod and in
case of any redem)tion by t'e in4estor before t'e eB)iry of t'e lock+in )eriod
makes 'im liable to )ay income on suc' income(s) for 6'ic' 'e may 'a4e
recei4ed any taB eBem)tion(s) in t'e )ast.
E=uity ;ndeB 0unds:+ E=uity ;ndeB 0unds 'a4e t'e ob3ecti4e to matc' t'e
)erformance of a s)ecific stock market indeB. 2'e )ortfolio of t'ese funds
com)rises of t'e com)anies t'at form t'e indeB and is constituted in t'e same
)ro)ortion as t'e indeB. E=uity indeB funds t'at follo6s broad indices (like & @ :
C5H 5ifty% &enseB) are less risky t'an e=uity indeB funds t'at follo6 narro6
sectoral indices (like <&E<(5UEH or C5H bank ;ndeB etc.). 5arro6 indices are
less di4ersified and t'erefore% are more risky.
8alue 0unds:+ 8alue 0unds in4est in t'ose com)anies t'at 'a4e sound
fundamentals and 6'ose s'are )rices are currently under+4alued. 2'e )ortfolio
of t'ese com)rises of s'ares t'at are trading at a lo6 :rices to Earning Ratio
(7arket :rice )er &'areA Earning )er s'are) and a lo6 market to <ook 8alue
(0undamental 8alue) Ratio. 8alue 0unds may select com)anies from di4ersified
sectors and are eB)osed to lo6er risk le4el as com)ared to gro6t' funds or
s)ecialty funds. 8alue &tocks are generally from cynical industries (suc' as
cement% steel% sugar etc.) 6'ic' make t'em 4olatile in t'e s'ort+term. 2'erefore%
it is ad4isable to in4est in 8alue funds 6it' a long+term time 'orizon as risk in t'e
long term% to a eBtent% is reduced.
E=uity ;ncome or Di4idend 1ield 0unds:+ 2'e ob3ecti4e of E=uity ;ncome or
Di4idend 1ield E=uity 0unds is to generate 'ig' recurring income and steady
ca)ital a))reciation for in4estors by in4esting in t'ose com)anies 6'ic' issues
'ig' di4idends (suc' as )o6er or Gtility com)anies 6'ose s'are )rices fluctuate
com)arati4ely lesser t'an ot'er com)anies9 s'are )ries). E=uity ;ncome or
Di4idend 1ield E=uity funds are generally eB)osed to t'e lo6est risk le4el as
com)ared to ot'er e=uity funds.
.
&ale :rice: + &ale )rice is t'e )rice you )ay 6'en you in4est in a sc'eme. (lso
called ?ffer :rice. ;t may include a sales load.
Re)urc'ase :rice: + Re)urc'ase :rice is t'e )rice at 6'ic' a close+ended
sc'eme re)urc'ases its units and it may include a back+end load. 2'is is also
called <id :rice.
Redem)tion &c'eme: + Redem)tion sc'eme is t'e )rice at 6'ic' o)en+ended
sc'emes re)urc'ase t'eir units and close+ended sc'emes redeem t'eir units on
maturity. &uc' )rices are 5(8 related.
&ales Load: + &ales Load is a c'arge collected by a sc'eme 6'en it sells t'e
units. (lso called% C0ront+EndD load. &c'emes t'at do not c'arge a load are
called _5o Load9 sc'eme.
Re)urc'ase or _<ack+end9 LoadI + ;s a c'arge collected by a sc'eme 6'en
it buys back t'e units from t'e unit+'olders.
&:?5&ER: + &)onsor is t'e )erson 6'o acting or in combination 6it' anot'er
cor)orate establis'es a mutual fund. &)onsor must contribute at least 4"L of t'e
net 6ort' of t'e ;n4estment 7anager and meet t'e eligibility criteria )rescribed
under t'e &ecurities and EBc'ange <oard of ;ndia (7utual 0unds) Regulation%
!--#. 2'e &)onsor is not res)onsible or liable for t'e any loss or s'ortfall
resulting from t'e o)eration of t'e &c'emes beyond t'e initial contribution made
by it to6ards setting u) of t'e 7utual fund. 2'e board of trustee manages t'e 70
and t'e s)onsor eBecutes t'e trust deeds in fa4our of t'e trustees. ;t is t'e 3ob of
t'e 70 trustees to see t'e sc'emes floated and managed by t'e (7C a))ointed
by t'e trustees are in accordance 6it' t'e trust deed and &E<; guidelines. 2'e
&)onsor a))oints t'e 2rustees% Custodian and t'e like t'e com)any )romoter%
t'e s)onsor takes big+)icture decisions related to t'e 7utual funds% lea4ing
money management and ot'er suc' nitty+gritty to t'e ot'er constituents% 6'om it
a))oints. 2'e s)onsor s'ould ins)ire confidence in you as a manager and%
)referably% be )rofitable. 0inancial muscle% so long as it is com)lemented by
good fund management% 'el)s% as money is t'e not an im)ediment for t'e 7utual
0und *it can 'ire t'e best talent% in4est in tec'nology offer 'ig' ser4ice standards
to t'e in4estors.
2RG&2: +
2'e 7utual 0und is constituted as a trust in accordance 6it' t'e )ro4isions of t'e
;ndian 2rust (ct% !$$ by t'e &)onsor. 2'e trust deed is registered under t'e
;ndian Registration (ct% !-"$.
2RG&2EE *
(&&E2 7(5(>E7E52 C?7:(51 ((7C):+
2'e (7C is a))ointed by t'e 2rustee as t'e ;n4estment 7anager of t'e
7utual 0und. 2'e (7C is re=uired to be a))ro4ed by t'e &ecurities and
EBc'ange <oard of ;ndia (&E<;) to act as an asset management com)any of t'e
7utual 0und. (t least ,"L of t'e directors of t'e (7C are inde)endent directors
6'o are not associated 6it' t'e &)onsor in any manner. 2'e (7C does t'e
researc'% t'e managers t'e cor)us of t'e fund. ;t launc'es t'e 4arious sc'eme of
t'e fund% manages t'em% and t'en li=uidates t'em at t'e end of t'eir term. 2'e
)eo)le in t'e (7C 6'o s'ould matter t'e most to you are t'ose 6'o take
in4estment decisions. 2'ere is t'e 'ead of t'e fund 'ouse% generally referred to
as t'e C'ief EBecuti4e ?fficer (CE?). Gnder 'im comes t'e C'ief ;n4estment
?fficer (C;?)% 6'o s'a)es t'e fund9s in4estment )'iloso)'y% and fund mangers%
6'o manages its sc'emes. 2'ey are assisted by a team of analysts% 6'o track
markets% sectors and com)anies.
(lt'oug' t'ese )eo)le are em)loyed by t'e (7C% it9s you% t'e unit
'olders% 6'o )ay t'eir salaries% )artly of 6'olly. Eac' sc'eme )ays t'e (7C an
annual _fund management fee9% 6'ic' is linked to t'e sc'eme size and results in
a corres)onding dro) in your return. ;f a sc'eme9s cor)us is u) to Rs.!""crores it
)ays !.,L of its cor)us a yearI on o4er Rs.!"" crores% t'e fee is !L of t'e
cor)us. &o if a fund 'ouse 'as t6o sc'emes% 6it' a cor)us of Rs.!"" crores and
Rs."" crores res)ecti4ely% t'e (7C 6ill earn Rs..., crore (!.,S) as a fund
management fee t'at year.
Regulatory re=uirements for t'e (7C: +
?nly &E<; registered (7C can be a))ointed as in4estment managers of
mutual funds.
(7C must 'a4e a minimum net 6ort' of Rs.!" crores at all times.
(n (7C cannot be an (7C or 2rustee of anot'er 7utual 0und.
(7Cs cannot indulge in any ot'er business% ot'er t'an t'at of asset
management.
(t least 'alf of t'e members of t'e <oard of an (7C 'a4e to be
inde)endent.
2'e 4
t'
sc'edule of &E<; Regulations s)ells out rig'ts and obligations of
bot' trustees and (7Cs.
Ob&i:!ti%$# %/ t2e AMC: +
;n4estments 'a4e to be according to t'e in4estment management
agreement and &E<; regulations.
2'e actions of its em)loyees and associates 'a4e to be as mandated by
t'e trustees.
(7Cs 'a4e to submit detailed =uarterly re)orts on t'e 6orking and
)erformance of t'e mutual fund.
(7Cs 'a4e to make t'e necessary statutory disclosures o )ortfolio% 5(8
and )rice to t'e in4estors.
Re#t"i0ti%$# %$ t2e AMC78
(7Cs cannot launc' a sc'eme 6it'out t'e )rior a))ro4al of t'e trustees.
(7Cs 'a4e to )ro4ide full details of t'e in4estments by em)loyees and
<oard members in all cases 6'ere t'e in4estment eBceeds Rs.! lak'.
O=e" t2e &!#t /e9 e!"#B 2i:2 eHuit m! 2!=e #>e9ed !##et !&&%0!ti%$
t%9!"d# eHuitie#' T2e "et!i& i$=e#t%" #2%u&d "e8eA!mi$e 2i# !##et !&&%0!ti%$
t% #ee t2!t it i# m%"e b!&!$0ed i$ &i:2t %/ im1"%=i$: b%$d "etu"$#' I/ t2e
eHuit 0%m1%$e$t %/ t2e 1%"t/%&i% i# &%9B ! SIP (S#tem!ti0 I$=e#tme$t P&!$
) m%de %/ i$=e#tme$t 9it2 ! ; t% e!" 2%"i4%$ i# t2e "i:2t #t"!te:'
;' P"%0e##? Met2%d%&%: %/
Stud
Researc' 7et'odology in a 6ay is systematic re)resentation of researc' or any
ot'er )roblem. ;t is a 6ritten game )lan for conducting researc'. ;t tends to
describe t'e ste) taken by a researc'er in studying t'e researc' )roblem along
6it' a logical background.
;t tends to describe met'odology for solution of t'e )roblem t'at 'as been taken
for t'e )ur)ose of study t'is )ro3ect focuses on t'e met'odology for tec'ni=ue
used for t'e collection% classification @ tabulation of t'e data. 2'is )lan t'ro6s
lig't on t'e researc' )roblem% t'e ob3ecti4e of study @ limitation of t'e study.
2'erefore% in order to sol4e a )roblem% it is necessary to design a researc'
met'odology for )roblem as t'e same 6ay differs from )roblem to )roblem.
T1e %/ Re#e!"02
Researc' met'odology is a 6ay to systematic sol4e t'e researc' )roblem. ;t is a
)rocedure% 6'ic' is follo6ed ste) by ste) to sol4e a )articular researc' )roblem.
2'ere are basically four ty)es of researc'es
EH:L?R(2;8E RE&E(RCH
DE&CR;:2;8E RE&E(RCH
D;(>5?&2;C RE&E(RCH
H1:?2HE&;& 2E&2;5> RE&E(RCH
EA1&%"!ti=e Re#e!"02
2o gain familiarity 6it' t'e )'enomenon or to ac'ie4e an insig't into it.
6e#0"i1ti=e Re#e!"02
2o )oetry accurately t'e c'aracteristic of t'e )articular indi4idual situation
or a grou).
6i!:$%#ti0 Re#e!"02
2o determine t'e fre=uency 6it' 6'ic' somet'ing occurs or 6it' 6'ic' it is
associate 6it' somet'ing else.
H1%t2e#i# Te#ti$: Re#e!"02'
2o test a 'y)ot'esis of casual relations'i) bet6een 4ariables.
2'e )resent )ro3ect is Descri)ti4e in nature. ;t is done to )oetry accurately t'e
c'aracteristic of a )articular indi4idual situation or a grou). 2'e ma3or )ur)ose is
descri)ti4e researc' is t'e descri)tion of t'e state of t'e affairs as it eBits at
)resents. 2'e main c'aracteristics of t'is met'od are t'at t'e researc'er 'as no
control o4er t'e 4ariablesI 'e can only re)ort 6'at 'as 'a))ened or 6'at is
'a))ening.
St!teme$t %/ "e#e!"02 1"%b&em
( researc' )roblem% refers to some difficulty 6'ic' a researc'er eB)eriences in
t'e conteBt of eit'er a t'eoretical or )ractical situation and 6ants to obtain a
solution for t'e same.
Here t'e researc' )roblem is mutual funds (s)ecial reference 6it' :5<).
St!teme$t %/ "e#e!"02 %b3e0ti=e#
;t aims at getting an insig't in to Retail loan. ;t also aims at familiarized 6it' t'e
customer during t'e market sur4ey 'el) me a lot in understanding t'e )ractical
as)ect of t'e loan as a 6'ole .
2o gi4e le4el of information to t'e customer. 2o gi4e satisfaction regarding
ser4ices offered by bank
2o make out 6'ic' bank )ro4ide ser4ices 6it' best resources
2o kno6 t'e a6areness among t'e common man about loan 6'ic' t'ey
6ant to take.
RESEARCH 6ESIGN AN6 METHO6OLOGY
Researc' is a systemic and ob3ecti4e )rocess of gat'ering recording and
anayzing data for aid of making decision regarding a )articular )roblem.
RESEARCH 6ESIGN
2'e researc' design is a master )lan s)ecifying t'e met'ods and )rocedures
for collecting and analyzing t'e needed information t'e researc' design of my
dissertation is
6ESCRIPTIVE RESEARCH
Descri)ti4e researc' includes sur4eys and facts findings in=uiries of different
kinds.
RESEARCH INSTRUMENTS
EGE&2;?55(;RE
SAMPLE 6ESIGN
target )o)ulation )eo)le of industries
sam)le size !"" )eo)le
sam)ling tec'ni=ue con4enience and 3udgmental
(' 6ATA COLLECTION

6ATA COLLECTION
PRIMARY DATA )rimary data is gat'ered t'roug' a sur4ey 6it' t'e 'el) of
=uestionnaire.
&EC?5D(R1 D(2( secondary data sources includes
<ooks
Fournals
4arious 6ebsites
com)any s'are )rice
2able no. 4.!
O$ 92i02 B!#i# %/ 02%%#e &%!$

Rate of interest 4L
E7; ,L
2otal (mt. .!L
any ?t'er L
2able no. 4.
+L
*+L
)+L
;+L
(+L
<+L
R!te %/ i$te"e#t
EMI
T%t!& Amt'
!$ Ot2e"
>ra)'s no. 4.!
C%m1!$ P"i0e L C2
8;DE?;5D .$, *;'-@
&(21(7C?7:.!$./, @'(@
:(25; !-".$, @'(;
>(77?5;5D !4$."" @'*;
F:(&&?C;(2 !!$.-" @'+)
C%m1!$ P"i0e L C2
L2 !!,.."
8
<+')<
U&U ."" 8,'@(
HCC /!.-" 8,',-
F&N&2EEL 4,4.#, 8<';)
<(F(F0;5&8.#4.!" 8<'*-
O00u1!ti%$ %/ t2e 1e%1&e



businessman 4,L
traders .L
contracer !$L
any ot'er !,L
2able no.4..
+L
*+L
)+L
;+L
(+L
<+L
bu#i$e##m!$
t"!de"#
0%$t"!0e"
!$ %t2e"
>ra)'s no. 4.
<' A$!&#i# !$d I$te"1"et!ti%$
A$!&#i# is a met'od of e4aluating future security )rices and market directions
based on statistical analysis of 4ariables suc' as trading 4olume% )rice c'anges%
etc.% to identify )atterns
( stock market term + 2'e attem)t to look for numerical trends in a random
function. 2'e #t%0> m!">et used to be filled 6it' te02$i0!& !$!&#t# deciding
6'at to buy and sell% until it 6as decided t'at t'eir success rate is no better t'an
c'ance. 5o6 tec'nical stock analysis is 4irtually non+eBistent. 2'e Readers
&ubmitted EBam)les )age 'as more on t'is to)ic.
Research and e)amination of t'e m!">et !$d #e0u"itie# as it relates to t'eir
su))ly and demand in t'e market)lace. 2'e tec'nician uses c'arts and
com)uter )rograms to identify and )ro3ect )rice trends. 2'e !$!&#i# includes
studying )rice mo4ements and trading 4olumes to determine )atterns suc' as
Head and &'oulder 0ormations and N 0ormations. ?t'er indicators include
su))ort and resistance le4els% and mo4ing a4erages. ;n contrast to /u$d!me$t!&
!$!&#i#% tec'nical analysis does not consider a cor)orationMs financial data.
2ec'nical analysts study trading 'istories to identify )rice trends in )articular
#t%0>#B mutu!& /u$d#B 0%mm%ditie#B %" %1ti%$# in #1e0i/i0 m!">et #e0t%"# or
in t'e o4erall /i$!$0i!& m!">et#. 2'ey use t'eir findings to )redict )robable%
often s'ort+term% trading )atterns in t'e in4estments t'at t'ey study. 2'e s)eed
(and ad4ocates 6ould say t'e accuracy) 6it' 6'ic' t'e analysts do t'eir 6ork
de)ends on t'e de4elo)ment of increasingly so)'isticated com)uter )rograms.
Te02$i0!& A$!&#i# su))oses markets 'a4e memory.;f so% )ast )rices% or t'e
current )rice momentum% can gi4e an idea of t'e future )rice e4olution.
Te02$i0!& A$!&#i# is a tool to detect if a trend (and t'us t'e in4estorMs
be'a4ior) 6ill )ersist or break. ;t gi4es some results but can be dece)ti4e as it
relies mostly on gra)'ic signals t'at are often intert6ined% unclear or belated. ;t
mig't become a source of re)resenti4eness 'euristic (s)otting )atterns 6'ere
t'ere are none)
Te02$i0!& !$!&#i# 'as become increasingly )o)ular o4er t'e )ast se4eral
years% as more and more )eo)le belie4e t'at t'e 2i#t%"i0!& 1e"/%"m!$0e %/ !
#t%0> is a strong indication of future )erformance. 2'e use of )ast )erformance
s'ould come as no sur)rise. :eo)le using fundamental analysis 'a4e al6ays
looked at t'e )ast )erformance of com)anies by com)aring fiscal data from
)re4ious =uarters and years to determine future gro6t'. 2'e difference lies in t'e
te02$i0!& !$!&#tJ# belief t'at securities mo4e according to 4ery )redictable
trends and )atterns. 2'ese trends continue until somet'ing 'a))ens to c'ange
t'e trend% and until t'is c'ange occurs% )rice le4els are )redictable.
2'ere are many instances of in4estors successfully t"!di$: ! #e0u"it using
only t'eir kno6ledge of t'e securityMs c'art% 6it'out e4en understanding 6'at t'e
com)any does. Ho6e4er% alt'oug' te02$i0!& !$!&#i# i# ! te""i/i0 t%%&% most
agree it is muc' more effecti4e 6'en used in 0%mbi$!ti%$ 9it2 /u$d!me$t!&
!$!&#i#.
Fu$d!me$t!& A$!&#i#
Fu$d!me$t!& !$!&#i# looks at a s'are9s market )rice in lig't of t'e com)any9s
underlying business )ro)osition and financial situation. ;t in4ol4es making bot'
=uantitati4e and =ualitati4e 3udgements about a com)any. 0undamental analysis
can be contrasted 6it' Mtec'nical analysis9% 6'ic' seeks to make 3udgements
about t'e )erformance of a s'are based solely on its 'istoric )rice be'a4ior and
6it'out reference to t'e underlying business% t'e sector itMs in% or t'e economy as
a 6'ole. 2'is is done by tracking and c'arting t'e companies stock price'
volume of shares traded day to day' both on the company itself and also on
its competitors. ;n t'is 6ay in4estors 'o)e to build u) a )icture of future )rice
mo4ements.
MISTAKE ONE
L!0> %/ K$%9&ed:e !$d N% P&!$
;t amazes us t'at some )eo)le eB)ect to trade t'e stock market successfully
6it'out any effort. 1et if t'ey 6ant to take u) golf% for eBam)le% t'ey 6ill 'a))ily
take some lessons or at least read a book before 'eading out onto t'e course.
2'e stock market is not t'e )lace for t'e ill informed. <ut learning 6'at you need
is straig'tfor6ard * you 3ust need someone to s'o6 you t'e 6ay.
2'e o))osite eBtreme of t'is is t'ose traders 6'o s)end t'eir life looking for t'e
Holy >rail of tradingZ <een t'ere% done t'atZ
2'e trut' is% t'ere is no Holy >rail. <ut t'e good ne6s is t'at you donMt need it.
?ur trading system is 'ig'ly successful% easy to learn and lo6 risk.
MISTAKE TWO
Gnrealistic EB)ectations
7any no4ice traders eB)ect to make a gazillion dollars by neBt 2'ursday. ?r t'ey
start to 6rite out t'eir resignation letter before t'ey 'a4e e4en )laced t'eir first
tradeZ
5o6% donMt get us 6rong. 2'e stock market can be a great 6ay to re)lace your
current income and for creating 6ealt' but it does re=uire time. 5ot a lot% but
some.
&o donMt tell your boss 6'ere to )ut 'is 3ob% 3ust yetZ
?t'er beginners t'ink t'at trading can be !""L accurate all t'e time. ?f course
t'is is unrealistic. <ut t'e best t'ing is t'at 6it' our met'ods you only need to get
,"+#"L of your trades Vrig'tV to be successful and 'ig'ly )rofitable.
MISTAKE THREE
Listening to ?t'ers
N'en traders first start out t'ey often feel like t'ey kno6 not'ing and t'at
e4eryone else 'as t'e ans6ers. &o t'ey listen to all t'e ne6s re)orts and so
called VeB)ertsV and get totally confused.
(nd t'ey take Vti)sV from t'eir buddy% 6'o got it from some cab dri4erJ
Ne 6ill s'o6 you 'o6 you can get to kno6 e4eryt'ing you need to kno6 and so
ne4er 'a4e to listen to anyone else% e4er againZ
MISTAKE FOUR
>etting in t'e Nay
<y t'is 6e mean letting your ego or your emotions get in t'e 6ay of doing 6'at
you kno6 you need to do.
N'en you first start to trade it is 4ery difficult to control your emotions. 0ear and
greed can be o4er6'elming. Lack of disci)lineI lack of )atience and o4er
confidence are 3ust some of t'e ot'er )roblems t'at 6e all face.
;t is critical you understand 'o6 to control t'is side of trading. 2'ere is also one
ot'er key t'at almost no one seems to talk about. <ut more on t'is anot'er timeZ
MISTAKE FIVE
:oor 7oney 7anagement
;t ne4er ceases to amaze us 'o6 many traders donMt understand t'e critical
nature of money management and t'e related area of risk management.
2'is is a critical as)ect of trading. ;f you donMt get t'is rig't you not only 6onMt be
successful% you 6onMt sur4i4eZ
0ortunately% it is not com)leB to address and t'e sim)le ste)s 6e can s'o6 you
6ill ensure t'at you donMt Vblo6 u)V and t'at you get to kee) your )rofits.
MISTAKE SIM
?nly 2rading 7arket in ?ne Direction
7ost ne6 traders only learn 'o6 to trade a rising market. (nd 4ery fe6 traders
kno6 really good strategies for trading in a falling market.
;f you donMt learn to trade Vbot'V sides of t'e market% you are drastically limiting
t'e number of trades you can take. (nd t'is limits t'e amount of money you can
make.
Ne can s'o6 you a sim)le strategy t'at allo6s you to )rofit 6'en stocks fall.
MISTAKE SEVEN
?4ertrading
7ost traders ne6 to trading feel t'ey 'a4e to be in t'e market all t'e time to
make any real money. (nd t'ey see trading o))ortunities 6'en t'eyMre not e4en
t'ere (6e94e been t'ere too).
Ne can s'o6 you sim)le tec'ni=ues t'at ensure you only V)ull t'e triggerV 6'en
you s'ould. (nd 'o6 trading less can actually make you moreZ
,' C%$0&u#i%$
(fter going t'roug' my 6'ole study ; came to t'e conclusion t'at different
Com)any of ;ndia eit'er )ri4ate or )ublic bot' )ro4ides in4estment sc'eme Nit'
t'e ob3ecti4e to generate income. 2'ey 'a4e many financial sc'emes regarding
Commercial in4estment 2'ere are many )eo)le 6'o are satisfies 6it' t'e
&c'eme. 2'e )rocedure of ;n4esting from t'is com)any is sim)le and easy
and also costumer friendly. ; also come to kno6 t'at many industrialist% traders%
and ne6 entre)reneur 6ere a6are of t'ese sc'emes.
(d4antages of 7G2G(L 0G5D&:+
:ortfolio Di4ersification:+ 7utual 0unds in4est in a 6ell+di4ersified )ortfolio of
securities 6'ic' enables in4estor to 'old a di4ersified in4estment )ortfolio
(6'et'er t'e amount of in4estment is big or small).
:rofessional 7anagement:+ 0und manager undergoes t'roug' 4arious
researc' 6orks and 'as better in4estment management skills 6'ic' ensure
'ig'er returns to t'e in4estor t'at 6'at 'e can manage 'is o6n.
Le## Ri#>78 ;n4estors ac=uire a di4ersified )ortfolio of securities e4en 6it' a
small in4estment in a 7utual 0und. 2'e risk in a di4ersified )ortfolio is lesser t'an
in4esting in merely or . securities.
Lo6 2ransaction Costs:+ Due to t'e economies of scale (benefits of larger
4olumes)% mutual funds )ay lesser transaction costs. 2'ese benefits are )assed
on to t'e in4estors.
Li=uidity: + (n in4estor may not be able to sell some of t'e s'ares 'eld by 'im
4ery easily and =uickly% 6'ereas units of a mutual fund are far more li=uid.
C'oice of &c'eme: + 7utual 0unds )ro4ide in4estors 6it' 4arious sc'emes
6it' different in4estment ob3ecti4es. ;n4estors 'a4e t'e o)tion of in4esting in a
sc'eme 'a4ing a correlation bet6een its in4estment ob3ecti4es and t'eir o6n
financial goals. 2'ese sc'emes furt'er 'a4e different )lansAo)tions.
2rans)arency: + 0unds )ro4ide in4estors 6it' u)dated information )ertaining
to t'e markets and t'e sc'emes. (ll material facts are disclosed to in4estors as
re=uired by t'e regulator.
0leBibility: + ;n4estors also benefit from t'e con4enience and fleBibility offered
by 7utual 0unds. ;n4estors can s6itc' t'eir 'oldings from a debt sc'eme to an
e=uity sc'eme and 4ice+4ersa. ?)tion of systematic (at regular inter4als)
in4estment and 6it'dra6al is also offered to t'e in4estors in most o)en+end
sc'emes.
&afety:+ 7utual 0und industry is a )art of a 6ell+regulated in4estment 6'ere t'e
interests of t'e in4estors are )rotected by t'e regulator. (ll funds are registered
6it' &E<; and com)lete trans)arency is forced.
LIMITATIONS OF STU6Y
;t is 4ery small researc'% 6'ic' may be insufficient to gi4e t'e real )icture
sco)e of t'e s'are market.
2'e researc' is based on collected data and t'e researc'er is not
res)onsible for any 6rong inference dra6n due to t'e incorrect filling of
t'e =uestionnaire by t'e res)ondents.
2'e met'od of result is also limited to t'e reliability of met'od of
in4estigations% measurement and analysis of data.
:eo)le 6ere not interested in filling =uestionnaire )ro)erly.
;n4esting sc'eme 'as been re4ised 4ery soon.
@' Re0%mme$d!ti%$
&ecurities Com)any needs to )ro4ide suc' ty)e of facilities as muc' as
)ossible because t'ese students can be t'e future customers of t'e com)any
for ot'er ser4ices also. (s for as branc'es are concern t'ey are not )ro4iding
muc' attention on )romoting t'ese facilities as com)are to to) management
of t'e com)any so )ro)er ste)s must be taken for t'at. 8isiting sc'ools and
colleges for )romotion )ur)ose is only )racticing in Del'i region it s'ould be
on
national basis.
;n case of any kind o delay in ser4ice )ro)er feed back system s'ould be
t'ere. 7ore efficient staff s'ould be a))ointed so t'at t'ey can easily
)ro4ides
all t'e coo)eration re=uired by t'e customer.
Gnnecessary formalities s'ould be remo4ed and s'ould try to reduced t'e
large documentation )rocess 6'ile sanctioned in4esting.
;nterior s)ace s'ould be eBtended so t'at )eo)le 6ill freely mo4e during rus'
'our. 5e6s )a)er and magazines s'ould ke)t for customers% so t'at t'ey feel
relaBed until t'eir transactions are o4er.
:ro)er 6ater and toilet s'ould be )ro4ided and t'at s'ould be 6ell noticed to
e4erybody. (s study re4eals t'at securities com)any sc'emes are t'e best
as
com)are to t'ere sector it s'ould be ca)italized as muc' as )ossible.

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