Stock classes – The class of the stock is the primary factor that is used for the classification. This class of stock is actually based on the voting rights of the shareholders. There are some stocks that do not let the shareholders vote at the annual meeting of the company to decide the company management and other issues. Then there are stocks that let the share holders to cast vote to take decisions in the company matters. Then there are certain stocks that give the shareholders a chance to cast multiple votes in different aspects of the company.
Market Capitalization – Stocks are also classified based on the market capitalization of the company. Market capital of a company is calculated by multiplying the current price of the stock of the company with the total outstanding shares of the company in the market. Stock types like Large Cap, Mid Cap, Small Cap and penny stocks are some of the examples of stock types that are done on the basis of the market capitalization of the company.
Sector Stocks – Stocks are also classified on the basis sector that the company is in. Stocks are grouped in according to the sectors like – banking stocks, realty stocks, IT stocks, steel stocks, oil stocks and so on.
Cyclic Stocks – Stocks that rise and fall according to the cyclic pattern of the market are called cyclic stocks. These stocks are highly sensitive to the market and respond quickly to the prevailing trend in the market.
Dividend Stocks – Stocks that give dividend to the shareholders on the regular basis are called dividend stocks. These companies give away some portion of the annual profit to the shareholders in the form of dividends.
Types of Investment in Indian stock market ?
There are many people in this world that are not aware of three kinds of investments. They are stocks, bonds and cash. So let us have a look at the types of investments.
Stocks
Stocks can be scary for those people who are not aware too much about a stock market functions. Well, if you are that type of person, then its time for you to sit on the Internet. There are many websites that helps you to understand about stocks and its functioning in the market and also about share tips like Sharetipsinfo.com . Now speaking of investors, you will find three types – conservative, moderate and aggressive. So when you realize what type of investor you are, you can invest in high risk investments or low risk investments.
If you are a conservative investor, then you would prefer to invest in the form of cash. You will invest money into mutual funds, treasury bills…etc as they are safe and got a low risk. Now if you are a moderate investor, then you would prefer to invest your money in real estate. And if you happen to be an aggressive investor, you would like to invest in high stock markets.
Bonds
Bonds are considered to be one of the safest modes of investing money. This is because bonds are backed by credit of a country’s government. If you are an investor, then you need not keep these for a month but you will be entitled to receive interests for the whole month. Isn’t this interesting? Again you do not have to pay any commissions when you redeem the same.But returns are quite low in Bonds that is the saddest part.
Cash
Cash is another type of investment. Remember that when you invest in a particular company, you need to make a prior decision or plan for how many years you are going to be in the Indian stock market.
So you have come to know about the types of investment in the market. Make sure that you make a good research of the overall market so that you come to know the ups and downs of a particular company and also do not hesitate to approach for a good and expert stock market tips provider or research house like Sharetipsinfo.
Online trading or Offline trading in Indian stock market covering NSE and BSE ?
Online Trading Or Offline Stock Market Investments Needs To Be Made Diligently
Gone are the days when you must have a stock broker to deal in stocks and make stock market investments. In this age of internet, when everything is going online, stock trading has also gone online. Just like the offline stock trading you can now buy or sell stocks online with just a few clicks of the mouse. There are obviously some advantages and disadvantages of both these form of trading.
Advantages Of Online Trading
Typically online trading requires the investor to pay lower brokerage. So, while you are selling or buying stocks you gain more by paying lower brokerage in comparison with offline trading.
In case of online trading you are trading on the real time. No phone calls and no wait time, you can directly sell or buy stocks in about no time and get the stocks at the price that are showing on your screen.
In case of online trading there is no middle man involved. You need not have a broker to execute your calls, you can do the selling or buying of the stocks yourself.
In case of online stock trading there is no paper work involved, all your stocks are stored at your demat account and you can see them online.
You can deal in different stock exchanges with a single online trading account and you need not have different brokers to trade at different stock markets.
Disadvantages Of Online Trading
The biggest disadvantage of online trading is that you must be online to place your bid and trade in stocks. When you are on move and you get a call for a potentially profitable stock you can not buy that stock at that moment itself.
For those who are otherwise busy all the time it is difficult to manage their portfolio by their own. So, online trading is hardly of any help for them.
Not all the exchanges are online till date, so the online trading options are still limited.
Advantages Of Offline Trading
It is the most trusted and the oldest form of stock trading. With an efficient and trusted broker you can effortlessly manage your portfolio without spending any time for that.
Disadvantage Of Offline Trading
Often times the brokers takes time to execute your instruction for selling or buying the stocks that might incur losses.
Offline trading brokerage is always higher than that of online brokerage.
What is meant by the term stock valuation ?
Stock valuation is a process that is used to calculate the price or actual value of the stock. Stock valuation is the primary requisite for making an informed and wise investment in the stock market. Without proper valuation of the stock you should never invest in the company no matter how well that particular company has featured in the recent past. If the value of the stock is not that strong, you can not make profit from that stock in the long run.
If you have done the stock valuation right, you need look into the stock chart every now and then and worry about your investment. On the other hand investing in a stock without proper stock valuation would mean that you have entered into a dark lane where you have no clue about the entries and the exits. So, if you are interested to make some profitable investment and take wise decisions while investing in the stock exchange, stock valuation is the first thing you need to do.
Stock valuation is the process that is believed to be the domain of the experts. But that is not really true. You need not be a finance analyst or MBA to do the stock valuation. It requires a little mathematical skill and patience to do the stock valuation. There are different methods for stock valuation that are followed by the experts. Basically there are two ways that are followed for stock valuation – one is the fundamental criteria, that is based on different economic criteria. Another method is called the market criteria that is calculated on the basis on different parameters of the stock market. While the economic criteria give the fair valuation of the stock, the market criteria basically gives out the real price.
For the proper valuation of the stocks, it is important that you consider the market criteria along with the economic criteria. In reality it is often seen that there is a huge difference in the economic criteria and the market criteria. So, it is always wise to do the valuation in both ways to get the exact idea about the value of the stock. After you have done the proper valuation of the stock, you can easily determine if a stock is over priced or under priced in the current price and can decide about which stock to buy and which one to sell. In short the stock valuation significantly reduces the risk factor of the stock market investing.
What is meant by margin trading?
Margin trading is basically buying stocks by taking a loan from the broker. It increases the buying capacity of the investor. In margin trading an investor can buy stocks of much higher value by investing only the part of the value of the stocks. Margin trading is typically done for short term, in most cases for a day.
In margin trading the buyer needs to pay only 20% to 30% of the value of the stock. Subsequently, if the price of the stock increases and the buyer sells the stock the profit and the amount that he paid for the stock is returned to his account. For example if an investor is having $1000 in his account he can buy stocks of approximately $5000. If the stocks are sold subsequently in $5500, the buyer will get back $1500. The benefit of margin trading is that, if the buyer had to pay the full value of the stock, he could have bought stocks of only $1000 and the profit from the trading would have been $100. So, margin trading gives the investors a chance to earn more with less amount of money in their account.
But there are some limitations for margin trading as well. First of all, not all the stocks are available for margin trading. Typically brokers do not permit margin trading for the penny stocks, over-the-counter bulletin board securities and initial public offerings. For doing margin trading you must have the minimum required amount in your account, that varies from stock to stock. If your account fails to have that amount at some point of time the broker will sell of the stocks to get back the amount. It typically happens when the price of the stock reduces in the market.
But this is only one side of the coin. Margin trading does have its odds as well. As margin trading allows you to buy stocks more than your capacity, if the stock price falls your loss also multiplies. This is simply because you have to incur the loss for the more number of stocks that you have bought in margin. Therefore, you need to be extra cautious while doing margin trading. You need to invest in stocks that are sure to rise in the market. You should not blindly follow a trend or news for investing in margin. Do you research well identify the right stocks and find the best investment opportunity to make the most out of margin trading.
Affect Of Rising Price Of Crude Oil On Stock Market:
For the last few years it has been seen time and again that increase in the price of the crude oil had a direct impact on the stock market. Though it is hard to imagine buy it is fact that a rise in the oil price has negative effect on the stock prices at the stock exchanges all over the world.
The main reason behind this is the fear of the investors that the profit margin of the companies will decrease because of the increase in the oil price. As an increase in the oil price directly increases the operational cost, fuel cost, transportation cost of the companies, it is quite natural that the profit margin of these companies will decrease. This is the reason that the buyers become susceptible about the future of the companies that are hugely dependent on oil. This uncertainty restricts the buyers to invest in these companies and as a result the price of the stocks falls that ultimately has a negative effect on the overall market scenario. But this phase is temporary as the companies adjust in the price level to make up for the increased price in the oil and maintain the profit margin.
All said and done this fear for the fall in the profit margin is not practical according to the theory. In practice the effect of the price increase in the profit margin of the companies takes time. Before that could actually happen the companies take adequate measure to avoid the loss. Therefore, the influence of the rise in the price of crude oil on the stock market is basically triggered of the panic of investors rather than actual impact. But still it is always wise to wait and watch after a rise in the oil prices takes place to make investments. In this phase it comparative safer to invest in sectors that are not really dependent on oil such as software industry, banking sector, financial companies.Derivatives Basics:
Derivatives are financial instruments whose price is determined by some underlying variables. Derivatives can be traded directly between the two parties as well as through exchanges. There are different types of derivatives based on the type of assets that it deals in such as commodity, equity, bond, interest rate, index and so on. Mainly there are four types of derivatives that are traded – Future, Forward, Options and Swaps. In case of stock market derivative trading essentially means trading in future contracts and options. In derivative trading, stocks are bought in the form of contracts and in a lot.
The biggest advantage of derivative trading is that you can buy huge amount of stock by paying only a part of the total value of the stock. As in derivative trading you have to buy the stocks in a lot the price of the lot is relatively lower than the total amount stock you get. So, this means you have a chance of making profit even by investing a comparatively less money.
Derivative trading also lets you short sell the stocks. That means you can sell the stocks even before you actually own them. This is beneficial when you have an idea that the price of a particular stock is going to reduce. In derivative trading you can first sell the stock at a higher price and then buy the equal number of stocks when the price has gone down. In that way you can make profit in derivative trading even if the price is going down.
In derivative trading the brokerage is relatively lower than the cash segment. If you consider the number of stock that you purchase in the form of future contracts then you will find that you have to pay less brokerage compared to the cash segment.
While dealing in derivatives the only thing that you need to be careful is the expiry dates of the contracts.Investing in the stock market
Investing in the stock market is profitable proposition for any investor. If done with little study and meticulous analysis of the stocks, stock market investment can give you huge return on your investment. But it is of no use if you do not keep track of the stock market on regular basis. Before you start investing in stocks there are a few things that you need to know. For example you must have a clear idea of the classification of the stocks that are done based on various criteria. Market capitalization of the company is one such metrics on which stocks are classified in a market.
Market capitalization is nothing but the value of the outstanding shares of a company in the stock market. The number is derived by multiplying the number of outstanding stocks of a company with the price of a share. Based on that, the stocks in a market are divided into four categories i.e. Large Cap, Mid Cap, Small Cap and Nano Cap stocks.
Large Cap Stocks – Stocks of the companies that has a market capitalization of more than $ 10 Billion is said to be Large Cap stocks. Generally stocks of large scale enterprises are listed in this category and stocks are highly priced in the market.
Mid Cap – Mid Cap stocks are stocks that are in middle of the Large Cap and the small cap stocks. Stocks of the companies with market capitalization between $2 Billion and $ 10 Billion are said to be Mid Cap stocks.
Small Cap – Stocks of the companies with market capitalization of less than $2 Billion is said to be Small Cap stocks.
Nano Cap – Nano Cap stocks are generally of those small public companies. Stocks of the companies with market capitalization of less than $ 50 million is said to be Nano Cap stocks.
Apart from this broad classification stocks are further classified into groups based on the industry in he which the company belong to. For example all the stocks of the steel manufacturing companies are grouped as steel stocks and all the pharmaceutical company stocks are grouped as pharma stocks and so on. This classification though is not technically done, it is beneficial for an investor who is interested to invest in a particular industry. In that case the investor can easily keep track of the industry and take buying and selling decisions if there is a general news on that particular industry.
Major Factors That Affect Stock Price in stock market globally
When you wish to invest in the stock market, then you should always make a good survey of the whole market. As you know that you cannot predict the stock market, so in that case you need to know the functioning of the market. There are some major factors that affect stock price. So let us discuss about the different factors affecting the stock price in this article.
Demand AND SUPPLY
One of the major factors affecting stock price is demand and supply. The trend of the stock market trading directly affects the price. When people are buying more stocks, then the price of that particular stock increases. On the other hand if people are selling more stocks, then the price of that stock falls. So, you should be very careful when you decide to invest in the Indian stock market.
Market Cap
Never try to guess the worth of a company simply by comparing the price of the stock. You should always keep in mind that it is not the stock but the market capitalization of the company that determines the worth of the company. So market cap is another factor that affects stock price.
News
When you get positive news about a company then it can increase the buying interest in the market. On the other hand, when there is a negative press release, it can ruin the prospect of a stock. In this case you should remember that news should not matter much but the overall performance of the company matters more. So, news is another factor affecting stock price.
Earning/Price Ratio
Another important factor affecting stock price is the earning/price ratio. This gives you a fair idea of a company’sshare price when it is compared to its earnings. The stock becomes undervalued if the price of the share is much lower than the earnings of a company. But if this is the case, then it has the potential to rise in the near future. The stock becomes overvalued if the price is much higher than the actual earning.
So, these are the major factors that affect stock price.
What are the different types of stocks available in the market and what are bear and bull market.
Options Are Wide – Make Your Mind Before Investing
There are different types of stocks that are traded in the stock market. The classification of stocks is done on different factors.
Stocks Based On Classes
Many things depend on the classes of stocks. Mainly it is the voting rights of the stock holders in the company decisions that is the most crucial criteria of the stock classes that effect the stock holders directly. While in most cases a stock gives the share holders right for one vote, there are other classes that give the stock holders capacity to cast more than one vote. There is also a class of stock that gives the stock holders no voting rights at all. This is done by the primary stock holders or the founders of the company to retain control on the running of the company.
Stocks Based On Market Capitalization
Stocks are also classified based on the capital of the company in the market that is the total lilangeni value of the company’s outstanding shares. This is calculated by multiplying the current price of the stock of the company with the total outstanding shares of the company in the market. Roughly there are three different types of stocks that are categorized on the basis of market capitalized - Large Cap, Mid Cap and Small Cap. Large Cap stocks have market cap of highest value, Mid Cap stocks have mid range market cap and the Small Cap stocks have market cap of lowest value.
Sector Stocks
There are certain stocks that are grouped on the basis of the sector that is the type of business that the company is in. There are different sectors like finance, banking, steal, power, consumer goods and so on.
Cyclical Stocks
These are the stocks that behave accordingly to the business cycles. The profit of these companies rises and falls in tune with the business cycles every year.
Defensive Stocks
Defensive stocks are the stocks that perform well even in the poor economic conditions. That means these products are services enjoy steady demand in the market throughout the year and does not depend on business cycles and overall market conditions.
Tracking Stock
It is type of common stock that is tied to its subsidiary. The dividend and the capital gain of the stock depend largely on the subsidiary instead of the company as a whole. Owning of a tracking stock does not give the owner voting rights to the company.
Whether Bull Or Bear Market You Can Earn Profit With A Smart Investment Strategy
Stock markets always go through market trends. Market trends is determined by the general temperament of the buyers and the sellers. The major or the primary trends of the stock market is the bullish or bearish market. Bull or the buyer and bear or the seller who ever is more active at a point of time is said to govern the market.
A bull market is when the investor confidence is at the peak. Generally a stable economic condition of the country and a steady growth in the stock prices initiate the bullish trend in the market. The steady growth in the market prompt the investors to invest in stocks and a steady flow of cash in the market further make the market more bullish in nature. At this point the market rises in a pace that is higher than the conventional speed. Till date the bullish market of the 1990’s has seen the biggest growth.
A bearish market is initiated by the fall in the stock prices for different reasons. In a bearish market that is initiated by the steady fall of the stock market, there is a panic amongst the buyers and there is always more number of sellers in the market than the buyers. In bearish market, investors desperately try to sell the stocks that they are holding to save some of their money that they have invested in the stocks. The general pessimism in the market and bulk selling by the investors further fuel the downward movement of the market.
Investors at most times confuse the bearish market with the correction phase that is also a secondary market trend. But in fact, correction is a much shot lived phase compared to the bearish market. In correction phase the overvalued stocks come to the price level that is perfect for that stock. Whereas, in a bearish market the stock prices come to much lower levels and break all the barriers.
Apart from the general market trends a particular stock and sector can also become bullish or bearish in nature. This normally happens when there is specific news about that particular company or the sector. Apart from these primary market trends there are also some secondary market tends that come in existence from time to time like correction, bear market rally and secular market trends.
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