Skip to main content

Getting started with equity investments

You need to invest money and time to build and maintain a portfolio that yields high returns

John Maynard Keynes said, 'Don't try to figure out what the market is doing. Figure out a business you understand, and concentrate'. Investing in stocks is more a science than an art. There are certain ground rules which investors must follow to be successful. Even before you decide to invest in stocks of individual companies, it is pertinent to have a proper asset allocation plan, that is, what portion of your portfolio should be dedicated to equity. If you belong to the category to investors who do not have the time to monitor investments closely, you would be better off investing in an equity mutual fund rather than picking up individual stocks.

If you want to design you own portfolio, here are some points to help you get started:

Identify your comfort zone

Are you an investor who would likes to be defensive or are you an aggressive investor? The choice of stocks would depend on what you are willing to own. Would you like to invest in a blue-chip with a stable business and regular dividends, or would you rather look for a mid-cap company which is tomorrow's possible bluechip? Are you chasing growth, looking for value, or would you like to have the best of both? Identify your niche and then go for the appropriate companies.

Buy value, not momentum

Do not rely on tips or 'hot picks' to build your portfolio. When you decide to invest in a company, it's important that you see value in that investment. For a start, understand the business of the company, check the credentials of the management, study the earnings, profits and growth of the company, the outlook of the sector or industry in which it operates, performance vis-a-vis its competitors etc. Research the company through various research reports available and study the balance sheet of the company. It's important to recognise the difference between the price of a stock and its value - that is what you are paying for the stock and what it is worth.

Diversify

The age-old wisdom of not putting all your eggs in one basket applies to equity investments too. You may have a liking for a particular sector but it's always prudent to diversify. Study the outlook of different sectors from a macro perspective and if the prospects of certain sectors are particularly good, try and identify the best companies to invest in, in those sectors. This would be a 'top-down approach' to investing.

Think long-term

Warren Buffet says, 'If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes'. When you are investing in individual stocks, in the short-term, their prices will be governed by the market movements. Irrespective of whether the movement is positive or negative, stick to your company, unless something has gone fundamentally wrong. If a business does well, the stock price is bound to follow. Do not take decisions based on rumours or pessimism - there is no room for emotions while investing.

Monitor investments

Once you have built a portfolio of individual stocks, it is crucial to monitor them and continue to study the earnings, profits and growth plans of the companies. You may have made a mistake in your selection. It would be prudent to admit it and make amends to the portfolio. Do not hesitate to cut losses on worthless investments. Don't hold them endlessly in the hope that they may redeem themselves in future. You may be losing a better opportunity.

Equity may be a high risk investment, but actually, risk comes from not knowing what you are doing. If you spend time and effort on building a portfolio of potential stocks, the rewards will be well worth the investment of time, effort and money.

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now