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

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax...

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

SBI Long Term Advantage Fund Series

Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. ICICI Prudential Long Term Equity Fund 5. Birla Sun Life Tax Relief 96 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Birla Sun Life Tax Plan Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave your comment with mail ID and we will answer them OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300  

ELSS Funds are Best Tax Saving Option

Equity-linked saving schemes (ELSS) are the best way to save tax in 2017 . The Economic Times assessed 10 tax-saving options on eight key parameters, including returns, safety , liquidity , costs, transparency , flexibility , ease of investment and taxability of income. ELSS funds scored highest, followed by the National Pension System (NPS) and Ulips at the second and third place, respectively . The terrific returns generated by ELSS (CAGR of 18.7% in past three years and 17.46% in past five years) are not the only plus point of these funds. Their costs are very low (2.52.75% a year) and all charges, portfolios and transactions are in the public domain. Returns are tax free because long-term capital gains from equity funds are exempt and they have the shortest lock-in period of three years. Investing in ELSS funds has now become very easy with the launch of the e-KYC facility . The whole process does not take more than 30-35 minutes. The Pension Fund Regulatory and Development Aut...
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