Basically there are three types of investment methods:
i. Short term investment
ii. Mid term investment
iii. Long term investment
i) Short term investment
Investment done from couple of weeks to couple of months is called short term investment. It is done based on breaking news, or based on charts of technical analysis.
ii) Mid term Investment
Investments done from couple of months to couple of years is called mid tem investment. It is done based on analysis of quarterly financial results or based on fundamental analysis.
iii) Long term investment
Investment done from one year to couple of years like 3 years, 5 years, 10 years etc Long term investment is basically done after thoroughly analyzing the fundamentals of the company and its future growth prospects. And also the wise investor invests in companies whose current share prices are undervalued but its future growth is huge. Generally long term investor is worry free from daily markets up and down and share prices volatility.
Meaning of Bid and Ask price
Bid Price
The bid price is the price at which buyers are ready to buy shares. The bid price is also called as buying price.
Ask Price
The Ask price is the price at which sellers are ready to sell shares. The ask price is also called as selling price or offer price
Company declares Quarterly Results
A listed company, either in BSE or NSE, declares their performance every quarter throughout the day.
Based on the performance of quarterly results market judge how the company is performing and if analysis shows that the company is doing well then its share prices goes up and if analysis found that company is not performing, as per expectation, then market reacts negatively to that company and the result is its share prices falls.
First quarter duration - April to June
Results declaration on - July
Second quarter duration - July to September
Results declaration on - October
Third quarter duration - October to December
Results declaration on - January
Fourth quarter duration - January to March
Results declaration on - April
Fourth quarter is considered as end of financial year end.
IPO (initial public offer)
As the name indicates initial public offer, it is the initial stage of the share in the primary market. After issue is complete IPO becomes share and comes into secondary market and market participant’s start trading or investing on this share. Whenever a new company gets listed on stock exchanges it issues IPO or any existing company (either private limits company or single owner company) want to go public then at that time it issues IPO.
Main intention of offering IPO’s
- Either to raise capital (money) for company’s expansion plans etc
- Or whenever an already existing company goes public.
Future Derivatives
Future derivative is the product whose value (price) depends in underlying security (assets)
Underlying assets are like equity (share/stock), indices (nifty, Jr. Nifty), commodity etc.
Future trading can be done on stocks as well as on Indices like IT index, Auto index, Pharma index etc.
In simple words -
In simple language one future contract is group of stocks (one lot) which has to be bought with certain expiry period and has to be sold (squared off) within that expiry period. Suppose if you buy futures of Wipro of one month expiry then you have to sell it within that one month period. This is the brief introduction about future derivative if you are interested to know more about future derivatives then please at Trading in Future Derivatives
Options
An option is a contract that gives the buyer the right, but not the compulsion, to buy or sell an underlying asset at a specific price on or before a certain date. Underlying assets are like equity (share/stock), indices (nifty, Jr. Nifty), commodity etc.
Calls and Puts
The two types of options are calls and puts:
A call gives the holder the right to buy an asset at a certain price within a specific period of time. Calls are similar to having a long position on a stock. Buyers of calls hope that the stock will increase before the option expires.
A put gives the holder the right to sell an asset at a certain price within a specific period of time. Puts are very similar to having a short position on a stock. Buyers of puts hope that the price of the stock will fall before the option expires.
Note - Currently we are in the process of writing more about options and how to trade on them and very soon we will post them on website. For more information please visit our Options section.
Mutual funds
A registered company with SEBI (securities exchange board of India) does investments in various financial products like share market, government bonds, securities etc on behalf of customers is called mutual fund.
There are various mutual fund companies in the market and few are mentioned below:
Sundaram, Reliance, SBI, HSBC, Birla and many more.
The mutual fund companies collect money from customers and invest on their behalf in various financial products.
Investors who don’t want to expose to share market directly or who doesn’t have much knowledge of share market they prefer to invest in equity related mutual funds.
Thanks for Reading My Article.
Regards,
RAJESH CHOUDHARY
CAclubindia
