Basics of the Share Market Stock Market

Tutorial
Posted by: Marketlive.in Administrator in Stock Market Tutorials January 19, 2011 0 17326
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Market Live brings in the Stock Market Tutorial which explains the basics of the Share
Market. Demat Account, IPO, Secondary Market All your Stock market jargons
being explained in a simple manner here.

What is a Stock ?

How do you make profits with stocks ?

What is the Stock Market ?

What is the Demat Account ?

Who is the Stock Broker ?

What is a stock ?
A stock is a partial ownership in a company or an industry, with rights to share in its profits.
When an investor buys a stock of a company, he is called a shareholder or a stockholder of
that company. The benefit of buying a share is that when the company profits, the
shareholders also profit. The company distributes the profit among its shareholders, which is
called the dividend.

How do you make profits with stocks ?

But many traders make real profit in stocks using the market price of the stocks. Stocks are
traded in the stock markets. The face value is the nominal value of the stock that is
determined by the issuer of the stock. Market price of a stock is the price at which currently
a stock is traded in the market. This price may be at premium or lesser than the face value of
the stock, depending on the companys performance and prospects, investors interests in the
company and a lot of other factors.
Market price of a stock keeps varying as traders trade the stock in the market. Traders often
make money using these variations in the market price of the stock. Stocks are bought at
lower market prices and sold at higher prices later. This is referred to as long positions in
market terms. Similarly stocks can be sold at a higher market price and bought at a lower
price later. Thiis is referred to as short positions in market terms. In these cases, the

difference in the market prices at the time of buying and selling will be seen as profit by the
traders.

What is the Stock Market ?

Basically it is an exchange place or a market that facilitates the trading of stocks. People
participating in the stock markets range from some casual traders and investors who trade as
a hobby, to large fund traders.
In India the most famous exchanges or markets are the Bombay Stock Exchange(BSE) and
the National Stock Exchange (NSE). Globally there are many markets including the famous
New York Stock (NYSE), NASDAQ, London Stock Exchange, Hong Kong Stock Exchange
etc..
Any market can be thought of with two functionalities:
Primary Market: Here the companies and industries raise long term funds for their
operations by issuing shares. Companies come up with an initial price, mostly with premium
for the face value of the shares, which will be distributed to the investors. This is called the
Initial Public Offer or the IPO.
Secondary Market : After a Company has finished its IPO, it is listed in the markets. After
getting listed and issued shares to investors, the shares can then be sold to other investors in
the stockmarket. Here the people can buy the shares at a current price as determined by other
investors in the market.

What is the Demat Account ?

Like opening a bank account for doing your personal financial transactions, you have to open
a Demat account to trade in the stock market. Demat account refers to Dematerialized
account. This account helps you to buy and sell stocks without the need for physical paper
shares.
A Demat Account is a must for trading the stocks these days. To open a demat account, you
should select a Depository Participant (DP). These days most of the banks are also DPs. So
you can contact any of the DPs with your identity, address proof and PAN documents for
opening a demat account for a prescribed fee by the DP. The registered DPs are also listed in
NSDL (http://www.nsdl.co.in/) and CDSL (http://www.cdslindia.com/) websites.

Who is the Stock Broker ?

Stock Brokers are members of the Stock Exchanges. Only these members can conduct
transactions in the exchange on behalf of the individuals and companies. So if you want to
buy or sell shares in the exchange, you have to contact a stock broker for doing so. This

normally requires the individuals to open an account with the Stock Broker. So the individual
becomes a client for the stock broker.
Once the client wishes to buy a stock, the broker would place the order in the stock exchange
on behalf of the client. When the transaction is done, the broker places the price to the client.
The client pays for the stocks he bought and the broker transfers the stocks into the demat
account of the client by following the transaction and settlement procedures.
Stocks Basics: Introduction
By Investopedia Staf

Wouldn't you love to be a business owner without ever having to show up at work? Imagine
if you could sit back, watch your company grow, and collect the dividend checks as the
money rolls in! This situation might sound like a pipe dream, but it's closer to reality than you
might think.
As you've probably guessed, we're talking about owning stocks. This fabulous category of
financial instruments is, without a doubt, one of the greatest tools ever invented for building
wealth. Stocks are a part, if not the cornerstone, of nearly any investment portfolio. When you
start on your road to financial freedom, you need to have a solid understanding of stocks and
how they trade on the stock market.
Over the last few decades, the average person's interest in the stock market has grown
exponentially. What was once a toy of the rich has now turned into the vehicle of choice for
growing wealth. This demand coupled with advances in trading technology has opened up the
markets so that nowadays nearly anybody can own stocks.
Despite their popularity, however, most people don't fully understand stocks. Much is learned
from conversations around the water cooler with others who also don't know what they're
talking about. Chances are you've already heard people say things like, "Bob's cousin made a
killing in XYZ company, and now he's got another hot tip..." or "Watch out with stocks--you
can lose your shirt in a matter of days!" So much of this misinformation is based on a getrich-quick mentality, which was especially prevalent during the amazing dotcom market in
the late '90s. People thought that stocks were the magic answer to instant wealth with no risk.
The ensuing dotcom crash proved that this is not the case. Stocks can (and do) create massive
amounts of wealth, but they aren't without risks. The only solution to this is education. The
key to protecting yourself in the stock market is to understand where you are putting your
money.
It is for this reason that we've created this tutorial: to provide the foundation you need to
make investment decisions yourself. We'll start by explaining what a stock is and the different
types of stock, and then we'll talk about how they are traded, what causes prices to change,
how you buy stocks and much more. If you're interested in learning more about investing
outside of just stocks, you can sign up to our free Investing Basics newsletter.

Stocks Basics: What Are Stocks?

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Stocks Basics: What Are Stocks?

By Investopedia Staff

The Definition of a Stock

Plain and simple, stock is a share in the ownership of a company. Stock represents a claim on
the company's assets and earnings. As you acquire more stock, your ownership stake in the
company becomes greater. Whether you say shares, equity, or stock, it all means the same
thing.
Being an Owner
Holding a company's stock means that you are one of the many owners (shareholders) of a
company and, as such, you have a claim (albeit usually very small) to everything the
company owns. Yes, this means that technically you own a tiny sliver of every piece of
furniture, every trademark, and every contract of the company. As an owner, you are entitled
to your share of the company's earnings as well as any voting rights attached to the stock.

Example stock certificate

(Click to enlarge)
A stock is represented by a stock certificate. This is a fancy piece of paper that is proof of
your ownership. In today's computer age, you won't actually get to see this document because
your brokerage keeps these records electronically, which is also known as holding shares "in
street name". This is done to make the shares easier to trade. In the past, when a person
wanted to sell his or her shares, that person physically took the certificates down to the
brokerage. Now, trading with a click of the mouse or a phone call makes life easier for
everybody.
Being a shareholder of a public company does not mean you have a say in the day-to-day
running of the business. Instead, one vote per share to elect the board of directors at annual
meetings is the extent to which you have a say in the company. For instance, being a
Microsoft shareholder doesn't mean you can call up Bill Gates and tell him how you think the
company should be run. In the same line of thinking, being a shareholder of Anheuser Busch

doesn't mean you can walk into the factory and grab a free case of Bud Light!
The management of the company is supposed to increase the value of the firm for
shareholders. If this doesn't happen, the shareholders can vote to have the management
removed, at least in theory. In reality, individual investors like you and I don't own enough
shares to have a material influence on the company. It's really the big boys like large
institutional investors and billionaire entrepreneurs who make the decisions.
For ordinary shareholders, not being able to manage the company isn't such a big deal. After
all, the idea is that you don't want to have to work to make money, right? The importance of
being a shareholder is that you are entitled to a portion of the company's profits and have a
claim on assets. Profits are sometimes paid out in the form of dividends. The more shares you
own, the larger the portion of the profits you get. Your claim on assets is only relevant if a
company goes bankrupt. In case of liquidation, you'll receive what's left after all the creditors
have been paid. This last point is worth repeating: the importance of stock ownership is
your claim on assets and earnings. Without this, the stock wouldn't be worth the paper
it's printed on.
Another extremely important feature of stock is its limited liability, which means that, as an
owner of a stock, you are not personally liable if the company is not able to pay its debts.
Other companies such as partnerships are set up so that if the partnership goes bankrupt the
creditors can come after the partners (shareholders) personally and sell off their house, car,
furniture, etc. Owning stock means that, no matter what, the maximum value you can lose is
the value of your investment. Even if a company of which you are a shareholder goes
bankrupt, you can never lose your personal assets.
Debt vs. Equity
Why does a company issue stock? Why would the founders share the profits with thousands
of people when they could keep profits to themselves? The reason is that at some point every
company needs to raise money. To do this, companies can either borrow it from somebody or
raise it by selling part of the company, which is known as issuing stock. A company can
borrow by taking a loan from a bank or by issuing bonds. Both methods fit under the
umbrella of debt financing. On the other hand, issuing stock is called equity financing.
Issuing stock is advantageous for the company because it does not require the company to
pay back the money or make interest payments along the way. All that the shareholders get in
return for their money is the hope that the shares will someday be worth more than what they
paid for them. The first sale of a stock, which is issued by the private company itself, is called
the initial public offering (IPO).
It is important that you understand the distinction between a company financing through debt
and financing through equity. When you buy a debt investment such as a bond, you are
guaranteed the return of your money (the principal) along with promised interest payments.
This isn't the case with an equity investment. By becoming an owner, you assume the risk of
the company not being successful - just as a small business owner isn't guaranteed a return,
neither is a shareholder. As an owner, your claim on assets is less than that of creditors. This
means that if a company goes bankrupt and liquidates, you, as a shareholder, don't get any
money until the banks and bondholders have been paid out; we call this absolute priority.
Shareholders earn a lot if a company is successful, but they also stand to lose their entire
investment if the company isn't successful.

Risk
It must be emphasized that there are no guarantees when it comes to individual stocks. Some
companies pay out dividends, but many others do not. And there is no obligation to pay out
dividends even for those firms that have traditionally given them. Without dividends, an
investor can make money on a stock only through its appreciation in the open market. On the
downside, any stock may go bankrupt, in which case your investment is worth nothing.
Although risk might sound all negative, there is also a bright side. Taking on greater risk
demands a greater return on your investment. This is the reason why stocks have historically
outperformed other investments such as bonds or savings accounts. Over the long term, an
investment in stocks has historically had an average return of around 10-12%.
Stocks Basics: Different Types Of Stocks
1. Stocks Basics: Introduction
2. Stocks Basics: What Are Stocks?
3.
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Stocks Basics: Different Types Of Stocks

By Investopedia Staff
There are two main types of stocks: common stock and preferred stock.
Common Stock
Common stock is, well, common. When people talk about stocks they are usually referring to
this type. In fact, the majority of stock is issued is in this form. We basically went over
features of common stock in the last section. Common shares represent ownership in a
company and a claim (dividends) on a portion of profits. Investors get one vote per share to
elect the board members, who oversee the major decisions made by management.
Over the long term, common stock, by means of capital growth, yields higher returns than
almost every other investment. This higher return comes at a cost since common stocks entail
the most risk. If a company goes bankrupt and liquidates, the common shareholders will not
receive money until the creditors, bondholders and preferred shareholders are paid.
Preferred Stock
Preferred stock represents some degree of ownership in a company but usually doesn't come
with the same voting rights. (This may vary depending on the company.) With preferred
shares, investors are usually guaranteed a fixed dividend forever. This is different than

common stock, which has variable dividends that are never guaranteed. Another advantage is
that in the event of liquidation, preferred shareholders are paid off before the common
shareholder (but still after debt holders). Preferred stock may also be callable, meaning that
the company has the option to purchase the shares from shareholders at anytime for any
reason (usually for a premium).
Some people consider preferred stock to be more like debt than equity. A good way to think
of these kinds of shares is to see them as being in between bonds and common shares.
Different Classes of Stock
Common and preferred are the two main forms of stock; however, it's also possible for
companies to customize different classes of stock in any way they want. The most common
reason for this is the company wanting the voting power to remain with a certain group;
therefore, different classes of shares are given different voting rights. For example, one class
of shares would be held by a select group who are given ten votes per share while a second
class would be issued to the majority of investors who are given one vote per share.
When there is more than one class of stock, the classes are traditionally designated as Class A
and Class B. Berkshire Hathaway (ticker: BRK), has two classes of stock. The different forms
are represented by placing the letter behind the ticker symbol in a form like this: "BRKa,
BRKb" or "BRK.A, BRK.B".
Stocks Basics: How Stocks Trade
1.
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Stocks Basics: How Stocks Trade
By Investopedia Staf

Most stocks are traded on exchanges, which are places where buyers and sellers meet and
decide on a price. Some exchanges are physical locations where transactions are carried out
on a trading floor. You've probably seen pictures of a trading floor, in which traders are wildly
throwing their arms up, waving, yelling, and signaling to each other. The other type of
exchange is virtual, composed of a network of computers where trades are made
electronically.
The purpose of a stock market is to facilitate the exchange of securities between buyers and
sellers, reducing the risks of investing. Just imagine how difficult it would be to sell shares if
you had to call around the neighborhood trying to find a buyer. Really, a stock market is
nothing more than a super-sophisticated farmers' market linking buyers and sellers.
Before we go on, we should distinguish between the primary market and the secondary

market. The primary market is where securities are created (by means of an IPO) while, in the
secondary market, investors trade previously-issued securities without the involvement of the
issuing-companies. The secondary market is what people are referring to when they talk
about the stock market. It is important to understand that the trading of a company's stock
does not directly involve that company.
The New York Stock Exchange
The most prestigious exchange in the world is the New York Stock Exchange (NYSE). The
"Big Board" was founded over 200 years ago in 1792 with the signing of the Buttonwood
Agreement by 24 New York City stockbrokers and merchants. Currently the NYSE, with
stocks like General Electric, McDonald's, Citigroup, Coca-Cola, Gillette and Wal-mart, is the
market of choice for the largest companies in America.
The NYSE is the first type of exchange (as we referred to
above), where much of the trading is done face-to-face on a
trading floor. This is also referred to as a listed exchange.
Orders come in through brokerage firms that are members
of the exchange and flow down to floor brokers who go to a
specific spot on the floor where the stock trades. At this
location, known as the trading post, there is a specific
person known as the specialist whose job is to match buyers
and sellers. Prices are determined using an auction method:
the current price is the highest amount any buyer is willing
to pay and the lowest price at which someone is willing to
The trading floor sell. Once a trade has been made, the details are sent back
of the NYSE
to the brokerage firm, who then notifies the investor who
placed the order. Although there is human contact in this
process, don't think that the NYSE is still in the stone age: computers play a huge
role in the process.

The Nasdaq
The second type of exchange is the virtual sort called an over-the-counter (OTC)
market, of which the Nasdaq is the most popular. These markets have no central
location or floor brokers whatsoever. Trading is done through a computer and
telecommunications network of dealers. It used to be that
the largest companies were listed only on the NYSE while all
other second tier stocks traded on the other exchanges. The
tech boom of the late '90s changed all this; now the Nasdaq
is home to several big technology companies such as
Microsoft, Cisco, Intel, Dell and Oracle. This has resulted in
the Nasdaq becoming a serious competitor to the NYSE.

The Nasdaq
market site in
Times Square

On the Nasdaq brokerages act as market makers for various stocks. A market maker provides
continuous bid and ask prices within a prescribed percentage spread for shares for which they
are designated to make a market. They may match up buyers and sellers directly but usually
they will maintain an inventory of shares to meet demands of investors.
Other Exchanges
The third largest exchange in the U.S. is the American Stock Exchange (AMEX). The AMEX
used to be an alternative to the NYSE, but that role has since been filled by the Nasdaq. In
fact, the National Association of Securities Dealers (NASD), which is the parent of Nasdaq,
bought the AMEX in 1998. Almost all trading now on the AMEX is in small-cap stocks and
derivatives.
There are many stock exchanges located in just about every country around the world.
American markets are undoubtedly the largest, but they still represent only a fraction of total
investment around the globe. The two other main financial hubs are London, home of the
London Stock Exchange, and Hong Kong, home of the Hong Kong Stock Exchange. The last
place worth mentioning is the over-the-counter bulletin board (OTCBB). The Nasdaq is an
over-the-counter market, but the term commonly refers to small public companies that don't
meet the listing requirements of any of the regulated markets, including the Nasdaq. The
OTCBB is home to penny stocks because there is little to no regulation. This makes investing
in an OTCBB stock very risky.
Stocks Basics: What Causes Stock Prices To Change?
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Stocks Basics: What Causes Stock Prices To Change?
By Investopedia Staf

Stock prices change every day as a result of market forces. By this we mean that share prices
change because of supply and demand. If more people want to buy a stock (demand) than sell
it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than
buy it, there would be greater supply than demand, and the price would fall.
Understanding supply and demand is easy. What is difficult to comprehend is what makes
people like a particular stock and dislike another stock. This comes down to figuring out what
news is positive for a company and what news is negative. There are many answers to this
problem and just about any investor you ask has their own ideas and strategies.
That being said, the principal theory is that the price movement of a stock indicates what
investors feel a company is worth. Don't equate a company's value with the stock price. The

value of a company is its market capitalization, which is the stock price multiplied by the
number of shares outstanding. For example, a company that trades at $100 per share and has
1 million shares outstanding has a lesser value than a company that trades at $50 that has 5
million shares outstanding ($100 x 1 million = $100 million while $50 x 5 million = $250
million). To further complicate things, the price of a stock doesn't only reflect a company's
current value, it also reflects the growth that investors expect in the future.
The most important factor that affects the value of a company is its earnings. Earnings are the
profit a company makes, and in the long run no company can survive without them. It makes
sense when you think about it. If a company never makes money, it isn't going to stay in
business. Public companies are required to report their earnings four times a year (once each
quarter). Wall Street watches with rabid attention at these times, which are referred to as
earnings seasons. The reason behind this is that analysts base their future value of a company
on their earnings projection. If a company's results surprise (are better than expected), the
price jumps up. If a company's results disappoint (are worse than expected), then the price
will fall.
Of course, it's not just earnings that can change the sentiment towards a stock (which, in turn,
changes its price). It would be a rather simple world if this were the case! During the dotcom
bubble, for example, dozens of internet companies rose to have market capitalizations in the
billions of dollars without ever making even the smallest profit. As we all know, these
valuations did not hold, and most internet companies saw their values shrink to a fraction of
their highs. Still, the fact that prices did move that much demonstrates that there are factors
other than current earnings that influence stocks. Investors have developed literally hundreds
of these variables, ratios and indicators. Some you may have already heard of, such as the
price/earnings ratio, while others are extremely complicated and obscure with names like
Chaikin oscillator or moving average convergence divergence.
So, why do stock prices change? The best answer is that nobody really knows for sure. Some
believe that it isn't possible to predict how stock prices will change, while others think that by
drawing charts and looking at past price movements, you can determine when to buy and sell.
The only thing we do know is that stocks are volatile and can change in price extremely
rapidly.
The important things to grasp about this subject are the following:
1. At the most fundamental level, supply and demand in the market determines stock price.
2. Price times the number of shares outstanding (market capitalization) is the value of a
company. Comparing just the share price of two companies is meaningless.
3. Theoretically, earnings are what affect investors' valuation of a company, but there are
other indicators that investors use to predict stock price. Remember, it is investors'
sentiments, attitudes and expectations that ultimately affect stock prices.
4. There are many theories that try to explain the way stock prices move the way they do.
Unfortunately, there is no one theory that can explain everything.

Stocks Basics: Buying Stocks

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Stocks Basics: Buying Stocks
By Investopedia Staf

You've now learned what a stock is and a little bit about the principles behind the stock
market, but how do you actually go about buying stocks? Thankfully, you don't have to go
down into the trading pit yelling and screaming your order. There are two main ways to
purchase stock:
1. Using a Brokerage
The most common method to buy stocks is to use a brokerage. Brokerages come in two
different flavors. Full-service brokerages offer you (supposedly) expert advice and can
manage your account; they also charge a lot. Discount brokerages offer little in the way of
personal attention but are much cheaper.
At one time, only the wealthy could afford a broker since only the expensive, full-service
brokers were available. With the internet came the explosion of online discount brokers.
Thanks to them nearly anybody can now afford to invest in the market.
2. DRIPs & DIPs
Dividend reinvestment plans (DRIPs) and direct investment plans (DIPs) are plans by which
individual companies, for a minimal cost, allow shareholders to purchase stock directly from
the company. Drips are a great way to invest small amounts of money at regular intervals.
Stocks Basics: How to Read A Stock Table/Quote

1. Stoc
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Intro
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2. Stoc
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Wha
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3. Stoc
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Dife
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4. Stoc
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How
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5. Stoc
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Wha
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nge?
6. Stoc
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Buyi
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7. Stoc
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How
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8. Stoc
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The
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9. Stoc
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Stock Market Tutorials / Mutual Fund Basics

Mutual Fund Basics

Posted by: Marketlive.in Administrator in Stock Market Tutorials July 7, 2012 0 6799 Views
Marketlive.in brings you a definitive guide to the Mutual funds. Get to know all that you
wanted to know about the mutual funds. Learn about how mutual funds operate and how to
choose a fund that suits your requirements.

What is a Mutual Fund ?

How is it different from investing in Stocks / Shares ?

Do they give guaranteed returns ?

How to invest in a Mutual Fund ?

How to make profit in Mutual Funds ?

What is NAV ?

What is Entry load and Exit Load ?

How to choose the best Mutual Fund ?

What is a Mutual Fund ?

You can think a mutual fund as a trust. It is a collective investment from many investors with
a common financial goal. Typically, a Fund manager would then invest this money collected
from the investors in various other kinds of instruments such as stocks, bonds, debentures,
ETF and so on. The Fund manager would be supported by a team of financial experts who
advice on the investment decisions. The income that the fund earns collectively from these
investments made by the Fund manager, would then be distributed to the original investors
who had invested in the mutual fund. The profit that the initial investor earns like this, is
called the Dividend issued by the Mutual fund.
An Example
To understand it better, let us take an example. Let us say investor A puts his money in a
Mutual Fund called X fund. The Fund manager of this X fund would inturn invest this
money in other instruments, say in the stock market. During the course of time, if the
investments made by the fund manager are profitable, then he passes on a share of the profit
to the original investor A, in the form of dividends.

MF concepts courtesy AMFI

How is it different from investing in Stocks / Shares ?

When you invest in Stocks, you would directly trade in the stock market. The stocks that you
buy or sell would be either credited or debited directly from your Demat account.
However when you invest in a mutual fund, your Demat account does not get credited with
any stocks. Even if the fund manager of your mutual fund invests your money in the stock
market. Apart from the stock market, depending on the nature of your mutual fund, your
money might be invested in other instruments also such as the bonds, real estate and so on.
The advantage with this approach is that the fund managers are usually a team of financial
experts. They are better informed to take investment decisions and thus could make better
profits from the investments, a share of which would be passed on to you.

Do they give guaranteed returns ?

Not all Mutual funds guarantee the returns for the investments made. It depends on the kind
of fund that you invest the money in. There are mutual funds which invest only in safer
instruments such as the Government Bonds and Debentures. These can assure a guaranteed
return.
However, the funds which invest in the Equity market, cannot guarantee the returns. The
performance of these equity based funds actually depend on the stock market. If they make
losses, then you would also run into a loss.

How to invest in a Mutual Fund ?

Mutual Funds are usually bought in terms of units. The price that you have to pay for buying
a single unit, would be the NAV of that Mutual fund. Note that the NAVs of the funds varies
in time, and hence the price of investment also varies.
Systematic Investment Plan ( SIP )
Many mutual funds also allow you to purchase their units through Systematic Investment
Plans or SIPs. Through SIP, you can specify a regular amount to be used for purchasing the
mutual fund units at specified intervals. For example if you enter a monthly SIP option for
Rs.500, it means that every month, you are buying as many units possible for Rs. 500, based
on the current NAV of the mutual fund at the time of purchase.

How to make profits in Mutual Funds ?

There are two ways that an investor can make profit from Mutual funds. The first one is
through the dividends declared by the fund. As explained earlier, when the fund manager sees
profit from the investments he has made, a share of the profits is passed on to the investor in
the form of dividends.
The second way one can make profit is through Capital Gains. The NAV of the mutual fund
either increases or decreases based on the profit or loss that the fund is making through its
investments. So if you buy some units of mutual fund at a lower NAV and as time passes, if
the NAV of the fund moves up, you can sell them at a higher NAV, making profits. This is
called Redemption.

What is NAV ?
The NAV stands for Net Asset Value. It is the market value of the assets of the scheme minus
its liabilities. Simply put, the NAV of one unit of a mutual fund, represents the price of that
the investor has to pay for purchasing it.
The NAV of the fund varies depending on the price movements of the instruments in which
the fund has put the money in. For example consider an Equity fund which invests money in
stocks comprising the Sensex. The NAV of the fund increases if these stocks gain in a day.
Similarly the NAV would decline, if the prices of these stocks fall in the stock market.

If you have purchased some units of a mutual fund at a certain NAV, and in the due course of
time, if the NAV has moved up, then you are under profit. You can redeem your units and get
back your investment money along with the profits. However if the NAV has declined from
your purchase date, then you are under a loss. You can either decide to take the losses by
redeeming the units at a lower price or wait for some more time for the NAV to move up.
Click here to view latest NAVs of all Mutual Funds

What is Entry load and Exit Load ?

Some mutual funds impose an Entry load, while you purchase the units of a Mutual fund.
This is usually specified in percentage. This is the amount that you have to pay in addition to
the price of the mutual fund, for buying the units. For example, consider a case when the fund
specifies an entry load of 2.5%. If you want to invest Rs.100, then you can buy the units only
for Rs.97.5, as Rs.2.5 will be charged as the Entry load.
Similarly, the Exit load is the amount that one has to pay to the Fund manager, while exiting
or redeeming the units from the Mutual fund.

How to choose a Mutual Fund ?

Choosing a Mutual fund depends mainly on the amount of risk that you can take in your
investment. Some of the equity based funds can promise to give very high returns for your
money, but at the same time, might be very riskier, as the performance depends on the Stock
market. Similarly, there are funds that invest in safer instruments, but give lesser returns
compared to the equity funds.
Hence it would be worthwhile to see the history of the performance of the Mutual fund,
before investing in it. You can select a fund, based on the number of dividends that it has
declared in a specified period, and the increase in the NAV of the fund over the period.
However past performance of a fund, might not guarantee that it will perform in the same
way in the future.
You can also ask your agent on the Entry loads and Exit Loads of various funds. You should
ensure that you do not end up paying much money for these loads.
What is the Nifty, Sensex, NSE and BSE ?

Posted by: Marketlive.in Administrator in Stock Market Tutorials January 3, 2014 4

Comments 189577 Views
Marketlive.in brings in Stock Market tutorials explaining the definitions of the Sensex and
the Nifty indices. The tutorial explains in simple terms what the BSE, NSE stand for and
what do the Sensex and Nifty indices signify.

BSE & NSE What are these ?

What is Sensex ?
What is Nifty ?
What do they show ?

BSE & NSE What are these ?

Stocks / Shares are traded in the stock market called as Stock Exchanges. These are the
places where people would buy and sell stocks/shares.

In India, although there are many such stock exchanges, two large stock exchanges are very
popular. The first one is the National Stock Exchange (NSE), which is located in New
Delhi. The second is the Bombay Stock Exchange (BSE), which is located in Mumbai.

What is Sensex ?

In the Bombay Stock Exchange, shares of many companies are traded. These companies
belong to different industrial sectors such as Oil & Gas, Banking, IT, Cement and so on.
A list of 30 such companies belonging to various sectors are chosen and they become the
constituents of the Sensex index. Sensex stands for Sensitive Index comprising of 30
stocks from the BSE.
The formula for arriving the value of Sensex is a bit complicated and we are not required to
understand the complex formula at this stage. All we have to understand is that the Sensex is
based on the price values of these individual 30 stocks.

What is Nifty ?

Similarly, in the National Stock Exchange, shares of many companies are traded. These
companies again belong to different industrial sectors such as Oil & Gas, Banking, IT,
Cement and so on.
A list of 50 such companies belonging to various sectors are chosen and they become the
constituents of the Nifty index.
The formula for arriving the value of Nifty is again a bit complicated and we are not required
to understand the complex formula at this stage. All we have to understand is that the Nifty is
based on the price values of these individual 50 stocks.

What do they show ?

The Sensex and the Nifty are called as the Benchmark Indices. They represent the overall
trend of the market in general.

These indices will give an overall picture of how the market is behaving. A rise in the Sensex
value indicates that all or some of the 30 stocks of the Sensex are trading higher. Similarly if
the Sensex value is down, it indicates that either all or some of the 30 stocks of the Sensex are
trading lower.
Depending on the number of shares traded for each company and the price of these shares,
the Market Capitalization (Market Cap) of these companies will vary. The Market Cap
plays a significant role in determining the weightage for each company in the Nifty and the
Sensex indices.
Thus based on the movement of these individual stocks, the values of the Nifty and Sensex
will change, which will indicate the general behaviour of the market.
Basic Terms in Trading Stock Market Tutorial

Basic Terms in Trading Stock Market

Tutorial
Posted by: Marketlive.in Administrator in Stock Market Tutorials January 19, 2011 0 12170
Views
Market Live brings in the Stock Market Tutorial explaining the basic and essential
terms involved during Online Trading in the Share Market. Buy/Sell Orders, Limit
Prices, Stop Loss Prices, Trigger Prices All the Stock market Trading jargons are
explained in a simple manner here.

How do I Buy / Sell Stocks with my Online Account ?

What is a Limit Order ?

What is a Market Order ?

Why didnt my Limit Order get executed ?

Why didnt my Market Order get executed ?

What is Stop Loss / Trigger Price ?

How do I Buy / Sell Stocks with my Online Account ?

Buying or Selling stocks is done by placing Orders. You can place a Buy Order to buy the
stocks at a particular price. Similarly to sell a stock at a particular price, you have to place a
Sell Order.
Each Online platform has different ways to place these orders. But generally, all of these
provide the following basic options when placing an order:

Option to choose whether you wish to Buy or Sell a particular stock

The name / symbol of the particular stock which you want to either Buy or Sell

The Number of stocks (Quantity) that you want to either Buy or Sell

The Price at which you would like to either Buy or Sell this stock.

After you have confirmed the order, it is placed in the Stock Exchange through the Online
System. Your stocks are actually bought or sold once this order gets executed in the
exchange.

What is a Limit Order / Limit Price ?

A Limit Order is a Buy / Sell order which you want to get executed at a pre-determined
desired price. This is the most common type of order that investors and traders place in the
market.
Buy Order with Limit Price
For example, if you want to buy the stocks of company A at a price of Rs.300. However the
current price of the stock might be higher than your desired price. But you feel that the price
of this stock would come down sooner and reach Rs. 300. In such a case, you can place a Buy
order with a limit price of Rs. 300. This means that you are instructing the system to buy the
stocks of company A, only if the price reaches Rs. 300 or lesser.
So if a Buy Order gets executed with the Limit Price specified, then you could be assured that
the actual price at which the stocks are purchased by you will always be either equal to or
lesser than the Limit Price specified by you.
Sell Order with Limit Price
Similarly you may have the stocks of company B in your demat account, which you would
like to sell at a price of Rs.500. But currently the market price of the stock is lesser than 500
and you expect that sooner the price will reach Rs. 500. In such a case you can place a Sell
order with a limit price set to Rs. 500. In this case, the stocks will be sold only if the price
reaches Rs.500 or above.
So if a Sell Order gets executed with the Limit Price specified, then you could be assured that
the actual price at which the stocks are sold by you will always be either equal to or greater
than the Limit Price specified by you.

What is a Market Order ?

Market Orders are placed, when you are not concerned too much about the current price of
the stock, but you want to get assured that the stocks are either bought or sold immediately.
So a Market Order can be placed only during the Market Trading Hours. You cannot place a
Market Order when the Markets are closed.
Market Order for Buying
For example, consider an instance where in you know the fact that company A will be
making a big announcement in the afternoon today and so the price of the stocks of this
company will definitely rise after this event. So you are looking for buying this stock
desperately now, irrespective of its current traded price. In such a case, you can place a
market order for this stock. This will place an order for buying the stocks at the Last Traded
Price in the Stock Market. So the chances of buying the stocks increase, as you are trying to
buy the stock very close to its Last Traded Price in the market.

Market Order for Selling

Similarly suppose that you know the price of stocks of company B will go down later in the
day when the company comes out with its Earnings report of Losses for the Quarter. So you
would want to sell the stocks of this company immediately, before the price of the stocks fall
drastically. In such a case, you can place a Market Order for Selling. This will place an order
for selling the stocks at the Last Traded Price in the Stock Market. So the chances of selling
the stocks increase, as you are trying to sell the stock very close to its Last Traded Price in the
market.

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