Beginners guide to stock market

Beginners guide to stock market

Most Often, gold and stocks are the investment showgrounds that attracts Indian investors. If you are someone looking to invest in shares and stocks (Stock Market) in India, and are just about to start off, here are some of the basic things you need to understand as a newbie.

What is the stock market all about?

In India, there are two primary exchanges; the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These are the only two exchanges in India where buying and selling of shares and commodities happen. Usually, there is a minor difference in the price of shares at the two exchanges. Your broker can guide you here in case you do not understand where to trade. 

What is the difference between primary markets and secondary markets?

When a company lands up in stock exchange with an initial public offer (IPO) it is known as the primary market. The secondary market is the place where actual trading of the shares takes place. The only purpose of an IPO is to list the stock or the company in the share market. Once the company gets listed, it starts trading in the secondary market. Buying and selling shares is largely like buying and selling any other commodity.

How are shares priced in the market?

The share prices of any company are directly proportional to the growth of the company. Usually, share prices go up when the company is growing very fast, earning very good profits or it gets new orders. Therefore, the price of a share is determined by demand & supply and growth of the company. Sometimes, some positive or negative rumors about the company affects its share prices. But this fluctuation is temporary and does not affect the position of the company in the stock market for the long term.

How much money you need to start investing in Stock Market?

Investors can start trading with even 1 share of the company. There is no minimum investment required  So if you buy a stock with a market price of Rs.100/- and you just buy 1 share then you just need to invest Rs.100. Of course, brokerage and statutory charges will be extra.

What do you need to get started?

PAN Card:

PAN (Permanent Account Number) is a primary requirement for entering any financial transactions in our country. The Tax Authorities assign this unique 10 digit Alpha-Numeric number assigned to an individual for calculating their tax liabilities

A Broker:

Brokers are the people who are authorized to buy and sell on the markets. One cannot just start trading in the stock market, without a broker. SEBI (Securities and Exchanges Board of India), which regulates the share markets provide license to the eligible individuals or agencies to trade in the stock market.

For buying or selling shares, an investor need to inform your broker about which share in what quantity you wish to buy at which price. If you are using an online trading system, you can set the price in the system at which you want to sell it.

Demat and Trading Account:

We cannot hold the shares in any physical form. It is the Demat account that will hold the stocks or shares in our name and the same will reflect in the stock portfolio. All the shares have to in a Dematerialized state or Demat state. For buying and selling shares, you need to have a Trading account. You need to open both Demat and Trading account simultaneously, in order to trade in the Indian Stock Market Once you have a broker or broking company, it will help you in opening Demat and Trading account

What are statutory charges?

Statutory charges are the government-imposed charges, just like GST or stamp duty that needs to be paid. These charges go to the government, not the broker. The fee charged by the broker is known as brokerage.

Bottom Line

Once you step into the stock market, the brokers or the brocking firms provide all this information to you, but knowing these things will help you in staying aware and invest carefully.

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How to Identify Bbest Dividend Paying Stocks and Make Best Out of Them?

Dividend Paying Stocks – Although capital appreciation is the first choice of investors in comparison with dividend income, that does not make dividend less worthy. Despite the fact, that capital appreciation yields are higher; it is volatile and risk associated. On the other hand, income from the dividend is balanced and predictable.

Most importantly, Dividends are a great source of “Passive Income”. Once you have invested in the dividends, it continues to pay you for long term; you just need to buy, sit back and enjoy the consistent flow of dividends. The income from the dividends keeps growing with the pace of Company’s growth. Simply by holding a good stock for long term (10 years or more), their dividend yield itself will become high enough to beat the returns of any debt.

Suppose this person held on to his shares till year 2018. What will be his dividend yield as on Mar’18? [Additionally, company-issued bonus shares 1:1 to all shareholders between Mar’09 & Mar’18, which simply doubles the income of dividend]

So, from all the angles, investors of the dividend stocks are the gainers, without any extra effort.

In order to go a step ahead, one can also reinvest the earnings from the dividend into the same stock (during the lower phase of the stock) and increase the income further.

In this article, let’s see, what the factors are; which needs to kept mind while investing in dividend paying stocks.

Consistency in Profits and Strong Cash Flow

The very first thing you need to look for is consistent profits. If a company isn’t making steady profits, there are less chances that it would be able to deliver dividends. Profitable growth of the company is the key indicator of a quality dividend-paying company.

Also make sure, that the company has sturdy cash flow generation. Because, it is the cash flow which pays off the dividend.

For Example:

are considered good dividend paying stock as they not only pay dividends regularly, but dividend also grows with time. This is due to their regular strong cash flow.

Check Industry Strength

This is most overlooked factor, while choosing long term dividend paying stocks. If an industry is touching the roofs for past few years, it does not mean that the stocks won’t drop ever, but they’re likely to be more resilient than most stocks. And as long as the industry is in prosperous mode, there is more chance for increase in dividend, over the period of time.

In order to identify potentially good dividend-paying companies, do the following research

·         Dig into the financial reports. Look for the profit and loss account of the company.

·         Check, how much the Earning per share (EPS) of the company has grown in last 5 years.

·         Check if dividend per share of the company has grown in last 5 years.

·         Relate, if EPS growth and dividend per share growth are similar. If this is so; it is a good sign for you. Growth in EPS indicates that the net profit of the company is improving and Dividend per share growth mean that the company believes in idea of paying dividend to the investors. Therefore, having similar EPS and Dividend per share means, as the profits of the company upsurges in future, it will increase the dividend pay out to the investors.

Bottom Line

Dividends are long term investments. Dividend payment is a process by which company share its net profit with its stockholders. Good dividend paying companies are more likely to increase its profits over time. As the profits improve, dividend payment by the company also rises.

In 2019, some of the top dividend paying stock in India are:

1.      Ingersoll Rand

2.      Wall Street Fin

3.      IOC 

4.      National Steel and Agro Industries

5.      21st Cent Mgmt

6.      Vedanta

7.      Merck

8.      Shervani Industries

9.      Nalco

10.  Polyplex Corp

Ninja Trader Indicators is one of the best tools that can help you identifying the Structure of the Current Market while giving you better understanding of market dynamics, so that you make right decisions on investing in long-term and short term stocks.

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