Question

define the topic and write least five things about this topic ( 2 paragraph)

Investing in Stocks

Answer 1

Investment in stock :

Stock / equity represent the owndersip in corporate and stock holder . Equity share holder will have voting right but no guratneed dividend. While preferred stock holder will have fixed dividend right (Some time convertible into equity also) but not voting right.

Investment is stock/equity is one of the common investment now a days. Most of the large corporates are listed on stock exchange and investor can buy/sale stock at prevailing market rate at stock exchange . Following things should be taken care of before making investment decision –

1. Investor risk potential : investment in Equity is subject to market risk . Investor should asses their risk taking ability before making investment . There are various major/ratio which can provide degreed of risk and return for a particular stock . Based on these ratio investor can decide whether to take higher risk or lower risk .
2. Maintain liquidity : A rational investor should have enough liquidity in hand after investment . Its advisable to invest surplus money in stock . Specially, one should always refrain from investing in equity using borrowed money.
3. Diversification :Its advisalbe to have diversified portfolio of stocks . Diversification will reduce risk and will save from large money if few stock does not perform .
4. Fundamental and techincal analysis of stock : Education is very much required in order to make money from stocks . Stock analysis is categorized into two part . Fundamental and techical analysis. While fundamental anlysis deal with company’s PL, BS future, past growth history, Management background, future growth potential etc., technical analysis deal with formulas which tells us whether stock is overpriced or underpriced and accordingly whether one should hold, buy or sale the stock.