The Stock Market Virgin

posted on Feb 25, 2011
Maheshraja Thambidurai
I am an MBA Grad from Uk , recently discovered my interest with the Stock market and chose...

Whats makes oneself consider  a stock market virgin? One can have answers that can vary within his/her subjective views depending on their exposure to this fantastic yet volatile and dynamic environment where the best of them all are easily owned!! Many of us would have tied our luck with investing in the stock market and make some quick bucks and reap on the profits.

Its without a doubt one of the methods considered lucrative to earn big and quick. Some may consider it more than deceiving rather intriguing. Many will also stand by their opinion that one needs huge money reserves to invest in stock market. The truth is not all but simple to agree that one doesn need huge investments but acceptable investment which the individual can believe that will earn him the desired returns he wanted.

There comes the next question, what is the acceptable minimal amount that can be invested ? I would like to say its subjective. I.m.o, part of our investment should be enought to buy some credible stocks in an confortable trading volume. Now what makes one to believe they are a stock market virgin is the money to invest and on what to invest. In general to start investing u dont need a lot but i wont suggest but based on my experience anything more than 20K is considered basic and reasonable to start with investing in the market. Also having the option to trade themselves, or using a sub broker to do the job, or even a phone call to your respective broking house would do the job.

In future we ll deal about various topics that wil help those newbies to hold a grip of the market and its volatality and dynamic enviornment. To be honest it can either be chaotic or linear and boring with unitrends.

There are certain terms that stare right on our faces.before all the following details, its wise to see the stock market as an environment driven by supply and demand

Personally, i had few nightmares about the market and its legion of terminologies.Its always to do some ground work before we test the new waters as the Financial Markets.To name a few, terminologies such as

  • Stocks/Equities
  •  Shares
  • Uptrend and Downtrend
  • Bulls
  • Bears
  • Corrections
  • Nifty
  • Commodities

The above bulleted terms are pretty basic.As a beginner its easy to relate these bullets. Lets assume you just know about stocks no more than the amount of an atom, the best way is the following;

First, let me answer this question: What is a share of stock?
Corporations sell shares of stock to raise cash to fund their operations. The first time that a company sells its shares is termed its initial public offering (IPO). Most companies make additional stock offerings from time to time to raise additional funds.
When you buy stock, you are buying ownership in the underlying corporation. For instance, if XYZ Corporation has issued 100 shares, and you buy one share, you have purchased a 1% ownership stake in XYZ.
Once the decision made by the corp. to sell its shares, there is little or no direct benefit the corp. reaps over the sales of their shares (The corp. executives may still in future hold many shares personally,preferring to hold on the long term, indicating their interest and always motivated by the performance of those shares and may contribute for the raise in price of that share). .
 
Stocks/equitites divided into shares, which can be bought by anybody like investors, small time traders to large corporates.
These Stocks/Equities will have their up-trend(high demand) and low-trend(low demand). Here it can be assumed a Bull market (up-trend) where the investors confidence in the market rise and have a positive market flow over the following days, weeks or months.

A Bear Market (down-trend) where a significant decline in price or the demand in general where the market in general will do downwards showing investors unwillingness to invest.

The basic factors triggering these trends are socio-economic stability globally and its impact on a country’s financial market.

What u see in a chart, the ups and downs more like an ECG .. signifies the corrections that the market goes through.
Corrections  have a short term price decline of 5% to 20% or so. A correction is a downward movement that is not large enough to be a bear market

Now having these basics in your arsenal what to choose for ur investment directs you towards NIFTY(National Index for Fifty) . The top 50 stocks on the national stock exchange are known as NIFTY

For new investors the best choice will be the top 50 stocks from where they can choose to invest. The reason to choose nifty is simple. They are trusted big guys in the market where they may decline but assured to rise above their previous highs and set the trend of the market often.

Next comes Commodities where u can buy the preferred raw materials you want. WE hear daily in news about the rising price of oil, gold or silver. Many investors and traders want to capture this rise and fall just like they do with stocks and equities. A suggested intro for beginners in the stock market.

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