When an individual or group of individuals put in their saved income with an intention to generate further income is called investment. It is usually done keeping a long-term time frame in mind. Therefore, one should start investment early, at regular intervals and for a longer period of time.
Investment should be a conscious decision and it should be done keeping in mind the following points:
In context of financial markets, an index is a portfolio of securities representing a particular market.
Dematerialization is the process of converting physical share certificates to an electronic form.
Various options of investment can be broadly cateogorized into:
Contract note is legally enforceable form, issued by trading members to clients, confirming the trades done on a particular date.
Investment diversification is about investing across asset classes thereby minimizing the impact of likely negative reurn if any.
Portfolio diversification helps minimise risks of losing money by investing in a particular company that can be affected by labour strike, fall in sales etc. Diversified portfolio help minimize risk as negative return from one stocks gets compensated by positive return from other stocks. Hence, prudence demands that one should invest across asset classes.
Bid is the price the buyer is willing to pay and Ask price is the price the seller is asking for.
Clearing Corporation ensures trading settlement to avoid counter party risk.
Rolling settlement result into mandatory payment/delivery on T+2 basis.
Pay-in day is the day when stocks sold are delivered to the exchange by the sellers and/or funds for the stocks bought are made available to exchange by the buyers.
Pay-out day is the day stocks bought, is delivered to the buyers and funds for the stocks sold are made available to the sellers by the exchange.
If the seller of the stock fails to deliver the stock within a stipulated time, the stock exchange conducts an auction of the stock holdings of the defaulter. The exchange also charges a sizeable amount as fee for the auction.
A no-delivery period is the time which the exchange sets up for the stocks of the company that has announced book closure or record date.
The first day of no-delivery period is the ex-date. If there is any corporate benefits announced for which book closure/record date is fixed, the buyer of stocks on or after the ex-date will not be eligible for the benefits.
Arbitration is mechanism provided by stock exchange to resolve dispute between the trading members and their clients in respect of trades done on the exchange.
IPF is maintained by exchanges to make good investors claims which may arise out of non-settlement of obligations by the trading members who have been declared as defaulter in terms trade executed on the exchange.
Simple interest is paid on Principal amount borrowed.
Compound interest is interest added on a principal amount and the whole amount is treated as new principal amount for the calculations of the interest for the next period.
Money has got time value. A rupee today and value of rupee in future is known as 'Time Value'. A rupee received now can earn interest in future.
It is a comprehensive statement stating the company’s activities and financial performance throughout the preceding year.
Balance sheet gives an insight into the assets and liabilities of the company. Profit and Loss statement states the profit or loss incurred from business operation during over a year period.
An equity share represents part ownership in business venture. Preferential shareholders are given preferential rights over share holders in the matter of dividend distribution but enjoy no creditor stake like ordinary share holders.