Finance & Money

Today everybody is talking about share markets and how time is ripe to make your investments. The dynamic changes in global economy have facilitated changes into the existing system, which has led people to believe that investments made now will reap rich long term dividends. It has encouraged many first time investors and drawn them towards share markets. It can be daunting at first to try and understand the nuances of market investments. But that shouldn’t bog you down, because investing in share market is fairly easy if you follow simple guidelines.

How To Invest In Share Market, is a question you’d often ask as a beginner. It’s only natural that you are riddled with doubts before you take your first steps in the share market.

Here are some of the basic things to ponder on before investing in shares:

• Share market is divided into different sectors like Real Estate, Finance, Food Companies, Oil, Steel etc. Different sectors show growth at different points in time and have their own levels of stability. Choosing the sector you would like to invest depending on a research on their market positioning is a good place to begin.
• You can choose between short or long term investment plans. Short term plans seem appealing at first because of instant gains but share markets fluctuate drastically. Choosing long term investment plans buffer your stock from unforeseen circumstances.
• There is only so much you can learn and understand about the market and there are still a lot of unknown factors that at times leave hard core professionals puzzled. So you need to take reasonable risks to make a steady growth.
• You will draw returns on your initial investments, and you can put them towards your further investments to multiply the benefits. Investing your returns to make future profits is a safe way of dealing in the share market, as you will always have secured your initial investment.

You can take advice from stock brokers but never take their word blindly and use your own rationale.

When should you invest?

• You will often be advised to invest at the best time possible when you can buy shares at lowest possible price. But you might lose out on time to start your investments and make gains in the interim.
• Now is a good time as any to start investing, because starting early will give you more time to make consolidated gains or recover initial losses if any.
• You should try and invest regularly to reap consistent benefits.
• Invest in short term as well as long term investment plans. Any market upheavals will balance themselves out in the long run given the variety in your portfolio.
• There is no appropriate amount for investment and no amount is small. You can start with smaller investments if you are comfortable with that and then move on to investing more.

Inflation is defined as the rise in price of consumer goods and services over a period of time in a particular economy. It is commonly measured by Consumer Price Index (CPI) and Gross Domestic Product (GDP) deflator. CPI measures the price increase of goods and services whereas GDP deflator measures the actual change in price of all domestic products.

With this increase in price increases the cost of living and greatly affects the lifestyle of people in the country. There are many researchers and analyst who tried to found out why such a thing happens and who are the key culprits of this inflation. Eventually it was found that the price increase is dependent on many factors.

Some of the significant causes of inflation in an economy are as follows:

Excessive Money

Demand Vs Supply is a very common equation that works wonders when the equation equals to one. But in case if the demand increases and supply is restricted then economy would experience a tough time because it would fail to meet the demands of one and all. This issue often becomes a challenge for both the economy and the people when there is excessive money. It’s obvious that if anyone has more money, the desire to buy more and spend more will automatically rise.

Increased Cost of Production

When the production cost increases, then companies tend to increase cost price of products in order to cope up with the rise. Every business firm and company is established with a desire to earn profits. In such a scenario if the cost or raw materials or machinery increases, the overall production cost would certainly increase. This also holds true if the cost of labor increases. This increase in production cost ends up by adding a heavy price tag to the final product, eventually putting the entire burden of inflation on the customers.

Deprecation in Exchange Rates

This kind of depreciation causes the price of import to increase and the price of export to decrease. Any item that is imported would come with a heavy price tag and then the product would move in its own business cycle till it reaches the final consumer. Finally, when the product reaches the buyer, he or she is pressurized with the heavy price tag that covers all the cost of manufacturer, dealer, distributor, wholesaler, and even the price paid for importing the product to the country.

National Debts

When a country requires borrowing money to cope up with certain economic crisis, then it has to deal with interest. The borrowed amount along with the interest has to be paid back to the country that lends money. In order to keep pace with the increasing loan tenure and the high interest, the country often increases price of consumer goods and services.

Strategizing plays a major role in determining the right market shares for trading. Very often, you may be following a flawed strategy thus unable to get the desired results. The share market of India is no doubt a lucrative platform for making money. Many an investor, after conducting research, finds out a couple of promising companies and starts investing in those companies with the objective of getting big returns. But this may turn out to be a flawed strategy as well.

There are many a start-up companies; investors invest in such companies on both long term and short term with the hope that these companies would make it big one day. But the truth is that out of say fifty companies, two or three companies are able to reach the top while the rest grow at a very slow pace or remain stagnant with a couple of them exiting from the scene. Shares trading thus need a cautious approach from your end. If you happen to invest in those two or three companies, your future is bright too. Becoming rich in a short span of time is certain but if you happened to invest in those stagnant companies or those that have exited, your investment will all be gone.

BSE shares are the shares of the companies listed in the Bombay Stock Exchange (BSE) and NSE shares are those dealt by NSE (National Stock Exchange) companies. Invest in both NSE shares and BSE shares across different sectors so that you spread your risks, thus protecting yourself from any major loss. This is one of the best strategies followed by many an experienced investor in shares trading. Investing in small cap, mid cap, and large cap market shares will thus help you maintain a balance in the loss profit ratio. Even if you face losses in small cap market shares, the profits gained in mid cap or large cap will not affect your financial health.

The value of a company in the share market of India can be determined in a number of ways. You can also follow numerous ways to determine the value of market shares whether it is NSE shares or BSE shares. Take into account the company’s market value, or in other terms, the company’s market capitalization. This market value will help you determine both the value of the market shares as well as the value of the company. This can be attained after multiplying all the outstanding market shares of the company by the current price of a single share. The calculation is quite easy; any investor with a little mathematical knowledge can do it. For example, the current share price per share is Rs. 15 and it has 10 million outstanding market shares. If you multiply it by the total number of shares, the market capitalization would turn out to be Rs. 150 million. Also take into account the size of the company while investing in it.