The best stocks to invest in IPOs and FPOs

Investing in the Indian stock market will not only gift you the chance of making lots of money, but occasionally it will also pose a threat in your winning streak, if you are not judicious in managing your finance or if you made a bad call in anticipating a stock. The stock market is not always about winning, but it is more about learning from every experience and using the knowledge to identify opportunities and threats in future investing ventures.

One of the most popular and highly rewarding ways of investing in the Indian stock market is IPO (Initial Public Offering and FPO (Follow on Public Offer). Though the former is capable of returning on investment in a big way, as the stocks prices may hit the roof, depending on the quality of services/products and a competent business model that is innovative and capable of differentiating itself from it’s competitors. On the other hand returns on FPOs maybe comparatively lower than an IPO, but the major advantage of an FPO is that you can invest in an already established public enterprise with huge market capitalization.

First of all it is important to find out why a business feels the need to go public and raise finance from the public. The answer to this is after a certain point of time successful businesses expand to a point, their own personal investment or from their partners are not enough to run the complex web of functions in the business. And borrowing from the banks and other debts instruments may not be able to raise sufficient financial backup. This is when raising money from the public comes into picture with floating of shares through IPOs.

Every other company who had ever gone public issued IPOs and even if they are already listed in BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), the major Indian stock exchange, still these established companies need to keep pumping fresh money in their enterprise to maintain a steady course in running the business. In this case they issue an FPO (Follow on Public Offer) and it enables them open their gates for investors to be a part of a large company and contribute in it’s business ambitions and also claim a fraction of their profits too.       

Even the pricing of shares in an IPO and FPO are different from one another. For instance the share prices of a company issuing an IPO is based on the price and collective secondary market determines the actual price post listing after additional information inflows or analysis. Whereas, in an FPO price is already established and gains or losses will be marginal, and there is no new information for the market to process or analyze.     

       

Depository account for online share trading

Buying shares means that you are having a portion of a business. It is like acquiring a small piece of the cake from a bigger chunk. And an individual who buys shares of a company is known as the shareholder of the company.

The process of buying and selling of shares has become comparatively safe, secure and very convinient in the form of depository services. A Stock broker will provide it’s clients with the provision of depository services that includes settlement, clearing and custody of securities, registration of your secuirties and dematerialization of shares.

You may have come accross the term dematerilization several times when it comes to modern system of online share trading, but if you haven’t then by having a depository account, your paper shares will get converted to the electronic realm and every transaction made i.e. buying and selling of shares is purely digital and done through the fully automated stock exchnages like the BSE or NSE.

The broker in regards to online share trading or opening of a depository account, is the key to your success, as your dematerialised shares will be held in a depository, governed by the NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Securities Ltd.)

Your broker is a registered agent or a Depository Participant (DP) of the NSDL or CDSL, enabling you to hold your securities in your depository account. It is essential that you choose a DP who is a recognised name in trust and performance. As your broker will be responsible of your time and money. Make sure that your broker has a good track record of offering the latest trading platform and that you can execute trades and do so via multiple screens and that you have the stop loss option to avert potentially threatening losses down to a minimum.

With most of the brokers available you can make a phone call to place an order or you can place an order online. And your broker on your behalf will  facilitate either buying or selling of shares, provide market intelligence with the help of years of analytical research, live updates, charts on market movement and statistics of each and every stock you are interested in. So if you have done your homework in sharemarket in India and ready to take a leap in online share trading, then subscribing to a broker and opening a depository account is the first thing that you must do.  

The best deals in brokerage account

If you have gone through a basic research in how to buy and sell stocks, you might have already got a general idea that opening a demat account and a brokerage account is essential in share trading and the foremost thing in doing so, is to subscribe to a broker. As you directly cannot deal with the exchange in executing orders, you have a broker who will act is the entity that facilitates your share transactions with the exchange on your behalf.  

Open a demat account    

Your broker will open a demat account that will help you in dealing with dematerialized shares. Earlier, paper shares were the primary instruments of buying and selling of shares and the process was needless to say very cumbersome. So, in India the dematerialized form of share trading was introduced and it served as a big advantage to the trades, companies and the stock exchange as buying and selling of shares were electronically taking place and very convenient.

A demat account also goes by the name of a depository account and it dematerializes paper share certificates into the electronic platform. You simply need to produce the demat account opening documents and fill out a simple form provided by your broker and get started in online stock trading.    

Brokerage Account     

There are two types of brokerage account that your share broker will provide you. The first one is the traditional account and the second one is the discount brokerage account. Both of these accounts will prove beneficial to different types of brokers. 

Whether you are a new comer in investing or you are an experienced trader. A traditional account will give a personalized touch in proving you with technical analysis on stock movement and expert advice on investing. Whereas a discount broker is only responsible of executing orders placed by you, both of these brokerage services cater to the needs of every broker.     

Share trading and opening a demat account

There is no thumb rule to gain huge returns from a stock or determining the direction, as to where the stock market is headed. There are a few principles or rules that will help you in making the right choices in share trading.

Never expect to put your money on a winning stock from sources like investing experts, close ones or rumours surrounding the market. Ones or twice such market tips may prove useful, but it will seriously limit you in being a successful investor, as investing is done through research and analysis of stocks and the market. Luck has never helped anyone in achieving success in share investing.

Investors generally like to cash out their investment which has doubled or tripled in appreciation and keep stocks which are going down in hopes of a revival. But to be successful, you have to be different. To be a long term investor, you should check your temptation of selling performing stocks and try to ride on a winner to seek long-term benefits and quit holding non-performing stocks and risk your stocks to plummet further, making it completely worthless. You should always invest and make choices rationally and not by hope or greed.

A demat account comes first in line when it comes to share trading. A demat account is almost synonymous to trading and it can now be easily opened with a stock broker. A stock broker is a financial intermediary along with others like a bank who are entitled to open a demat account for you through a central Depository like the CDSL (Central Depository Securities Ltd.) and NDSL (National Depository Securities Ltd.)

Different brokers offer a wide variety of stock trading services to their customers. It may include requesting order executions online, call and trade facility, in which you can also place your order if you are not online. Expert analysis on the market, live updates, advisory services etc.

Some of the documents you need to open a demat account are as follows:

     1)      Photocopy of your PAN card.

     2)      Residence proof (Driving license/passport/ration card etc.)

     3)      6 months bank statement.

Opening a demat account and trading in shares has never been so simple. Just fill out a simple form and provide all the necessary documents required in opening a demat account and then you can start investing and create wonderful financial opportunities.        

Open a trading account for share trading

For online share trading having a demat account is the first and foremost thing that a trader should do in order to participate in the unique process of buying and selling shares from the various companies that are listed in the stock exchanges BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) on the basis of their market capitalization.

First of all, let us understand what is a demat account? It is an online medium through which shares and securities acquired by you will be held electronically. Dematerialized shares are maintained in a very safe environment where trading and transfer of securities become a very simple matter.

But it wasn’t always like that and before the concept of dematerialization (demat) existed. There were physical share certificates and gradually it became quite obvious, that it will soon be replaced by a more efficient system of conducting transactions. As there were serious flows with paper share certificates, due to loss of shares in transit or fire, forgery, signature mismatch etc.

But with a demat account all of these shortcomings were eliminated instantly and the stock exchanges were completely computerized to execute and settle trades more effectively. And now it is virtually impossible to think of any other alternative to demat accounts.    

To start trading in shares, you must approach a broker and open a demat account. Make sure that your broker is a Depository Participant and is registered with NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Securities Ltd.)

The DP is like an agent to NSDL or CDSL and the broker’s objective is to open a demat account for you that your shares and securities are held in an electronic form. But you also need a trading account to actually execute buying and selling of shares of the different scripts or companies listed on the stock exchange.

The advantages of opening a trading account are as follows:- 

1   1) No stamp duty charge has to be incurred by you, as the problem of physical shares is removed, as shares are transferred electronically.

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     2)With advanced trading software you will get chance to analyze live stock market updates, market analysis, charts, market news etc. in a single screen.

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     3) Every trade executed is done on a real time basis and the broker will facilitate buying and selling of shares on your behalf.

Enjoy The Benefits of Options Trading

Options trading are contracts that allow the trader to buy or sell his stock at a specific price before the contract expires. Options trading are one of the most creative and flexible financial derivative instruments that has made been available to the investors. Options trading are truly one of the most flexible, speculative and hedging tool there is. Basically there are two types of stock options 1. Call options 2. Put options.

The call options is definitely very popular among traders that give the right to sell the underlying stock for a fixed price. Thus it enables you to buy the underlying asset at a price fixed right now no matter how high it rallies in the future for just a small price relative to the price of the underlying stock. Call options are an important flexible and risk limited leverage instruments, call options are also a very sound hedging instruments for any kind of stock portfolio, whereas, in put options will give you the ability but not the obligation to sell the underlying stock at a fixed price by a fixed expiration date. Put options allows you sell the underlying stock at a fixed price right now no matter how low it falls in the future.

Just like any other powerful financial instrument, misuse of options trading will not be the best thing that will happen to you. But were there are risks, there are rewards and if you are able to exploit it’s strengths in your investing strategies then you will get your desired results. Following are some of the distinct advantages of options trading:-

    

    1 ) Cost effective - Options trading has tremendous amount of leverage and a trader can get an option position that will imitate the position of a stock, but at a massive cost savings. For e.g. to buy 200 shares of an $80 stock, an investor has to pay $16,000. Nonetheless, if the trader were to buy two $20 calls (with each contract representing 100 shares), the total amount would be only $4000 (2 contracts x 100 shares/contract x $20 market price). You will be left with $12,000 to use as you desire. However, it is not that simple. You have to select the right call to purchase to imitate the stock position properly. This strategy is not only cost effective but also viable.

     2) Less risky – But it depends on how you use it. Sometimes it can prove to be riskier than having equities. But, it is also used as an instrument to reduce risks. There are less financial commitments involved in options than equities. It is a trustworthy form of hedge and it makes it less risky than equities. And when an investor purchases stocks, a stop loss order is regularly placed to safeguard the position. The main function of a stop order is to stop losses below a predetermined price identified by the investor.              

     3) Unique strategies – Options trading is very unique opportunities for you implement creative strategies to exploit the different characteristics of the market scenarios like volatility in price fluctuation and decay of time. 

     

    4) Low capital requirements – Options allow you to trade with very less capital requirements. It empowers you to do much more in options market with just $1000 but not so much with $1000 in the equity market.