A share is partial ownership or equity in a company. Purchase of stocks in a company makes a person a shareholder of the company. There are two types of stocks: common and preference. If you are a shareholder of common stocks, you are entitled to vote in for the directors of a company, and entitled to receive dividends on your shares (if the company pays dividends). If you are a shareholder of preferred stocks, usually you do not have voting rights, but you receive a fixed dividend and are paid before common shareholders. There are two ways of share trading, 1) applying for the equity shares of the company through Initial Public Offerings and 2) buying the shares from exchange platform through a broker. Only equity shares are listed on stock exchanges. Preference shares are generally not listed on the stock exchanges.
Mutual fund investment is a professionally managed pool of money from investors with similar investment objectives. A mutual fund represents many individual stocks from a variety of industries and is managed by a fund manager. Mutual funds offer diversification and professional management of the investor’s money. There are two ways of mutual fund investments 1) While buying units from the New Funds Offerings and 2) buying from the existing funds on its price based on its Net Asset Value (NAVs). The NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. The NAVs are declared on daily basis. The units can be bought or sold on present NAVs during 11 am to 3 pm during the stock market trading days at the offices of funds’ offices, brokers, etc.
Mutual fund investment involves Systemic Income Plan (SIP) it involves investment of a fixed sum of money into a specific investment scheme, for a pre-determined number of months. The minimum amount can be as small as Rs.500 and the frequency of investment is usually monthly or quarterly. The power of compounding can do wonders. In due course of time, a small amount can grow into a significant amount. More importantly, an SIP does away with the need or effort to time the market. And this is where SIP fits in. By the process of regular investing one gets to invest in the highs as well as the lows, and this helps in averaging out the volatility in the market.
Aditya A. Mehta is widely recognized as the Mutual funds investment specialist and Mutual funds of india expert. Investmentz India provides tips on Online mutual fund, and online share trading in India.
You must log in to post a comment.