Stock Markets-a premium investment option - Business & Economy - Stock Market - TIK Share

Stock Markets-a premium investment option


CA Pulkit Sharma

2013-03-05


 

Stock Market fancies us a lot because of its potential to give extra ordinary returns. But with big returns comes the big Risk. Investing or trading in Equity Market is a game that requires skill, Technique and patient.

Generally from my experience, the persons who deal in stock market can be classified in these categories:

  • Traders
  • Investors
  • Hedgers

Traders: 

  • Every investor at the beginning of his interaction with Stock market tends to be a Trader. The extra ordinary Return fuels the greed and ignites the excitement to play with the stocks.
  • Trader is not only who does Intraday trading, but also one who keeps changing his stocks in portfolio.
  • Trading requires the analyzing the trading share. Trading is the most risky form of interaction with Stock Market. And being the most risky, it’s naturally the highest rewarding Interaction.
  • To be a successful Trader, one has to be professional, new Traders starts irresponsible behavior once they hit few successful trades.
  • Traders should have the access to latest Information, and a sharp mind to analyze the impact of those information on Stock Market.
  • Stock Market performs as per the economic condition, Trader has to be opportunist and take benefit of ups and downs in Economic Conditions.

Investors:

  • Investors are the person who holds the Equity for a longer period. They are not fully depended on Stock market and for them stock market is just another avenue of income generation.
  •  Investing requires the Fundamental analysis of company in which investment is being made.
  •  Investors invest in a company only after they are assured about integrity of management.
  • Investors are not worried about daily fluctuations in their investment; they are concerned only about long term appreciation of their investment.
  • Investors considers the nature of business rather than past performance of share price of company, investors values the longevity of company’s business than current performance of business.

Hedgers:

  • Hedgers interact with stock market to safeguard their investments; they are mainly very short term investors with skills of a trader.
  • Hedgers are mainly companies which have invested in stock market and to protect any loss in their investments, they trade in Future and Option segment of their investment.
  • Hedging is a very useful tool in hands of Treasury department of companies to make good the loss incurred in investment.
  • Though hedging cut down the rate of return on investment but protect the further loss.
  • Today Future and Option market is bigger than normal cash market and it continues to grow bigger, the flexibility of Future and Option will only increase the interest of companies to hedge their investments.

Compared to developed countries, participation in stock market is very less in India. In developed countries around 30% - 40% of population has investment in stock market, whereas in India the participation is only around less than 2%. But with the increase in literacy and knowledge about stock markets, participation in India is increasing. And hopefully in next decade, we may see a good percentage of population investing in Stock Markets.