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EQUITY INVESTMENTS

EQUITY INVESTMENTS

  • How should I invest in equities?

It is generally seen that many investors go about investing in a highly irrational manner. They buy a scrip impulsively upon receiving tips from their associates, news or a rumor about a stock. Acting on such baseless information is like living in a fool's paradise.

Our recommendation is to follow a three part approach to investing in equities.

1. Don’t get excited when you are tipped on any stock. In such cases, your next move should be to obtain first hand unbiased information from credible sources.

2. The next step is to do a little bit of number crunching. Check out the growth rate of the stock's earnings, as shown in a percentage and analyze its graphs. Learn more about the P/E ratio (price-to-earnings ratio), earning per share (EPS), market capitalization to sales ratio, projected earning growth for the next quarter and some historical data, which will tell what the company has done in the past. Get the current status of the stock movement such as real-time quote, average trades per day, total number of shares outstanding, dividend, high and low for the day and for the last 52 weeks. This information should give you an indication of the nature of the company’s performance and stock movement.

3. Also getting acquainted with the following terms will take you a long way in equity investing:
- High (High): The highest price for the stock in the trading day.
- Low (Low) : The lowest price for the stock in the trading day.
- Close (Close) : The price of the stock at the time the stock market closes for the day.
- Chg (Change) : The difference between two successive days' closing price of the stock.
- Yld (Yield) : The dividend divided by the price of the stock.

  • When you enter an order to buy or sell a stock, you will essentially see the "Bid" and "Ask" for a stock and some numbers. What does this mean?

The ‘Bid’ is the buyer’s price. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell.

The ‘Ask’ (or offer) is what you need to know when you're buying a stock i.e. this is the rate/ price at which there is seller ready to sell his stock.