Friday, July 16, 2021

Stock Basics-1 How to invest in stock, Mutual funds safely

Many of you might be new into investing and thinking of whether to invest in Indian Stock Markets or Not.  If you are looking for 100% safe investment , then neither the stock market nor the Mutual Funds are good options for you. Please make use to PPF accounts which give 7.1% interest and lock-in period of 15 years. You can also make use of Voluntary PF(VPF) contribution to the PF fund managed by your company which would yield you 8.5% interest. But you need to wait till your retirement  or some emergency situations to withdraw money from there. If you are not willing to wait that long and willing to take certain amount of calculated risks, then stocks and Mutual Funds are an option for you. 
Although i am not an expert in this, let me try to answer few queries which were being asked by many of my friends. 

  1. How many stocks to hold ?
  2. How many sectors , which ones? 
  3. What should be the distribution ? 
  4. How to minimize risk ? 
  5. Are Mutual funds good to invest in ? 
  6. Good time to book profit ? 
 1. Depends on your budget and willingness to wait. Eg: i took wipro for around 200 last year after the share discussions in the class. Now it is 575. Irony is i took only 1 share for testing my calculations 😉 

 2. Better to diversify into more sectors like heathcare, banking, it, tyres etc 

5. Yes, there are many types of mutual funds 
 A. Debt funds which are like funds which give loans to others n you invest on it. They give more or less similar rate if return each year 
B. Equity based funds which invest in stock market. There is a certain subset known as ELSS which give tax benefits under 80c as well along with dividend, share price appreciation benefits 
C. Treasury advantage funds which buy bonds from govt. these give less returns compared to above two. But are safest 

3. Distribution should be with equities, mutual funds for a new-bee. Can learn about other advanced options like IPO eventually. 

 4. Start slowly with small investments in fewer companies which are in NSE10 or BSE10. Compare various MF schemes in moneycontrol n other websites for the crisol score and start with SIP instead of one time investment 6. Good time to book profit: For MFs it is around 3 years . For shares , depends on the amount you have invested in each share . Eg for a share worth 1500 8% profit might b good profit to book. For penny shares < 20 Rs you might need to wait more. You need to consider the amount of brokerage charged at the buying, selling by the brokers like hdfc securities and the depository charges issued by bank like hdfcbank when u sell the shares

P.S : I am not a stock broker and this blogpost is for educative purposes only. Please perform further analysis from your end before purchasing any stock, MF schemes. 

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