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Long term invest in stock market
What all can an investor do in stock market ?
Investors can do 2 things in stock market
1. Long term investment ,taking the delivery of a specific stock and holding it in the Demat account for a long period of time,1 month may be 1 year maybe 10 year and more is called long term investment in stock market
2. Intraday trading, In this process the stock you buy does not comes to the Demat account
What is long term investment ?
It is the way of taking delivery of a stock holding it in our Demat account
Why to do long term investment ?
1. Capital appreciation/capital gain: After buying a specific stocks we hold the stock but the value of the stock increases by time ;Eg if you buy a stock for 68 rupees and after a month or year its value became doubled and you can sell it in the current value this is how the long term investment work
2.Dividend; making small the profit of a company ours is called Dividend, buying a share from a company means that we owns the small percentage of it
How to select companies for long term investment ?
There are two ways for this
1. Fundamental analysis
you can analysis companies specifically in stock market, whether the company is maturing or not, is there a growth in the company, is the company making high profit etc
2. Technical analysis;
we can predict the growth of the company using chart and certain tools
What factor derive stock price?
Two factors deciding the stock price
1. Fundamental factor ; this factor is related with fundamental analysis
2. Market sentiments and news
Story of stock delivery in long term investment
We give the stock information that we are planning to buy to our broker and the broker match's our request algorithm to the stock market and connects the other seller's broker to match our request and takes stocks from them to our Demat account and we need to know that the stock we mentioned will not be delivered at the exact time of money transaction, the day we ordered can be marked as T day or transaction date, there is settlement period after our order and the we get the stock only after that Settlement Period =T+2 Days, which means if you ordered at Monday you will only get the stock after Wednesday
Just imagine that some one holds 100 stock for 3 years bought for 1000 rupees and after 3 years the stock get priced 2000 and he sells the stock so he gets a profit of 1 lakh, that's simply called long term investment
Tools to measure returns on investment
Returns can be measured through two ways
1. Absolute returns:
Absolute return values = (current sale value - purchase value)/purchase value *100
absolute method is hardly used because it does not consider time, so we use the second method
2. CAGR (Compounded Annual Growth Rate)
CAGR formula = [(ending value/beginning value)^1/no .of year-1]*100%
CAGR shows more realistic values
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