Businesses that make good stocks

Businesses that make good stocks

The secret to that lies in the answer to this question: What makes successful businesses? Of course, successful businesses are those that can earn money. The following factors may shed some light on whether the business in question is making money.

Business continuity

First, look at continuity of business. Take the instance of a company in the electronics sector. The Indian government-owned ECTV closed down operations when it failed to take advantage of other business opportunities. It was once the largest seller of television sets in the country. Another example in this industry was Videocon VCR, which was set up as a stand-alone manufacturer of VCRs. The company failed to be alert to technological advancements, which sounded the death knell for the outdated VCR and obviously for the company too!

Adequate capacity

Second, look at capacity. How big is beautiful? Size brings in economies of scale all right—cost is spread over a larger output, bringing down the overall cost. But bigger isn't necessarily better in this case. Companies can grow out of control. Arvind Mills built 10% of the global denim capacity, creating an oversupply situation. When these capacities went on stream, prices of denim dropped and the infrastructure costs just killed the company. Arvind Mills couldn't go close to achieving full capacity in its manufacturing, which it needed to do to be viable. 

Something similar happened to Core Healthcare. The company scaled up its capacities to 60% of India's IV fluids capacity. The market just could not absorb this capacity and its quality was found wanting in the international market. The obvious happened: losses mounted and the company completely eroded its net worth. 

Big could also mean small, but dominant in its area. Small companies in niche segments which nevertheless rule their sectors. Like Himatsingka Siede, a designer house that made it big in the international silk furnishing business, catering to a select market and never going in for the overkill.

Capacity as much as the market needs, 

not how much the company can make

Survival ability

Competition kills and this is one major cause of failure. Hindustan Unilever has over the years taken the competition to its rivals and expanded its portfolio. When growth from its bread and butter business of detergents and soap was plateauing, the company found new outlets to grow. In the last three decades, this survival skill transformed the company into an FMCG conglomerate with powerful cash flows. The survival factors here are more to do with the ability of the management to see future trends in their business.

Subsidies and barriers to entry

In numerous cases, to encourage the development of a business or of society, governments resort to subsidising services and equipment in order to make it viable for manufacturers to develop infrastructure. But such sops-dependent businesses may not make for wise long-term investments. Once such benefits are withdrawn, as they must eventually be, companies are exposed to the cold chill of ruthless competition, which may squeeze margins and reduce cash flows. Monopolies also bring with them inefficiencies that are hard to scale back in a free regime. 

Talking about subsidised businesses, Renewable Energy Systems and NEPC Micon are two companies that actually thrived on subsidies to grow their profits. That's all they did. In a crunch, when subsidies were withdrawn, they found themselves uneconomical and unviable because their products weren't as efficient as alternatives available in the market. The markets have recognised these factors at the earlier stages and valued these companies at a meagre ten times their earnings.

Monopolies and subsidised business come with a disclaimer: Though cash flows are strong, returns will exist only as long as the happy situation does

Minor points to watch, from the company's viewpoint

Appropriate infrastructure: The infrastructure should complement the market where it sells its product or where it procures its raw material. You can't have a cement plant in Karnataka and try to service the Delhi market. It would be far more expensive just to transport goods that far, thus spiralling costs.

Watch competition

New capacity creations: Most capacities in any business come in at the peak of the business cycle. This generally leads to a drop in selling prices as new capacities mean more supply. And a demand drop would hurt the players in that field.

Increase in capacities usually comes at the crest of the product cycle

Cost management: The company should have a suitable cost structure for the business. Lower costs enable the company to survive in a down phase well. In an upward business cycle, good cost management implies higher profitability.

Efficient companies go the distance. In an industry revival, these are the first to rebound

Products with stamina: Look out for opportunistic businesses. There have been small niche players who have tried to identify and milk insubstantial opportunities. For instance, a small company, India Food Fermentations, tried to market the concept of dosas as fast food through a vending machine, Dosa King. This company went bankrupt.

Novelties don't make lasting businesses

The above factors were about as comprehensive as we could cover them. These are, broadly, the most common factors one encounters as an analyst in the process of sieving out companies eligible for investment. Sharekhan’s Stock Ideas are well-researched companies with sound fundamentals. In order to get healthy returns on your portfolio over a longer term, invest in Sharekhan’s Stock Ideas, which presents our best stock picks in today’s market

Traders swing both ways

Traders swing both ways

15:35 Minutes | Uploaded on 13 Jan 2009

Traders swing both ways

If there is one brahmastra in the trader's arsenal, it is his ability to go short. Taking that analogy further, a stance to only go long and not short would be like going to war leaving half your weapons home. Certainly not something that is advisable, unless of course you are looking to be a martyr. 

You must agree with the adage that the trend is your friend. If you suffer from an allergy to going short, then you must be specialist at wringing your hands in dismay. What else can you do when the market swings downwards, as it so often does?

What is Short Selling?

“Buy low, sell high” is the goal of both short selling and long buying in shares. A short sale reverses the order of a typical stock purchase: The stock is sold first and bought   

Just as a buyer buys in anticipation of prices going up so he may sell at a profit, a short seller sells in anticipation of prices going down so he may buy the shares back at a lower price. The difference is his profit. If you look closely, in both the cases the shares have been bought low and sold high. The only difference being that in short selling, you reverse the order of the transactions.

Why sell short?

The two primary reasons for selling short are opportunism and portfolio protection. Occasionally we see a stock that we believe has gone up too high too fast. Or we may see a stock struggling to get past a strong resistance. Taking a short position is the only way we can profit from both these situations.

Short sales are also used to protect a portfolio against a market downturn. Short sellers rake in the moolah when stock prices fall. So when we think prices are going to fall, we diversify a predominantly long portfolio by adding some short positions. This way the portfolio will have positions that make money both when prices rise and when they fall.

We then use the profits from the short sales to help offset losses in the long positions. This reduces the volatility in the portfolio's returns and helps protect the value of the portfolio when prices are falling.

In defence of the short

Oh! We can almost hear long-termers hiss and boo at the suggestion that short-selling is a nifty portfolio management tool. Don't listen to them. In the long term we are all dead, remember.

They'll tell you that there is no need to short. They'll tell you not to worry about short-term fluctuations in the market. But the point is that most bear markets start with a tiny innocuous intra-day blip that grows and balloons. And before you know it the bears are on the rampage, tearing your portfolio to shreds. 

Why sit through a correction where your portfolio has the potential of losing, say, 10% of its value when you could possibly generate a positive return during the same period? Then, when the market turns up, you can get back to the long side and participate in the next leg of the bull market. It does sound like a smart thing to do, doesn't it?

Acting and reacting

But does that mean we react to every intra-day blip that pushes down prices. God! No. That's a sure-fire, time-tested, quality-checked, guaranteed method of committing financial hara-kiri. As is the case with every trade, even a short call is put out only if the risk-to-reward ratio makes sense. 

That brings us to the other thing that the long-termers would make noises of disapproval over. The risk in a short trade.

A short could turn into a long sad story

Short-selling stock is an extremely high-risk transaction. The potential gains are limited while the potential losses are unlimited. That's right. Losses tend to infinity!

How? The potential gains are limited to the size of the short sale. The lowest a stock can fall to is Rs0.50 (normally even the rottenest of shares manage to find a stray quote at Rs0.50). So it costs next to nothing to buy back the shares and close out the short sale. In this case, the profits almost equal the outlay on the original short sale, excluding transaction costs.

The potential losses however are unlimited because a stock can keep going up in price indefinitely. Imagine if you had gone short on 100 shares of Infosys Technologies in the IT bull run or say BHEL in the last bull run. Now that you have imagined what that would feel like, it's best you put it out of your memory. That is the kind of stuff nightmares and horror films are made of.

Down on an up

The other risk with taking short positions is that stock prices tend to rise over time. Betting whether a stock's price will go up or down is not like flipping a coin. (Thank God! Or we would be out of a job.) The odds are not even. Over the long term, stock prices on average do tend to trend up. 

Also, the reason most people buy shares of a company is because they expect the company to make profitable investments that will make the value of their stock go up. (We do know of a few who buy stocks so that they can use the loss as a tax hedge. Guess there is no better place for that kind of service than the stock market.) Betting that a stock will fall in price is betting against the trend. It does happen but the odds are against it.

So to keep a long story short, short selling can be a very profitable strategy to play the downside, it comes with so much risk that the losses could wipe you out of home and hearth if not handled with discipline and the right kind of tools. Like stop losses. But that is a story that has already been told over and over again.

For now, to find some profitable short selling calls, turn to Sharekhan’s Smart Charts that presents the best positional trading calls in the market on today’s date. Each call is introduced along with a recommendation (Go Long/Go Short), a price target, a stop loss and a chart depicting the trend in the stock. Log in to your trading account with Sharekhan now and start trading. Check the monthly performance of Smart Charts here

Seasoned Investor

Meet the 'Mind Traps'

17:03 Minutes | Uploaded on 13 Jan 2009

Meet the 'Mind Traps'

Here is a quick test to determine your Investment Quotient (IQ).

Stock A at Rs100 has a 7% chance of dropping below Rs100 in the next five years.

Stock B at Rs200 has a 93% chance of gaining from this price level in the next five years.

Which is a safer investment bet--Stock A or Stock B?

In case you picked Stock A, you are being very smart or foolishly brave.

In case you picked Stock B, you are one among the many investors who fall for a very common mental illusion caused by "Framing" according to behavioural scientists. 

In simple words, "Framing" stands for human fallibility to decide based on the way information is presented. 

Let us revisit the IQ test 

Both the stocks have an equal chance of falling by 7% from their current levels. After all a 93% chance of Stock B going up means it has a 7% (100-93%) chance of falling. 

In case you chose Stock B, you are not very different from the average man on the street who prefers Stock B to Stock A just because it is presented in a manner that makes it appear more appealing.

As humans, we always make approximations in our decision making process. No wonder, we are all on the lookout for easy ways to make money. One of the approximations we do is to figure out departures from a base case described rather than calculate what is the eventual outcome. 

So in this case, the description of Stock A's 7% chances of falling turns out to be the base case and the second option is evaluated against this. So a 93% chance ofrising looks good for Stock B. The mind does not grasp the implications of a 7% fall and 93% rise in the first sweep!

In case you managed to get the above test right in one sweep, great show! But be sure to stay away from the many more that abound. 

Experience comprises illusions lost, rather than wisdom gained.

                                                                                - A French Parish Priest 

Welcome to the world of psychology of investing 

The recent past has seen the development of a new field in investing that blends economic decision making with psychology in order to understand individual as well as collective financial behaviour. 

Investors and traders alike get lost in myriad illusions created by the mind that is a big stumbling block for making wise investing or trading decisions. 

Here is another way "framing" impedes decisions that we seldom recognise. 

Investors are not as much "risk averse" as they are "loss averse". 

Here is a desi version of classic example that the founding fathers of this discipline, Daniel Kahneman and Amos Tversky, presented to two groups of people. 

Group I choice set

You have Rs1,000 in your pocket and need to choose between one of these two investing options

Option 1: A sure shot gain of Rs500 

Option 2: A 50% chance to double the money and a 50% chance of making no profits

What would you choose?

Group II choice set

You have Rs1,000 in your pocket and need to choose between one of these two investing options

Option 1: A sure shot loss of Rs500

Option 2: A 50% chance of losing the Rs1,000 capital and a 50% chance of losing nothing!

Hmm! In their experiments they found that 84% in Group I chose option 1 whereas in Group II, a good 69% chose option 2!! 

Know why the groups chose those options the way they did? It had to do with the way the options were posed to them. Group II participants had a sure shot loss staring at them as one option whereas the other option presented them an opportunity though half a chance to walk away with losing nothing. 

Of course, the knowledgeable among you would have figured out that there is nothing to choose between the two options, as they are the same. 

Hence, as long as the Sensex is climbing 400 points every month, a bullish trader will stomach a 100-point fall during a week and see it as a money-making opportunity. But when the Sensex is in a downtrend, even a 100-point rally during a week does not enthuse the traders enough! 

In fact, empirical studies done in the USA prove the following: "Positive emotional value of a gain is only one-half to one-third of the negative emotional value of an dollar equivalent loss. For example, a $100 loss causes emotional pain two to three times the emotional pleasure of a $100 gain." This theory is called "Prospect Theory"? 

Most people feel more pain for losing Rs100 than they feel happiness when they make Rs100. 

Which portfolio would you prefer?

Portfolio A has Rs1,000 worth of one stock that appreciates by 10% and Rs1,000 worth of another stock that declines by 15%.

Or

Portfolio B has Rs1,000 worth of one stock that stays flat and Rs1,000 worth of another stock that declines by 5%.

There are similar studies done that demonstrate people prefer portfolio B to portfolio A. 

Why? 

Portfolio A has one stock that declines by 15% whereas the maximum decline of stock in Portfolio B is 5%. The mind ignores the fact that the other stock in Portfolio A appreciates by 10%.  

Hence, most people prefer Portfolio B to Portfolio A though both the portfolios lose the same.

Has your curiosity been tickled enough? Keen to fight and take control over your own illusions? To make sound investments, buy into Sharekhan’s Stock Ideas, which presents our best stock picks. The investment ideas come with a price target and a time frame over which gains can be materialised. Log on to your trading account now and let the game begin. To learn our view on the market, read our latest Market Outlook report.

First Step

Equity funds for market thrills

Wondering which mutual fund scheme to invest in? Equity funds, debt funds, balanced funds, this fund, that fund…the list goes on.

·If you are looking to invest in the stock market but do not have the time to manage your investment, you could hire a professional fund manager by investing in a mutual fund that invests in the stock market, that is in equity funds.

Equity funds pool savings of many investors and invest this sum predominantly in a bunch of stocks, typically 25-30 stocks, across various sectors. A portfolio of the average equity fund might look something like this: Infosys, Wipro, ITC, Reliance, ACC, Bharti, DLF and some more. For an affordable amount, say as little as Rs1,000, one can pick up a stake in all these companies through an equity fund.

·The fund house does everything for the investor, for a fee. Its fund managers and analysts track the market and sift through the universe of stocks, and construct portfolios capable of delivering returns characteristic of equities.

·Equity funds should be considered by investors looking to maximise returns on their investment, and can bear the risk of it eroding temporarily in that pursuit. The universe of equity funds comprises many kinds of schemes, each of which services a specific investment objective. The choice of scheme should match with one’s risk profile and investment objective.

The different types of equity funds include:

·         Diversified equity funds

·         Equity-linked savings schemes (ELSS)

·         Index funds

·         Exchange-traded funds (ETFs)

·         Sector funds

·         Specialty funds

Diversified equity funds

·Of the various kinds of equity schemes, diversified equity funds are the most popular ones among investors. They offer a broad and dynamic exposure to the stock market.  Because they invest in many stocks across many sectors and because they have the freedom to chop and churn their portfolios as they like, diversified equity funds are a good proxy to the stock market. If a general exposure to equities is what you want, they are a good option.

·Diversified equity funds aim to outperform the market, which is represented by stock indices such as the BSE Sensex or the NSE S&P CNX Nifty. In order to achieve this objective, they actively manage their portfolios.

·Diversified equity funds are governed by fewer rules vis-à-vis other types of equity schemes. They can invest in all listed stocks, and even in unlisted stocks. They can invest in whichever sector they like, and in whatever ratio they like. This flexibility is reflected in the performance of actively managed diversified funds, which typically takes on a wide range. So, for instance, even when the Sensex or the Nifty would have gone up by 50%, some diversified schemes would have returned twice that much, while some would have risen just 5%. That’s why it’s important that investors choose their fund house and scheme well.

Equity-linked savings schemes

Equity-linked savings schemes (ELSS) are diversified equity funds that also offer income tax benefits to individuals. ELSS is one of the many Section 80C instruments but offers a pure equity exposure. In fact, an ELSS has to have at least 90% of its corpus invested in equity, at any point in time.

·Under Section 80C, individuals can claim up to Rs1 lakh as deduction from taxable income on making investment in specified instruments. One can invest the entire Rs1 lakh in ELSS in a financial year and claim a deduction of this amount from the total taxable income.

·However, investments in these schemes are subject to a lock-in period of three years. In equity investing, one has to get in, be regular and stay patient. The lock-in clause of ELSS perforce gives an investor a holding period of at least three years--long enough to have a decent shot of making the market work for oneself.

Index funds

·Want to know an easy and an inexpensive way of investing in the Sensex? Invest in an index fund that mirrors the BSE Sensitive Index! An index fund is a diversified equity fund, with a difference--the fund manager has absolutely no say in stock selection. At all times, the portfolio of an index fund mirrors an index (such as the Sensex or the Nifty), both in its choice of stocks and their percentage holding. So an index fund that mirrors the Sensex will invest only in the 30 Sensex stocks and that too in the same proportion as their weightage in the Sensex.

·Because of this, the net asset value (NAV) of an index fund moves virtually in line with the index it tracks. For example, if the Sensex rises 10% in a month, the NAV of a Sensex-linked index fund will also roughly appreciate by 10% over the same period. If the Sensex drops by 10%, so will the NAV of the index fund.

·Although index funds aim to mirror market movement, their returns tend to be marginally lower than the index they track.  This is termed as “tracking error” and occurs due to various costs an index fund has to bear, such as brokerage, marketing expenses and management fees. Obviously, the lower the tracking error, the better the fund.

·A broad-based stock index is the barometer of the stock market and, indirectly, of the corporate sector and the economy. If one is content with market returns, index funds are the best option. An index fund offers a lot of convenience as well. While it continues to track the market all along, one does not have to track the fund.

·The passive nature of index funds also makes them less risky than actively managed equity funds. The profile ensures that many tenets of fund management, like adequate portfolio diversification, are adhered to at all times.

Exchange-traded funds

Like index funds, exchange traded funds (better known as ETFs) too mirror an index. For example, the Nifty Benchmark Exchange Traded Scheme (Nifty BeES), tracks the Nifty. However, unlike an index fund, which can be transacted through the fund house at the end-of-day NAV or the following day’s NAV, an ETF is listed on the stock exchanges, and can be bought and sold from the market at real time prices, through a broker. One can, thus, invest in the market at real time index values.

·For example, each unit of the Nifty BeES roughly equals one-tenth of the Nifty value. So, if the Nifty is trading at 5700 at a given time, the NAV of a Nifty BeES unit will be about Rs570, and the buy and sell quotes will be based on this price.

·ETFs also tend to show a lower tracking error than index funds. The unique operational mechanism of ETFs means they don’t have to buy or sell securities, which means they don’t have to pay brokerage. This translates into lower expenses. In May 2007, there were just six equity ETFs in India. However, given their obvious superiority in passive fund management, they are very popular globally. To invest in an ETF, hit this button.

Sector funds

·Sector funds invest in stocks from only one sector, or a handful of sectors. The objective is to capitalise on the story of the sector and offer investors a window to profit from such opportunities.

·Because of their narrow focus, sector funds are considered amongst the riskiest of all equity funds. In a diversified fund, even if one sector performs badly, others can cover up. But if the chosen sector of a sector fund performs badly, its entire portfolio suffers.

·Hence, sector funds are recommended for only those who understand the working of the sector they are investing in.

·There are a number of sector funds dedicated to sectors such as information technology, pharma, fast moving consumer goods (FMCG), infrastructure, banking and so on.  Sector funds, thus, offer a diverse choice ranging from “defensive” sectors, such as pharma and FMCG, to “cyclicals” like infrastructure and commodities.

Specialty funds

·Specialty funds include mid-cap funds, blue-chip funds, small-cap funds and so on.

Blue-chip or Large-cap funds

·Blue-chip funds typically invest in equity of the big, established companies, that is the blue-chips, such as Reliance, Infosys, ITC, Tata Steel and so on.  Market players also refer to them as “large-cap” companies, with size in this context being benchmarked to the company’s market capitalisation. A typical large-cap stock would have a market capitalisation of over Rs5,000 crore.

·These funds have a lower risk vis-à-vis mid-cap or small-cap funds, because of the quality of companies they invest in.  Also, the growth forecasts are relatively more predictable and easier to make, and investment is relatively easy. Returns are expected to be moderate because the big companies have already grown to a point where they can grow only so much.

Mid-cap funds

·Mid-cap funds are diversified equity funds that target “mid-sized” companies on the fast-growth trajectory, with a reasonable level of risk. Market players refer to them as “mid-cap” stocks, with the companies having a market capitalisation of typically between Rs1,000 to Rs5,000 crore.

·Mid-sized companies have more scope to expand than their larger counterparts, who have already walked the growth path.  Companies such as Infosys, Dr. Reddy’s Laboratories and Hero Honda were mid-sized companies in the early nineties. Those who invested in them early enough would have seen their money grow many times over. These are the kinds of big moves that mid-cap funds aim to capitalise on.

·The danger, of course, is that for every Hero Honda there are more than a few Hindustan Motors and PAL-Peugeots, companies that stagnated or withered away. That’s the risk mid-cap funds face.

Small-cap funds

·These are diversified equity funds that target “small-sized” companies. These are typically companies that are at an infant stage but where the potential of growth is very high. Market players refer to them as “small-cap” stocks, with the companies having a market capitalisation of typically less than Rs1,000 crore. Small-cap funds venture into the relative unknown, where both risk and reward are greater.

That is about the size of it as far as equity funds are concerned, there are other types of funds too. To invest in an equity fund, click here. To know the top mutual fund picks of this month, hit this button. If you wish to experience the thrills, spills and chills of the stock market firsthand, invest in our Stock Ideas, which are well researched companies with strong fundamentals.

How To Become A Successful Stock Investor

The key to becoming a successful stock investor is to know the difference between a great investment and a bad investment. Many investors assume that great companies are great investments, but this is not always an accurate assessment. Sometimes, a wonderful business can make a lousy investment.

Most stock investors can be classified into two investment styles: value and growth. Value investors utilize an investment style that favors good companies at great prices over great companies at good prices. These investors use such valuation measures as price-to-book ratio, price-to-earnings ratio, and dividend yield to determine the attractiveness of an investment. Growth investors invest in companies that are growing their earnings and/or revenue faster than the industry or the overall stock market. These companies usually pay little or no dividends, instead preferring to use profits to finance future expansion and growth. Value investors prefer to own companies at good prices, and growth investors prefer to own great companies and price is a secondary issue.

Which style is better? It depends on the investor. Stock investors with a lower tolerance for risk should consider investing a larger portion of their portfolio in value stocks. Investors with a higher tolerance for risk should consider investing a larger portion of their portfolio in growth stocks. However, investors who want to avoid under performing the stock market as whole should always invest at least a small portion of their portfolio in both investment styles.

Over the long term, value has outperformed growth, but from time to time growth has outperformed during the short term.

Stock investors should be aware of the following: 

• The stock market rewards different styles at different times.
• Value investors tend to be buy-and-hold investors, and growth investors tend to be more short-term oriented.
• It is very difficult to determine which style will outperform in the short-term.
• The variance between performance of value and growth styles can be very large during short time frames.
• For some growth stocks, growth never does come. Eventually the share price falls.
• Some value stocks are cheap for a reason - they are bad stocks and they deserve to be cheap.

Overall, the best investments are those companies that able to grow profits and add shareholder value. These companies have traditionally been value companies. Investors who prefer to select their own stocks should consider a value approach and complement these investments with a growth mutual fund. Remember that selecting the wrong growth company is not as forgiving as selecting a value company erroneously, as the market correction in growth stocks in early 2000 showed us.

You may freely publish this article online, in email newsletters, or in print so long as the resource box and byline are in tact.

How To Invest In Share Market ?

Share Market

Share Market is a place where everyone take bath in order to taste the money. But it purely depends on the fundamentals, luck, global cues, behavior of other country markets, currency rate, Forex rates, currency trading etc. Trading is done in terms of the shares. These shares are the name of the companies which gets listed, generally. Also the share price varies time to time even second by second, if the variation graph is critical.

Types Of Sectors

There are various sectors in the share market. Some of the known sectors are Oil, Reality meaning RealEstate, Construction, Finance, Telecommunication, Refineries, Steel, Broking firms, Food and beverages, Metals, Jewelery, Packing, Consumer Goods etc. The best sector to invest is the decision taken by the investors understanding the fundamentals of the company, turnover, volumes traded, balance sheet and so on.

Identify the Best Sector

As we saw above there are lot of sectors available in front of the investors. But which sector one should choose that will give good returns in short term and long term investments. If the economy is weak and the world is facing a financial pressure or crisis then it is tough to identify the sector as every sector would get affected. 

So it is better to pick up the mid cap stocks that will not go worse in near future. Because large cap stocks will plunge and surge drastically like anything. If you were caught at the peak say January 2009. then it is tough to get to that level.

How To Invest ?

This is the first question a person asks himself and approaches others when he wants to invest in sharemarket. Basically you should have a clear vision when you want to reap the benefits that is the returns. 

If you want to pullout the invested money in short term, you should choose the critical moving sectors and shares and also don't act blindly on the third party suggestions. If you want to have the investment to be taken by your generation, then you can go for Long Term investment. 

In long term investment one should analyze the pure fundamentals of the company, the dividend amount it pays to the share holders,the capital and the percentage of share ratio between the company and the public.

Terms Of Investment

Basically investors should go for two types of investments, short term and long term. 

Short term investments are one that an investor will buy stocks and keep in his portfolio for at least 3-6 months. Gain must me kept in mind and thus the selection of stocks plays vital role here. Equity advisor consultancy is recommended.

Long term investments are one that an investor will buy stocks and keep in his portfolio for more than 6 months and for years. Here portfolio management is very important as many tax free income flashes the eye like Dividend, investment duration etc.

Share Trading Houses

Generally shares are traded electronically today and these process is done through the brokerage houses and from exchanges like Bombay Stock Exchange BSE and National Stock Exchange NSE.