Author: Heeramb Parrit

1. Don’t be influenced by any implicit/ explicit promise made be the issuer or any one else.
2. Dont’s invest based only on the prevailing bull run of the market index or of scrips of other companies in the same industry or scrips of the issuer company/ group companies.
3. Don’t expect the price of the shares of the issuer company to necessarily go up upon listing or forever.

1. Read the Prospectus / Abridged Prospectus carefully, with special attention to :
   • Risk Factors
   • Background of promoters
   • Company History
   • Outstanding Litigations And Defaults
   • Financial Statements
   • Object Of The Issue
   • Instructions for Making An Application
2. Use the ASBA Process for applying ( Under this the investor authorizes his bank to block in his bank account an amount equivalent to the application money. The money remains in the bank. Upon Finalization of the basis of allotment only the amount equivalent to the bank account and the rest is freed up )
3. In case of non-receipt, within due period the credit to demat account/ refund of application money lodge a complaint with compliance officer of the issuer and with post issue lead manager.

Initial Public Offering (IPO) is when a hitherto unlisted company makes either a fresh issue of shares or some of its existing shareholders make an offer to sell of part of their eisting shareholding for the first time to the public. This paves the way for the listing and trading of such shares. An IPO of fresh shares is typically made by a company when it needs money for growth expansion or diversification or acquisitions or even to meet its increasing working capital requirements. In an IPO involving an offer for sale the proceeds go to the selling shareholders.

Further Public Offering (FPO) is when an already listed companymakes either a fresh issue of securities to the public or the existing promoters make an offer for sale to the public. An FPO where fresh securities are issued is typically made be a company when it needs money for growth expansion or diversification or acquisitions or even to meet its increasing working capital requirements. An FPO is also the preferred route (over a right issue) when the company wants to bring in new investors both insitutional as well as retail. It may be pointed out that the FPO route is alsobeing utilizes extensively by the Government fot the PSUs for the purpose of disinvestment of government’s holdings.

A market where shares are publicly issued and traded is known as a share market. The answer to ‘ what is stock market ‘ is pretty similar to that of a share market. The key difference between share ,arkets and stock markets is that the former only allows you to trade in financial instruments sych as derivatives, bonds, mutual funds as well as the shares of listed companies.

The key factore is that the basic platform offers trading facilities that companies can use to trade stocks in the stock market. On a stock exchange, one can only buy and sell those stocks that are listed on it. Hence, buyers and sellers meet on a stock market. India’s prime stock exchanges are the National Stock Exchange and the Bombay Stock Exchange.

1. Equity Shares 2. Preference Share

1. Equity Shares :- These are also known as ordinary shares, and it comprises the bulk of the shares being issued by a particular company. Equity shares are transferable and traded actively by investors in stock markets. As an equity shareholder, you are not only entitled to voting rights on company issues, but also have the righ to receive dividends. However, the dividents issued form the profits of the company are not fixed. You must also note that equity shareholders are subject to the maximum risk owing to market volatility and other factors affecting stock markets as per their amount of investment.
2. Preference Shares :- These are among the next types of shares issued by a company. Preferential shareholders receive preference in receiving profits of a company as compared to ordinary shareholders. Also, in the event of liquidation of a particular company, the preferential shareholders are paid off before ordinary shareholders.

The market value of shares listed on a stock market continues to fluctuate. It is difficult to fix the value of a share at one particular price. This is where derivatives enter the picture. Derivatives are instruments that allow you to gtrade at a price that has been fixed by you today. To put it simply, you enter into an agreements where you choose to either sell or buy a share or any other instrument at a certain fixed price.

One key financial instrument part of share market basics is mutual funds investing. Mutual funds are investments that allow you to indirectly invest in the share market . You can find mutual funds for a variety of financial instruments like equity, debt, or hybrid funds, to name a few. Mutual funds work by pooling money form all the investors that fund them. This aggregate amount is then invested in financial instruments. Mutual funds are handled professionally by a fund managee.

Each mutual fund scheme issues units that are of a certain value similar to share. when you invest in such funds, you become a unit-holder in that mutual fund scheme. When instruments thar are part of that mutual fund scheme ear revenue over time. the unit- holder receives that revenue of the fund or in the form of dividend payouts.

A company requires money so they can undertake projects. They pay their investors dividends from the revenue earned on their projects. One way of raising the capital for operations and other company procedures is via bonds. When a compay choose to borrow money from a bank, they take a loan which they repay through periodic interest payments. On a similar note, when a company opts to borrow funds from a variety of investors, this is known as a bond, which is also paid off through timely interest payments. Take the following example as an explanation of how bonds work.

Imagine that your goal is to start a project that will begin to earn money in two year’s time. To undertake this project, you will require some initial amount to get you started. Suppose you acquired funds in the form of a loan form a friend and write down the recepit of the loan stating that you owe them Rs. 1 lakh which you will repay in five years with an interest rate of 5 % per annum. Suppose that your friend now holds this recepit, it means that they have just purchased a bond by lending out money to your company. Since you have promised to pay the principal amount at 5 % interest, you do so and finally extinguish your princiapl repayment by the time the fifth year comes to a close.

Share

In simple words, a sahre indicates a unit of ownership of the particular company. If you are a shareholder of a company, it implies that you as an investore, hold a percentage of pwnership of the issuing company. As a shareholder you stand to benifit in the event of the company;s profits, and also bear the disadvantages of the company’s losses.

One may invest in :-

1 Physical assets like real estate, gold, commodities etc.

and

2. Financial assets such as fixed deposits with banks, small saving instuments with post offices, insurance , provident / pension fund etc.

and

3. Securites market related instruments like shares , bonds, debentures etc.