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It is imperative for the investors to follow the Dos and Don’t in general while dealing in the stock market. As there are attendant risks associated with it.
Given below are the Dos and Don’ts in general for investors who are dealing in Stock markets.
Dos
- Always deal with the market intermediaries registered with SEBI / Exchanges.
- Give clear and unambiguous instructions to your broker / agent / depository participant.
- Always insist on contract notes from your Broker. In case of doubt of the transactions, verify the genuineness of the same on the Exchange website.
- Always settle the dues through the normal banking channels with the market intermediaries.
- Before placing an order with the market intermediaries please check about the credentials of the companies, its management, its fundamentals and recent announcements made by them and various other disclosures made under various Regulations. The sources of information are the websites of Exchanges and companies, databases of data vendor, business magazines etc.
- Adopt trading / investment strategies commensurate with your Risk bearing capacity as all investments carry risk, the degree of which varies according to the investment strategy adopted.
- Please carry out due-diligence before registering as client with any Intermediary. Further, the investors are requested to carefully read and understand the contents stated in the Risk Disclosure Document, which forms part of investor registration requirement for dealing through brokers in Stock Market.
- Be cautious about stocks, which show a sudden spurt in price or trading activity, especially low price stocks.
- Please be informed that there are no guaranteed returns on investment in stock markets.
Don’ts
- Don’t deal with unregistered brokers / sub-brokers, intermediaries.
- Don’t deal based on rumours .
- Don’t fall prey to promises of guaranteed returns.
- Don’t get misled by companies showing approvals / registrations from Government agencies as the approvals could be for certain other purposes and not for the securities you are buying.
- Don’t leave the custody of your Demat Transaction slip book in the hands of any Intermediary.
- Don’t get carried away with onslaught of advertisements about the financial performance of Companies in print and electronic media.
- Don’t blindly follow media reports on corporate developments, as they could be misleading.
- Don’t blindly imitate investment decisions of others who may have profited from their investment decisions.
Important terms to check while purchasing a stock.
Please check.. before you invest !!!
P/E
The P/E ratio (price-to-earnings ratio) of a stock (also called its “earnings multiple”, or simply “multiple”, “P/E”, or “PE”) is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share.A higher P/E ratio means that investors are paying more for each unit of income. It is a valuation ratio included in other financial ratios.The reciprocal of the P/E ratio is known as the earnings yield. Stock having a P/E less than 30 are said to be good investmets
EPS
EPS. Total earnings divided by the number of shares outstanding. Companies often use a weighted average of shares outstanding over the reporting term. EPS can be calculated for the previous year (”trailing EPS”), for the current year (”current EPS”), or for the coming year (”forward EPS”). Note that last year’s EPS would be actual, while current year and forward year EPS would be estimates.
DVI (Dividend yield)
The yield a company pays out to its shareholders in the form of dividends. It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stock’s price. For example, if a stock pays out $2 in dividends over the course of a year and trades at $40, then it has a dividend yield of 5%. Mature, well-established companies tend to have higher dividend yields, while young, growth-oriented companies tend to have lower ones, and most small growing companies don’t have a dividend yield at all because they don’t pay out dividends