investor awareness program CDSL for investors

to gain knowlegde about cdsl

1. CAPITAL MARKET AWARENESS AN INITIATIVE OF :
CDSL

2. Importance of Due Diligence in
Investing
Manish Bansal
Director
Value Ideas Investment Services Pvt.Ltd.
Email –[email protected]
Mobile -[phone]
www.xceleratingminds.com

3. Derivatives
Equity
Mutual
Funds
Bonds/
Debentures
etc.
Securities Market
Primary
Market
Secondary
Market

4. Myths and Realities –
Securities Market
Myth: Stock Market is Gambling
Reality:Gamblingtransfers
wealthfromawinnertoloserbecauseit
producesnothing.Investingincreases
overallwealthbecausethecapital
investedinstocksprovidestheinitial
fundingforfirmswhichexistforthe
purposetoproducinggoodsandservices.
Intheaggregate,stockinvestorsdemand
andreceiveareturnthatissubstantial
andpermanent
Myth:Whatgoesupmustcomedown
Reality:anystocktrendconsistsofaseriesof
advancesandretreats,resultinginanet
increaseovertime.Soifyouaregoingto
believethestatement"whatgoesupmust
comedown,"thenkeepinmindthatitoften
happensthatastockmovesway,wayup,and
thencomesdownjustalittle.
Onceagoodperformingstockhasbeenidentified,
don'twaitforapullbackinpricebeforetakingyour
position.Inthelongrun,thiswillcostyoumorein
profitsthanitsavesinlosses.

5. Myth: It’s Easier For A Low-Priced Stock To
Double In Value
ItonlytakesaRs.10increaseforastocktrading
atRs.20persharetodoubleinprice.ARs.100increaseis
requiredforastocktradingatRs.200todoubleinprice,
however.So,it’seasiertomakemoneywiththeRs.10stock,
right?
Reality:Inorderforastockpricetodouble
invalue,thecompany’sentiremarketcapitalization
alsohastodoubleinvalue(assumingnochangein
thenumberofsharesoutstanding).
Hence,itisimmaterialastowhatisthe
absolutevalueoftheshare.Ithastobeevaluatedin
termsofearningspershare
Myths and Realities –
Securities Market
Myth:BuyWhat’sInTheNews
Reality:Typically,bythetimeyouhearthenews,ithasalready
beendisseminated.Professionaltradingorganizationsreacttothe
newsimmediatelyandwillpriceinanychangesinthestockfaster
thanyoucanlogintoyourbrokerageaccount,muchlessplacea
trade.Thisiswhytryingtoreacttotheday’sheadlinesisalosing
game.
Whatyoucandoisgoaroundthem.Ifastockismakingheadlines
withgoodnews,takeyourtimetoanalyzethestockandlookfora
goodentryprice.Thenplanonholdingontothestockforan
extendedperiod,eyeingthevaluation,thebusiness,thefinancial
statementsandotherpertinentfactors.Unlikeaprofessional,you
don’thavetoreportyourperformancetoanyone,soyoucan
patientlyinvestandholdontoyourstocks.
Alsoresearchshowsthatstockswithlessrelativetradingvolume
tendtoperformbetter.Thereasonissimple:Sincethereisless
focusonthem,thesestocksaremorelikelytobemispricedand
thereforeundervalued.

6. ASBA –Application supported by blocked
amount
ASBA application
Amount for the applied
issue blocked in the
investor’s account
After allotment, the amount
applicable debited and the
balance amount unlocked
No issue of refund
Continues to earn interest
6

7. How do you decide to participate in an
IPO?
•Offerdocument -Not to invest without reading it
•Sustainablebusiness model
•MerchantBanker for the issue and their track record
•Bookvalue / premium to be paid and whether worth investing
•who are the type of investors –particularly institutionalinvestors
•Not to go by the market rumours
7

8. How does secondary market function?
1. Placing the
order
2. Trade
execution
3. Clearing of
trades
4. Settlement
of trades
5. Funds
/securities
Transaction
Cycle
8

9. Rolling Settlement ( T+2) in secondary
market
Mon Tue Wed Thur Fri Sat Sun
1 2 3 4 5 5 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
30 31
Trade day settlementTrade day settlementTrade day settlementTrade day
Trading
Holiday settlement
9

10. Three critical decisions while finalising a stock
broker
Who has the
control
Commissions /
Margin debits
The extent of risk
and exposure
10

11. Please remember….
No cash to the
broker. Only cheque
in the name of
broking firm
No sharing of
internet trading
account password
with anyone
Register the mobile
number with broker /
DP for receiving trade
information
Document all
discussions–oneto
one/telephone by
instantlysendingen
email
11

12. Why ?
Professional
management
Transparency
Liquidity
Convenience
Small ticket size
Diversification
Well-regulated
low costs
Why Mutual Funds
12

13. Mutual Funds :Myths n facts
13Myth:MutualFundsareonlyforthelongterm
Reality:Yes,long-terminvestmentshavea
slightadvantage,butthatdoesn’tmean
thatMutualFundsareonlyforsuch
investors.Infact,therearevariousshort-
termschemeswhereyoucaninvestfroma
daytoafewweeks.
Myth: Mutual Funds with a Rs. 10 NAV are better
than Mutual Funds having a Rs. 25 NAV
Reality:Thissimplycomesdowntoasubconscious
movementtowardswhatseemstobecheaper.Butthefactis
thatwhatmattersisthepercentagereturnoninvestedfunds.
Forexample,givenasimilarperformancelevelof10%
appreciation,aRs.10NAVwillrisetoRs.11whereasafund
withaNAVofRs.200willrisetoRs.220.
Myth: One needs a large sum to invest in
Mutual Funds
Reality:Thisisoneofthemostlongstandingmyths
whichtodayhaveabsolutelynovaluewhatsoever.
MostfundstodayallowinvestmentsaslowasRs.1000,
withnolimitsonthemaximumamount.Infact,even
forEquitylinkedsavingsschemestheamountisaslow
asRs.500.

14. Steps in investing in mutual fund?
•Identify your investment needs, time frame and risk profile
What is the intent of your investments
When do I intent you intent to use these funds
How will you withdraw the money
How do you intend to invest—single sum / fixed sums on a regular basis (e.g. monthly, quarterly,
annually)
How much return do you need after considering effect of inflation , to achieve my investment
needs.
How much can you afford to invest, after setting aside funds for daily needs and savings to provide
for emergencies ?
How much fluctuation is acceptable in your investments?
What would you prefer?
14

15. Mutual Fund = ULIP
MF Features ULIP
Investment Product Investment+Insurance
OnlyinELSS Lock in period3-5years
High Liquidity Lowincomparison
1-2.5%maximum Charges Noupperlimits.Setupthe
insurancecompanies.Initialyears
chargesashighas18%.Inshort
termmaynotbetherightoption
Higherreturnsubjectto
marketrisk
PotentialreturnsLowsincepartofitgoesto
insurance
Strictdisclosures Portfolio disclosureNomandatoryrequirements
Longterm:
EquityFunds-taxfree
Debtfunds–20%
Tax benefitsUnderSec80Cuptoonelakh
Dependsonthetypeof
mutualfund.However,
comparativelyhigherrisk
Risk exposureSincetiedwithinsurancenotso
highaggressivestrategiesfor
investment
I am
mutual
fund
I am
ULIP
15

16. 16
Exchange Traded
Funds
Likea mutual fund that tracks index , a commodity or a basket of assets
Traded on the exchange like stock
They do not outperform the markets ; but simple replicate its performance
Attracts brokerage
Has a net asset value
Illustration
ETF
Share A
Share B
Value : Rs.500
Value : Rs. 1000
2000
200
Smaller
units for
ease of
investment

17. 17
Gold Exchange Traded Funds
Easiest and cost effective way of holding gold
Brokerage is only Rs 1 per lakh
Taxation : Holding for a year is considered long term. Hence
no tax if held for a year
No wealth tax applicable
Can be purchased in small lots
Back with physical gold of the highest purity
Accepted as collateral for loans
Regulated by SEBI

18. 18
Gold Exchange Traded Funds
Features Banks Jewellers E Gold Fundof
Funds
Gold ETF
Wealthtax ApplicableApplicable ApplicableNot ApplicableNot Applicable
Benefitsof LT
capital gain rates
After 3
years
After 3 yearsAfter 3 yearsAfter one yearAfter one year
Value added tax
(VAT)
ApplicableApplicable ApplicableNot ApplicableNot Applicable
Pricing Differs from
bank to
bank
Different with
each jeweller. No
transparency
/standard
Linked to
international
gold prices
and
transparent
Linked to
international
gold prices and
transparent
Linked to
international
gold prices and
transparent
Impurity Risk Nil High Nil Nil Nil
Premium High Very high Low Low Low

19. Ask these questions before
investing in a product
Registered with any
of the regulator
Matches with my
investment goals
How will my
investments make
money and give
assured return
How long has the
company in business
and people behind
it?
Have they ever
returned the money
to investors ?
If no, then
beware…
19

20. Thank you