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Saturday, 18 July 2015

My tryst with stock market - V 1.0

Stock market or share market, words that give nightmares to many people and at same time lighten eyes and face of many others. Many people who have never been even close to anything related with Stock market have formed such a negative opinion about it that the same negativity has perpetuated among most of the Indians. I can’t question or justify such massive wrong perception but can surely put forward my point of view in coming posts along with this one and can share my fairly long learning experience and also little working experience in stock market.

There is a saying that “one bad fish spoils whole pond” and to be honest we have many such bad fish in stock market. If you discuss share market and its goodness with anyone who is not part of it, they will cite example of Satyam scam and Harshad Mehta. Yes Satyam scandal was massive jolt to Indian stock market in 2009 but we have moved on a long way from that. The regulations, the watch list, the checkpoints we have now are much tougher than those days. We have BSE, NSE, SEBI and Government agencies to monitor that everything is fine and all laws are being followed. There has been no big controversy with stock market since 2009 and we are growing stronger and bigger. India is one of the fastest growing economy and so is Indian stock market. If you believe in India growth story then you must believe in Indian stock market story.




For me simple funda of stock market is “If you can’t buy a company, buy few % of that company through shares”, yes that % will look really minuscule but that % will grow with same speed as the company. Imagine you buying .00000000000005% of a good worthy company with 10,000 Rs and after 15 years company grows 20 times, your percentage will still be same but value of that percentage share will grow by almost 20 times, means your 10,000 will become almost 200,000. These calculation can vary here and there but the basic growth logic will be the same, faster the company grows, faster your share value will grow. It is as simple as that, where is the risk here that might give you nightmare?  Now the question comes how to believe in company and how to identify such companies. Here comes the role of research and understanding the business module of a company. If you believe in a company that it will grow, it might not, but if lakhs of people believe in a company that it will grow, it will never fail.  If you don’t believe in private companies, go for government companies you believe in.

Before I stop here to write remaining in next post, here is an example of how investing in a good company for long time can give more value to your money than any other investment

TCS : Tata Consultancy Services

Year
Share Price in INR  (On average)
Comments
2002
300

2005
1500

2008
670
Stock split in 2006 2:1
2010
1067

2014
2643

2015
2560


So if you had 10 shares of TCS in 2002, you would have invested 3,000 Rs , now you would own 20 shares of TCS and that money would have become 51,200 in lump sum and it would be totally tax free. This is just a basic detail, apart from this, good companies keep giving dividends to shareholders based on company’s performance every year and TCS has given 150 Rs dividend per share till now.

Share market is not bad, some companies are, So Don’t avoid share market, avoid bad companies.

Contd.............

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