Definition of 'Stock'
A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

Investopedia explains 'Stock'
A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets.

Why should you invest?

Simply put, you should invest so that your money grows and shields you against rising inflation. The rate of return on investments should be greater than the rate of inflation, leaving you with a nice surplus over a period of time. Whether your money is invested in stocks, bonds, mutual funds or certificates of deposit (CD), the end result is to create wealth for retirement, marriage, college fees, vacations, better standard of living or to just pass on the money to the next generation. Also, it's exciting to review your investment returns and to see how they are accumulating at a faster rate than your salary.

When to Invest?

The sooner the better. By investing into the market right away you allow your investments more time to grow, whereby the concept of compounding interest swells your income by accumulating your earnings and dividends. Considering the unpredictability of the markets, research and history indicates these three golden rules for all investors 1. Invest early 2. Invest regularly 3. Invest for long term and not short term While it’s tempting to wait for the “best time” to invest, especially in a rising market, remember that the risk of waiting may be much greater than the potential rewards of participating. Trust in the power of compounding Compounding is growth via reinvestment of returns earned on your savings. Compounding has a snowballing effect because you earn income not only on the original investment but also on the reinvestment of dividend/interest accumulated over the years. The power of compounding is one of the most compelling reasons for investing as soon as possible. The earlier you start investing and continue to do so consistently the more money you will make. The longer you leave your money invested and the higher the interest rates, the faster your money will grow. That's why stocks are the best long-term investment tool. The general upward momentum of the economy mitigates the stock market volatility and the risk of losses. That’s the reasoning behind investing for long term rather than short term.

How much money do I need to invest?

There is no statutory amount that an investor needs to invest inorder to generate adequate returns from his savings. The amount that you invest will eventually depend on factors such as:

           Your risk profile

           Your Time horizon

           Savings made

Personal finances.Why bother?

There is always a first time for everything so also for investing. To invest you need capital free of any obligation. If you are not in the habit of saving sufficient amount every month, then you are not ready for investing. 
Save to atleast 4-5 months of your monthly income for emergencies. Do not invest from savings made for this   purpose. Hold them in a liquid state and do not lock it up against any liability or in term deposits.

Save atleast 30-35 per cent of your monthly income. Stick to this practice and try to increase your savings.

Avoid unnecessary or lavish expenses as they add up to your savings. A dinner at Copper Chimney can always   be avoided, the pleasures of avoiding it will be far greater if the amount is saved and invested.

Try gifting a bundle of share certificates to yourself on your marriage anniversary or your hubby’s birthday   instead of spending your money on a lavish holiday package.

Clear all your high interest debts first out of the savings that you make. Credit card debts (revolving credits)   and loans from pawnbrokers typically carry interest rates of between 24-36% annually. It is foolish to pay off   debt by trying to first make money for that cause out of gambling or investing in stocks with whatever little   money you hold. Infact its prudent to clear a portion of the debt with whatever amounts you have.

Retirement benefits is an ideal savings tool. Never opt out of retirement benefits in place of a consolidated pay   cheque. You are then missing out on a substantial employer contribution into the fund. 

Different investment options and their current market rate of returns.

The investment options before you are many. Pick the right investment tool based on the risk profile, circumstance, time zone available etc. If you feel market volatility is something which you can live with then buy stocks. If you do not want to risk the volatility and simply desire some income, then you should consider fixed income securities. However, remember that risk and returns are directly proportional to each other. Higher the risk, higher the returns. A brief preview of different investment options is given below:

Equities: Investment in shares of companies is investing in equities. Stocks can be bought/sold from the exchanges (secondary market) or via IPOs – Initial Public Offerings (primary market). Stocks are the best long-term investment options wherein the market volatility and the resultant risk of losses, if given enough time, is mitigated by the general upward momentum of the economy. There are two streams of revenue generation from this form of investment.

1. Dividend: Periodic payments made out of the company's profits are termed as dividends.

2. Growth: The price of a stock appreciates commensurate to the growth posted by the company resulting in capital appreciation.

On an average an investment in equities in India has a return of 25%. Good portfolio management, precise timing may ensure a return of 40% or more. Picking the right stock at the right time would guarantee that your capital gains i.e. growth in market value of your stock possessions, will rise.

Bonds: It is a fixed income(debt) instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with fixed rate of interest on a specified date, called as the maturity date. Other fixed income instruments include bank fixed deposits, debentures, preference shares etc.

The average rate of return on bonds and securities in India has been around 10 - 12 % p.a.

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