Skip to main content

Investing in Shares is a way to make money

Long term investing in shares of companies is one of the legitimate way of investing your money and making a good return out of it.Since there is risk involved, only organised ones are seen in plenty at stock markets. Retail investor or common man investing his hard earned money is a minority phenomenon today.A share or stock is practically a small part of ownership of a company.

How are people making money at the share market?

Some are short term traders.Others are long term investors.Short term traders are the ones who can be compared to the real estate flippers in your locality.They put some money and do some trades on shares in stock market (buy/sell).This is a strict no for first timers especially with large amount of hard earned money.

How are people making money from shares through long term investing?

Buy low,sell high principle.People buy shares at low prices at some point of time with their conviction that the company will do good in the future.If the company does well in the future,hearing positive news about it in the market, lot of people will try to buy the stock from the market.When demand increases the price of stock also increases. When the share is at a high price due to some speculation, people sell the shares and get out of their holding position.For eg: Ajith bought 100 shares of xyz company for Rs 100.So he invested 10000 rs and after two years on a particular day a news has broke out that the company got a big order from another company.That day traders are in a frenzy and the price of share rose to Rs 250 per share.So Ajith sold it and got out of his position.He got a profit of Rs 15000 from the 10000 he has invested.Also he got Rs 250 and Rs 200 as dividends in the two years when he was a shareholder. In two years his investments made a return of 150 percent.

So the advantages of stocks are price appreciation and dividends.Another benefit is you don't have to pay tax on the profits you made out of the shares if you are selling it after one year.The profits you make will be called as long term capital gain and it does not attract taxation.

What is dividend?

When the company makes profit, sometimes they decide to distribute a part of it to the owners.This gets distributed to each of the shareholders.The money you get as a shareholder is called dividend.For example a company got profit of Rs 10 lakhs in the financial year 2012-2013. It decides to keep 5 lakhs for building a new office, 3 lakhs to pay loans.The rest two lakhs it decides to give back to the investors.Suppose the company has 100 shares out of which 50 shares are owned by the promoter Mr. Ajay Chandran and the rest 50 are in the hands of small investors.Ajay Chandran having a hold in the director board can decide to distribute the 5 lakhs rupees to the investors such that each shareholder gets Rs 5000.Ajay chandran would get 2,50,000 in that case and a retail investor having 10 shares will get Rs 50000 as dividend.

In real world dividends are meagre. Because when the shares are issued for the first time, shares have a face value of say Rs 10.And because of rumours when they are traded in the market, the share with face value of Rs 10 would be sold at Rs 2558 per share.

Why i suggest you invest in stocks?

You participate in a nation building activity.You invest in a business.Some business fail and others succeed.If your 'company' win you make money otherwise you lose.May be your investment will get microscopic and vanish.If you are a person interested in taking the risk, and track the news about the company you invested in, you can do it.

How it will change you?

In order to protect your investment, you will be forced to learn systematic ways of long term investing.You will then learn about financial reports of the company,know about the industry, the trends.So there is a chance you may make excellent moves and make good returns.You will try to learn about financial education which is not just limited to accountants and tax planners.

How to start investing in shares?

Start with a small amount say Rs 10000 (or whatever you feel comfortable) in the indian market.The starting amount should be such that your financial health should not get endangered if you broke in the stock market.Make sure that you are not gambling.Greed and addiction to trade are the reason for failing in your endeavor.


I had a simpler and better article in my old blog which is now no more.I have tried to explain shares in a simple way in this post.Feel free to comment on this post if there is any error/ typo in the post.


Popular posts from this blog

Dr. Fixit Water Proofing Product Newcoat and Primer Pricelist July 2013

When it was raining heavily in kerala, i was investigating pricelist of Dr. Fixit Waterproofing products. It took me some months to share this with all of you.Let me make myself clear.I do not have a great opinion in my mind about Dr. Fixit products, so i went for Aluminium roofing.This post is for public awareness only and is not a brand endorsement. Dr. Fixit Newcoat 4 litres pack : Rs 1415 Dr. Fixit Newcoat 20 litres pack: Rs 6520 Dr. Fixit Primeseal Primer 1 litre pack: Rs 345 Dr. Fixit Primeseal Primer 10 litre pack: Rs 2995 Dr. Fixit Primeseal Primer 20 litre pack: Rs 5780


I lost my voter id card issued by the election commission of india. I lost it along with the driving license in 2007. I took Duplicate Driving Licence from the same RTO in 2008.Now I have been postponing the efforts to take duplication voters id card due to various reasons. One election came in between and election people were giving duplicates but I didn’t went. Now local body election happens in Kerala. So I got an information that the election department at the Tehsil (Taluk) office is starting to issue duplicate voter id cards from 08.10.2010.So I drove to mavelikkara  yesterterday  in my Astar and it was raining heavily. I reached there and find a long queue of people.Since I have completed the form before hand, I just need to find my card id number and put the data and place in it.A person employed there took my application form and he checked the number of my family member in the kiosk in the same room. The kiosk terminal didn’t showed my number. So he forwarded my application

Generate your online e-aadhaar card easily

Aadhaar Demystified   Aadhaar ,meaning foundation in indian languages, has become a hall of shame  or an object of inconvenience for the common man (aam aadmi). Despite a prominent personality like Mr. Nandan Nilekani at it's helm, India's aadhaar project is an epic fail. UIDAI or unique Identification Authority of India is a ghost body created by the central government.It is yet to get complete legal and constitutional status to discriminate people by providing gas subsidy {LPG subsidy for domestic use} only to aadhaar holders. Why India needed an ID System? India was in the dark about it's own citizen.Infiltration from Bangladesh, Pakistan and Srilanka happens all the time.Politicians provide illegal immigrants (a large chunk are run away criminals and terrorists) with indian election id cards inexhange of votes / money. Some crooks were eating up subsidies designed to reach deserving common man [aam aadmi] by forging fake documents and multiple accounts.