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Other investments – Shares – Ownership

by | Jan 2, 2018 | Basics, Finance

I am calling these non – fixed income investments.

The main categories under this heading are

  • Shares
  • Real Estate

Of course, there are any number of investments, but other than the fixed income ones, these are the most common. Let’s start with Shares or ‘stock’ as they are commonly known.

First of all, what is a stock? Even if you are already investing in stocks, give it a thought. Say you go to the market and buy some vegetables. You give the guy some money and you get something in return. However, to buy a stock, you have to open a ‘DMAT’ account, which in some ways, is like a bank account. You call the broker and tell him that you want to buy say, 100 shares of Tata Power. He buys it and send you a contract and a bill. You pay him and the shares show up in your DMAT account. What have you got?

What you have got is ownership of the company in the proportion of the number of shares that you buy. If there are 1,00,000 shares issued by the company and you buy 1,000 shares, then effectively, you own 1% of the company. This ‘ownership’ concept is very important. Say, you want to buy a car – the amount of work put in is really great – you ask friends, read up reviews, go for test drives, discuss the mileage / litre, etc, etc. But, most of us, when we buy shares, buy it in a jiffy on some ‘hot tip’! That is the reason that more than 90% of people who invest in shares actively, lose money.

Before buying, put in some effort and know the company thoroughly. Go through past financial statements. At the very least, ask a couple of people what they think of the company.

1 Comment

  1. Shailaja

    Acting on Hot tips received without a little study, will mostly burn the investment…. l am learning.😀

    Reply

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Written By: niranjan

Financially Stupid Niranjan

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