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Unit 7: Investment Strategies-II

2. The Nasdaq: The second type of exchange is the virtual sort called an over-the-counter Notes
(OTC) market, of which the Nasdaq is the most popular.
3. Bombay Stock Exchange (BSE)

4. National Stock Exchange (NSE)

Technical Analysis of Stocks

In the stock market there is no rule without an exception, there are some principles that are
tough to dispute. Still there are some fundamental concept every investor should know before
investing in stocks.
1. Carefully study the financial ratios such as EPS, P/E ratio, P/S etc of the stock
2. Try to figure out the earnings of the stock
3. Try to figure out your return

4. Synchronize the flow of economy with the stock process
5. Carefully read the various market news sources on television and internet such as
moneycontrol.com, Bloomberg, CNN etc.

When you purchase stocks, or equities, as your advisor might put it, you become a part owner
of the business. This entitles you to vote at the shareholders’ meeting and allows you to receive
any profits that the company allocates to its owners. These profits are referred to as dividends.

While bonds provide a steady stream of income, stocks are volatile. That is, they fluctuate in
value on a daily basis. When you buy a stock, you aren’t guaranteed anything. Many stocks don’t
even pay dividends, in which case, the only way that you can make money is if the stock
increases in value - which might not happen.
Compared to bonds, stocks provide relatively high potential returns. Of course, there is a price
for this potential: you must assume the risk of losing some or all of your investment.

7.6 Investment in Mutual Funds

A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling
your money with a number of other investors, which enables you (as part of a group) to pay a
professional manager to select specific securities for you. Mutual funds are all set up with a
specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small
stocks, bonds from governments, bonds from companies, stocks and bonds, stocks in certain
industries, stocks in certain countries, etc.
The primary advantage of a mutual fund is that you can invest your money without the time or
the experience that are often needed to choose a sound investment. Theoretically, you should
get a better return by giving your money to a professional than you would if you were to choose
investments yourself. In reality, there are some aspects about mutual funds that you should be
aware of before choosing them.

Organisation of Mutual Funds

A mutual fund can be constituted either as a corporate entity or as a trust. In India, UTI was set
up as a corporation under an Act of Parliament in 1964. Indian banks when permitted to operate
mutual funds, were asked to create trusts to run these funds. The basic difference between a
corporation and a trust is that in the case of the former, the liability is limited whereas in case of

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