Rights of shareholders

Shareholders (stockholders) have ownership interest in the company

proportional to shares owned.
Large shareholder vs. small shareholders
Rights include:
rights to be residual claimants
voting rights influence management
How the market sets prices
The price is set by the buyer willing to pay the highest price
The market price will be set by the
buyer who can take best advantage of the asset
Superior information about an asset can increase its value by reducing its risk
What is a stock market?
A stock market or equity market is a market for the trading of company stock
(shares) and derivatives at an agreed price.
The size of the world stock market was estimated at about $36.6 trillion USD
at the beginning of October 2008.
What is a share/stock/equity?
Shares represent a fraction of ownership in a business. The common feature
of all these is equity participation. Different classes of shares have different
voting rights.
Ownership of shares is documented by a legal document that specifies the
amount of shares owned by the shareholder, and other specifics of the
shares, such as the par value or the class of the shares (if any).
These days these stock certificates have been dematerialized.(No physical
document!)

Who is a shareholder?
A shareholder (or stockholder) is an individual or company (including a
corporation) that legally owns one or more shares of a company.
Shareholders are granted privileges depending on the class of stock,
including the right to vote on matters such as elections to the board of
directors, the right to share in distributions of the company's income, the
right to purchase new shares issued by the company, and the right to a
company's assets during a liquidation of the company.
Shareholders vary from individual stock investors to large hedge fund traders.
Why does a company issue shares to the public?
A company may want additional capital to invest in new projects.
The promoters may simply wish to reduce their holding, freeing up capital for
their own private use.
Once a company is listed, it will be able to issue further shares via a rights
issue, thereby again providing itself with capital for expansion without
incurring any debt.
Financing a company through the sale of stock in a company is known as
equity financing.
Trading

The shares of a company are in general be transferrable from one

shareholder to another . This leads to buying and selling of shares termed as
trading.
Investors usually buy and sell shares on the exchanges through a stock
brokers registered with the exchange.
A company may list its shares on an exchange by meeting and maintaining
the listing requirements of a particular stock exchange.
Share price determination
At any given moment, the price is strictly a result of supply and demand.
The supply is the number of shares offered for sale at any one moment. The
demand is the number of shares investors wish to buy at exactly that same
time.

 Actual trades are based on an auction market model where a potential buyer
bids a specific price for a stock and a potential seller asks a specific price for
the stock. (Buying or selling at market means you will accept any ask price or
bid price for the stock, respectively.) When the bid and ask prices match, a
sale takes place.
Listing requirements
The set of conditions imposed by a given stock exchange upon companies
that want to be listed on that exchange.
Examples include minimum number of shares outstanding, minimum market
capitalization, and minimum annual income.
These requirements vary from exchange to exchange. Example:
Bombay Stock Exchange (BSE) has requirements for a minimum market
capitalization of Rs.25 Cr and minimum public float equivalent to Rs.10 Cr
whereas the London Stock Exchange has requirements for a minimum
market capitalization (700,000) .
Ways of buying and selling shares
Through a stock broker: They arrange the transfer of stock from a seller to a
buyer. Both the buyer and the seller of the share pay commission known as
brokerage to the broker.
Directly from the company:
1. If at least one share is owned, most companies will allow the purchase of
shares directly from the company through their investor relations
departments.
2. A direct public offering is an initial public offering(IPO) in which the stock
is purchased directly from the company, usually without the aid of brokers.
When to invest in a particular stock?
Fundamental analysis refers to analyzing companies by their financial
statements found in SEC Filings, business trends, general economic
conditions and the growth prospects of company's market segment. A few
parameters which are looked upon include Price to Earnings (PE) Ratio, Price
to Book Value ratio, Equity to Debt ratio.
Technical analysis studies price actions in markets through the use of
charts and quantitative techniques to attempt to forecast price trends
regardless of the company's financial prospects. A few examples include
Trend lines, Bollinger Bands, Oscillators etc.
Stock Market Index

 The movements of the prices in a market or section of a market are captured

in price indices called stock market indices. Such indices are usually market
capitalization weighted, with the weights reflecting the contribution of the
stock to the index. Examples of index include Sensex, Nifty, DJIA, S&P500,
Nikkei etc.
The constituents of the index are reviewed frequently to include/exclude
stocks in order to reflect the changing business environment.

Importance and role of the stock markets

Raising capital for businesses
Government capital-raising for development projects
Mobilizing savings for investment
Facilitating company growth through acquisitions
Creating investment opportunities for small investors
Barometer of the economy
Kinds of Trading

Intra-day Trading

Delivery based Trading

Intra-Day Trading

Buying and Selling on the same day

Brokerage will be different for intra-day and delivery based trading, intra-day
being lesser
Delivery Based Trading

Buying and Selling are on different days

Brokerage will be higher than intra-day

Their will be minimum delivery charges

What is fundamental Analysis?

Analyzing a stock based on the fundaments of the country, the sector, and
the company individually.

It includes going through balance sheet and profit-loss statement of the

individual company and checking various ratios.
3 Important Ratios

EPS :

PE :

P/BV

PAT Dividend/ No of shares

Present share Price / EPS
Present share price / Book value

What is Technical analysis

Forecasting the future direction of prices through the study of past market
data, primarily price and volume. In its purest form, technical analysis
considers only the actual price and volume behavior of the market or
instrument.
Some Tips to newbies

Execute couple of paper trades before you actually execute the real trade, we
have many simulators and games available now

Always follow strict entry and exit points

Always execute a limit order

Never buy and sell for full amount in one go,

Spread it across a range, it will give much better bottoms and tops

Never average a losing trade

STAGES OF STOCKS LIFE

Authorized sharesare the shares a corporation is allowed to issue.

Issued sharesare the shares actually issued and sold to investors.

Shares repurchased by a corporation are called treasury shares, or treasury

stock.

Shares purchased by stockholders are called outstanding shares, shares

standing out in the hands of the public.

STOCKBROKERS
An investor who wishes to buy stock will most likely place an order with a
stockbroker. A stockbroker is an agent licensed by the SEC to buy and sell securities
for clients.
A stockbroker who works for a full-service brokerage firm provides research
information, suggests investment strategies, and offers advice on market
conditions.

TIME IS EVERYTHING
When an order is placed with a stockbroker, the investor also must tell the
stockbroker how long that order should stand.
A day order tells the stockbroker to fill the order that day. At the end of the day,
the order is cancelled.
A good 'til cancelled (GTC) order stands until it is filled or until the investor cancels
it.

Conclusion
Stock means ownership. As an owner, you have a claim on the assets and earnings of a
company as well as voting rights with your shares.
Stock is equity, bonds are debt. Bondholders are guaranteed a return on their investment and
have a higher claim than shareholders. This is generally why stocks are considered riskier
investments and require a higher rate of return.
You can lose all of your investment with stocks. The flip-side of this is you can make a lot of
money if you invest in the right company.
The two main types of stock are common and preferred. It is also possible for a company to
create different classes of stock.
Stock markets are places where buyers and sellers of stock meet to trade. The NYSE and
the Nasdaq are the most important exchanges in the United States.
Stock prices change according to supply and demand. There are many factors influencing
prices, the most important of which is earnings.
There is no consensus as to why stock prices move the way they do.
To buy stocks you can either use a brokerage or a dividend reinvestment plan (DRIP).
Stock tables/quotes actually aren't that hard to read once you know what everything stands
for!
Bulls make money, bears make money, but pigs get slaughtered!

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