How to Invest? Investing in Shares (Stocks) and Mutual Funds

The Stocks and Shares shop, Leeds

The stocks and shares shop, Albion street, Leeds, a part of Redmayne Bentley stockbrokers. Picture taken on the afternoon of Saturday the 16th of January 2010.
The stocks and shares shop, Albion street, Leeds, a part of Redmayne Bentley stockbrokers. Picture taken on the afternoon of Saturday the 16th of January 2010. | Source

Why investing? How to invest in stocks (shares) and mutual funds?


These are valid questions. It is again more important where to invest? Whether investing in Mutual funds or in stocks? The questions are more important in the present time of economic crisis. Financial problem has stormed over almost everyone.

If we search for the root cause of the American economic crisis and the financial problem we find a trend of over expenditure. American people have been spending continuously more than their means. Banks and financial institutions had also been issuing credits to them in an anticipation of ever growing the market and individual income since decades. However, everything has an end.

The bubble is burst and the American economy has shocked with sub-prime crisis. Failure of major financial institutes has intensified the problem. Now everything is in a downtrend. There are few or no buyer for real estate. Stock markets are crying for liquidity. US $ 700 bailout plan of the Federal Government does not work.

The answer to the root cause of the problem is that most of the American people did not save and invest. It is not the earnings that make one rich but it is the saving that makes. We grow rich when we learn to convert savings into great investments says Robert Kiyosaki in Rich dad Poor dad.

Mutual funds and shares (Stock) are major tools for investment. Economic advisers normally advice for investing in diversified funds. Investors generally have mutual funds, equity shares, fixed deposits, bonds etc in their portfolio.

Investing in Shares or Mutual funds?


Great investors use these financial instruments intelligently and mint money. Investments do not only need money but financial education too. One has to know the techniques of investment. Financial intelligence is the key word of investment as per Robert Kiyosaki (Cashflow quadrant).

The investors who have little or no knowledge of financial instruments may opt for mutual funds. The fund managers are educated and skilled professionals. They are equipped with knowledge of the market. They do research works for the market and take appropriate decisions of investing or disinvesting funds on behalf of their clients. Mutual funds keep some percentage of profit and pass out the rest to their clients. Though all derivatives have exposure to market risks, mutual funds are comparatively safer.

They used to have huge funds, access to local and foreign markets, the capacity of hiring top professionals and management capabilities. Many times foreign stock markets are better than local. It is very difficult for an individual to have all these facilities. Moreover, it is impossible for small investors and newbies in this field. Hence, it is advisable for the starters to begin with mutual funds. The beginners can also diversify their funds both into mutual funds and shares.

(Starters may also opt for bonds, fixed deposits in the banks and financial institutes, Gold and Silver. However, this is not the topic of present article hence excluded)

Smart players play mainly in shares.They are smart enough to smell market trends. They also have big risk bearing capacity. Generally, they are trained and well-experienced individuals and groups. They have already acted with their investments in bonds, mutual funds etc.These provide them both with liquidity and safe income that enhance their risk-bearing capacities.These smart investors earn huge money both in bull and bear markets. There is no doubt that money flows to them from all sides.

Mutual Fund sales growth from 2004 to 2013

Mutual Fund sales growth from 2004 to 2013
Mutual Fund sales growth from 2004 to 2013 | Source

Asset class wise holdings in mutual fund industry

October 2013 statistics of asset class wise distribution of the mutual fund industry in India showing overwhelming reliance on Debt.
October 2013 statistics of asset class wise distribution of the mutual fund industry in India showing overwhelming reliance on Debt. | Source

Experts suggest


Some newbies look them minting money and jump into the unknown and dangerous zone of share market. They go there out of their greed and innocence. They want to make money overnight that is not possible in general. They normally loose huge money in the share market.

Sometimes they loose everything they have. The situation becomes worse when they invest with borrowed money with a great hope to become a millionaire or even a billionaire. They live in fool's heaven and make big losses. Their dreams generally turn into a big fuss. The article is intended to save them from big losses. I will be glad if this article will help them.Experts suggest some simple tips to follow:

1. Newbie should invest in bonds and mutual funds and gain experience.

2. If they want to invest in shares they should do it carefully. It is better to consult professionals or experienced persons in the field. A small ratio of available funds may be invested in shares and the major portion is to be kept in bonds and mutual funds.

3. It is better to Watch the market trends regularly and listen to experts. Learn to read economic and financial data. Read documents carefully before investing. Try to understand writings between the lines. Manage your funds judiciously. Do not be overenthusiastic.

4.. Learn and acquire financial skills. Be financially intelligent. There is no alternative of knowledge. If you have knowledge, control over yourself and if you are financially intelligent money will start flowing towards you.

So be smart. Wish you best of luck in the stock market.


Investment quiz

Request


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Disclaimer: ( The writer does not guarantee a profit from any investment. The hub is based on reading materials available in hard and soft copies and consulting experts. Readers should check it. Investments are subject to market risks and one has to take his own decision. The author is not and will not be responsible for any loss or damage).

Where should you go for a low risk investment?

  • Bonds
  • Mutual funds
  • Equity shares
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Comments 14 comments

vrunip 4 years ago

heya this hub is really good...though i m nt an investor i m a student of bba(finance) so good to knw this stuff n also it wil be helpful to me in ma near future....

thanks ya


trade4target 5 years ago

Good covered point, lots of people simply put something weired theories in front of public.

But it doesn't work i think because know one sure how it will going to happen

It looks like just coping ideas which someone has already written. I found even on

popular blogs guest bloggers bring same theories which I already know. I observed they

just try to spice up their article without knowing what really audience want to read.

trade4target


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Neil,

Thanks for visiting the hub and for your comment.

Jyoti Kothari


Neil Ashworth profile image

Neil Ashworth 6 years ago from Ireland

Great hub!!! Love it..


Indian lady 6 years ago from India

Hi,

Newbies should start with mutual funds and then opt for shares. Start investing in shares is dangerous.

Investing in shares and mutual fund is very informative hub.

Thannks,

Indian lady


David Johnson 7 years ago

Jyoti,

The hub investing in shares and mutual funds is a good one for the starters.

It will help the newbies and they will restrict themselves from jumping to stock market and loose money in shares.

Thanks,

David


JYOTI KOTHARI profile image

JYOTI KOTHARI 7 years ago from Jaipur Author

Hi Lily,

Those who have knowledge of financial products acn go like this. Otherwise it will be proved very risky.

Jyoti Kothari


Lily 7 years ago

Jyoti,

I feel equity as safe tool because I have full control over buying and selling it. Good info.

Lily


JYOTI KOTHARI profile image

JYOTI KOTHARI 7 years ago from Jaipur Author

hi Josephine,

thanks for commenting. How does this hub help you in deciding your investment? I wish, may crisis over soon.

Jyoti Kothari


Josephine 7 years ago

Hi jyoti,

I am facing heat of economic crisis and struggling with my investments. this hub will help me in decieding my investments.

thanks for nice tips.

Josephine


JYOTI KOTHARI profile image

JYOTI KOTHARI 7 years ago from Jaipur Author

Thanks for comments. This is the right education and financial intellegence. Congrats!

Jyoti Kothari


Bhrat Sharma 7 years ago

Investment is a technique that one should understand. I not very educate but know this. I earning in bull and bear market both.

This hub present same theory. good. very good.

Thank you


rajakrsnan profile image

rajakrsnan 7 years ago from Bangalore

"It is not the earnings that make one rich but it is the saving that matters. We grow rich when we learn to convert savings into great investments."

Jyothi I agree with the above statement you made. Earnings do not make anyone rich. Even just saving will not do. Savings need to invested taking into account the kind of risk one will take to multiply it over a period time.

I prefer share for all my investments except where I have to go for tax savings, i take the ELSS route, that is MFs.

Educating oneself continuously about what one does will help in times of crisis. Every investor should understand what risk is and act accordingly.

Good post. Expecting more in coming days.

Cheers!


guidebaba profile image

guidebaba 7 years ago from India

Thank you Jyoti for answering my request and for this excellent explanation.

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