Guide line before investing in the security market

The main motto to invest in the security market to get the better return than the general fixed deposit or the bank deposit .Security market is provide the good return but here the risk of investment is much higher than the other investment option. To reduce the risk factor some precaution needed.
Security analyst has taken some basic step to educe the risk .

1. Quality of Management:
Quality of the management help to achieve the company goal which help to get the better return and also help to increase the turnover of the company. In every company there is saturation point but the good management with new innovation are able to get the primary level again .

2. Overall growth prospect:
If you want to purchase any company shares than check the past performance of that company .
Its liquidity, financial result ,assets combination etc.
As I past performance is not always good to judge the future of any company but still it help to decide the primary level of investment.

3. Quality of Earning:
Quality of earning menace the financial result of the company from last few years ,also check the turnover ration which help to get the financial structure of the company.

4. Clear information of the corporate strategy:
This means to check the transparency of the company. If the company regularly provide the financial result ant the financial position information also provide the assets and debt information of the company which help to get the clear picture of that company it also help to make the right future prediction of that company. This help to get the information that where the fund investment and how much it invested.

5. Liquidity position:
Investment in the security is very risky so when anyone go for the investment in security market than its better to check the liquidity position of that company which help to get knowledge that if there is any financial problem arises than the investor get back there capital investment.

6. Position in the market place:
Market position help get the financial strength as well as the goodwill of th company ,Goodwill of the company some time major difference in the investment and the price of the security.
7. industry prospect:
Industry prospect means the growth strategy relation with the Govt and the society .Some time the Govt. promote some industry and on the other hand Govt. impose some extra duty on some other industry to reduce the import or to increase the export extra.

8. Relation with the investors.
Relation with the investors means the company provide all the material fact financial information in the regular interval to the investor .They paid the dividend and the interest as time period decided in the agreement and also company informed the investor the new business strategy which effect the earning of the investor.

Different types of bonds

Bonds are easily converted intro the liquid cash in comparison to other source of the invest . In financial market depends on the pure debt reduce with the introduction of the different means of bonds. Main category of bonds are:

Secured and Unsecured bonds:

Secured bonds are backed by the assets that means the secured bond holder has the right sell the property related to the bond to get the amount back .Unsecured bonds doesn't arise any right of the holder of bonds on the assets o the company.

Convertible and non convertible bonds:

Convertible bonds are those which converted in the equity shares after the maturity period. Non convertible bonds carry interest on the investment portion its not transfer into equity shares.

Bonds market innovation:

Now a days the pure debt rarely used to collect the funds as this arise financial burden second one that the debt fund collected by any industry need to follow many rules and regulation as well as the restriction by the Industrial governing body that debt capital collected up to limited amount.

In the financial market there is new way of fund raising system invented which reduce the dependence on the pure debt.

1.Zero interest rate Fully convertible bonds:

Here the interest rate is 0 and the bonds converted into the equity shares after the maturity period .

Example: Suppose the market value of the bonds is rs10 after maturity rs 100 bonds converted into the 2 equity shares of rs35 each with premium rsrs30 on each.

2.Detachable Equity cu pons:

Here the bonds holder get the detachable equity cu pons which they transfer into the equity shares aft6er maturity or they are able to sale the detachable portion in the market.

3.Secured Premium Notes:

Here the investors get the flexibility ,that after a 4 or 7 years the investors are able to go for the equity transfer with pay the remaining amount or go for the nonconvertible portion with getting interest as well as capital appreciation .

4.Triple option convertible bonds:

Here the investor get the fully transfer option at the maturity of the bonds or go for non transferable option or get third one transfer the half portion into the equity shares and remaining in nonconvertible portion get the interest on that.

5.floating rate bonds:

This bonds interest rate changes with change in the market interest rate therefore these bonds are called floating rate bonds.

6.Extendibles Bonds:

Extensible bonds are those bonds,where the maturity periods are more than one here the issuer extend the maturity period with the changing market condition. If the interest rate arises than the holder can increase the maturity periods on the other hands if the interest rate reduce than the holder has right to sell the bonds.

7.Foreign currency bonds:

In this bonds the issuer country collect money from the homeland bonds holder and issue the foreign bonds this bonds help to the holder to get the benefits of the higher interest rate of the foreign country .

These bonds are know as Bulldog in UK and Samurai in Japan.

8.Govt. Bonds:

Govt. collect the debt amount to fulfill the gap of the fiscal deficit ,demand for the Govt. bonds is now a days increase as this is the safes means of investment.

9.Inflation rate bonds:

Now a days the European and the American market arise the funds by issuing the inflation bonds the market value of these bonds increase with the inflation,and the interest rate also provide a good source of income.

A New Way to Collect The Debt Fund(Convertible Debt Bonds)

Convertible debt is one of the hybrid investment where one can invest in the debt bonds and these debt bonds transfer to equity shares on the later period.
Debt bonds help to get the debt for long period of time as well as it not arise any liquidity crunch situation among the company to return the cash on the maturity of the debt bonds.
US and the Japan are the two largest debt bonds market in the world.
What are the basic need that a company use convertible bonds or convertible debt bonds,company wants to get the finance with lowest cost and debt bonds fulfill that also it help to arrange debt finance for long period of time.

According to the transfer norms convertible bods divided in the different categories:
1.Issuer terms based:
I used this terms as these bonds are converted into the equity on the maturity but the conversion depends on the will of the issuer. If the issuing company does want to transfer the debt bonds than its pay the amount on cash to the holder with interest on it.

2.Conversion on the third party shares:
Generally this is not a convertible bonds as because the issuer company issue any third party shares to the holder in place of its own shares . This type of convertible bonds issued by the newly opend company .

3.Mandatory convertible:
This is the actual convertible bonds where the issuer company transfer there convertible portion on equity shares after the maturity period.
4.Cash payments:
Here the issuer company paid the amount as per the current market value of the bonds with the interest amount or paid more amount than the actual market rate .

5.Issue of the old or new dividend based bonds:
Here the issuing company has right to issue the shares based on old or new dividend rates.
6.Partial convertible bonds:
The issuer company transfer a fraction amount to the bonds to the share and paid the remaining amount as cash with interest on it.

7.Issue of the holding company shares:
Here the issuing company transfer the bonds on the holding company shares ,these issue help to get the AAA rated company shares by the investor .
8.Reverse convertible:
Reverse convertible is actually one type of extension of the maturity period by the issuing company on the maturity date of the old bonds.

Uses:
1.Long term borrowing:
Issuing company arrange the finance for a long time ,because the convertible debenture maturity period some time more than 5five financial years.
2.Low cost of borrowing:
The cost of borrowing is less than the debt borrow ,here the interest rate calculated on the bonds but paid on the maturity as well as the company no need to pay the liquid cash on the maturity period ,they only transfer the amount on shares.
3.Voting Right transfer:
voting right transfer only when the equity shares given on the conversion but if the preference shares issue than the no voting right transfer to the holder of the shares.

4.Help to collect the huge amount by debt:
There is certain condition that a company cannot raise fund by debt after a certain amount but the convertible debt bonds help to get extra amount from the market.
5.Tax advantage:
Tax calculated on the net profit of any company but the interest on the convertible bonds deducted before the tax deduction.

Some Basic Steps For Shares Or the Bonds Transfer

Transfer of shares has some criteria need to follow. If all the criteria not followed than the shares transfer become void .

1.Proper Documentation:

All the shares certificates and document transfer in the name of the purchaser.

If the all relevant proof of documents are not present than it require to inform the Bord of Directors to prepare the document in the name of the purchaser .

2.Proper Stamping:

All the relevant document are properly stamped before its transferring .

3.Verification by the Registrar of the Company:

All the relevant documents should be presented before the registrar of that company for its verification this time period within the 2 months but in some cases extended by the central Govt.

4.More than One Receiver:

If there is more than one receiver than all of them need to signed in the transfer paper with there detail of holding percentage.

5.Joint Holder of the Shares:

If the shares and bonds are jointly owned ,than everyone need to signed documents for approval of the transfer of the shares certificates.

Special cases of the Transfer of the shares certificates:

1.President of a country or Limited company:

The nominee of the president or the nominee of the Bord of Directors of any company can sign for transfer of the shares certificates in the name of the other party.

2.Minor Case:

in case of the minor holder the nominee or the guardian can sign the transfer certificate .

3.Power of the attorney holder;

The power of attorney holder of any Company have the right to make the transfer deal and signed in the transfer certificates.

4.Lunatic holder of the shares:

Lunatic people are not able to sign the transfer deed of the documents ,the legal guardian or the nominee make the transfer and signed in his or her place.

5.Shares transfer by any Trust:

In case of the shares transfer by th Trust trusty has the right to signed in the transfer documents as per the law.

6.Limited Company:

In case of the Limited company the Bord of Directors of the Company has the authority to tarnsfer the shares or the nominee appointed by the Board has the right to signed in the tranfsert deeds.

7.Liquidation Case:

In case of the liquidation the Liquidator appointed by the Govt. or by the Court has the right to signed in the transfer deed.

8.Claim of the Tax authority on the move able assets:

If the tax authority has lump sum tax due and the shares has in the control of the tax department than the Tax commissioner has the rights to signed in the transfer certificates.

Special cases of share transfer:

Cu-pons and Certificates transfer : Cu-pons and share certificate are different things. Cupons are issued and after submitting the cu-pons share alloted to the holder the cu-pons transfer no need any kinds of documentation like share transfer.

Transmission:

Shares transmitted to the other family members of the family in case of the death of the owner. In case of the partnership business the shares transfer to the other lived partner. In case if the holder of the shares made any will than this shares transfer as per his guideline.

Insolvency:

In case of the insolvency the Insolvent-or appointed by the Govt, has the right to dispose the shares,and sign the transfer deeds.

Lunacy:

In case of unsound minds the legal guardian and the nominee appointed by the court has the right to transfer the shares.

Step should be consider before the investment in the Mutual Funds company

Mutual funds investment now days get the important means of investment as it gives higher return with low risk in comparison to other mens of investment.
Some criteria are decided to go for the mutual funds investment :

Suitability: Before investing in mutual funds you need to decide that this is the right means of investment and also suitable with your requirement and fulfill the condition which you want .
Level of risk:

Level of risk: Mutual funds pay the good return but it doesn't means it risk free investment , risk level not ignore .Than it require that you decide how much risk you can afford, because there is interest risk capital risk due to reduce in price value of the bonds the market go down ,than also the investor lost there money which invested in the mutual funds, therefore the investors need to first select how much risk level he can afford.

Investment objective: When any investors invest in the mutual funds he first decide the objective of investment. Objective means he prefer the growth means want to get the capital profit on redemption or prefer the increase in the income by dividend on the investment.

Funds performance:Funds performance check by the past record of the funds,but its also true that past trends cannot decide the future performance. Past trends only help to check the performance ad some situation,it also helpful.

Funds portfolio:Before investing in any mutual funds scheme ,investor need to check the portfolio combination. Where the funds invest its funds.
Funds objective: Funds objective means Funds invest total investment in particular sector or in specific industry and there is any deviation the investment trend in the near future or not.
Diversification of investment base: It also needed to check that fund change it investment policy regularly which is not good in point of view of investment return .Regular diversification show that the investment is not earn long term gain in the market.
Transparency : Check that Mutual funds company regularly produce his financial report in media also send the news letter to the investor also the detail of the investment and income report available at all of its branch office.
Discloser:Mutual funds disclose all its material facts and policy to the governing bodies appointed by the govt. to look after the performance of the mutual funds there is no hidden agenda or investment.
The main goal of invest is getting good return get when we sell the investment therefore there is need to check that mutual funds sell there investment at regular interval and maintain th profitable business by selling except in some cases when market goes down. When we decide to sell the funds:
Regular under perform by the Funds: When the fund company market value regularly reduce than it better to sell the funds to minimize the capital loss or to save from further loss.
Drift in investment style: suppose the mutual funds company change his investment pattern and invest in different avenue than the path of investment mention in the rules and regulation book of that Mutual funds than its better to sell the portion of investment.

Consolidate : Means to get return or collect the funds from the sale of the investment.

To earn the tax break:If anyone want to get the tax benefits investment than go for the tax saving plan or to invest in the equity where the investor get the tax benefits on the investment.

Govt. Bonds is safest way on investment

Govt. security or treasury bonds, now a day gives a good return and it’s also a safe investment, there is not a issue to loss capital due to adverse condition.

Future for the treasure bonds also goods as interest rate reduce day by day and there is not any symptom in the market that Govt. increase the interest rate in the near future, In that market scenario, the bank deposit reduce and money comes in market and the increased money flow in the market increase the inflation situation and also affect the purchasing power of the currency.

Govt. issues this security bonds in the market not only to reduce inflation pressure but also to meet the fiscal deficit.

Now the question arises what is the fiscal deficit?

Govt. makes different development plans and also invests in defense and other research programme, there is no other option to reduce investment or neglect any one of this sector, but the actual investment in these means most of times more than the revenue generate by the govt.

To meet this extra expenditure Govt. need to take loans from the world monetary funds or raise money from internal sources.

Loan taken from world financial institution not good from any respect because some time world bank of International Monetary Funds impose different terms and condition on the country to use such fund on a related field also these institution demand to concentrate on specific field of economy and they also want the total detail of the use of that funds which is never appreciate because it disclose many financial plan of the economy which need to kept secret for the development, or economic growth.

Than there is only one way to raise money by the issue of the Govt. security.

Budget deficit of US govt. in 2010 is$1.57 trillion and in 2011 it will be$ 1.267 trillion.

Advantage of the Govt. Bonds:

1. Safe means of investment: Govt. bonds are the safe means of investment. Govt. bonds market value not change as like other investment avenue, it is the safest way of investment.

2. Liquid cash transfer: Govt. bonds easily transfer into liquid cash as per requirement, by mortgage it to any bank or to sell in the open market.

3. High interest rate: Govt. bonds interest rate not change with the change in market situation that means if you invest in one interest rate till the maturity you got the same interest rate benefits. Interest rate in the Govt. bonds higher that the bank deposit or other investment plan.

4.Capital gain : Govt. bonds market value not reduce as like any other means of investment .Investor always get better return after maturity of the bonds.

5. No need to maintain Portfolio investment: Govt. bonds are most safe way of investment, you don’t need to invest in different means of investment or maintain the portfolio management to minimize the risk of investment.

6. Good future prospect: As per the economic situation the market demand for the govt. bonds increase, as the reducing rate of interest and development of infrastructure Govt. need huge investment in future which means Govt. collect that money from issue of the bonds.

Precaution step taken before investment----

Investment is a risky work if you want to get high return than definitely you need to ready for high risk, lower the risk lower gain, but some precaution will reduce risk or minimize the risk.
First you need to understand why investment is required.
Suppose you have $10000 today but the purchasing power of $10000 is reducing with the time .Investment help to maintain the marginal value of money.
Second you have a requirement $50000 after 10 years and you save from today to get this amount .In every year you need to reserve $5000 to get the amount $50000 after 10 years ,or you need to deposit a certain amount today in any bank to get the
$50000 after 10 years, in any one this condition you are not benefitted by the market change, or $5000 every year not help your money to get extra advantage ,on the other hand if you invest $5000 every year in any investment plan which is quite necessary that as liquid that ,you easily converted that investment in liquid cash than you are getting extra benefit from your saving .suppose I purchase $5000 share of a company every year and after 10th year when I need the liquid cash than I sell the whole share in that time and the whole investment arise near about $ 70000 that means I get $20000 extra.
Again the investment depend on the basis or requirement suppose You need cash money or need equivalent amount to pay to any other after a long period of time .
Suppose you need liquid cash on maturity than you definitely go with the option when the liquid cash easily available after maturity like debt bonds investment.
Debt bonds issued by the Govt. or any other financial institution to collect money.
This amount converted into cash after maturity, here the interest rate is also high compare to normal market but the risk factor is also high.
I will never advice anyone to invest his total reserve in any single investment plan .First I suggest That if you have a surplus amount of reserve than you go with the investment plan, you never go to invest your total income in the investment plan if do to any reason market down than you lost your total amount at one time.’

Steps that need to monitor before investment:

1. Risk taking ability: First you need to decide how much financially strong you are, if you are financially strong than surely your risk taking ability higher than other.
This ability varies with age group with reserve amount with market condition.
People from 30to40 age groups are risk averse they not ready than the 40 + people.
Market ups and down will also affect the investment plan if market continues upward trend than surely the investment increase in the market, and vice versa in opposite Condition .
2.Interest rate :Interest rate in the market change the investment, suppose if the interest rate high than the investment reduce ,people choose to deposit the amount and get the interest on the deposit amount, but if the interest rate low than investment increase in the market.
3. Past trend: Past financial result of any company would help to collect money suppose the company show good financial result in the past definitely, investore go for that company for investment, but as per my point of view I will never recommend anyone to invest based on the past record.

4. Economic policy of the country: Open market economy will attract the investor, on the other hand autocratic or the socialist plan distracts the investment.

5. Future plan: Future prospect of any company is help to understand the future trend and help to make the future projection for that company .I will recommend anyone to select the investment plan as per the future prospect, which help to know the actual financial position of the company in future.

5. Liquidity position: If you want to invest in any plan first need to decide the liquidity position because if the company does have adequate amount of liquid cash than might be possible you loss your money.

6. Time period of investment: Never ever make any decision of investment or disinvestment by regular changing situation of market always go for long term investment plan which help to get better return.

7. Portfolio investment system: Never put your eggs in single basket, mean to say never invest in any single company of the investment plan .Invest indifferent sector of investment which helps to reduce the financial risk.

New Era of Global Investment

Return from the Asian market continues increase on other hand devaluation of dollar arise a fear of capital loss among the investor.

Is it the right time invest in the Asian countries and get the maximum return.
Yes its true that that Asian economy play a major role in the world economy, the boom of Chinese, India, and other east Asian countries attract all foreign investors , and the Yuan, rupees now as gained much value in the world market.
As per the US financial statistic ,Chinese economy now the third largest economy and Indian economy comes in the 6th spot ,but in the future the Chinese economy cross the Us economy and become the biggest economy of the world and India become the second largest the time frame set for this phenomena ,2025 .
The reason behind this prediction is that when the whole world facing the recession only these two Asian giant not affect much by the world recession .Other countries reduce their manpower in factory for cost cutting on the other hand, Indian and China generate new employment opportunity.
If India and China maintain the same economic growth than it’s not a big task for these economy to get this position, but it’s too early to predict that the time come to invest in the Asian market, because we never forget the downfall of Asian Tiger in mid 90s.
The growth of the Asian market total depend on the growth of the Japan as Japan is the largest economy in the Asia, and yen play big role in the Asian market, also the growth of the Asian market directly or indirectly depends on the Japanese economy but there is no sign of revive in the near future by Japanese economy.

But there is second aspect too, one time the total world economy depends on the US for there growth but now the scenario total changed.
After World War 2, dollar become the world currency and the Asian European countries directly or indirectly depends on the US export for getting the foreign currency.
Japan became one of the big economies, because after 2nd World War Japan become the biggest trading partner of US .Demand for the Japanese electronics; cars increase 10 times more than the pre War time.
GM loss there US market but the Japanese Toyota, Honda, Mitsubishi, Nissan get the new market and their demand increase many times than before.
Japanese companies also used the dumping system to increase there market share, and therefore the US market filled with Japanese electronics.

Not only Japan Euopean Union also export the 1/3 portion of total export only to US, Middle countries also export most part of there petroleum to the US.

In the present economic world, China and India’s demand for energy increase multiple times than before, these two countries require energy for their industrialization.
Economic growth of India, China, Egypt and other East Asian countries gives the new market to the world.
Indian become the biggest mall car producer in the world, new middle class population of Indonesia and China demand more luxuries goods for consumption and the demand much higher than the actual production of consumer durable goods ,therefore all big consumes producing companies open there factory in India and China.
Indian stock exchange cross the mark of 16000 points.
Main points to concentrate when invest in any Asian country ----------


1. Security issuing companies liquidity position, that industry capable to return or not.

2. Check the interest rate of that country is it fluctuate according to market or not.

3. Influence of the Govt. on the foreign investment, because the autocrat govt. impose restriction the payment of interest on foreign investment, which done in past by the Malaysian and Indonesia in past.

4. One more thing that high return means high risk but try to invest in AAA rate or in the blue chip companies to reduce the market risk.

5. Last but not the least to use portfolio management than to invest in any single industry.