What precautions must one take before investing in the stock markets?

1. INVESTMENT BASICS

2. SECURITIES

3. PRIMARY MARKET

4. SECONDARY MARKET

4.1 INTRODUCTION

• What is meant by Secondary market?
• What is the role of the Secondary Market?
• What is the difference between the Primary Market and the Secondary Market?

4.1.1 Stock Exchange

• What is the role of a Stock Exchange in buying and selling shares?
• What is Demutualisation of stock exchanges?
• How is a demutualised exchange different from a mutual exchange?
• Currently are there any demutualised stock exchanges in India?

4.1.2 Stock Trading

• What is Screen Based Trading?
• What is NEAT?
• How to place orders with the broker?
• How does an investor get access to internet based trading facility?
• What is a Contract Note?
• What details are required to be mentioned on the contract note issued by the stock broker?
• What is the maximum brokerage that a broker can charge?
• Why should one trade on a recognized stock exchange only for buying/selling Shares?
• How to know if the broker or sub broker is registered?
• What precautions must one take before investing in the stock markets?
• What Do's and Don'ts should an investor bear in mind when investing in the stock markets?

4.2 PRODUCTS IN THE SECONDARY MARKETS

• What are the products dealt in the Secondary Markets?

4.2.1 Equity Investment

• Why should one invest in equities in particular?
• What has been the average return on Equities in India?
• Which are the factors that influence the price of a stock?
• What is meant by the terms Growth Stock / Value Stock?
• How can one acquire equity shares?
• What is Bid and Ask price?
• What is a Portfolio?
• What is Diversification?
• What are the advantages of having a diversified portfolio?

4.2.2. Debt Investment

• What is a 'Debt Instrument'?
• What are the features of debt instruments?
• What is meant by 'Interest' payable by a debenture or a bond?
• What are the Segments in the Debt Market in India ?
• Who are the Participants in the Debt Market?
• Are bonds rated for their credit quality?
• How can one acquire securities in the debt market?

5. DERIVATIVES

6. DEPOSITORY

7. MUTUAL FUNDS

8. MISCELLANEOUS

9. CONCEPTS & MODES OF ANALYSIS

10. RATIO ANALYSIS

Here are some useful pointers to bear in mind before you invest in the
markets:

• Make sure your broker is registered with SEBI and the exchanges and
  do not deal with unregistered intermediaries.
• Ensure that you receive contract notes for all your transactions from
  your broker within one working day of execution of the trades.
• All investments carry risk of some kind. Investors should always
  know the risk that they are taking and invest in a manner that
  matches their risk tolerance.
• Do not be misled by market rumours, luring advertisement or 'hot
  tips' of the day.
• Take informed decisions by studying the fundamentals of the
  company. Find out the business the company is into, its future
  prospects, quality of management, past track record etc Sources of
  knowing about a company are through annual reports, economic
  magazines, databases available with vendors or your financial
  advisor.
• If your financial advisor or broker advises you to invest in a company
  you have never heard of, be cautious. Spend some time checking out
  about the company before investing.
• Do not be attracted by announcements of fantastic results/news
  reports, about a company. Do your own research before investing in
  any stock.
• Do not be attracted to stocks based on what an internet website
  promotes, unless you have done adequate study of the company.
• Investing in very low priced stocks or what are known as penny
  stocks does not guarantee high returns.
• Be cautious about stocks which show a sudden spurt in price or
  trading activity.
• Any advise or tip that claims that there are huge returns expected,
  especially for acting quickly, may be risky and may to lead to losing
  some, most, or all of your money.