What is a Stop Loss order?

When you are holding a particular stock/F&O/commodity, you fear the losses that can happen when the price starts moving against you. If you place an order to limit such a loss it is called as a Stop Loss order. So for example, if you have bought a stock at Rs 100 and you want to limit the loss at 95, you can place an order in the system to sell the stock as soon as the stock comes to 95. Such an order is called as a Stop Loss, as you are placing it to stop a loss which could … Click here to continue…..

Strategies to save portfolio during major stock market correction

The term “save” indicates generating 5%-10% positive return from overall portfolio while market corrected by more than 50%. You can’t expect 20%-30% return while market corrects by 50%+. Even marginal positive return will be great during those situation. You need to take the following steps  during major stock market crash – You need to sell-off your entire portfolio much before such stock market crash and seat  in cash. Keeping huge cash in hand is another painful experience. For example, as per economic indicators and market data, one should sold-off his entire equity portfolio during October,2007. However from October,2007 to January,2008 … Click here to continue…..

What to do during minor stock market crash?

During minor stock market crash it is more of discipline that can save your portfolio. Followings are the disciplines and required action – Don’t sell-of your entire equity holdings to re-enter at lower level. Nobody in this world can predict short term market movement correctly. So, it may happen that after your sell-off market takes U-turn and you are not able to invest at lower level. You may end up with selling at lower level and buying at higher level. Further frequent buying and selling increases transaction cost (brokerage,STT,exchange fees etc) and taxes. You need to pay extra 15% capital … Click here to continue…..

How to optimize post tax returns

Tax on share trading can be reduced considerably by following certain Tax saving methods – Trading as business income: – If you consider your trading gain as “business income” then you have to pay tax as per your Tax slab. The benefit is you can deduct your trading related expenses from the gain. Suppose you made a profit of Rs 1,00,000 from equity trading and you fall into 20% tax bracket so you need to pay 20% of 1,00,000 as tax. However, this tax outgo can be reduced by showing related expenses or by adjusting loss from share trading. Expenses on internet bill, … Click here to continue…..

Income Tax on share trading

Income tax on share trading  depends on whether you are showing it as “Capital gain” or “Business Income”. Capital gain: If  you are trading in stock market as an  investor (mostly involved in delivery based trading), the gains from trading can be classified as: Long term capital gain: – If  equity shares are sold after 12 months holding then such gain is subject to tax exemption. However, the security must be traded an Indian stock exchange on which STT has been paid. Exemption on long-term capital gain tax is not applicable if the shares are sold on the exchange outside India. Long … Click here to continue…..

Difference between bonus issue and stock split

A bonus is a free additional share while a stock split is the same share split into two. Some companies accumulate its earnings in reserve funds instead of paying it to shareholders in the form of a dividend. This accumulated reserve fund is then allotted to shareholders as bonus shares in proportion to their existing holding. So, shareholders can get bonus shares in compensation of dividend. But when a stock is split, for example, 10:1, from Rs 10 FV to Rs 1 FV, there would neither be an increase nor a decrease in the reserves of the company. In a … Click here to continue…..

Stock Split

It is as simple as cutting an eight-inch pizza into eight slices from four slices. When a stock split is declared by the company the number of shares increases but the investment value remains the same as the number of pieces in pizza is increased but the size of pizza is the same:) Splitting a Pizza = Splitting a  stock split ! The stock is split with reference to its face value. For example, the Nestle’s face value is Rs.10, and there is a 1:1 stock split then the face value will change to Rs.5. If you had one share … Click here to continue…..

Bonus Issue

A bonus issue is a stock dividend, declared by a company to reward the shareholders. The bonus shares are issued out of the reserves of the company. In simple terms, these are free shares that the stockholders receive against the shares that they currently hold. These allocations typically come in a fixed ratio such as 1:1, 2:1, 3:1, etc. For example, if the Nestle declares bonus in the ratio of 2:1 ratio, the existing shareholders, will get two additional shares for every one share they hold at no extra cost. So if you own 100 shares of Nestle, then you … Click here to continue…..