Basics of-stocks-and-investing

Introduction to Stocks and Investing

:- Ved Prakash Pandaa

Objectives

• Explain What is a Stock

• Explain the Types of Stocks

• Explain the Classification of Common Stock

• Describe the Role of Beta in Your Portfolio

• List the Various Stock Screening Criteria

• Explain the Types of Analysis in Stock Trading

• Explain the Ratios for Valuing Firms

• List the Criteria for Choosing a Broker

• Explain the Common Stock Investing Strategies

• Explain the Steps of a Typical Stock Transaction

• Explain How to Read Stock Quotations

• Explain the Calculation of Price-to-Earnings Ratio (PE)

• Explain the Key Terms of Stocks and Investments

• Describe the Rights of a Stockholder

• Describe the Various Investment Options

Introduction

Peter Looney works as an executive.

For a long time, Peter has felt that he should invest the extra amount of money

that he makes from his job.

Introduction

He has been saving in cash form for a long time.

However, he wants that he should use the saved amount to invest in something that could help him multiply his money and help grow his finances.

Introduction

Peter has always thought of starting a business venture to grow his money, however, he is greatly averse to the huge amount of risk involved in any business venture.

So, Peter starts asking advice from his colleagues about what possible investment options are available in the market.

Introduction

George, one of Peter’s colleagues, advices him to invest in stocks and mutual funds.

Stocks are the capital raised by a corporation through the issue of shares entitling holders to an ownership interest also known as ‘equity’.

Introduction

Mutual funds are an investment vehicle made of pool of funds collected through a regulated investment company from many

investors.

This pooled money is then used for the purpose of investing in securities such as stocks, bonds, money market instruments

and similar assets.

Introduction

Money managers operate the mutual funds by investing the fund's capital and attempt to produce capital gains and income for the fund's investors.

George tells Peter that by investing in stocks and mutual funds, Peter can earn a small share of the great profits that big and successful organizations make for themselves and their shareholders.

Introduction

George tells him that although Peter will get to enjoy a part of the profit made by the organization, he will be spared of the hassles of running a business on his own, and also will undertake a much lesser risk than if he would have to run a business on his own.

Therefore, although stocks and mutual funds would help Peter to multiply and grow his money, he would be able to do so by taking advantage of the stability and experience of these fast growing and stable organizations that have been operating and making profits for decades.

Introduction

George also adds a word of warning for Peter.

He tells Peter that the most important thing that he should keep in mind while investing in stocks and mutual funds is that he should determine the maximum risk that he is willing to take.

Introduction

Peter should always make sure that he never invests more than his risk taking

capacity.

George assures Peter that if he takes calculated risks and invests wisely; then

stocks and mutual funds prove to be a very lucrative way of growing his money.

Introduction

Therefore, you can understand that investing in stocks and mutual funds are a great way to multiply and grow your money by undertaking calculated amount of risk according to one’s own risk taking capacity.

Let us learn about stocks and investing in detail.

Objectives
















What is a Stock?

• Any business needs money or capital whenever it has to start its operations or expand its business operations.

• Thus, in order to raise this capital for a business start-up or expansion, the corporation would offer shares of stock for sale to the public.

What is a Stock?

• By selling these shares or stock to the public, the company is able to increase its finance reserves and also get the necessary funds to start operations or expand its operations.

• So, any individual who purchases a ‘share’ or ‘stock’ of a company becomes a part owner of a portion of that company, based upon the number of shares purchased compared with the number of shares that make up the company’s total stock offering.

What are Stock Exchanges?

Why Stocks should be in Your Portfolio?

• It has been found over several decades that, as an asset class, common stocks have outperformed all other major asset classes.

• Also, stocks deliver strong long-term capital gains.

• They prove to be one of the best and most tax-efficient types of return.

Why Stocks should be in Your Portfolio?

• You should include stocks in your diversified portfolio because the individual stocks in a diversified portfolio can reduce the overall risk of your portfolio.

• Dividends and capital gains are taxed at a lower preferential federal tax rate and so if tax planning is done wisely, then stocks can prove to be tax-efficient assets.

Objectives
















Preferred Stock

Common Stock

Let’s look at each in detail.

There are two main types of stocks that are offered by any company such as follows:

Types of Stocks

Common Stock

Common Stock is a ‘voting stock’. Hence, any individual who has purchased the common stock of a company is entitled to vote for appointing the officers of the company and it’s Board of Directors. Thus, common stock is the ownership share in publicly held company.

Common stock holders have a residual claim on a company’s assets. Each common stockholder or shareholder of a corporation is entitled to certain rights and obligations. Thus, each common stockholder has the right to vote. Moreover, if a common stockholder is not able to vote in person, he can give a written consent to give permission to someone else to vote on his behalf as a proxy.

Common Stock

Preferred Stock

‘Preferred Stock’ as the names suggests has a preferential position over common stock. Therefore, during the payout of dividend to share holders, it is first paid to preferred stock owners before common stock holders.Preferred stock is also ownership shares of a company.

However, it differs from common stock because in preferred stocks, the dividend is guaranteed and paid before dividends on common stock are paid. On the other hand, if profits of the company increase, the dividend for preferred stocks isn’t increased accordingly.

Preferred Stock

Large Capitalization /

Large Cap Stocks

Mid Capitalization / Mid Cap Stocks

Small Capitalization /

Small Cap Stocks

The following are some of the key asset classes for common stocks:

Key Asset Classes for Common Stocks

Large Capitalization /

Large Cap Stocks

Mid Capitalization / Mid Cap Stocks

Small Capitalization /

Small Cap Stocks

The following are some of the key asset classes for common stocks:

Key Asset Classes for Common Stocks

Large Cap stocks are stocks of companies with market capitalization (shares outstanding times’ price) of greater than $10 billion.

Mid Cap stocks are stocks of companies with market capitalization of between $2 billion and $10 billion.

Small Cap stocks are stocks of companies with market capitalization of less than $2 billion.

Objectives
















Classification of Common Stock

Common stock can be classified as follows:

Blue-chip Stocks

Growth Stocks

Income Stocks

Cyclical Stocks

Defensive Stocks

Value Stocks

Let us look at each in detail.

• Blue-chip Stocks:

o ‘Blue Chip Stock’ is a stock that is issued by a large, stable, mature company.

o This is not a specific list, but changes over time.

Blue-chip Stocks

Blue-chip Stocks

• Growth Stocks:

o ‘Growth Stock’ is the stock that compensates investors primarily through increase in value of the shares over time.

o These are issued by companies which are growing faster than average and which generally reinvest dividends.

o They generally have higher PE and PB ratios than the market as a whole.

Growth Stocks

Growth Stocks

Value Stocks

• Value Stocks:

o Value Stocks are issued by companies which are less expensive compared to the market.

o They generally have lower PE and PB ratios than the market as a whole.

Value Stocks

Income Stocks

• Income Stocks:

o ‘Income Stock’ is the stock that compensates investors primarily through the regular payment of dividends.

o These are issued by companies which pay dividends regularly.

Income Stocks

Cyclical Stocks

• Cyclical Stocks:

o ‘Cyclical Stock’ is stock exhibiting above-average sensitivity to the business cycle.

o These are issue by companies whose share prices move up and down with the state of the economy.

Cyclical Stocks

Defensive Stocks

• Defensive Stocks:

o ‘Defensive Stock’ is a stock that is relatively insensitive to the business cycle.

o These are issued by companies whose share prices move opposite to the state of the economy.

Defensive Stocks

MCQ

Q. Which of the following is a stock issued by a large, stable and mature company?

Click on the radio button to select the

correct answer!

MCQ

Q. Which of the following is a stock issued by a large, stable and mature company?

Objectives
















What is ‘Beta’?

Interpreting Beta

It is very important that you understand how to interpret ‘Beta’ to understand how a stock is behaving with respect to the movements in the overall market.

Interpreting Beta

The following are some important points that you should bear in mind while interpreting ‘Beta’:

If Beta < 1.0 = This means that the stock has less risk than the market. Therefore, a stock with Beta < 1.0 will move less than the market.

If Beta > 1.0 = This means that the stock has more risk than the market. Therefore, a stock with Beta > 1.0 will move more than the market.

If Beta = 1.0 = This means that the stock has the same risk as the market. Therefore, a stock with Beta = 1 will move with the market.

Role of Beta in Your Portfolio

• •

The ‘Beta’ indicator plays a crucial role while selecting the stocks that will make up your portfolio.

Hence, when you build a portfolio, you should always track the beta of your portfolio. The ‘Beta’ of your portfolio is the weighted Beta of each of your stocks or funds in the portfolio.

So, this weighted ‘Beta’ or the ‘Beta of your portfolio’ will indicate and show you how risky your portfolio is versus the market.

•

Role of Beta in Your Portfolio

• • •

You should always keep in mind that a diversified portfolio moves with the market. So, in a diversified portfolio, you will feel less effect from one company.

Hence, it is crucial that you should always be diversified in all your investments.

So, you should diversify by buying a broad array of financial assets.

You should not only invest in large-capitalization stocks, but also broaden and deepen your portfolio by buying international stocks, small cap stocks, etc.

•

Understanding Leverage

1 • ‘Leverage’ is another important concept while learning about stocks and investing. ‘Leverage’ is the process of increasing your purchasing power by borrowing money to invest in more assets.

2 • Therefore, it is very natural that the ‘Leverage’ increases your risk as you invest more than your own financial capacity by borrowing from others.

3 • Also, when you borrow money for investing the rate of return on the loan is fixed, however, there is no fixed or guaranteed rate of return on your investments.

Understanding Leverage

4• As a ground rule, you should always keep in

mind that you should ‘never’ use leverage to invest. Leverage is as pure and simple as an ordinary ‘debt’.

• Therefore, Leverage magnifies capital gains and losses.

6 • So, if you want to invest a larger amount, then the best thing that you can do is saving for making the larger investments but never borrow money for it.

5

Costs of Investing in Stocks

• Hidden Costs

• Explicit Costs

• Implicit Costs

It is crucial for you to understand that there are a few major costs of investing in stocks.

Also, the costs of investing in stocks can be divided into the following three major types:


• Explicit Costs

Explicit Costs

‘Explicit Costs’ includes the costs that are reflected in and you see each month in your financial statement. Therefore, ‘Explicit Costs’ include:

Custody or Annual Fees

Brokerage Commission Costs and Fees


• Explicit Costs

Explicit Costs






Brokerage Commission Costs and Fees:

• ‘Explicit Costs’ include the brokerage commission costs and fees.

• Brokerage commission costs and fees is a service charge applied by a broker in return for arranging the purchase or sale of financial assets.

• Explicit Costs

Explicit Costs






Custody or Annual Fees:

• ‘Explicit Costs’ include custody or annual fees.

• Custody or annual fees are fees the brokerage house charges to hold the stocks, bonds, or mutual funds in your account.

• Implicit Costs

Implicit Costs

‘Implicit Costs’ are the taxes that you pay. Hence, it is crucial that you should take into account these ‘implicit costs’ as these are critical costs that must be taken into account to get the true return of your portfolio but which are not noted on your monthly financial reports.The following are some of the ‘Implicit Costs’ that you may have to pay:


Short-term Capital

Capital Gains Taxes

Long-term Capital

Dividends

• Implicit Costs

Implicit Costs



Short-term Capital

Capital Gains Taxes

Long-term Capital

Dividends

Capital Gains Taxes

Capital Gains Taxes:

You may have to pay taxes on the gains you have made by selling financial assets.

• Implicit Costs

Implicit Costs



Short-term Capital

Capital Gains Taxes

Long-term Capital

Dividends

Short-term Capital

Short-term Capital:

You may have to pay taxes on the gains that you made in selling assets owned for a period of less than one year.

• Implicit Costs

Implicit Costs



Short-term Capital

Capital Gains Taxes

Long-term Capital

Dividends

Long-term CapitalLong-term Capital:

You may have to pay taxes on the gains that you made in selling assets owned for a period of more than one year.

• Implicit Costs

Implicit Costs



Short-term Capital

Capital Gains Taxes

Long-term Capital

DividendsDividends

Dividends:

You may have to pay taxes for the dividends that you receive from the companies. Dividends are the returns you get from the company. Different countries have different rules and policies for taxing stock dividends, bonds and other dividends at federal tax rate and your state marginal tax rate.

• Hidden Costs

Hidden Costs

‘Hidden Costs’ are the costs that you have to bear while investing in stocks that are not included in the ‘Explicit Costs’ and the ‘Implicit Costs’. Some of the ‘Hidden Costs’ that you should look out for while investing in stocks are as follows:


Account Maintenance Fees

Account Transfer Fees

Inactivity Fees

Minimum Balance Fees

Interest on Margin Loans

Sales Charges or Loads

• Hidden Costs

Hidden Costs





Inactivity Fees





Account Transfer Fees:

‘Account Transfer Fees’ are the charges that you need to pay for moving assets either into or out of an existing account.

• Hidden Costs

Hidden Costs





Inactivity Fees





Account Maintenance Fees:

‘Account Maintenance Fees’ are the charges that you need to pay for maintaining your account.

• Hidden Costs

Hidden Costs





Inactivity Fees




Inactivity FeesInactivity Fees:

‘Inactivity Fees’ are the charges that you need to pay because you did not trade or did not perform any account activity during a specified period.

• Hidden Costs

Hidden Costs





Inactivity Fees




Minimum Balance FeesMinimum Balance Fees:

‘Minimum Balance Fees’ are the charges that you need to pay because you failed to maintain a minimum balance in your account.

• Hidden Costs

Hidden Costs





Inactivity Fees





Interest on Margin Loans:

‘Interest on Margin Loans’ is the amount that you need to pay as an ‘interest’ on money you borrowed to buy securities.

• Hidden Costs

Hidden Costs





Inactivity Fees



Sales Charges or LoadsSales Charges or Loads

Sales Charges or Loads:

‘Sales Charges or Loads’ are the sales charges that you need to pay to the broker for helping you purchase specific securities such as mutual funds.

Risks in Stocks

You should always bear in mind while investing stocks that all kinds of stocks are susceptible to a number of risks. Moreover, the amount of risk may not be equal in all stocks. The following are the major types of risks faced by stocks:

Interest Rate Risk

Inflation Risk

Business Risk

Financial Risk

Liquidity Risk

Political or Regulatory Risk

Exchange Rate Risk

Market Risk


Interest Rate Risk

Interest Rate Risk:

• ‘Interest Rate Risk’ is the risk caused by the rise or fall in interest rates which may result in a decline or rise in the stock’s value.

Interest Rate Risk

Inflation Risk

Inflation Risk:

• ‘Inflation Risk’ is a risk caused due to a rise or fall in inflation which will result in a decrease or increase in the value of the stock.

Inflation Risk

Business Risk

Business Risk:

• ‘Business Risk’ is risk that the share price will fall due to problems with the business.

Business Risk

Financial Risk

Financial Risk:

• ‘Financial Risk’ is a risk is caused due to any adverse effect caused on the financial performance of the firm due to ways in which the firm raises money.

Financial Risk

Liquidity Risk

Liquidity Risk

Liquidity Risk:

• ‘Liquidity Risk’ is a risk that investors will be unable to find a buyer or seller for a stock when they need to sell or buy that particular stock.


Political or Regulatory Risk:

• ‘Political or Regulatory Risk’ is a risk that unanticipated changes in the tax or legal environment will have an adverse impact on a business.


Exchange Rate Risk

Exchange Rate Risk:

• ‘Exchange Rate Risk’ is a risk that changes in exchange rates will impact the profitability of firms that operate and function on a global or international level.

Exchange Rate Risk

Market Risk

Market Risk:

• ‘Market Risk’ is risk of the impact on price due to the overall market movements.

Market Risk

Stock Market Sectors

When deciding to buy or sell any stock, it is crucial that you should have thorough knowledge about the sector of the particular stock that you intend to buy or sell. The performance of the overall sector in the economy will to a greater extent affect the stocks of the company belonging to that particular sector.


The following are some considerations that you should keep in mind with respect to the sector of any company:

You should always be aware of which sectors are doing well.

Keep a track of the performance history of the various sectors to determine the high performing sectors.

You should always be aware of what are the new rules and regulations that have come up in different sectors of the economy in your country.

You should always be aware of which sectors are not doing well.

Always keep abreast of the latest news and trends with respect to the different sectors.


The given image shows the various sectors in an economy of any country:

Objectives
















Stock Screening Criteria

It is very important that you should screen each and every stock that you intend to buy or sell before deciding on a purchase or sale.

Screening the stock carefully on certain crucial criteria will help you make informed and wise decision to safeguard your money against risk as well as losses.

Stock Screening Criteria

The following are some of the crucial criteria that you should screen the stock upon:

Sect

or

• ‘Stock Split’ is a process through which a company splits its own shares to keep the price of its stock affordable and in a buying range.

• Generally, a stock price of $6-$100 per share is considered affordable.

• A company may decide to split each of its shares into a number of shares.

• So, a company may split its stock (x) for 1, which results in the stock price declining by the same multiple (x).

• You should bear in mind that a stock split has no impact on firm value, but it may give information on the firm’s prospects.

Stock Split

• For Example:

o Assume you had 20 shares priced at $100 each or 20 * $100 = $2,000.

o If the stock split 2 for 1, you would have 40 shares (2 * 20) and the price would adjust to $50 each, or 100 / 2.

o Your value would be 40 * $50 = $2,000, the same as before

Stock Split

Reverse Split

Let us now look at a real life example to understand stock

splitting.

Real Life Example

Real Life Example

Peter Smith owns 300 shares of Globus Stock selling at $600 per share.

At a recent Board Meeting, Globus’ management has decided to split the stock, in order to make the stock more affordable for the average investor.

Real Life Example

Look at the questions given below and try answering them in context of the changing situations at Globus.

How much was Peter’s investment before the split?

Consider that Globus’ management decides to split the stock three-for-one, how many shares would Peter own

after the split?

What is the new price per share after the split?

How much would Peter’s investment be worth after the three -for-one split?

Now, let’s take a look at the answers.

Real Life Example

Look at the questions given below and try answering them in context of the changing situations at Globus.



after the split?



Now, let’s take a look at the answers.


• Peter’s investment before the split = 300 shares x $600 per share = $180,000.


after the split?

• Number of shares that Peter would have after the three-for-one split = 300 x 3 = 900 shares.

Real Life Example


• Peter’s investment before the split = 300 shares x $600 per share = $180,000.


after the split?

• Number of shares that Peter would have after the three-for-one split = 300 x 3 = 900 shares.


• New price per share after the split = $600/3 = $200.


• Peter’s investment worth after the three -for-one split = 900 shares x $200 per share = $180,000.

• Therefore, Peter’s investment worth after the three -for-one split remains the same as his initial investment amount.

Objectives
















Analysis in Stock Trading

• Technical Analysis

• Fundamental Analysis

• Cash Flow Analysis

Before trading in stocks, various kinds of analysis is carried out by investors, financial experts, financial institutions, etc. to give an indication about the performance of a stock, its volatility etc.

The following are a few key types of analysis performed on stocks:


• Fundamental Analysis

The chief assumption on which ‘Fundamental Analysis’ is carried out is that the value of the stock can be determined based on the future earnings of the company.

Financial Analysts carry out thorough research on the background and operations of a company, the state of the industry to which the company belongs, the global industry and the global economy etc.

Fundamental Analysis

• Cash Flow Analysis

The chief assumption on which ‘Cash Flow Analysis’ is carried out is that the value of a company is the discounted value of the free cash flows to all shareholders and to equity shareholders.

Cash flow models are built by investors to predict expected cash flows to the equity shareholders and to the total firm.

Cash Flow Analysis

• Technical Analysis

The chief assumption on which ‘Technical Analysis’ is carried out is that supply and demand are the key factors needed to understand stock prices and market trends.

Therefore, the company’s value is determined in Technical Analysis by focusing on psychological factors such as greed and fear and also economic factors.

Technical Analysis

Objectives
















Ratios for Valuing Firms

• Return on Equity (ROE)

• Price-to-Earnings Ratio (PE)

• Price-to-Book Ratio (PB)

• Dividend Payout Ratio

There are a few key ratios that are used for valuing firms such as follows:


• Price-to-Earnings Ratio (PE)

Price-to-Earnings Ratio (PE)

• The ‘Price-to-Earnings Ratio (PE)’ is defined as the market price of the stock divided by the Earnings-per-Share (EPS). This basically means it is what you would pay for $1 of earnings.

• The PE Ratios is one of the most widely used ratios. It is chiefly used to compare financial performance of different companies.

• Price-to-Book Ratio (PB)

Price-to-Book Ratio (PB)

• The ‘Price to Book Ratio (PB)’ is defined as the price of the company’s stock divided by the book value per share.

• The PB ratio basically indicates the price you are paying for a $1 worth of assets as shown on the balance sheet.

• Return on Equity (ROE)

Return on Equity (ROE)

• The ‘Return on Equity (ROE)’ is defined as a ratio of the company’s Earnings-per-Share (EPS) divided by the company’s book value per share.

• Thus, ROS measures how well the company is utilizing the assets of the company to make money.

• The ‘Dividend Payout Ratio’ is defined as the ratio of dividends paid divided by the earnings of the company.

• Also, it is also calculated as dividends per share divided by earnings per share.

• So, when this ratio is high, it shows that a firm is returning to the shareholders a large percentage of company profits.


Dividend Payout Ratio

• The ‘Dividend Payout Ratio’ is defined as the ratio of dividends paid divided by the earnings of the company.

• Also, it is also calculated as dividends per share divided by earnings per share.


Dividend Payout Ratio

MCQ

Q. Which of the following ratios is often seen as a measure of future earnings potential?


correct answer!

MCQ

Q. Which of the following ratios is often seen as a measure of future earnings potential?

Types of Orders

Limit Order

Market Order

Stop Order

As an investor and stock trader, you can place the following three types of orders on your stocks:

Types of Orders

As an investor and stock trader, you can place the following three types of orders on your stocks:

Limit Order

Market Order

Stop Order

‘Limit Order’ is a request to buy stock at any price up to a specified maximum or to sell stock at any price above a specified minimum.

‘Market Order’ is an offer to buy stock at the market price.

‘Stop Order’ is an order to buy or sell stock holdings when the market price reaches a certain level.

MCQ

Q. You have invested in a stock. The stock prices go up and have made a profit for you. Which of the following should you do to help you protect your gains?


correct answer!

MCQ

Q. You have invested in a stock. The stock prices go up and have made a profit for you. Which of the following should you do to help you protect your gains?

Types of Brokers

Let’s look at each in detail.

There are various types of brokers who offer various kinds of services for buying and selling of stocks and various securities such as follows:

Full Service Brokers

Full Service Brokers

• ‘Full Service Brokers’ are the traditional brokers who are present since the start of stock exchanges across the world.

• Such full service stock brokers develop and maintain personal relationships with clients.

• Such brokers recommend to their client the purchase and sale of securities based upon the client’s needs.

Discount Brokers

Discount Brokers

• ‘Discount Brokers’ is a relatively new kind of brokerage service offering that has come up in the brokerage business.

• The discount brokers through the firm execute a customer’s transaction on behalf of the client.

• However, a discount broke does not give any advice to the customer regarding the purchase or sale of the security.

Electronic Trading Platforms

Electronic Trading Platforms

• Another more modern and latest form of trading can be done electronically by customers.

• In such electronic trading, the customers can through the use of computer on-line services initiate their own buy and sell orders.

Objectives
















• As a new investor, it is important that you should start investing with the help of an experienced broker.

• Hence, it is very crucial that you should choose the right broker who can guide you to make stock trades in a wise manner.

Criteria for Choosing a Broker

Criteria for Choosing a Broker

There are a few criteria that you should keep in mind before choosing a broker. So, before you choose a broker, keep in mind the following considerations:

• The brokerage site should have a useful and informative website and trading platform.

• The trading platform and interface should be able to allow you to trade during high-traffic trading periods.

• The account should be properly insured and valid as per local and national regulations.

• Check and find detailed information about the commission structure.

• Find out detailed information about all the types of services offered by the brokerage firm.

• Find out if the brokerage firm offers any daily updates on the stock listings, news, information and dedicated relationship manager as well.

• Check and find detailed information if the broker or brokerage firm is willing to pay you interest on any un-invested cash in your account. Also, what is the interest rate that the broker is willing to pay?

Objectives
















Common Stock Investing Strategies

• Dividend Reinvestment Strategy

• Buy and Hold Strategy

• Dollar-cost Averaging Strategy

You can use a number of different strategies for investing in stocks.

The following are a few of the most common strategies for investing in stocks:


Buy and Hold Strategy


Buy and Hold Strategy:

A ‘Buy and Hold Strategy’ is the strategy of buying a financial asset and not selling it for an extended period of time. Hence, this is a long-term strategy. It proves to be very cost-effective.


Buy and Hold Strategy:

A ‘Buy and Hold Strategy’ is the strategy of buying a financial asset and not selling it for an extended period of time. Hence, this is a long-term strategy. It proves to be very cost-effective.

Buy and Hold Strategy

Dollar-cost Averaging Strategy

• Dollar-cost Averaging Strategy

Dollar-cost Averaging Strategy:

A ‘Dollar-cost Averaging Strategy’ is a strategy of purchasing a fixed dollar amount of a security at regular intervals, such as every month.

Dividend Reinvestment Strategy


Dividend Reinvestment Strategy:

A ‘Dividend Reinvestment Strategy’ is a strategy where additional shares of stock are purchased with the dividend payments. ‘Dividend Reinvestment Strategy’ is also known as ‘Dividend Reinvestment Plans’ or ‘DRIPs’.


Dividend Reinvestment Strategy:

A ‘Dividend Reinvestment Strategy’ is a strategy where additional shares of stock are purchased with the dividend payments. ‘Dividend Reinvestment Strategy’ is also known as ‘Dividend Reinvestment Plans’ or ‘DRIPs’.

Dividend Reinvestment Strategy

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