Stock Market

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Understanding Importance of Stocks

Investing in stocks has been gaining importance in the Indian market scenario as it fetches very good return in the form of dividends as well as profits on sale. However investing in stocks requires some early preparation and only prudent decisions will help in getting the desired results. Stock market is characterised by volatility that leads to price fluctuations and even small changes in the economic or market factors will have a direct impact on the price of the company’s shares. When as an investor you buy the shares then you own that much share in the company and also get right to vote in the annual meeting. Some of the older and more established companies will pay out the profit share as dividend almost regularly. But the new companies may not be able to do so. Such companies will roll the profit and reinvest it back into the business for research, expansion and other growth plans. The Board of Directors have the right to decide about the declaration of the dividend. 

Stocks are purchased with the prediction that the company will perform well and so the stock price will increase in the future. The rise or fall in a share price will greatly depend on the social, economical as well as the political factors. If the company is leading in the industry then their performance as well as the profit margin tends to be on the higher side. Such factors will also help the investors in making investment decisions. 

Any kind of investment will also have risk as the inherent element. But the level of risk will vary depending upon the type of investment. In case of the stock investment also the risk element is present but depending upon the performance levels and other market indicators it may differ in its intensity.