Monday, January 31, 2011

Stock Market basics-1

Stock Market investments are long term investments that should not be funded by short term debt. Always invest the surplus in Stock Market. Investments in stock market can be done at any age. But as the age increases one should reduce the exposure in stock market to half of his portfolio.
In the long run, equities always offer the highest returns. The amount that can be invested in stock market depends on two criteria. The risk profile of the person and two, the liquidity requirements of the person.
Risk profile
Equity investments are not free of risk. Person who has debts should not invest in Stock Markets. Person who has good career with stable income can take lot of risks in Stock Market. Person who is retired and who is not earning now should take small risk in the stock market.

Liquidity
Liquidity means the need of cash to meet one’s repaying obligations. A person who has debt is in need of liquid cash to meet out his obligations. So he should not invest in Stock Market. A person who has excess money and who has little requirement of liquid cash, can invest a lot in market. A person who has retired from job also is in need of liquid cash to meet out his recurring obligations like rent, telephone bills etc.

Investments in Stock Markets should be done based on risk profile and liquidity requirement of a person.



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