GET UP AND GET GOING

The best part about wealth creation is that it is never too late or too early to get started, although it is better if you start early and do it regularly.Starting early gives you the benefit of compounding and gives your investment ample time to grow. I dont want to build castles in the air but it is possible for any tom ,dick and harry to make savings of upto 1CRORE,yes a crore with a C.What u need is perseverance and a good finacial planning.If u save Rs 5000 per month and put it in a safe instrument such as PPF ,which gives return of 8% compounded annually then in 35 years your corpus will be at whopping 1 CRORE .More astonishingly the saving component is only Rs 21 lacs rest 80 lacs is your perseverance in the form of interest earnings. In the following table look at the power of compounding with 8% and 16% returns.

Years...................................8%.....................................16%

1........................................62,600................................. 65,200

5 ......................................3,67,249 ...............................4,48,389

10 ....................................9,06,859 ..............................13,90,160

20 ....................................28,64,699 ...........................75,22,759

22 ...................................34,71,593 ...........................1,02,63,457

27 ...................................54,68,158......................... 2,20,05,156

35 ..................................1,07,87,032....................7,30,70,485

bold letter show the year in which u will save a crore.

Perceiving the human nature I know most of u would be tempted to deposit Rs 60,000 at one go in the year end.But remember your investment will grow a bit faster if u save and invest Rs 5000 per month rather than Rs 60,000 at the year end.Let me explain this. Suppose you get interest of 8% on Rs 5000 saved per month, then at the end of year you will have Rs 62,600 to reinvest compared to Rs 60,000 if u chose otherwise.

Now the question arises where u can invest so that u can get returns of 8% and 16%.The rule of thumb says higher the risk more is the potential of higher gains.A fundamental idea in investing is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk. There are lot many ways in which you can measure risk ,according to me if u cant take sound sleep at night after investing it is the harbinger of risk. Risk is a relative term it will vary person to person.Although I will explain all the investment instruments in blogged in the introductionbut I will start with my favourite..............

STOCK MARKETS

A stock market is a place where shares are issued and traded through exchanges (Bombay Stock Exchange,BSE and National Stock Exchange, NSE). Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies a platform access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance. When you buy a share of a company you become a shareholder in that company. Shares are also known as equities.Equities have the potential to grow in value over time.It also gives your portfolio an impetus necessary to reach your long term target.The data available proves that equities have outperformed most of the other investments in the long term.(Over a 15 Year period from1990 to 2005, Nifty has given annualised return of 17%.source NSE ).However this doesnt mean all equities high returns.Equities are high risk investments.one needs to study them carefully before investing.For better undestanding I am continuing my article in the form of Q/A

Is there any difference between share and equity?
No.
Shares :Certificates representing ownership in a corporation.
Equity : Think of equity as ownership in any asset after all debts associated with that asset are paid off. For example, a piece of land with no outstanding debt is considered the owner's equity since he or she can readily sell it for cash. Stocks are equity because they represent ownership of a company, whereas bonds are classified as debt because they represent an obligation to pay and not ownership of assets.

What are Sensex and Nifty?
Sensex stands for sensitivity index .It is the barometer of the sentiment on BSE.It consists of 30 most widely traded and financially sound companies which cover large sample of companies of the exchange.Sensex is a free float market capitalisation weighted index.Market capitalisation of a company reflects the total value of a firm's equity currently available in the market.Free float market capitalisation means that proportion of total shares issued by the company readily available for trading in the market .It excludes promoters holding,government holding and strategic holding which normally wont be traded in the market.
Nifty is to NSE what Sensex is to BSE. Nifty consists of 50 most widely traded and financially sound companies on NSE.

What are Bulls and Bears?
Bull is an investor who thinks the market or a specific security will rise. Bull market is a situation where most of the equities show upward trend for a period of time.Indian markets had a phenomenal bull run since 2003 before it was stunted in may 2006.Bulls are optimists.
Bears are complete antithesis of Bulls.They feel that the market or a specific security will fall. The curent situation may be said to be a bearish hiatus in long bullish market.Bears are pessimist

What is a primary market and a secondary market ?
Whenever a company, corporate or goverment issues its security(shares or bonds) for the first time in the stock market it does it in the primary market thru an IPO (Initial Public Offering).
Subsequent trading of these securities after being listed on the exchanges takes place in the secondary market.Majority of trading is done in secondary market.
In the primary market securities are offered to the public to raise capital or fund or to disinvestthe government share.Secondary market is a place where alreadyexisting/pre issued securities are amongst invesors.

What is an IPO?
An Initial public Offer (IPO) is the selling of securities (shares or bond) to the public in the primary market.It is when an unlisted company either makes a fresh issue of securities or an offer for sale for its existing securitiesor both for the first time to the public.When securities start trading on the exchange they r said to be listed. The sale of securities can be either thru Book Building or thru Fixed Pricing.