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Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

Every investor looks to the stock market for shares that will make him money. But sometimes investors can’t buy shares of a popular company. The reason is that the share price is so high. Companies decide to split their shares when this happens. Stock split, as the name suggests, is when the face value of a stock goes down and the number of outstanding shares goes up at the same time. The main goal of a stock split is to make the stock easier to buy and sell, so that investors can buy more of it. Companies do stock splits when they realise that the price of their shares is too high or is higher than the prices of their peers. For example, if a company does a 1:10 stock split, a stock with a face value of INR 1000 is split into 10 shares with a face value of INR 100. But keep in mind that the company’s share capital doesn’t change. This means that a stock split is nothing more than a cosmetic change, and that the news of a stock split won’t affect the price of the stock in a way that will lead to unusually high returns. Even if there is information in the announcement, it is most likely to show up as unusual returns on the day of the announcement, which is called the record date. There are some ideas about why companies split their stocks: Signaling: a stock split is a sign that the company will grow in the future. This is because real-world studies of stock splits in developed economies have shown that the day after the announcement of a stock split, returns are often unusual. Optimal trading range: On every stock market, stocks tend to trade in a certain range. As we’ve already said, stock splits are done to get the price of the stock back into the normal trading range. This lets more investors buy shares. According to this theory, the goal of bringing the stock price back to the usual trading range is to improve liquidity, which will lead to investors making more money. This is a way for small or ignored firms to get the attention of the market. This is done by a company that feels it has been undervalued in the market because market participants haven’t shown much interest. So, companies use stock splits to get more attention and make sure that more investors can get information about the company. This is more important for small businesses than for big businesses. What do investors get out of a stock split? In a stock split, the number of shares goes up, but the value of each share goes down. This makes it easier for new investors to get interested in the company’s stock and buy some. In other words, the number of shareholders could grow if more investors bought at lower prices. It looks like investors who bought the split share at a lower price may not benefit from the stock split. But if the share price goes up, it could be because of a stock split. This tells the market that the share price of the company has been going up before the split, so investors think that the growth will continue in the future. So, after a stock split, should you buy a share? Before 1999, SEBI only let INR 10 and INR 100 be used as face values. Today, the split ratio can be 2:1, 10:1, 5:1, or any other number. A few reports suggest that the trading range theory is wrong because most stock splits are announced for stocks that were already trading at low prices. So, market experts have seen that the price of a share after a stock split depends on how the market is doing and how well the company is doing. Before investing in a share after a stock split, make sure you keep the above two points in mind. There’s no need to say that the market will always have mixed feelings about stock splits. Also, one last thing: don’t confuse a bonus with a stock split. Bonus shares only change the company’s issued share capital. A stock split, on the other hand, changes the company’s authorised share capital.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

Corporate actions are measures that a company does that change the value of its stock. There are different kinds of corporate actions that a company can take. If you understand these corporate actions well, you can get a clear picture of the company’s financial health and decide if you want to buy or sell a certain stock. Dividends and How They Affect Price A company gives dividends to the people who own shares in it. Dividends are a way for a company to share the money it made during the year. Dividends are paid out based on each share. Consider the face value of a company to be Rs 10. If it declares dividends of Rs 40 per share. This means that the dividend payout is 400%. Please keep in mind that dividends are not necessarily paid out every year. If the company thinks that instead of giving dividends to shareholders, it would be better to use that money to fund a new project that will help the company in the long run, it can do that. Also, dividends don’t have to be paid out of profits alone. If the company lost money during the year but has a healthy cash reserve, it can still pay dividends out of the cash reserve. During the financial year, dividends can be paid at any time. If it is paid during the financial year, it is called an interim dividend and if the payout is at the end of the FY, it is a “final dividend.” Sometimes giving out dividends could be the best thing for the company to do. When the company has no more ways to grow and has extra cash, it would make sense for the company to reward its shareholders. This would be a way for the company to repay the trust that its shareholders have in the company. At the Annual General Meeting (AGM), where the company’s directors meet, the decision to pay a dividend is made. Dividends are not paid out as soon as they are announced. This is because the shares are traded throughout the year, and it would be hard to tell who gets the dividend and who doesn’t. Here are the important dates you should know. Date of Dividend Declaration: This is when the Annual General Meeting (AGM) takes place and the board of directors of the company approves the dividend issue. This is the date that the company decides to look at the list of shareholders to see who is eligible for the dividend. Most of the time, there are 30 days between the dividend announcement date and the record date. Ex-Date/Ex-Dividend Date: The ex-dividend date is usually set two business days before the record date. The dividend is only given to shareholders who owned the shares before the ex-dividend date. This is because normal settlement time in India is T+2. So, if you want to get a dividend, you should buy the shares before the ex-dividend date. Date of Dividend Payout: This is the date when dividends are given to shareholders who are listed in the company’s register. Cum Dividend: Shared are considered cum dividend will the ex-dividend date, which means that the dividends are about to be paid. When a stock goes ex-dividend, its price usually goes down by the amount of dividends paid. For instance, if Reliance is currently trading at Rs. 2,800 and has announced a dividend of Rs. 100, on the ex-date, the price of the stock will go down by the amount of the dividend paid. In this case, the price of Reliance will go down to Rs. 2,700. The price falls because the company no longer owns the money that was paid out.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

As the name suggests, high-risk investment plans are best for people who want their money to grow over the long term. Most high-risk investment plans, on the other hand, tend to have big risks, but they also offer chances to make big returns in the long run. Plans like these are examples of high-risk investments: High-risk investment opportunities require a good online trading platform and at Zebu, that’s what we offer. As a highly experienced share broker company, we try to support our customers with the lowest brokerage on everyday transactions. 1. Direct equities Investors who are willing to take risks can use stocks to reach their financial goals. Even though every asset is important in its own way, stocks have a better track record than other assets over the long term. So, in an equity investment, you can buy a piece of a company’s ownership, which gives you a say in the business’s profits and losses. 2. Unit-linked insurance plans Most people in India think that ULIPs, or unit-linked insurance plans, are one of the best ways to invest because they offer both life insurance and investment returns. Not only that, but you can also move your money between high-risk, medium-risk, and low-risk investments. This is because it lets you put your money in a variety of different funds. Part of your money is put into different funds based on your investment goals and risk tolerance, and the rest is used to give you the much-needed insurance coverage. Overall, ULIPs are basically life insurance plans that let you invest your money in different money-market linked assets based on your goals. So, ULIPs are another way to invest in a portfolio of stocks or bonds that is managed by a professional. The benefit of investing in a bond fund through a ULIP is that, according to the current tax laws, you may be able to get a tax break under section 80C if you meet certain conditions. ULIPs make it easy to see where you stand in terms of risk, so you can choose a higher-risk fund for your long-term goals. As your investment nears its end, you can gradually switch to investments with less risk. 3. Mutual Funds A mutual fund is made up of money from different investors that is put into the stocks or bonds of a company. Most of the time, thousands of investors share a mutual fund, and a fund manager works to get the best returns possible. A professional fund manager is in charge of running the mutual fund. Mutual funds offer a way to invest in multiple asset classes with a smaller amount of money. For example, you can invest in a fund that only buys stocks, a fund that only buys bonds, or a fund that buys both stocks and bonds. Mutual funds might have different types of risky funds based on the stocks or bonds they invest in. Index funds are thought to be the safest type of equity fund, while Gilt funds are thought to be the safest type of debt fund. Medium-Risk Investment Medium or moderate risk investments are, as the name suggests, plans for investments that are diversified or well-balanced. Plans for investments with a moderate risk profile offer the chance for growth and the ability to deal with a certain amount of market volatility. Most medium-risk investment plans help you diversify your portfolio by including both equity and debt instruments. This way, you can get stable returns without taking huge risks. As mentioned earlier high-risk investment opportunities require a good online trading platform. And being a highly experienced share broker company, we try to support our customers with the lowest brokerage on everyday transactions.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

When it comes to investment plans, the risk is the chance or likelihood that the asset will either perform worse than expected or lose all of its value. So, different investment plans can be roughly divided into three groups based on the amount of risk they involve, as shown below: Before we get into understanding low-risk investment options, we need to understand how the right tech can enhance your trading journey. With Zebu’s online trading platform you can perform your investments seamlessly. As one of India’s biggest share market broker, we offer the best trading accounts with great advantages for our customers. Investing with low risk Low-risk investment plans are, as the name suggests, those in which the risk is close to zero. In other words, investments with low risk tend to grow in value steadily and reliably, but they also tend to lose less money. Here is a list of the best ways to invest money that can be thought about. 1. Sukanya Samriddhi Yojana The Sukanya Samriddhi Account is becoming more well-known as one of the best ways for Indian girls to save money. If you have a girl child, this programme is meant to make it easier for the girl child to become wealthy. You can get a Sukanya Samriddhi Yojana account at both commercial banks and post offices. Under Section 80C of the Income Tax Act of 1961, you can also save a lot of money on your taxes. 2. Public Provident Fund (PPF) Public Provident Fund (PPF) is one of the best ways to invest in India because it offers so many benefits. If you get paid a salary, PPF can help you in many ways. The interest you earn on your PPF is not taxed, but you can get a tax break under Section 80C of the Income Tax Act of 1961. 3. Post Office Income Plans for Every Month Most people think that the Post Office Monthly Income Scheme is one of the best ways to invest. It’s best for people who don’t like taking risks and want low-risk plans with good returns. Here, you need to know that the income from monthly income plans from the post office is fully taxed, but the monthly income plans do not have Tax Deduction at Source (TDS). 4. Government Schemes For Senior Citizens (SCSS) The senior Citizen Savings Scheme (SCSS), which is run by the Indian government, is thought to be one of the best ways to invest in India for a number of reasons. First, the plan gives senior citizens a lot of financial security. The second thing is that the government decides every three months what the interest rate will be for this plan. You can open an SCSS account at any bank or post office that is owned by the government. 5. Tax Saving Fixed Deposits Tax Saving FD’s are thought by many to be one of the best ways to invest in India because they can help you save a lot of money on taxes under Section 80 C and reduce your overall tax liability. 6. Sovereign Gold Bonds Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India and backed by the Indian government. SGBs are securities that are worth their value in units of gold and can be used instead of holding physical gold (grams). At the end of the term, you can get your money back. This makes SGBs one of the best ways to invest in India. To easily invest in SGBs with Zebu, please get in touch with us. 7. Life Insurance There are two types of life insurance that are low risk: savings and income plans and protection plans. There is no clear investment part to these life insurance plans, so they do not offer returns that are tied to the market. Instead, these life insurance plans give your family a strong financial safety net and good protection against life’s unknowns. 8. Bonds Bonds are proof that you gave the issuer money at a certain interest rate. You could get interest payments on each bond on a regular basis, and in the end, you would get the face value back. You can also sell the bond before it runs out if you need the money. Bonds are thought to be one of the best ways to invest in India because they are fairly safe. Now that you understand more about low-risk investment opportunities, you need to understand how the right tools can help your Investment journey. With Zebu’s online trading platform you can perform your investments seamlessly. As one of India’s biggest share market broker, we offer the best trading accounts with great advantages for our customers.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

Starting your investment journey can be intimidating but is a necessity considering inflation and economic uncertainty. That is why you need a sound investment strategy to help you meet your financial objectives. At Zebu, it is our mission to help every Indian become financially independent and that is why we have platforms that will help you invest wisely. Please get in touch with us to know more. At Zebu, an online share broker company it is our mission to help everyone in India become financially independent, we offer the best online stock market trading platform with the best trading accounts. Here are four things to think about before choosing an investment strategy. Financial Objectives Your long-term and short-term financial goals should be the main thing you think about before you choose an investing strategy. Keeping track of such financial goals will help you make smart choices. Some examples of such goals are getting married, going back to school, travelling abroad, and buying a new smartphone. For instance, if you want to save up for a trip to your favourite foreign country, a post office deposit or a recurring deposit could be some of the best ways for you to invest. You can put money in either of these accounts at a post office near you. Budgeted, near-term cost When looking for a way to invest in India, one of the most important things to do first is to figure out how much you expect to spend in the future. These can be things like your child’s wedding, college, or buying a home. If you do this, you’ll have a better idea of how much money you need to invest now in order to get enough money back in the future to pay for any upcoming bills. Present Expenses When looking for the best way to invest, it’s important to start by looking at what you’re already spending. For example, if you don’t have any big expenses like rent, you will have more money to save or invest for the long term. But if you have financial obligations that make it hard for you to save much money, it would be better for you to invest in a financial plan that gives you a good return on your money. Financial Dependents Most people in India don’t think about how their dependents’ finances affect them when they buy an investment plan. Still, you have to do this because you need to have enough investments or savings to meet the financial needs of your dependents as well as your own. For example, if you only have two children who depend on you, you probably won’t need to invest as much as someone who also has to take care of their parents, siblings, and children. Investment options for short-term goals Plan for investment for one year If you like to invest for the short term, even three years can seem like a long time. But there are many 12-month investment plans that can also help you avoid market risks. Here are some good short-term investments you might want to think about: • Recurring Deposits • Fixed Maturity Plan • Post Office Deposits • Arbitrage Funds • Debt Fund • Fixed Deposits Plan for an Investment for 3 Years 3-year investment plans are a common type of short-term investment plan. These plans are best for people who want to make a lot of money in a short amount of time. Here are some choices you might want to think about: • Liquid Funds • Fixed Maturity Plan • Recurring Deposits • Savings Account • Arbitrage Funds Plan for 5 Years of Investing Even though five years is a long time, in India a five-year investment plan is usually seen as a short-term investment with low market risk. But compared to other short-term investments, the returns on a 5-year investment plan are much higher. So, here are some choices for you to think about: • Savings Account • Liquid Funds • Post Office Time Deposit • Large Cap Mutual Fund As an online share broker company, it is our mission to help everyone in India become financially independent, we offer the best online stock market trading platform with the best trading accounts.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

When it comes to investing, stock trading gives more weight to short-term profits than long-term ones. It can be dangerous to jump in without knowing what to do. How do you trade stocks? When you trade stocks, you buy and sell shares of companies to make money off of daily price changes. Traders keep a close eye on these stocks’ short-term price changes and then try to buy low and sell high. Traditional stock market investors tend to be in it for the long term, while stock traders focus on the short term. If you trade individual stocks at the right time, you can make quick money, but you also risk losing a lot of money. The fortunes of a single company can rise faster than the market as a whole, but they can also fall just as quickly. If you have the money and want to learn how to trade, you can trade stocks quickly from your computer or phone thanks to online brokerages. Ways to trade stocks There are two main ways to trade stocks: When an investor makes 10 or more trades per month, this is called “active trading.” Most of the time, they use a strategy that depends heavily on timing the market. They try to make money in the coming weeks or months by taking advantage of short-term events (at the company level or based on market fluctuations) like results, RBI policies and global economic events. Day trading is the strategy used by investors who buy, sell, and close their positions in the same stock all on the same trading day. They don’t care much about how the businesses they’re investing in work. The goal of a day trader is to make some money in the next few minutes, hours, or days by taking advantage of price changes that happen every day. How to buy and sell stock If you’re new to trading stocks, you should know that most investors do best by keeping things simple and putting their money in a mix of low-cost index funds. This is the key to long-term outperformance. So, if you want to trade stocks, you need to do five things: 1. Get a trading account To trade stocks, you need to put money into a brokerage account, which is a special kind of account made for holding investments. You can open an account with Zebu in just a few minutes if you don’t already have one. But don’t worry, just because you open an account, you’re not investing your money yet. It just lets you know that you can do it when you’re ready. 2. Set a stock trading budget Even if you’re good at trading stocks, putting more than 10% of your portfolio in a single stock can make your savings too vulnerable to changes. If you want to start investing, you could start by putting away Rs 2,000 a month. When you have Rs 2,000, you could put Rs 500 into an investment. Think of the Rs 500 you don’t invest as a parachute. It might not be necessary, but it’s there just in case. Other things to do and not to do are: Trade with the money that you can afford to lose. Don’t spend money that you need to use soon for things like a down payment or school. Cut that 10 percent if you don’t have a good emergency fund and aren’t putting 10 to 15 percent of your income into a retirement account. .3. Figure out how to use market orders and stop orders Once you have a brokerage account with Zebu and a budget, you can use the website or trading platform to buy and sell stocks. You’ll be given a number of order types to choose from, which will decide how your trade goes. In our guide on how to buy stocks, we explain these in more detail, but here are the two most common types: Market order: The stock is bought or sold as soon as possible at the best price. Limit order: Buys or sells the stock only at a price you set or higher. For a buy order, the limit price is the most you’re willing to pay, and the order will only go through if the stock’s price falls to or below that amount. 4. Use a “paper trading account” to get some practice Try investing in the market without putting any money in it yet to see how it works. Choose a stock and keep an eye on it for three to six months to see how it does. You can also learn about the market with the help of tools like online paper trading. Customers can test their trading skills and build a track record with stock market simulators before putting real money on the line. 5. Use a good benchmark to measure your returns This is important advice for all investors, not just those who are very active. When picking stocks, the main goal is to beat a benchmark index. That could be the Nifty 50 index, which is often used as a stand-in for “the market,” the Sensex, or other smaller indexes made up of companies based on size, industry, and location. Measuring results is very important, and if a serious investor can’t beat the benchmark, which is hard for even professional investors to do, it makes financial sense to invest in a low-cost index mutual fund or ETF, which is basically a basket of stocks whose performance is close to that of one of the benchmark indexes. And these are the basic dos and don’ts for beginner traders. Stay tuned for more on this subject.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

You must recall your first bike ride. That is the kind of encounter you will never forget. But, while you were enjoying the ride, there is always that one kid nearby who clearly wished he hadn’t had to go through the horrible experience. So, while you were ready to accept the risk of riding a bike, your friend would have preferred to stand back and observe. Similarly, some people may be more willing to accept risks than others when it comes to investing. And your risk profile indicates how much risk you are willing to face when investing. Risk Profile Everyone has different financial objectives in life. That is, your risk tolerance is determined by your financial ambitions as well as your existing financial health. Let’s have a look at the various risk profile groups. There are three major kinds – The careful investor – this means that you want to take a low risk. The average risk-taker – this indicates that you are willing to take a small level of loss in exchange for higher returns. The aggressive risk-taker – this indicates that you are willing to take on more risk in exchange for a higher potential return. However, you are not required to fit within any of the categories. Depending on your investment objectives, you can choose to participate in all of them. Consider the following example. When it comes to keeping an emergency fund, you want to invest in something that will provide you with security and liquidity rather than large profits. In that instance, you choose a low risk, low return profile, showing that you are cautious. However, if your financial goal is retirement, which could be 25 years away, you can be an aggressive investor. This is because you want to earn a good return over a long period of time. In this case, the high profits would be directly proportional to the risk. Furthermore, because your investment horizon is decades away, risks can be handled in the long run. Start by taking care of emergency funds and investments with low-risk investment options. Then, move on to the funds needed for your children’s education and retirement. Next, adjust your risk appetite to invest in stocks building your wealth. You can control investment risks in two ways: Invest for the long term. Regularly invest little sums. Some investors try to outperform the market in a relatively short period of time. However, history has shown that short-term investments do not generate the same level of return as long-term ones. Long-term investment works because bull and bear markets provide wonderful opportunities to ride through the highs and lows of cycles while investing in high-return, high-yielding assets. Investing in smaller quantities allows you to benefit from rupee cost averaging. This technique ensures that you purchase more shares (or units) when prices are low and less shares (or units) when prices are high. As a result, you can average out your investment costs and deal with market volatility. Furthermore, adopting a disciplined approach, such as investing little sums on a regular basis, helps create excellent financial habits that will undoubtedly come in helpful in the long term. Investing tiny amounts over time might help your investments develop. All owing to the compounding power. Earnings from stock investments are reinvested, allowing your investments to generate even greater income. So, even if you start with a tiny amount, the longer your money stays invested, the greater the chance for growth and compounding. But did you know that you may utilise both of these methods to reduce risk in high-risk investments? Here’s how it works: If you have a substantial money to invest in a high-risk investment, consider putting it in a low-risk investment vehicle such as a debt fund. You can then gradually transfer tiny amounts of money from that fund to a high-risk investment vehicle. For example, if you wish to invest Rs. 10 lakhs in equities stocks or funds, you can put Rs. 1 lakh into equity stocks or funds in the first month and the remainder in a short-term debt fund. The remaining funds can then be transferred in small increments over the next few months. This way, you may manage market volatility while still earning high long-term profits.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

If you have seen the recent miniseries about one of India’s famous scammers, you would have come across this phrase: Risk hai to Ishq hai (Where there is a risk, there is love) Think about the times that you enjoy going on a long drive. When you started learning how to drive, it must have seemed risky and scary. But now that you are an experienced and good driver, you can enjoy the road to a great extent. All that risk you took seems to be worth it, right? The same is true for investment. Every investment has some level of risk. While you cannot prevent risk, you can reduce it by being financially savvy and recognising your risk tolerance. The same is true for investment. Every investment has some level of risk. While you cannot prevent risk, you can reduce it by being financially savvy and recognising your risk tolerance. So, if you want to achieve your goals, you must invest. But, if no investment is genuinely risk-free, how will you achieve your objectives? That’s a problem! But there is a workaround. You can increase your return potential by diversifying into the correct investments to help limit market volatility and keep your financial goals on track. Investment risk-reward matrix Every investor seeks an investment opportunity that will provide them with the highest possible profits as quickly as possible. But remember that it’s better to proceed slowly in the correct way than quickly in the wrong direction. And, as the saying goes, “all good things take time.” Similarly, investments take time to mature. In terms of investments, the risk-to-reward ratio is an important issue to consider. Consider you and your friend deciding to participate in the ‘dice throwing’ Instagram trend. In this game, your friend suggests that each of you contribute Rs. 500, for a total contribution of Rs. 1000. You will win the complete money if the dice is tossed and lands on an even number. Your friend stands to win if it is an odd number. The risk to reward ratio, in this case, is 1:1, as both of you have a 50% chance of winning the money you put in. It doesn’t sound like an attractive investment, does it? Assume you opted not to play. Your friend decides to up the stakes after hearing this. He modifies the game and recommends that if you contribute 500, he would place three times that amount, or 1500, for the same bargain. This sounds amazing, doesn’t it? You still have a half-chance of winning. If you win, he will receive Rs. 1500, which is three times your initial investment. As a result, the risk to reward ratio is 1:3. In technical terms, the risk to reward ratio is a valuable measure that helps gauge an investment’s profit (reward) relative to its potential loss (risk). We have already learned that each investment carries a certain level of risk. According to the industry, the greater the risk, the greater the reward. We’ll look at common assets and their risk-reward ratios to see what you may expect if you invest in them. Equity Shares and equities are the most volatile of all investments, making them the riskiest. However, it has the greatest potential for long-term profitability. Debt/bonds Debt securities are issued with the promise of interest payment. Because the risk is lower, the rewards achieved over time may not be as great as in the case of equities. Property investment The real estate market is volatile by nature. Key risks are determined by a variety of factors such as geography, demand, structural challenges, and a lack of liquidity. Based on all of these criteria, the risks associated with real estate investing are likely to be comparable to those associated with equities and bonds. Gold When it comes to gold investment risks, the expense of keeping and insuring the precious metal may be included. However, you can now invest in gold through Sovereign Gold Bonds (SGB), digital gold, gold ETFs, and gold mutual funds. Investing in gold provides diversification and a distinct blend of reward benefits. However, the risks associated with commodities such as gold are determined by market demand and supply. Varied assets will provide you with different growth rates. After reading about the various degrees of risk associated with each investment, you may be wondering, what if you just keep the money at home? Wouldn’t that imply no risk? Keeping cash at home, for example, may be dangerous. Alternatively, simply having money in a savings account exposes it to inflation. This means that the money will continue to lose value over time. And that’s an extra risk you’d be incurring. So, it is always better to invest.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

Studying economics can help you understand the potential effects of economic policies on diverse industries. Economics is a tool that can help you predict macroeconomic conditions and understand the impact of those forecasts on businesses, equities, and financial markets. When you study the economy as a whole, it is called macroeconomics and when you inspect each aspect of the economy individually, it is called microeconomics. Let us now examine what they are. Microeconomics Microeconomics studies decisions made by individuals, firms, homes, workers, etc. Assume you and your family eat onion pakora every day. But you see that onion prices are increasing dramatically every day. So, you call for a family meeting and decide that you will eat onion pakoras only once in three days. While your family might not enjoy the decision, they agree since they contribute to the family finances equally. Microeconomics is the study of how specific changes in commodity prices can cause a person or corporation to change its behaviour. Macroeconomics Microeconomics, on the other hand, is concerned with parameters such as inflation, growth, inter-country trade, and unemployment. Microeconomics and macroeconomics are mutually beneficial. Microeconomics is a bottom-up method in which individuals and enterprises are examined first, then an industry, and finally the country. Macroeconomics is a top-down method in which the country is examined first, followed by the industry, and finally individuals or businesses. Macroeconomic considerations have a significant impact on stock market growth and success. What are the factors that macroeconomics looks at? It focuses more on elements such as GDP, unemployment rate, inflation, interest rate, government debt, economic cycles, and so on.

Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

In the previous blog, we discussed a few important types of stocks. Now, let’s look at the other major categories. 5. Value Stocks These are stocks that are trading below their worth or intrinsic value. What exactly is intrinsic value? It is the true worth of the company based on estimates rather than the market price of the company’s stocks. Consider the following example: Assume you come across a firm called Sheetal Communications, which has a current share price of Rs. 500. However, based on your calculations, the company’s intrinsic value is Rs. 600 per share. The stock market will eventually recognise the company’s true worth, and the stock will grow correspondingly. Value stocks are inexpensive and have the potential to generate high returns over time. However, both value companies and terrible stocks are available at a low valuation. So how do you tell the difference between the two? Remember that value stocks are quality businesses that have been momentarily trading at lower prices and have the ability to resurge and prosper in the future. Some possible reasons for a temporary decline include results falling short of expectations for a quarter, a brief piece of bad news riding strong sentiment but with a smaller financial impact, or simply poor market mood. Weak stocks, on the other hand, have limited liquidity, inconsistent earnings history, or poor metrics on conventional financial parameters. 6. Growth Stocks You might have guessed how stocks in this category work. These are companies whose earnings are expanding faster than those of their peer group. However, because of their stronger growth rate, these stocks require a higher investment than their rivals. They require additional capital to expand due to their rapid growth. As a result, these stocks will pay no or very little dividends and will reinvest earnings largely in the firm. However, the difficulty with these stocks is that a company’s rapid growth rate does not usually last long. This means that when the company’s growth rate returns to normal, the stock price may decline with it. 7. GARP Stocks GARP, or Growth at Reasonable Price, is a hybrid of growth and value investment. GARP investing identifies growth stocks that are accessible at a reasonable valuation. The goal is to find growth firms that consistently exhibit above-average earnings growth while trading at a low value. These equities have an average P/E ratio and a greater rate of earnings growth, resulting in a PEG ratio of one or less than one. However, there is a distinction between GARP and value investing. Value investors seek out stocks that are inexpensive, but the chance of losing money with GARP is negligible. 8. Momentum Stocks Momentum stocks are based on the idea that if a stock is rising, it will continue to rise for some time. This means that investors would buy rising stocks and sell them when they appear to have peaked. It is usual for investors to buy up-trend momentum equities at greater prices with the hope of selling at even higher prices. Early riders on the momentum rally benefit the most. However, momentum can be a trap for new investors if they enter the stock too late, especially if the up-move is about to end. When a stock begins to rise in price, investors become concerned that they will miss the next major move and begin to buy. This causes the stock to rise even higher, and so on. Momentum investing is based on technical information rather than fundamentals. And, while momentum investing may not be a good option for inexperienced investors, when done correctly, it can result in remarkable profits. 9. Income stocks These investors want a steady income with the possibility of capital appreciation. Income stocks are less risky than other equities in the market. Companies in the income stock category receive extra income in the form of dividends that the company pays per share.