IPO: How to apply?

Continuing inflationary pressure has surged the equity market investment as equity shares deliver higher rate of return as compared to other havens. However, the investors have faced many complexities in understanding the equity market. We have tried to make the concept of equity shares a cakewalk through our YouTube videos, just click on the link to get the elementary knowledge of Equity market:

What is a Share? Why should we invest? (link)

Benefits of owning a share!! (link)

In order to be able to invest in share market in India, the following procedure is need to be followed.

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Investor has a choice of timing for investment in equity shares, firstly when the shares are issued to the public to raise capital and secondly when these shares are traded on the stock exchange. The primary objective of investing is to buy the shares at low price and sell at a higher price. If a stock promises potential future growth and is under-priced in comparison to it’s book value during its Initial Public Offering (IPO), then it is most profitable time to buy the stock.

A common investor can apply for an IPO of a company in following procedure:

  1. The first step is to choose the IPO that applicant wishes to apply for. One can find the list of upcoming IPOs on Securities and Exchange Board of India’s (SEBI’s) website. The best way to decide is by going through the companies’ prospectus available on SEBI’s site. The prospectus gives a fair idea about the company’s business plan and its purpose.
  2. After the selection of desired IPO, investor has to ensure sufficient funds in his or her account.
  3. A Demat account is a prerequisite to apply for an IPO. A Demat account is nothing but a facility to store your stocks and financial securities electronically. The account can be opened by submitting your PAN card, Aadhaar card, address and identity proofs.
  4. Now, IPO can be applied through Trading or bank account. Sometimes trading, demat and bank accounts are clubbed together by the banks for better facilities. Applicant needs to bid while applying for shares, as per the lot size mentioned in the prospectus. Lot size is the minimum number of shares applicant has to apply during an IPO.
  5. The company usually sets a price band. The upper limit is known as the cap price while the lower is called floor price. Applicant has to bid for shares in this price range.
  6. When this application is submitted, applicant’s account doesn’t get debited until shares are allotted to him or her. During the IPO process banks are authorized to block the amount of application in applicant’s account as per ASBA (Applications Supported by Blocked Amount, a process developed by the India’s Stock Market Regulator SEBI for applying to IPO).
  7. If the applicant gets full allotment then he will receive a Confirmatory Allotment Note (CAN) within six working days after closure of the IPO process. On the other hand if the applicant gets fewer shares than he had applied for or fails to get allotment then bank will unlock the bid money (in part or full).
  8. Final step is to wait for the listing of shares on stock exchanges, which is done within seven days from the finalization of issue. After the listing investor can either sell the shares (partly or fully) or keep his money invested in that company.

Buying your dream Home? Just Wait….

In this world, every working individual would like a have their dream home one day. They work hard in their life to buy a house in their life & they say “this is my biggest asset”, Well somewhat they are true. But ever wonder if it’s really worth it or not. So, let me start with the definition of an asset- “Something valuable that an entity owns, benefits from, or has use of generating income.” Ask yourself, does it fulfill the definition of your home?

Is your home a valuable entity or the land? because the value of land will appreciate overtime not your home!

What benefits do you get form your house other than shelter, which you can easily rent out at much lower cost than your monthly EMIs. Still you don’t have to lose out from your life savings for the down payment of your home?

Is your own home generating any income? Unless you are renting it out! Which most people don’t. But apart from paying your big buck EMIs, you pay taxes for your property, repair & maintenance every now & then.

So, your biggest asset now seems to be your liability?

Study suggested that almost 70% of millennial regret after buying their house. Here is what expert says: “Millennial are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face,” says Ryan Bailey, head of Bank of the West’s retail banking.

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Reason behind the regrets:

Reason 1:  Overspending on down payments of the house. The survey found one in three millennials dipped into their retirement accounts to pay for their homes.

Reason 2: Underestimating going cost. When you buy a home, the expenses don’t stop once you move in, Millennials understand basic costs, such heating and electric bills, insurance etc. Also, when you’re a homeowner, you can’t call your landlord to fix things, so you want to make sure you have a little extra cash in the bank.

Reason 3: Settling for something that you don’t like. Most common is when a home buyer buys a house far from the city reach just have an own house because buying house in posh locality will cost more so they settle far away. This regrets a lot because daily commuting would not be easy.

Hence, buying a house always seems pleasant but be aware of the facts & consequences. Happy buying houses!!

 

Source: CNBC, Bank of the West,

 

 

Want to be Wealthy?: Start investing early!

Hello, everyone today I am going teach you how to become rich as early as possible in your life. There is no magic formula. Everybody wants to be filthy rich in their life, but nobody seems to know how? What is the way? Some would say work hard, other would say work smart! But what exactly should be done! So before moving forward I would like to give you a brief introduction about “Investment”.

A common person does his/her savings from the monthly income but never invest and sometimes they would end up with an excuse that they are unable to save as their expenses increased. The common formula of savings, we all know:

  • (Income- Expenses)= Savings/Investment

But after reading this articles one should try to apply this in a different way:

  • (Income- Savings/Investment) = Expenses

 

So, I would suggest try this from now. A common man could see the difference instantaneously in their life & are able to save more than previous and can see how they have also cut down their expenses. So how is saving money is different from investing money, and how it is important in our life. “One of the main reasons investing money is important is that it helps to create more money, as opposed to just saving money in a bank account”.

 

Now that everyone have understood what is investment, let me speak about how investing from an early stage will help to create wealth more and more than ever before. Hence I would give some reason how early investment can help:

  • Time allows you to take risk: Typically, when it comes to investing, ventures that are more volatile yield the highest return on investment. Investors, who have the time to recover if something were to go wrong, have the opportunity to make riskier moves. Those who begin to invest late in life are often inherently more cautious with how they invest their money.

 

  • Compound interest will make the difference: Essentially, compound interest is the interest earned on interest. By continuously reinvesting your earnings, you are exponentially increasing your return on investment, continuously reinvesting your earnings, you are exponentially increasing your return on investment. Let us understand the power of compounding with a simple example:

Retirment Plan

See the difference both are of same age, one started early and the other delayed. Ram who started investing early has a retirement value of 9cr and Sham who started investing at his later stage has a retirement value of 2.5cr. This the power of compounding.

 

  • Your spending habits will improve: Investing early allows you to develop disciplined spending habits by focusing on your budget and cutting expenses when needed. The goal here is to earn money by saving money.

 

  • Be a step ahead: Compared to your counterparts, who may have chosen to invest later in life, over time you will be able to afford things that others can’t.

 

  • Your quality of life will improve: Early investment will reduce the risk that you’ll be forced to make reckless choices to secure a stable retirement.

Hence start investing early to get retirement benefits early.