Portfolio

Collection
of
financial
assets
(investments)
such as stocks(shares), bonds and cash.
May be held by individual investors
and/or
managed by financial professionals,
hedge
funds, banks and other financial
institutions

 Generally
portfolio
is
designed
according to investor's risk tolerance,
time
frame
and
investment
objectives.
Monetary value of each asset may
influence the risk/reward ratio of the
portfolio and is referred to as the
asset allocation of the portfolio.

Financially sound portfolio

identification
of
investment
objective.
important requirements - liquidity,
capital appreciation, current income
of investor, time span and fiscal
(economic/financial) implications
appropriate scheme of investment

Stock market
Place were the companies go to raise
money for future growth and expansion.
For this they issue stock or shares
Investors will buy the stock of companies
which they think is well positioned to
generate profits, driving the price up.

Stock
An investment representing ownership
of a part of a company.
Such ownership entitles to a share of
the company's future profits.
Stock's value is determined by the
market of buyers and sellers.

Investment strategy
Mainly based on risk diversification and cost
averaging.
Risk diversification - buying stock in different
companies involved in different market sectors
& who conduct business in varying locations. It
is to spread investments so they are not
vulnerable to market fluctuations.
Cost averaging - long-term investment strategy
that eliminates problem of market timing.
Purchasing specific amount of stock or mutual
funds every month, an investor can limit his risk
of buying when stock is overvalued but also
take advantage of times when it is undervalued.

 Marketplace
Stock are commonly traded in organized
marketplaces around the world. These
formal marketplaces are commonly
called stock exchanges and allow buyers
and sellers to carry out transactions. The
New York Stock Exchange is an example
of one of the largest stock exchanges in
the world.
Corporations that meet certain size and
financial standards can list their stock for
trading.

 Stock trading volume - how many

shares were bought and sold during a
particular time.
This is important to investors because it
measures changes in the supply and
demand for a stock. Both high and low
trading volumes commonly indicate
changes in expectations and might trigger
investors to buy or sell stock.
A stock index is a compilation of stocks
constructed in such a manner to track a
particular market, sector, commodity,
currency, bond, or other asset.

 Stock Index- it measures the prices of a

broad collection of stocks to measure
business performance across the economy.
As a result, stock indices are used as
benchmarks, or points of comparison, to
measure growth in the stock market.
A stock market index is a method of
measuring a section of the stock market.
These indices are used as benchmarks to
measure the performance of portfolios
such as mutual funds.

 The index may be weighted to reflect

the market capitalization of its
components, or may be a simple
index which merely represents the
net change in the prices of the
underlying instruments.
Most publicly quoted stock market
indices are weighted.

 How the stock market works

The stock market is driven by supply and
demand. The number of shares of stock
dictates the supply and the number of
shares that investors want to buy dictates
the demand. It's important to understand
the for every share that is purchased,
there is someone on the other end selling
that share (or vice versa). The stock
market is really just a big, automated
superstore where everyone goes to buy
and sell their stock.

 The main players in the stock market

are the exchanges. Exchanges are
where the sellers are matched with
buyers to both facilitate trading and
to help set the price of the shares.

 How stocks are valued.

two types of valuations.
One is a value created using some type of cash
flow, sales or fundamental earnings analysis.
Another is dictated by how much an investor is
willing to pay for a particular share of stock
and by how much other investors are willing to
sell a stock for (in other words, by supply and
demand).
Both of these values change over time as
investors change the way they analyze stocks
and as they become more or less confident in
the future of stocks.

 Fundamental valuation-This valuation

is used by people to justify stock prices.
For example of this type - P/E ratio.
This valuation is based on historic ratios &
statistics.
It aims to assign value to a stock based
on measurable attributes. This form of
valuation typically drives long-term stock
prices.

 The other method - stocks are valued

based on supply and demand.
The more people want to buy stock,
the higher its price will be. And
conversely, the more people want to
sell the stock, the lower the price will
be.
This form of valuation is very hard to
understand or predict, and is often
drives the short-term stock market
trends.