Investmen decision at share market:Prerequisites

Investmen decision at share market

Investment selections at secondary stock exchange need some basic conditions like analysis of market indices and company fundamentals, stock choice and portfolio risk management. sadly, recent downward trends of Bangladeshi stock exchange following a pitched battle indicates that investors ought to have higher information concerning commercialism and precautions towards initial investment, particularly at the unsteady secondary market. market value of various shares on the DSE has practised 'random walk' owing to market anomalies in costs also as come distortions. Evidently, the aftermath of this holdup manifests itself altogether of its dimensions, that have menacing economic consequences on investment climate as well as losses of capitalisation.


In fact, stock markets of East Pakistan (DSE and CSE) run below the international standards in terms of its structure, laws, police work and overall observance systems. Some investment friendly rules thrust capitalisation although market suffers for the shortage of fine shares. Moreover, inadequate rules and laws of regulative bodies for short-run management over market mechanism negatively have an effect on share market. within the meanwhile, data spatiality additionally exists owing to the deficient observance and supervising. And hence, a downward trend makes investment atmosphere at risk of thousand of retail investors.

Another determinant like lack of market transparency, short-selling, trading and behavioural biases of the investors distort the market potency that additionally results in unstable scenario.

Generally, during a distorted market, share evaluation depends on what folks expect instead of discounted worth of expected future dividends, that generates a stock bubble. even so, the last word effects of the bubble have widespread negative consequences on all outstanding shares of the market.

Under the circumstances, initial investors ought to take some preventive actions to save lots of his/her investment. the primary factor is that the time once investors enter into stock markets. Some investors create their selections whereas market indices like DGEN area unit growing over a brief amount of your time. In such cases among many weeks, costs cool down mechanically and that they lose their invested with amounts. this is often owing to the actual fact that they invest on the premise of dishonorable data unfold by market manipulators. Against this scenery, choice of securities firm is another crucial step to coming into at the share market.

The second vital criterion is that the complete understanding of actual statistics as reference to company's share fundamentals. It includes basic understanding on income statement, class of share, profit once tax, internet quality worth (NAV), earning per share (EPS), worth earning quantitative relation (PER), issued dividend, market to value quantitative relation, regularity of annual general conferences (AGM), call quantitative relation, sheriff's sale and different market-timing indicators. Some times high market to {book worth|value} quantitative relation overestimates the money value that offers a wrong worth signal to the marginal investors that really overvalued by illegitimate share exchange activities (alleged manipulations) of market speculators. it's usually prompt that price-earning quantitative relation of over twenty of any share is risky for investment, however within the recent bull it reached around seventy for a few specific shares.

During investment associate capitalist may contemplate the subsequent specific aspects: total quantity of investment, risk bearing capability, risk-return analysis, risk diversification, higher portfolio management considering profit rule, time horizon for the speculative and basic gain. For the starters, detection of market spatiality is also troublesome. sometimes, stock markets is alert to economic science indicators and domestic worth shocks. As risk and come area unit associated with one another, expectation of fast speculative gain on low class share causes investment risky either lowering the investment or losses of total quantity.

Regulatory bodies has organized basic courses on share exchange and commercialism operation sporadically. Interested capitalist ought to attend to grasp professional opinion concerning the market structure, opportunities and threats.

Actually, there's no sure formula to predict the attainable changes of a stock exchange as a result of some economic and non-economic factors oft have an effect on the market costs. although scrutiny market performance to a benchmark statistics are going to be an important policy imperative, however the foremost criterion whereas somebody invest at secondary share market is that the investors has got to act rationally correlating this market data with foretold future investment atmosphere. this is often the means that afterward will increase ability below risky market atmosphere and skill to accommodate with worth variability and thereby reduces the investment risks.