Contents

Author's note on the sixth edition
Preface

Introduction: Answering some basic questions

What are shares?

What is investment?

Why has investment become so important now?

1. The case for investing in shares

Your capital grows quickly

You get income too

Investing in shares is not speculation

It is a liquid investment

You can ensure the safety of your capital

It is easy to manage

You don't need a lot of money to start

2. Important things every investor should know

What is a company?

Liabilities and rights of shareholders

Public limited and private limited companies

Register of members

Annual report

Preference shares and equity shares

Rights shares

Bonus shares

The stock exchange

Reading daily market quotations

Multinational companies (MNCs)

Blue chips

Bulls and bears

Buyback of shares

Stock splits

Dematerialization of shares

Rematerialization

Advantages of dematerialization

On-line trading

Futures and options

Fundamental analysis

Technical analysis

Securities and Exchange Board of India (SEBI)

Stock market indices

3. How to buy and sell shares

Selecting a broker

Buying and selling shares

How to place orders with the broker

Preliminary paperwork

4. Three basic investment rules

Rule 1: Don't buy unlisted shares

Rule 2: Don't buy inactive shares

Rule 3: Don't buy shares in closely held companies

5. What to look for in a company

Is the management dynamic and forward looking?

Is the company sufficiently large in size?

Does the company have a core competence or is it diversified?

Is it a growth company?

The company's environment

Does the company have labour problems?

Is the company internationally competitive?

6. How to select a company to invest in

Ploughback and reserves

Book value per share

Earnings per share (EPS)

Price earnings ratio (P/E)

Dividend and yield

ROCE, RONW and PEG ratios

7. The right price and the right time

Using P/E ratio to assess share prices

How book value may be useful

Using the previous year's "highs" and "lows"

Making the most of booms and recessions

Four simple rules for selling

Some suggestions for better timing

8. Investing in public issues (IPOs)

How profitable are public issues?

Applying for an IPO

Some guidelines for investing in new issues

9. How to identify profitable investment opportunities

Turnaround situations

Amalgamations and mergers

Takeovers and acquisitions

Changes in government policies

Technological innovations

Anticipating the future

International trends

Sunrise industries

10. Know yourself and your fellow investors

Human beings are basically irrational

We are all part of a crowd

Admit your mistakes

Greed and fear

Don't be a snob

Seeing the reality for what it is

Keeping up with your neighbours

Learn to take risks

11. A step-by-step guide to actual investing

Preliminary screening

Examining the company

Analysing the company's finances

Making an investment decision

12. Investing in mutual funds

What are mutual funds?

Making money from mutual funds

Types of mutual funds

Advantages

Disadvantages

Net asset value (NAV)

Investor complaints and grievances

13. Tips for successful investing

Basic principles

Understanding the stock markets

Tactics and strategy

Appendix A: Sources of information

Appendix B: Composition of stock indices

Appendix C: Compound interest table

Index