Investing in stock markets

Most of us get excited & worried at the same time on the talk of Investing in Stock Market

Frequently the question asked is:

1. Which Scrip?
2. What time is the "RIGHT TIME"?
3. How much return would it fetch?

I would try making it simpler to understand in the coming days. Before I begin I would like to raise one question.

What do we see before buying a car?

I guess every Indian broadly considers the following
1. The segment (small car/ SUV/ large car etc)
2. The price of the car
3. The average fuel efficiency
4. The specs/ features of the car (luxury, value –buy, etc)
5. The Market share and distribution/ service network.
6. The resale value of the car

a.The segment can be compared to which industry-stock you would like to have in your portfolio.

b.The price of the car can be compared with the price of the stock. The market price of the car is determined by the stakeholders (the car company) similarly the market price of the stock is determined by its shareholders.

c.The fuel efficiency can be compared with what is the yearly dividend payout (Earnings growth) the company gives out to shareholders every year on an average.

d.The specs can be compared with the risk preference/ appetite of Individuals.

e.The distribution/ service network can be compared to the Market Capitalization of the stock. The large cap stock would have diverse and multiple shareholders compared to small cap.

f.The resale value of the car can be compared to the liquidity of the stock. As resale value has a direct link to market share/ distribution/ service network for cars similarly there is direct link between Market cap and liquidity of the stock.