Active Investors
Introduction:-
• “An
investor is a person who allocates capital with the expectation of a
financial return.”
• Investors
always wish for huge benefits when they invest in the market.
• To
invest in stock market, than you can have different options for investment for
which probably you are not aware.
• This
investment could be a lot closer and simpler than you think.
• If
you make any wrong mistake in selecting the stocks, then you may have to lose
all your cash.
• So
all investor should be active and aware about stock market.
• Here
are five steps to becoming an active investor.
(1) Know your rights
(2) Exercise your rights
(3) Stay Informed
(4) Analyze Proposals
(5)Legal recourse
1)
Know Your Rights
• Know
your right as a shareholder. you must play a more active role.
Ø How
you can safeguard your interests as a owner of the company.
Ø How
you can take up the cudgels (fight) against corporate misgovernance, influence
the decisions taken by companies and be an informed investor.
2)
Exercise your rights
• Company
shareholder little influence on company’s decisions.
• Investor
can vote on key business proposals.
The law required companies to obtain shareholder approval on a variety
of issues like
q
Approving
mergers or acquisitions
q
Appointment of directors on the company board
q
Changing auditor…etc
• If you are physically attend the Annual
General Meeting (AGM), you can even bring up issues and ask uncomfortable
questions from the management.
3)
Stay Informed
• Companies
are required to send copies of the annual report and give timely notice for
shareholder meetings with detail of the agenda.
• If
you keep abreast of what’s going on, you can take decisions regarding your
investment.
• If
enough information has not been provided in the shareholder notice, and report,
etc.
• investor should write to the company for
clarifications or raise these issues in the general meeting.
4)
Analyze
Proposals
• Whenever
a big merger, acquisition, and restructuring deal is proposed by company.
• it
raise questions.
q
How will
it benefit the company.?
q
What is the rationale for the decision.?
q
Will it create value for shareholders.?
• It
is not easy to the inner workings of a merger or acquisition. Create many
problems e.g.
q
Terms of
sharing of resources
q
Utilization of manpower.
q
Access to
raw material etc…
• Investor
should watch out for red flags in such deals, such as a huge dept to finance an
acquisition, or overpaying for the purchase.
5)
Legal recourse
§ It’s
not easy a shareholder to initiate direct action against a company.
§ Section
235 of the companies act allows investigation into a firms affairs.
§ Shareholder
can also apply to the Company Law Board (CLB) under sections 397 and 398 of the
Act to appeal against oppression of their interest or mismanagement by the
firm.
§ Shareholder
can also file a complaint against listed companies with SEBI for online.
Learning:-
Ø Actually,
stock market is something which can not predict what’s going to happened in the
market. So according to me a small investor can be more active if he has an
awareness about the rights.
Ø An
investor should make a proper analyze of market and also should study the past
record and annual report of the company. After that an investor can take a
decision whether to invest or not. If an investor make any wrong decision in
selecting the stocks than he may have to suffer a big loss.
