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.