Monday, August 27, 2007

There is no such thing as getting rich quick in the stock market

Book Value
Stock Exchanges, Investments and Derivatives
V. Raghunathan and Prabina Rajib


Is all price volatility due to speculation? How do the regulators control price volatility? Do circuit breakers have a flip side? What is the structural arrangement of a mutual fund (MF)? How is NAV (net asset value) calculated? If an index fund is indeed tracking an index, why should there be tracking errors? What is rupee cost averaging? What are participatory notes (PNs) and why should SEBI object to these? Once dematerialised, can one rematerialise one’s shares? If the bonus issue is merely a book entry, then why do companies issue bonus shares at all?

To these and 240 more ‘nagging questions’ find ‘straight answers’ in ‘Stock Exchanges, Investments and Derivatives’, third edition, by V. Raghunathan and Prabina Rajib ( http://www.tatamcgrawhill.com/ ). Over the last about fifteen years, the book has grown from 100 questions to the present number, but continues to open with a disclaimer: that it is “not about getting rich quick”. Why so? Because there is no such thing as getting rich quick in the stock market, reason the authors. “You get poor about as quick as you get rich.”

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