Stocks & Mutual Funds
You understand the basics. Now learn how equity markets work, how to read financials, and how to build a diversified portfolio that grows wealth systematically.
What you'll learn
How Stock Markets Work
Stock exchanges (NSE, BSE, NYSE, NASDAQ) are marketplaces where buyers and sellers trade shares of publicly listed companies. Prices reflect the collective expectation of future earnings.
- →Market cap = share price × total shares outstanding
- →Primary market: IPOs, where companies raise capital
- →Secondary market: where you buy/sell existing shares
- →Indices (Nifty 50, S&P 500) track a basket of top companies
Reading Financial Statements
Three documents tell you everything about a company's financial health: the income statement (P&L), balance sheet, and cash flow statement.
- →Income statement: revenue, expenses, net profit
- →Balance sheet: assets, liabilities, equity
- →Cash flow: operating, investing, and financing cash flows
- →Red flag: consistently negative operating cash flow
Key Valuation Metrics
Valuation multiples help you decide if a stock is cheap or expensive relative to its earnings and assets.
- →P/E ratio: price-to-earnings — the most common valuation metric
- →EPS: earnings per share — a measure of profitability
- →Market cap: small (<₹5000 Cr), mid, large-cap classification
- →PEG ratio: P/E adjusted for earnings growth rate
Mutual Fund Types & Selection
SEBI classifies mutual funds into equity, debt, hybrid, and solution-oriented. Within equity: large-cap, mid-cap, small-cap, flexi-cap, sectoral, and index funds.
- →Index funds: low cost, track the index, beat most active funds long term
- →ELSS funds: tax-saving under 80C, 3-year lock-in
- →Expense ratio matters: even 0.5% difference compounds significantly
- →Direct plans always outperform regular plans (no distributor commission)
Asset Allocation Strategies
Asset allocation — how you split money between equity, debt, gold, and cash — is the biggest driver of portfolio returns and risk.
- →100 minus age rule: rough equity percentage guideline
- →Rebalance annually to maintain target allocation
- →Goal-based allocation: different goals need different asset mixes
- →Avoid over-diversification: 5–8 quality funds/stocks beat 30+
Tax-Saving Investments (ELSS)
ELSS (Equity Linked Savings Scheme) mutual funds offer ₹1.5 lakh deduction under Section 80C with the shortest lock-in of 3 years among 80C instruments.
- →LTCG of 12.5% applies after 1 year (above ₹1.25 lakh exemption)
- →Better post-tax returns vs PPF, NSC over long term
- →In new tax regime, 80C deductions are not available — choose based on your regime