Investing money, not trading it
Contributions, units, corporate actions, and the arithmetic that decides what a return means.
What this track is for
This track covers the money that is not a trade. It starts with what a regular contribution actually buys. It separates a fund's unit price from its cost and its quality. It shows how inflation and concentration hide inside a return figure. It walks through an application that blocks money rather than spending it. It ends on the corporate actions that change your share count without changing what you own.
Steps6Each says why it follows the last
You will be able to5Things to read and recognise
Comes afterIs this pattern real?Read that track first
The track, in order
6- How a SIP Works: Units, Average Cost and the Rate You AssumeStart with what a contribution actually buys. You get units at whatever the price is that day. And you get an average that is not the average of the prices.A SIP is a way of paying into a mutual fund scheme on a schedule. It is a method of paying, not a type of investment and not a promised rate. Each instalment buys the amount divided by that day's NAV, the scheme's value of one fund unit. So a lower NAV buys more units and a higher one fewer. The average cost is arithmetic, not protection. The holding can still sit below the money paid in.
- NAV, Expenses and What a Fund Comparison Has to MatchYou have units. Now comes the price each one carries, and why a lower price buys more of them without being cheaper.NAV is a scheme's assets, less what it owes, divided by the units it has issued. It is an accounting value, not a rating and not a price tag. A low NAV buys more units for the same money, and that is all it means. On the same percentage gain, two holdings of equal size are worth the same. Costs the scheme bears are already inside the NAV. An exit load, and the reader's own tax, are separate questions.
- Diversification and Inflation: Two Things a Return Figure HidesTwo risks a return figure hides: money that buys less than it did, and five holdings that are one bet.Counting positions is not measuring diversification. Take a ₹1,00,000 portfolio with ₹60,000 in one holding. That is 60% one bet, whatever the other four are. And a return is not the same as what it buys. Growth of 8% against inflation of 6% is not 2%. The ratio, (1.08 ÷ 1.06) − 1, gives about 1.89%. The same arithmetic turns 5% growth against 6% inflation slightly negative.
- CAGR, XIRR and Absolute Return: Three Answers About One AccountYou can read a return figure now. This is how to work one out, and why the same account gives three different numbers depending on which question you ask.Absolute return is the total change from start to end. It says nothing about time. CAGR turns that total into one steady yearly rate. It is honest only when no money moved in or out along the way. XIRR uses the date of every contribution and withdrawal. So XIRR is the one that fits a schedule of payments. Same account, three numbers, three different questions.
- IPO Applications: What ASBA Blocks and What Allotment DecidesA different way in, with a step the others do not have. Money is blocked rather than spent. And an application is not an allotment.An application is a request, not a purchase. Under the blocked-amount mechanism the money is held in the bank account rather than paid across. A block confirmation is not an allotment. Say 100 shares are applied for at ₹100 and 50 are allotted. Then ₹5,000 is payable for those 50, and the rest of the block is released. Allotment settles who receives shares. It never settles what they will be worth.
- Bonus Shares, Splits and Dividends: What Actually ChangesClose on the actions that change the number of shares you hold without changing the size of what you own.A larger share count is not a larger stake. Take a two-for-one split. Ten shares quoted at ₹1,000 become twenty at ₹500, and the holding is worth ₹10,000 either way. A one-for-one bonus also takes ten shares to twenty, without doubling the business behind them. A cash dividend is different again. Value leaves the company as cash, so the price can adjust around the event.
When you finish this track
Next track: Before your first stock market order
Start here. What the market is. What each of your accounts does. And what happens when you press buy.
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