Reddit reviews Why Stocks Go Up and Down, 4E

> I hope this is not too open-ended, but what would you folks say are the major pros and cons of investing in real estate vs e.g. securities?

You may not like this answer but you need to read about it from better sources.

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If you want to know about real estate, consider buying this book. If you want to know about securities and markets, consider buying this book.

I finished Buffettology a couple of weeks back. Great book - really informative and gives a useful model for thinking about things.

Here are some other things I have read and enjoyed:

• Intelligent Investor. Obviously a widely recommended book. I found Jason Zweig's edition with commentary quite useful - though his comments sometimes contradict the original text and are anyway pretty obsessed with the fallout of the dotcom boom. That said his additions are journalistic and so easier and easier to read that Graham's original prose.
  
• Why Stocks Go Up and Down. I know a bit about accounting and finance but this book really explains the effect on equities (and also explains bonds). I need to review some of the later chapters
  
  I'm currently reading Value Investing Made Easy. /u/moumouren also recommended me The Warren Buffett Way which is sitting on my desk now.
  
  I'm not an expert though - like you I am just starting - so take all this with a grain of salt. Just some ideas.

Do you need some way to survive on just this ₹20,000? It might be difficult, but investing in some stocks might help you survive, ONLY if you do your research before investing. Don't get into speculative/intra-day trading (futures). That shit will eat you whole. Regular, long-term trading requires a few months, at least. I am assuming this is the only amount you have with you, nothing more. Living expenses are somehow taken care of, and this is the only sum you have in the bank.

Usually it's bad practice, but considering the restrain on saving you have, set a definite amount you want from each stock investment. For say ₹1000 investment, if you make a profit of ₹100 in a few months, consider yourself lucky. There will be some losses along the way. Set a loss threshold, and if a stock dips below that, sell it asap.

IMPORTANT to note: only get into stock trading if you understand the basics. Why stocks go up and down might be a good place to start. It gets a little too dense, with Balance sheets and Income statements at every page, detailing various approaches to increase capital in a company. You'll have to study a company's past performance, evaluate it's potential for growth. The latter part is usually done by experts working in the field for years if not decades. But if this is all the money you have, you need to be prepared thoroughly to invest it. There needs to be a strong foundation before you go building castles.

>So even if the cash is used in re-investment, it will still add to reserves/retained earnings, right?

Correct, it is still the retained/reserve from the profits owed to the shareholders.

>So companies with earlier years reserves kept in excess cash or liquid investment instruments don't need to do this "bonus debenture" trick - they can directly use that cash which will reduce both "cash" on the asset side & also reduce the reserves on the equity side. Is this right?

The reserve remains the same. Cash reduces.

>So if a company is issuing paid up bonus shares, it's just jugglery on paper - they are taking subtracting X from the retained earnings figure & adding X to the paid up equity figure. I am not sure what purpose this serves other than increasing liquidity of the stock (per stock value reduces without changing the total value in the hands of the stock owner).

Dividends are a taxable event. With 2019 budget buybacks are also taxable event. Companies are expected to return cash to shareholders. Some might opt to return "value" to the shareholders instead. What and how they do is very debatable. A good primer on this is: https://www.amazon.in/Why-Stocks-Go-Up-Down/dp/0989298205

It is basic financial calculations and goes into each calculation step by step.

>If a company is instead of issuing bonus debentures, it seems to be a form to taking a loan from the stock owner instead of taking it from the bank or from debt investors. I am not sure what to make of this - whether it's good or bad from the stock owner's point of view - on one hand, it may be a cheaper loan than what the company can get from the market, but on the other hand it has decreased the assets on the balance sheet!

Assets remained the same because for the money the company got BDAL's aircrafts and buildings etc in return.

Bonus debentures are not a bad idea per se, if they need the money. What they did was give two dividends one year and next year asked for excess money. Interest rates are low, so there are many companies which have chosen to take loans (from banks or otherwise) and continue to give dividends to shareholders. It just increases leverage, I don't like it but some might think it is the best use of cash.