Can You Buy 1 Lakh Shares of a Company with Just Rs. 1 Each?
Yes, absolutely, you can purchase a large quantity of shares at a very low price. However, the importance of understanding the associated risks should not be overlooked. Many small companies present themselves as potential investments, but they carry a high degree of risk due to their uncertain future prospects and limited market capitalization.
Risk and Investment
The question often arises whether it is wise to invest in such low-priced stocks. While it is indeed possible to buy 1 lakh shares of a company with a share price of Rs. 1, one must be prepared to face potential challenges. Small companies typically have higher volatility in their share prices and higher risk of bankruptcy. Therefore, it is crucial to thoroughly analyze the company's financial health, industry trends, and market conditions before making such an investment.
Investing in a Smart Manner
Instead of purchasing 1 lakh shares in a single company, diversification is recommended. As mentioned by Sharma ji, investing in multiple reputable companies can spread the risk and potentially lead to better returns. For instance, investing 20,000 INR in Wipro, 15,000 INR in ITC (Indian Tobacco Company), 20,000 INR in Dabur, 15,000 INR in PNB (Punjab National Bank), 10,000 INR in IOC (Indian Oil Corporation), 10,000 INR in HDFC Life, and 10,000 INR in CAMS (Camaris Ltd) can provide a balanced portfolio.
Why Should You Be Cautious?
Technically, you have the option to buy any number of shares at a price that is best available to you. However, it is often observed that companies offering shares at a very low price are typically associated with significant underlying risks. The low price usually indicates that the company is facing financial distress, facing legal or operational difficulties, or operating in a highly competitive and volatile industry. Such companies are often referred to as penny stocks or 'bhangar' (pigeonseed) in Indian markets. Trading in penny stocks can be highly speculative and fraught with greater risks. Despite the potential for higher returns, there is a higher likelihood of experiencing losses.
Due Diligence and Research
To avoid making impulsive and risky investments, it is essential to conduct extensive due diligence and research before investing in a company. This involves examining financial statements, understanding the company's business model, analyzing industry trends, and assessing the management's track record. Additionally, staying updated with news and reports about the company can provide valuable insights into its performance.
Time Frame and Patience
Investments in the stock market require patience and a long-term perspective. It is advisable to set a clear investment time frame and avoid making whimsical decisions based on short-term market fluctuations. A strategic investment approach ensures that you remain focused on your goals and maintain a disciplined approach to investing.
Conclusion
While purchasing 1 lakh shares of a company with a share price of Rs. 1 is technically possible, it is crucial to approach such investments with caution. Small companies often come with high risks. A diversified and well-researched investment strategy is essential to maximize returns while minimizing risks. It is always recommended to invest in companies that align with your risk tolerance and investment goals.