Is it a smart decision to invest Rs. 5000 in shares?

I have limited knowledge about the share market. I have been studying the volatility and sensitivity of the indian stock market for 6-7 months and I believe I have a fair knowledge about it. So owing to my limited knowledge and minimum risk appetite I would like to invest Rs. 5,000 in stocks. Is it a good decision? How big is the risk of diversification and transaction cost for such a meager amount? And I am investing with a short to medium term perspective ie my number of transactions might me more which would mean I will have to pay more transaction costs. Considering all that would mutual funds be a better option?

Also can anyone please also suggest of any investment forums where queries related investments are answered "free of cost".

suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsoft's stock?

has a volatility of 30%. Given the higher volatility, should we expect Microsoft to have equity cost of capital that is higher than 10%?

Basic Accounting Concepts pls help!?

Beacon Inc. has decided to expand its operations to owning and operating long term health care facilities. The following is an excerpt from a conversation between the chief executive officer, Frank Forrest, and the vice president of finance, Rachel Tucker.

Frank: Rachel, have you given any thought to how we’re going to finance the acquisition of St. Seniors Health Care?

Rachel: Well, the two basic options, as I see it, are to issue either preferred stock or bonds. The equity market is a little depressed right now. The rumor is that the Federal Reserve Bank’s going to increase the interest rate either this month or next.

Frank: Yes, I’ve heard the rumor. The problem is that we can’t wait around to see what’s going to happen. We’ll have to move on this next week if we want any chance to complete the acquisition of St. Seniors.

Rachel: Well, the bond market is strong right now. Maybe we should issue debt this time around.

Frank: That’s what I would have guessed as well. St. Senior’s financial statements look pretty good, except for the volatility of its income and cash flows. But that’s characteristic of the industry.

Discuss the advantages and disadvantages of issuing preferred stock versus bonds.

How does my portfolio look?

fnaax (formula funds international select) 22116.52 12.5%
fnsax (formula funds us select) 36606.03 20.7%
xlg (rydex 50) 39826.60 22.5%
sfenx (fundamental emerging markets) 28356.65 16.1%
sfnnx (fundamental int. developed) 20225.76 11.5%
sflnx (fundamental us large) 29510.18 16.7%

Here are the reasons behind my choices. First, although the fees on the formula funds seem to be high, I like Greenblatt’s concentrated strategy on investing in companies with high earnings yields and high returns on capital. Over time, I think these funds will outperform their relevant indexes. Second, larger capitalization stocks appear to be a lot cheaper on a valuation basis than smaller capitalization stocks. XLG has a lot of big names that are trading at very reasonable prices. Third, fundamental indexing has its advantages over traditional market weighted indexing due to market behavior, so I feel these will slightly outperform in the long run. Fourth, I have over 40 years until retirement, so I feel being 100% in stocks makes a lot of sense, especially considering how low bond yields are. I do not equate beta (volatility) with risk, so even though the market will be volatile, I can stomach it quite easily. Fifth, in the aggregate, my portfolio breaks down to US 60%/ Foreign 40%, with 60% of the foreign allocation Developed and 40% Emerging. I think that valuations look good in emerging markets, and going forward economics are going to be better than for the developed economies. Hence, the slight over-weighting.

Finance question, find alpha???????????

Assume that the CAPM is a good description of stock price returns. The market expected return
is 7% with 10% volatility and the risk-free rate is 3%. New news arrives that does not change
any of these numbers but it does change the expected return of the following stocks:

Green leaf:
Expected return: 12%
Volatility: 20%
Beta: 1.5

How to find alpha. Thanks

How do I find alpha for a given security?

I have been looking around online, and I’ve found a couple of different ways to compute alpha, but it’s not making much sense. If I know Expected Return of a stock, the Risk Free Rate, the Markets Expected Return and Volatility of both Market and Stock, how the heck do I find alpha for a stock? I’m so confused!

Within the capital asset pricing model a) the risk-free rate is usually higher than the return in the market.?

Within the capital asset pricing model a) the risk-free rate is usually higher than the return in the market. b) the higher the beta the lower the required rate of return. c) beta measures the volatility of an individual stock relative to a stock market index. d) two of the above are true.

Why don't the stock markets trade only once a day: to control stability and lower volatility?

With the spontaneous nature of stock brokers, stocks prices in no way represent the actual price of ownership in a company.
If they went to a system where trade information was only released once a day, it would in theory, slow down the erratic movements in prices, creating stability and lowering the volatility of the markets.
I’m sick of damn recessions.

Will Raptor CEO David Karuri consider an IPO offering in 2012?

While there is a lot of volatility in the stock markets, one cannot seam to wonder why a company with so many projects under Research and Development (R&D) does not seek private equity funding through an Initial Public Offering?

Regression Lines and Stock Market's Help?

The data is as follows:
Year: 1 NYSE: 4.0% Stock Y: 3.0%
Years: 2 NYSE: 14.3% Stock Y: 18.2%
Years: 3 NYSE: 19.0% Stock Y: 9.1%
Years: 4 NYSE: -14.7% Stock Y: -6.0%
Year: 5 NYSE: -26.5% Stock Y: -15.3%
Year: 6 NYSE: 37.2% Stock Y: 33.1%
Year: 7 NYSE: 23.8% Stock y: 6.1%
Year: 8 NYSE:-7.2% Stock y:3.2%
Year: 9 NYSE: 6.6% Stock Y: 14.8%
Year: 10 NYSE: 20.5% Stock Y: 24.1%
Year: 11 NYSE:30.6% Stock Y: 18.0%
Mean=NYSE 9.8% and Stock Y 9.8%
Beta= NYSE 19.6% and Stock Y 13.8%
1. Construct a scatter diagram showing the relationship between returns of Stock Y and the market. Use a spreadsheet to a calculator with a linear regression function to estimate beta.
2.Give a verbal interpretation of what the regression line and the beta coefficient show about Stock Y’s volatility and relative risk as compared with those of other stocks.
3.Suppose the regression line were exactly as shown by your graph from part b but the scatter points were more spread out. How would this affect (1) the firms risk if the stock is held in a one asset portfolio and (2) the actual risk premium of the stock if the CAPM holds exactly?
4.Suppose the regression line were downward slopping and the beta coefficient were negative. What would this imply about (1) stock Y’s relative risk and (2) the correlation with the market and (3) its probable risk premium?