The Corporate Affairs Ministry has advised investors "not to gamble their hard earned money" in stock markets by going for penny stocks and asked them to beware of "free advice" on electronic media.
Initial public offerings of PSUs, however, are a safe bet as there is "very little risk of fraud", the MCA said in 'A Beginner's Guide to the Capital Market'.
After repeated stock market disasters, like the ones by notorious share brokers Ketan Parekh and Harshad Mehta, the IPO scams of 2003-2005, and the latest bungling of the accounts in Satyam Computer, which caused huge losses to investors, the MCA has taken upon itself the task of educating people on the Do's and Don'ts of investing.
"Beware of the media, especially the stock-specific advice on electronic media. Too many saints in the capital market offering free advice!.. In reality, many of these advisors have vested interests," the guide said.
The government also advises investors not to over-depend upon "comfort factors" like IPO grading and independent directors. Also, sectoral frenzies should not prompt investment in IPOs because not all companies in a sector are good and many companies change their names to reflect the current sectoral fancy.
Do not blindly take decisions based on accounts just because these are audited, the guide cautions, "high incidence of fraudulent accounts and mis-advertising of financial results. Satyam case is a wake-up call."
The Rs 10,000-crore Satyam fraud, which came to light in January last year, was a result of years of bungling of accounts by founder Ramalinga Raju and associates.
One of the MCA's '20 Mantras' to wise investing also asks people to learn to sell. "Most investors buy and then hold on (most advice by experts on the media is also to buy or hold, rarely to sell).. Profit is profit only when it is in the bank," it noted.
But above all, it says, "Let not greed make you an easy prey!".
The ministry has dedicated the week to investors and plans to organise at least 3,000 education and awareness programmes this fiscal.
