Month: September 2018

Understanding the working of the stock exchange is an on-going process. No one will be able to fathom its intricacies to perfection. Its discipline is known only to it. Stock market accommodates everybody but listens to none. Strength of its armor lies in its moods and trends. An investor needs to carry on with the available discipline and learn from the past mistakes. Stock market is a great college of self-education. Look, how it humbled all the analysts, brokers, bankers and the so called investment wizards in the current volatility. None could avert the impending events and millions of investors lost their life’s savings. You remember and recall the gains made by your friends. But there were occasions when they too lost much and then recouped their energies to challenge the stock market with the experience gained.

In the game of stock trading you need to be an incessant learner to save yourself from the trading mistakes. Some of them are:

1. Prediction of stock movements is a difficult task. Do not indulge in it.
2. Try to learn the timing of the market, how to enter and exit trades.
3. Apart from your own study and judgment, extensive reading of reputed stock journals, advice from at least two competitive experts before embarking upon heavy investments in a particular stock is essential. Along with the positive aspects that you have identified with the company, give serious consideration to the negative factors.
4. Have a perfect theory understanding of the fundamental concepts and working of NSE, NASDAQ, Bull and the Bear Markets and the need to quickly adjust to the developments taking place in the volatile market.
5. Mistakes in investments often happen due to impatience and the greed to make quick profits. This is not the proper way to understand and respond to the market.
6. Before the advent of the internet, tools of trade like stock results, access to instant trades, analysis tools, charts, trading trends were not available to an average investor and one had to depend on the of the brokers. Now an investor can be self-sufficient and trade independently. This means one has opportunities for the asking, and the need to learn about the possible mistakes is all the more.
7. Day trading is tempting but the chances and results of the mistakes are grim. Get associated with an active trading consultant, the expert in this area.
8. In day trading, at the end of the day, you need to come out with a clean slate, as you are not expected to hold the instruments for more than a few minutes and not at all till the end of the day. You start each day afresh. Stock market index movements are linked to the share prices in one way or the other. Just like a boatman understands the movements of small or big waves and uses the oar at the appropriate degrees, your buying and selling activities need to be guided by the short term trends in the market. This is the critical area where an investor commits mistakes. With no fixed formula to avert the mistakes, your experience and confidence are the only guiding stars for you that will lead to profits or take you to losses.
9. Do not trade beyond the limit of your liquid funds( funds available with you after providing  for  all living needs)
10. For on-line trading, a high-speed Internet connection is a must. Trades are finalized in a fraction of a second in stock market, and you miss the opportunities, if your equipments do not deliver optimum level of efficiency and speed.
11. Have a financial plan and a trading goal. Develop the habit of keeping records.
12. Remain guided by the ground realities in the market, than by your moods. Do not have unrealistic expectations.

Keep the lessons of your past mistakes in the front row of your mind, and work in the stock exchange with a positive mindset and with proper understanding of the psychology of trading.

Certain golden rules for investment in shares need to be remembered at all times under all conditions that govern the stock market. You have seen the traffic signal colors, red, amber and green–stop, look and then proceed. One visiting the stocking market for the first time or even the regular investor must remember these signs. What is profit through stocks? It is mainly cashing on the intelligence of other persons, through your intelligence. No one comes to the stock market with the intent to lose. Everyone wants the profits as quickly as possible. Many carry the feelings that the stock market is the granary of profits. Fields with ready harvest-just go and pluck the ripe fruits! You feel you are the owner of a perennial fruit-giving tree!

And suddenly there is a tempest! The ripe and unripe fruits fall to the ground. The flowers wither away…. with a loud thud, the tree crashes to the ground right in front you, as you watch helplessly. All your hopes are shattered. That was the position of the investing public when the markets crashed in 2008.

When you own the stocks, the normal expectation of even the conservative investor is to watch the company grow, receive dividend checks regularly and get periodical bonus shares. Since the industrial revolution, stocks have been important financial instruments for building wealth through a good and imaginative investment portfolio. The stocks listed in the Exchange are in thousands, the internet revolution has made it possible to trade in stocks in any part of the world.

Stocks are popular mode of investment with the common man, and most of them do not know the technicalities involved in making the investment decisions. Popular talks, deliberate misinformation, get-quick-rich mentality, belief that investment in shares is the magic answer for amassing wealth play their roles in this area. Guidance from the brokers is accepted, for the common man has no time for making detailed analysis for each and every share listed in the Exchange, but the best option is to make one’s own decisions for investment, and gradually learn the importance of timing in buying and selling shares. Selling the shares well in time to maintain the correct balance of the portfolio is as important as buying. One steeply sliding share may undo the good that has been happening to your portfolio through rises in other shares. The basic issue is, you must know what the numbers under various heads in the balance sheet of a company mean. Such a study helps you to avoid costly mistakes.

Whether it is long-term investing or short-term investing, you need to know where to begin and the amount that you are willing to invest. A good grasp of the broad perspective of the market is the fundamental requirement. With the internet revolution the exchange of information is very fast. The best company may face severe competition to its products by similar innovative products being produced in a distant country and made available with excellent market strategy.

The new technological innovations have the potentiality to wipe out a particular product from the market as the common man may discontinue using it, in preference for the new product. Granted that you have arrangements to handle your portfolio with the broker, that doesn’t mean you need to relax your guard. It is your money. Remember what happened to the market two years ago. The financial analysts, the brokers, the economists, the banking advisers, the mutual fund experts—all of them failed and the stock market played truant with millions of investors and brought their doom! Turn the pages of the history of the stock market and learn lessons how the market has been a great leveler!

If he were not a famous investor in shares, he would have been a famous author. To be frank, he is both! Warren Buffett is well-known for his quotes and one-liners, which reveal the inner joy he must be experiencing while on the serious game of investing. Buying and selling shares! He has the keen sense for doing both, for each transaction means tens of thousands of dollars for him. He recognizes the worth of each dollar that makes the millions and millions that make billionaires. He is one of richest billionaires in the world today, like of which you count with your fingers. Other billionaires have the great industrial empires behind them. As for Buffett, he is an empire by himself! His brain is the economist, analyst, think-tank, Managing Director and what not!

Luck favors the brave. The world of investing is interested to know how he chooses the stocks and why he does what he does. His way of working has become the philosophy for the investors. The best way to understand Buffet is to follow him. Buy what he buys. He is considered as a long-term investor. According to him “the best holding period fort a share is, forever”.

Some of his golden methods of investing are:

1. As Ryan Barnes says “Warren Buffett has an uncanny ability to pick the stocks with the greatest potential for growth.”
2. He has the patience and the worthy pockets that permit him to wait. Do you?
3. According to him, “the stock market is a method for transferring money from the impatient to the patient”.
4. Choose some stocks that have the latent capacity to tender more than average returns in the long run. Be not afraid of the short term market ups and downs.
5. Among the index investing and active investing which are popular in the stock trade, Buffet chooses the index investing. He doesn’t stop there. He talks about the third alternative, which makes what Buffet is! That is “focus” investing which is a specific type of portfolio strategy, which has the capacity to beat the index. This is the big canvas for Buffett.
6. Focus means, to select some stocks that are likely to produce more than average returns  from the long-term perspective, invest the substantial percentage of your investible funds  and have the fortitude to hold on to them when the market hisses and fumes, goes up and tumbles down.
7. Buffett gives top priority to the management of the company. He tracks the share price, analyzes the economics of the business it is doing, but who does the business is more important to him. It is the question of common sense. Great people will not do great mistakes. The stock of well-managed companies is bound to rise. Buffet thus, reaches out to the outstanding companies.
8. Buffett goes to find the stability of management, which according to him leads to high probability of performing better in future.
9. Buffett advocates, ‘less is more’. For the investor who doesn’t have time for deep studies and stock analysis, his advice is simple and straightforward. Find five to ten sensibly priced companies, which have the long-term competitive advantage. Study their products and the market for them. Own the stocks of a limited number of very good companies.
10. Buffett mainly focuses on consumer foods, newspapers, insurance companies and furniture stores.
11. From the point of an analyst, Buffet ensures that the debt of the companies that he is going to invest is not too high. Due to change in banking regulations, the credit squeezes, the company may have problems of raising finance for expansion. He wants the investor to have a close look at the debt to equity ratio, the current ratio and the quick ratio.
12. His great emphasis is on “holding the stocks forever”.

One final advice– Do your homework well,   before following anyone and investing.  Follow your conscience and judgment. Take a decision in ten minutes that will last for a decade.

If you wish to make good profits in the stock market, then you will need a lot of patience. Many times it’ll happen that you buy a stock and then it starts to go down. If it is a good company, then you will need to hold onto the stock till you get a profit. It could even take 6 months to 1 year to get good returns from that stock. If you lack patience then all you’d do is keep booking losses even in the good companies that are bound to give you profit in a longer term. A lot of time we buy a stock and we sell it in a loss within a week and call it a bad or stupid stock. This is not the correct way to invest your money. I personally still have some stocks in the red for several months but I’m still holding to it because I know that it is definitely going to give me good returns in future.

Holding onto your stock is very important if you wish to make profit in stock market. Investing into stock market is not a get rich quick scheme and so make sure you enter the market with a lot of patience. The rally in the stocks occur only for a few days and the rest of the time the stock consolidates. The stock consolidates for most of the time and then rallies up for a few days and then corrects a bit and consolidates again. So if you want to continue making profits with your stock, holding onto it is very important.

Lack of Patience

I sold a stock at the levels of 80 with making a mere 2 rupees profit per share because the stock wasn’t moving anywhere for months. In a matter of time, the stock rallied up to almost 120 and is now trailing around 110. If I had been a bit more patient, I would have had made a lot of money here.

With Patience

I had bought a stock around 45 and within a couple of weeks the stock had dropped to levels of 39. It was a good company and so I decided to not sell and continue to hold it. Now the stock is trading close to levels of 50. Had I sold it around 39, I wouldn’t have a chance to make the deserved profit.

So are you going to make the same mistake that I did or you will gather some patience and make good profit here?

Our markets have been performing horribly, completely under performing it’s peers and specially the west. There is hardly any buyers out in the markets due to all the negativity.

On the positive side, each fall on this market is giving a very good entry point to long term investors where one can cherry pick good quality stocks on cheap valuations and hold tight till markets rebound in future. I don’t recommend trading short term at all. A lot of people are buying into the markets for 2-3 months perspective, well please don’t. This free falling market is not the right time to buy with such a short duration. Invest into the market at current levels and using each declines to buy some more ONLY if you are going to stay invested with a long term horizon, atleast 24-36 months.

There is a lot of uncertainty in the markets and it is going to remain so lackluster for a few months more. The best part for this consolidation move in the lower levels is as each month is passing, the investors are getting their salaries from where they could fetch some money to buy good quality stocks on these prices. I shall advice investors to keep buying into good quality stocks on every declines and have a 36-60 months view, you will definitely make a lot of money. The only risk to your return is if you’re not buying into the right company. Stick to good quality stocks and avoid stocks you have no clue about.

With violent reversals current stock, the trader does not know whether to buy or sell and the investor is reluctant to build or to enter the market because the fall is probably not over.

So if you are an investor and a little bit trader … there is something crazy. Do not worry, we will put the record straight. What to do, whatever your profile? The investor wants to grow its capital An investor seeking to profit from its capital over the long term, for example, a project financially.

The idea is to grow your capital over time, so that in X years, you are richer today. Success is measured in years by then. It is a complete philosophy of life, how to manage your money. And that’s what you have in mind right now: no matter how short-term markets.

The trader wants to be a little rich, but very quickly and very often. Conversely, a trader is someone who tries to beat the market in the short term and to deliver short-term income. This approach is obviously more risky – especially when you look at the markets in recent weeks, which gave us nice surprises and reversals.

The strategy here is to position themselves in securities that have met all conditions to see their classes quickly and strongly shifted (either up or down) in the coming sessions.

Is it time to buy? For long-term investors, the recent rout in the markets is the real godsend. This is the best time to buy shares for five months. Yes, the market may drop even lower in the short term it may come back to test the yearly lows or even crash down further! And right now, you find how the market? Quiet or risky?

It would be a shame to follow your gut right now, and you say “I will buy when it’s quieter. “Just remember the flight of investors during the fall of 2009: it was at this time that he was buying!  copyright stock market today

Car buying quiet usually returns to first pass a strong rebound. The short-term traders should have a different approach. They must find a turning point on a title – or conversely when a course will accelerate.

But nothing is certain and everything happens very quickly. We must therefore carefully follow your trading scenario: playing an announcement of results, follow your technical goals. come from stock market today

And always place a stop. There is no urgency to buy a market in a low point: in trading, the opportunities are for all time. That said, there is no doubt that the current volatility offers great opportunities.

Do not just mix your long-term objectives with short-term strategy.

As I had already shared, SIP is a method of investing a fixed sum of money regularly in a Mutual Fund Scheme. It is quite similar to regular saving scheme in a bank account like a recurring deposit. The only difference is that there are good chances of getting a better return than a bank deposit when investing in stocks.

Benefits Of SIP

• SIP offers you tax benefits which could come in handy if have to pay income tax.
• Regular Investment makes you disciplined in your savings and also leads to wealth accumulation.
• SIP comes with a locking period, so even if you wish to spend you cannot as the funds are locked and cannot be taken out.
• In SIP, invest as low as 500 or 1000 rupees. There is no need to worry if you do not earn a lot of money as you can still be a market investor with as low as 500 a month and even that would come up to be quite a good sum after a few years.
• In SIP, you invest in mutual funds where your investments are managed by market experts and professionals who have good knowledge in this field, so you have a chance to do much better than that of investing yourself alone.
• In SIP, you will be purchasing units at all phases of the market, high or low, depending on that you get the units share and so you dont need to worry about market going up or down. But just have to wait for the right time to take out your money after the scheme is over and no more deposits are being done. Thus your investments get averages out at the end and the loss is very limited which isnt the case when you invest all at once.

SIP refers to Systematic Investment Plan. SIP is a method of investing a regular amount of money every certain time period, say a month. It is an alternative to investing a large sum of money at once. SIP is a good method of investment, specially for those who do not have a large sum of money to invest at a go or even if they have but they are not able to invest all of them at the same time, due to whatever reasons. It is a good method for those who are working and earn a fixed sum of money every month. Like for example, if a person earns 20,000 rupees a month and his expenses are 10,000, then he can easily invest at least 5,000 a month. Most of the working professionals do not have a large sum of money to invest, so they can go into SIP method and can save quite a lot of money on a recurring basis and also enjoy good returns on his savings. SIP is also preferred by those people who wants a good saving but cannot resist spending money. If their money would directly deduct from the account and go into a plan that has a 3 to 5 year locking period, then there is no chance they can take out money or spend anywhere.

In SIP method, you buy share units every month/quarter based on the share value at that current time. So it balances itself at the end, since we know that the market keeps going up and down every time and your shares will be bought at a time the market is low, as well as at the time the market is high. If the market is too high at a time you want to invest, SIP is the best way to go, since if you invest a large sum at a high price and the market falls, your large sum value will go way down but in SIP, you only purchased a little bit at that high time and once the market falls, you do incur a loss but only on the small sum you invested, all the rest of the investments that will proceed in further months will be bought in a lower market value. So like I said, it averages out at the end.

But remember that SIP does not offer you a very high gain that you can get from a one time investment of a large sum but it is more sort of a very safe play and plus keeps regular disciplined savings. If you have a large sum of money to invest in the market and want a good gain on it then prefer some one time investments of large sums in different sectors of the market, specially at a time when market is going low.

It is very important that you identify your stance in stock market. That is, are you going to invest OR trade in the stock market? If you are not sure about this, then you will commit a lot of mistakes and yield lower returns from your investments. You might be an investor and behave like a trader making losses and vice versa. I’m going to give a brief introduction to both of the types which will help you identify yourself.

Investors – Investors invest their money into stocks for a longer period of time. They invest into stocks with good fundamentals and stay invested till they reap profits, could it take a year or two or even more. A smart investor enters a good stock when it has corrected or say they buy good undervalued stocks and maximise their gains. They don’t put money into a stock that has already rallied up and are in it’s highs because a high valued stock has limited upside and they will not get much appreciation in that stock. So investors wait for a correction in the stock and buy stocks on dips. Investors don’t care about stop losses and targets, they invest from a long time view and only take out once they’ve claimed a nice appreciation. If the stock goes down a lot from their purchase price, they will continue to hold the stock or even buy more to average it out. They’ll hold it till the day the stock comes back to its highs and only then book profits.

Traders – Traders put their money into any stock that is going to give them some appreciation in a short term. They don’t keep money into stocks for a very long period of time. They identify a stock worth putting money into, then buy it keeping in mind a target price to book profits and a stop loss to book losses. Traders can never trade in any stock without a specific target and stop loss in mind. Traders exit the stock if a target or a stop loss price has been achieved in that specific stock. A trader does not care if the stock is undervalued or overvalued, all they care about is entering a stock that is going to give any appreciation in a day or a few days to a week. Since a trader maintains a stop loss close to the buying price, they don’t really have a chance to make much loss. Many times the already rallied stocks rally even further up and that is where traders make their profits and investors miss out. Traders sometimes also enter stocks with no fundamentals unlike investors.

A trader usually makes more profit than an investor but being a trader means putting a lot of time into stock market investing. Majority of the active traders spend their day trading in the stock market and that is how they mostly make their living. However investors are normally working people, a job or business who do not have a lot of time to give to stock market and so they invest into the market from a longer term perspective and don’t need to check  their stocks all the time. An investor misses out returns during a time when he is waiting with cash on the side lines for the market to correct and market instead of correcting continues to make new highs, like the scene with current market. So if you have a lot of time in hand, it is better to trade than to invest to claim better returns.