How To Keep Your Emotions In Check While Trading On their way to becoming market masters, stock traders go through different stages. One of the hardest things to learn is how to trade without letting your emotions get in the way. You can be good at picking stocks and managing risk and still fail as a trader if you can't keep your emotions in check. When you know how to control your emotions, you can be patient with your winners and not at all with your losers. Even though it seems easy to say that you should stick to your trading plan, it is actually much harder to do so. Most of us have strong feelings about money, which makes it hard to stick to our rules. To do this, you have to take the money out of the picture. Financial risk can't be a factor in making decisions. It might be hard to incorporate this ideology while trading but you can remove the emotions from trading only if you are able to get this right. Here are some ways to trade without letting your emotions get in the way: 1. Don't put yourself in more risk than you can handle. Most traders keep their losers too long and sell their winners too soon because they take on too much risk. Taking on too much risk ties down your risk management, making it harder for you to make trades with a positive expected value. This is something you can change by taking less risk. Then, many traders find that the upside isn't enough to make them want to trade at all. If a trader doesn't have a way to make good profits with the money they have, they may start to take on more risk to try to get better results. But you can make your trades more likely to go up without taking on more risk if you scale into your positions. As the trade goes in your favour, add to your winners. You don't need to put yourself in danger by doing this. You can lower the risk of your other positions by using the money you made from your first positions. Add to the list of winners. Don't throw money at your losers. 2. Change how you think about money We often tell people that it's best not to look at the summary of their trades' profits and losses. When you do this, you get too caught up in the current gain or loss on your positions, which makes your fear or greed about the trade worse. Instead of making decisions based on the chart, think about the money. People can't be expected to trade without checking to see if they are making or losing money. So, if you have to look at your trades, instead of focusing on how much money you are making or losing right now, think about how much money you will make or lose if your trade hits the stop loss levels. If you buy 1,000 shares of a stock for Rs 100 and the stop is at Rs 90, you could lose Rs 10,000. That's how much you could lose when you leave. Let's say that this stock goes up to Rs 120 and you move your stop to Rs 110. Even though your position is up Rs 20,000 right now, if you get out on the stop, you will only make Rs 10,000. You need to pay attention to the number that matches your exit point. Don't think too much about where you are now. If you congratulate yourself on making Rs 20,000 on a trade, you start to feel something about that number. If so, you are less likely to sell the stock if it goes back down to Rs 110, where you would only make Rs 10,000. You thought you would make Rs 20,000 and hoped it would be more. It hurts to leave at a lower price, so many people stay and wait for things to turn around. Count on what you already have, not what you want. 3. Make a plan on paper and trade it Some people can lose their minds because of how they feel about a trade. When you make a trade, your feelings can make you break your trading rules. Having a plan written down will help you stay on track when you get lost. The plan doesn't need to be long or hard to understand. A trading plan shouldn't be longer than one page, in our opinion. It should include your rules for entry, risk management, scaling, and leaving the business. There should also be a review process so that you can work to make your rules and how they are carried out better. When you write down an idea, it gives it more value. Before you make another trade, take the time to write out a plan.
Jun 16, 2022
In a stock market, what are "sectors"? The Indian share market is extremely vast with several thousand companies listen on the exchanges. India's National Stock Exchange, for example, has more than 1900 companies on its list (NSE). And they are divided into 11 sectors. The firms work in many different fields. Sectors are a way to group companies on the stock market by the type of business they are in. Read on to find out more about the different stock market sectors, with a focus on the Indian equity space. Sector-wise separation Before putting money into a stock, investors have to do a hard job. It is to carefully analyse the stocks and understand how the stock as well as its sector is performing. When you know which books are on which shelves in a library, it's easier to walk over and pick the book that fits your interests the best. In the same way, when stocks are put into groups called "sectors," they are easier for investors to find. In the same way, sectors help investors figure out where they don't want to put their money. For example, when there is a pandemic and air travel is limited, investors might not want to put their money in the tourism or aviation industries. What are the stock market's different sectors? Some of the most important parts of the Indian stock market are: Agriculture & Commodities Aviation Automobiles Financial services and banks Electricals & Electronics FMCG Gas & Petroleum Infrastructure for Information Technology Pharmaceuticals Real Estate Telecommunications Textiles Tourism What are some of the most important sectors of the Indian stock market? Some companies are very well-known, while others are not. The good thing about sectors is that they help investors find hidden gems. Here are four of the most important stock market sectors that you need to know about: Automobile Sector There are more than just carmakers in this sector. It is also where commercial vehicles, two-wheelers, three-wheelers, and tractors are made. Since India is an agricultural country, people who invest in tractors and other commercial vehicles tend to be serious about them. Examples of leading automobile companies are Maruti Suzuki, Ashok Leyland, Bajaj Auto and Escorts. Banks and Financial Services The Banking sector is well known because it makes money from money. The banks' top line is made up of the cash flows of every other company on the market as a whole. This is because almost every other business borrows money from a bank to manage its capital structure. This is why profits from financial companies are different from profits from other types of companies. So, if you take a sectoral approach to investing, you can take this difference into account. Non-Banking Financial Companies (NBFCs), Asset Management Companies (AMCs), Ratings and Research Institutions and Insurance Players, as well as public and private banks, are all part of this huge sector. NBFCs work with people who don't have bank accounts. Mutual Funds are taken care of by AMCs. Rating agencies work on credit ratings and make money in other ways, like by selling research. Insurance companies pool small amounts of money from many people to cover the losses of a few. Examples: ICICI Bank, Bajaj Finserv, Nippon Life, AMC CRISIL This sector is worth keeping an eye on because it is about to get one of the biggest players in the insurance and fintech industries. Fast moving consumer goods In the FMCG sector, companies make things that we buy and use every day. These things are used up quickly. FMCG products guarantee a steady stream of income, which leads to steady profits and a strong return on investment. Examples: Hindustan Unilever, Britannia Manufacturing, Colgate Palmolive, Procter & Gamble The FMCG industry can handle a recession. So even when the economy as a whole was bad, the grocery stores near you would still be busy selling FMCG products. Pharmaceuticals Sector Some of the products that come from the pharma industry are biologicals, active pharmaceutical ingredients, excipients, vaccines, and cures for both common and rare diseases. Investors are learning more about the business because of the COVID-19 pandemic. The industry is heavily regulated because the products affect the health and safety of people all over the world. Examples: Biocon, Sun Pharmaceuticals. Pharmaceutical companies like Pfizer and AstraZeneca have a special advantage: they have unmatched pricing power. It goes without saying that there are rules in place to stop irresponsible behaviour. In short, sectors are groups of stocks that have similar business models. This lets investors focus on a certain industry and find a certain stock. The amount of information that investors have to deal with takes up a lot of their time. When investors use a sectoral approach to investing, they make sure to spend their time on the right group before focusing on the right stock. In addition to helping people learn more, sectors help find hidden gems in the field that might not have been known before.
Jun 15, 2022
Gold is a popular investment choice because it protects against inflation. But when there is more than one way to invest, an investor may not know which one to choose because they all track the price of gold. Tax and investment experts say that the Sovereign Gold Bond and the Gold ETF (Exchange Traded Fund) are best for two different types of investors. Gold ETF is better for investors who want to invest for the short term while keeping liquidity in mind because it lets investors sell their money whenever they want. But for medium- and long-term investors, the Sovereign Gold Bond is better because it guarantees a 2.5 percent return and the maturity amount isn't taxed. Both are investments that protect against risk, but investors with little time to invest should choose gold ETF. For investors who want to be able to sell their investments quickly, Gold ETF is a better choice than Sovereign Gold Bonds, which have an 8-year lock-in period if the investor wants the maturity amount to be tax-free. If you want to invest in gold over a long period of time, the Sovereign Gold Bond is better because it lets you buy gold in small amounts over time. The Reserve Bank of India (RBI) makes these small amounts of gold available from time to time. But it can't be traded for 8 years, or 5 years from the date the bond was bought and 3 years after that. An investor can withdraw their money after 5 years, but if they do, they will lose the exemption for long-term capital gains (LTCG) that the scheme offers. So, under the Sovereign Gold Bond Scheme, an investor must keep their money invested for 8 years before they can get a tax break. In addition to not having to pay taxes, the Sovereign Gold Bond Scheme gives investors a guaranteed return of 2.5%, which the Gold ETF scheme does not. After 8 years, the maturity amount would be sent to the person's bank account automatically. Iin the Sovereign Gold Bond Scheme, the investor doesn't get to choose when the bond matures. Instead, the maturity amount is based on the average price of gold at the end of the last three business days before the redemption date. Gold ETF also charges fees for fund management and brokerage when an investment is made or sold, which Sovereign Gold Bond Scheme doesn't do.
Jun 14, 2022
When we are in our early or middle 20s and get our first job, the pay is not very high. From there, we have to figure out how to pay for things like rent, food, transportation, etc. every month. At this point in our lives, saving money and making investments are the last things we think about. But there are many reasons to start investing early. And we'll talk about all of that in this blog. Here are 5 reasons why you should start investing as soon as you can. Number 1: When you start young, you can start small We all have things we want to do, like buy our favourite car or get married in an exotic place. For example, let's say you want to get married in 5.25 years and you need to save Rs 15 lakh for this. You decide to put your money into equity mutual funds. Even though mutual funds don't offer guaranteed returns, their long-term returns are around 12%. Now, you would have to put away Rs 11,250 every month to save Rs 15 lakh in 5.25 years. Alternatively, if you start saving for the goal 2 years later, you would have to save Rs 18,750 per month to reach the goal on time. You would also have to save more. In the same way, if you start early on any goal, whether it's to buy a house or save for retirement, your monthly investments and total investments will be much less than if you wait. Number 2: It brings discipline to your life If you start saving and investing early on, it will improve your spending habits on its own. We'll tell you how. If you want to save a fixed amount of money from your fixed salary, you will have to limit your spending by making a monthly budget. And making a budget is the best way to change how you spend money because it helps you keep track of how much you spend each month on things like food, utilities, rent, entertainment, etc. And after doing this simple task for a long time, it becomes a habit. Now, to get into the habit of saving put away the amount you want to save each month. Then, use the money you have left to make a monthly budget. If you make Rs 25,000 a month and want to save Rs 5,000, for example. Then, as soon as you get paid, put away the Rs 5,000 first. Use the rest of the money to keep up with your expenses. Number 3: Compounding makes you wealthy The longer you keep your money invested, the more the benefits of compounding will help you. Let's look at two examples of this to see what we mean. Let's say you want to save Rs 8 crore for your retirement. In the first scenario, you start investing in a mutual fund when you are 25 years old. And to do this, you would need to save Rs 12,000 every month until you were 60. And over the next 35 years, you would put away a total of Rs 50.4 lakh. In the second scenario, you put the goal off for 15 years and start saving for retirement when you are 40. The goal amount, which is Rs 8 crore, hasn't changed. Now, because of this delay, the amount you invest each month will be Rs 80,000, and the total amount you invest will be Rs 1.92 crores. So, if you put off investing for 15 years, the amount you put away each month goes up by more than 6 times, and the total amount you put away goes up by 4 times. Over time, this is how compounding works. Number 4: If you stay invested for longer, you can build up a bigger nest egg If you keep your money invested for a long time, you can get the benefit of compounding for a longer time. This means that the amount you have saved over the years will be much higher. To explain this, we can look at the point we talked about before. When we talked about the benefits of compounding, we said that even if you only invest Rs 12,000 per month, you can build up Rs 8 crore if you start investing at age 25 and keep it up until age 35. But if you start investing 15 years later and your savings decrease but deployed capital increases. So, it's best to start early and keep investing for a long time if you want to build up a big nest egg without feeling the pinch in your pocket or lowering your standard of living. Number 5: You are more willing to take risks. When you are young, you have more opportunities to take risks than when you are older. At this age, you don't have as many financial responsibilities, so you don't have to think too hard before putting your money into something risky. Even if you make mistakes with your investments, you'll have plenty of time to fix them and get back on your feet. For instance, a good rule of thumb for investing in stocks is (100 - your age). That is, if you are 30 years old, you can put 70% of your money in stocks and the rest in bonds. The rule of thumb says that if you are 22 years old, you can put up to 80% of your money in stocks. But if you start investing when you're 45, you might not want to take that much of a risk. As a rule of thumb, you should only put 55 per cent of your money in stocks. Even though stocks are riskier than fixed-income investments, they may give you higher returns over time, allowing you to build a bigger nest egg with a smaller investment. Bottom Line So, if you haven't started investing yet, you should do so today. Start small, keep things simple, and continue to learn as you go. Remember that getting rich is a long-term process that can't be rushed. And as a young worker, the best thing you have going for you is time.
Jun 13, 2022
Are there any tips and tricks for trading options that can help you decide when to buy and sell options. What should you do when trading call options? Here's a guide for people who are just starting out with option trading. It tells you what factors can help you decide when to buy and when to sell an option. Price How do you decide if an option is priced too low or too high? Like with stocks, you will have to figure out what the option is really worth. Clearly, you can't figure out the value of an option the same way you figure out the value of a stock. But there is a different model called the Black & Scholes model that has a complicated formula to help you figure out the intrinsic value of any option. If the price of an option is more than what it's really worth, it's overpriced and should be sold. If the price is less than what it's really worth, it's underpriced and you should buy it. Volatility This is an important thing to think about when deciding whether to buy options or sell them. Volatility is good for both call and put options because it makes the option more valuable if the price goes up, but it limits your risk if the price goes down. Even if the stock price stays the same, if volatility goes up, the value of the option can go up. When volatility is likely to go up, it is always best to buy options. When volatility is likely to go down, it is best to sell options. Events Can you imagine what would have happened if you had sold put options before the Lehman Brothers crisis or the Greek crisis? Before big events or important geopolitical risks, it's always better to buy options instead of selling them. When you buy options, your loss is restricted to the premium you pay. If you sell options before something bad happens, you could lose all your money. Trend How you feel about the stock or index is a very important part of whether you should buy or sell an option. It would be ideal if you can determine if the stock will either go up decisively or go down decisively. In that case, you can buy either a call option or a put option, depending on what you want to do. Time decay This is a very important thing to think about when deciding whether to buy or sell an option. Remember that every option contract has a set date when it ends. Time hurts the person who buys the option and helps the person who sells the option. Most of the time, time decay is pretty stable in the first few days of the month. But as the expiration date gets closer, the time decay starts to happen more quickly. That means the value of the option starts to drop quickly. So, it's not a good idea to buy options close to their expiration date unless you really want to take a risk and bet on volatility. A big choice is whether to buy the option or sell it. The more you think about a choice, the better your chances of making the right one.
Jun 12, 2022
Some stocks pay you just to hold them. Stocks that pay dividends can be a good way to make money without doing anything. They can also protect you from inflation. "Buy low, sell high" is a phrase that is often used to describe a good way to trade stocks. But investors can also make money on the market by getting dividends. Dividends, in short, are a way for companies to share some of their profits with their investors. Shareholders benefit because each share of stock they own gives them the right to a set dividend payment. Companies give out dividends on a regular basis, usually monthly, quarterly, or annually. Dividends can be paid out in cash or in the form of more company stock. Because of this, you can almost think of stocks that pay dividends as a way to make money while you sleep. Growing dividends from good companies can make a big difference in a portfolio and reinvested dividends are a much bigger source of growth than market returns alone. Dividend-paying stocks have been getting a lot of attention lately because they do more than just give you a steady stream of income. They also protect your money from inflation, which makes them perfect for the current market. How stocks that pay dividends protect against inflation In an inflationary environment, it's good for big companies that have a long history of paying consistent dividends every year because they can handle higher prices and even benefit from them. As inflation causes prices of goods and services to rise, a company's revenue, earnings, and dividends will also rise. Looking for a portfolio of stocks with strong cash flows that yield an average of 3% to 4% or more and consistently grow dividends by 5% to 10% each year. These are the kinds of businesses that investors should go after. Many companies with high-dividend stocks have used business models for a long time that work well when prices go up, which helps them make money in the long run. People still have to heat (or cool) their homes, drive to work, and eat, even when prices are going up quickly. Generally, companies in the energy, natural resources, and food and consumer staples sectors have strong pricing power and cost management, which lets them raise prices, keep demand up, and make more money. What investors need to remember Beginner investors should definitely buy stocks with dividend growth, but they should be careful when making investment decisions. Portfolio rebalancing, which is reacting to events as they happen in real-time, can be pricey when inflation is going up. Inflation pressures have been growing for a while, and the prices of many high-dividend stocks already reflect this. In general, the best idea is to think long-term, try to build a diversified portfolio of holdings, and resist the urge to try to time the market and shop around.
Jun 11, 2022
Have you ever thought about why one stock might sell for Rs 200 and another for Rs 20? How do these prices get set? In this article, we'll talk about what intrinsic value is. What Does Internal Value Mean? The true value of a stock is called its "intrinsic value." This is calculated based on anticipated monetary benefits. Let's put it this way: it is the most you can pay for the asset without losing money when you sell it later. Technical analysis helps you figure out how the price of a stock will move and what price levels it may reach. But the price is still very closely tied to what the stock is really worth. So, technical analysis only helps figure out where and how much a stock's price will move. Prices have to start from somewhere before they can move in a certain direction. Say that the price of stock right now is Rs 300. Based on your technical analysis, it looks like it might go up to Rs 330. But how did the price of Rs 300 get there? There is a way to figure it out. Let's use the example of buying a house. The main reason for building this apartment is to rent it out. Let's say you want to keep it for 10 years. You shouldn't pay more than you can make from it. In other words, the total amount of rent you could get in 10 years plus the price you could get if you sold it after 10 years. The value found in this way would be the flat's true value. This value is adjusted for things like inflation and different kinds of risks to make sure it is correct. This will come up again in the section. The discounted cash flow model or the present value model is a way to figure out the true value of something. It can also be used to figure out what a stock is really worth. So, the bottom line is that a stock's "intrinsic value" is the total amount you could make from it in the future. The question then is: How much money can you expect to make in the future from shares? When you buy stocks, the company gives you a piece of its annual profit. We call this a dividend. If you add up the value of the dividends and the price at which the share will be sold in the future (called the "terminal value"), you can figure out what the share is really worth. However, does Rs 200 in dividends today have the same value as Rs 200 in dividends 10 years from now? The value of Rs 100 in ten years is less than the value of Rs 100 today. In other words, inflation makes money worth less over time. To account for this change in value, you will have to use a method called "discounting" on each future dividend. In this step, you will divide each of the future dividends by a certain rate and then add them all up. Add the values to get the intrinsic value. RELATIVE VALUE METHOD: Now, let's talk about the second way to figure out what a stock is really worth. This is done by comparing the price of the stock with one of the most important things about the company. Some key fundamentals include sales revenue, net income or profit (also called earnings), book value of equity shares, etc. When you buy shares of a company, you own a piece of the company's core assets. For instance, you might get a share of the company's sales or profits. This is because when you buy shares, you become a part-owner of the business. Now, it makes sense that you should always try to buy something at a good price and pay as little as possible. The less these shares cost on the market, the less you have to pay per unit to buy these fundamentals. Let's look at a specific case. The price to earnings (PE) ratio is one of the ratios you can use to compare prices. In this ratio, you compare the price of a company's share to how much it earns per share. If the price per share is Rs 300 and the earnings per share (EPS) is Rs 30, the PE will be Rs 10. This means that you pay Rs 10 for each rupee that the company makes. How do you know whether or not this price is fair? To find this, you must compare it to the PEs of the company's competitors. If, for example, the average PE of your competitors is 15, you are paying less for your shares. This is because you have to pay an average of Rs 15 per unit of earnings for a share of one of the competitors. But you only pay Rs 10 for your company. Because of this, this method is called the relative value method. You can also use this method to figure out how much a company's stock is really worth. By rearranging the formula for PE, you can see that the stock's real value is the sum of PE and EPS. Now, take the average PE of your competitors, which is 15, and multiply it by the EPS of your company, which is 10. This will give you the intrinsic value of your stock. It adds up to Rs. 150. This means that Rs 150 is a fair price for your stock. Since you can buy it in the market for only Rs 120, it is a great deal. You can buy it with the expectation that it will go up to this fair value. The relative value method is important because it uses both the fundamentals of the company and market trends to figure out how much a stock is really worth. This makes it more real, but also more likely to be wrong. If fundamentals change a lot in the future, your estimate of the stock's true value could be wrong.
Jun 10, 2022
Intraday trading often proves that taking fewer trades gives you better profits. Instead of buying and selling stocks the whole trading day, it might be smart to do intraday trading only during a few key hours. In fact, traders who work with stocks, index futures, and ETFs have found that it's better to spend one to two carefully chosen hours a day on trading. The ideal time-frame for intraday trading Long-term intraday traders will do well to find the best time frame. Using these hours can help you get the most done because they are when important things happen on the market. On the other hand, people who trade all day have little time for other things and don't make enough money. Even intraday traders who have been doing it for a long time can lose money if they trade outside of the best time frame for intraday trading. This raises the question: what is the best time frame for intraday trading? Most say that it is between 9:30 and 10:30 in the morning. Should you buy or sell within the first 15 minutes? Intraday trading is best done in the first one to two hours that the stock market is open. But in India, most stock market trading channels don't open until 9:15 a.m. Why not start at 9:15 instead? If you have been trading for a long time, trading in the first 15 minutes might not be as risky. For people who are just starting out, it's best to wait until 9:30. This is because, in the first few minutes after the market opens, stocks are probably reacting to the news from the night before. A trade will often show sharp price movements in one direction. This is nicknamed the "dumb money phenomenon" because people rely on old news. Traders with a lot of experience may make some good deals in the first 15 minutes. They are mostly mean reversal traders. Beginners who have never heard of "dumb money" or the strategy that experienced traders use to fight against it will think the market is very volatile. So, it's better to wait until 9:30 than to jump in at 9:15. Trading at the open Not all moves are bad. After these first extreme trades, the market will have the right amount of volatility for beginners. Since this is the case, the best time to trade is between 9:30 am and 10:30 am. There are many benefits to intraday trading in the first few hours after the market opens: The first hour of the day is usually the most volatile, giving you plenty of chances to make the best trades of the day. The market is liquid enough to get in and out of during the first hour. Since there is more volume, liquid stocks are likely to be sold off faster. – It has been shown that the stocks bought or sold in the first hour make some of the biggest moves of the whole trading day. If you do it right, it can give you the best returns of any time during the trading day. But you should also prepare for large losses in the first hour due to volatility. – After 11 a.m., trades usually take longer and involve fewer people, which is bad for intraday traders who need to finish their deals by 3:30 p.m. If you need more time, it would be a good idea to keep this session going until 11 a.m. But day trading is a better fit for the strategy of only trading in the first hour. Think about the bigger picture. The range of 9:30 to 10:30 is not a rule that every trader must follow. It's good for beginners in general, but you can change it to fit your needs. It's smart to think about the bigger picture. For example, one strategy for intraday trading is to keep the day of the week in mind along with the best time frame. Monday afternoon is often a good time to buy on the market because prices tend to go down at the beginning of the trading week. Experts say that you should sell on Fridays, right before the drop on Monday. Also, not every trader needs to do something during that first hour. People who usually make more than one trade in a day can choose a shorter time frame. Intraday traders who only make a few trades each day can choose a longer time frame instead. Traders with a lot of experience may also change their time frame on different days, depending on how busy they are.
Jun 09, 2022
Researching stocks is not a long process, but it can take a beginner anywhere from 2 to 4 hours to finish the whole thing. A platform like Zebull Smart Trader for stock screening and fundamental analysis can help get the job done faster. Why should you look into stocks? Researching doesn't just mean reading about a company's founders and how it makes money. It takes into account all internal and external factors, such as the company's financial statements and how well it does in its industry and compared to its peers, among other things. I'm sure you spend a lot of time researching new gadgets (like a cell phone) before you buy them, so why not do some research before you buy a share in a company? How long should you spend researching? People have different ideas about how much time they need to spend researching stocks. Even so, the job is a lot easier now that there are platforms and tools for advanced screening and fundamental analysis. With just a few clicks and taps on your computer, you can get all the information you need about a company. But this isn't where the main part starts. Before you can start, you have to figure out which sector and industry you want to invest in. Once you know, the next steps will be a lot easier. You can use the "Top-down Method" to find a potential industry. With this method, you start with the economy and narrow your list down to one or two stocks of a potential industry. Let’s follow an example. Assume you have a good opinion of the IT Industry. There are a few things you can do to find the best stock in the industry. First, you need to look at the economy as a whole to see if the IT space is in a growth phase or not. Next, you can go straight to the specific sector (in this case, the IT sector) and try to narrow your search to an even smaller niche. To find these pieces of information, you might have to read business articles and analysts' predictions. If you have done this before, it shouldn't take more than a couple of hours. For a beginner, the same process could take an extra hour or more. In the same way, picking stocks isn't too hard because you can get all the financial information you need from fundamental analysis platforms like Zebull Smart Trader. The whole process could take anywhere from two to four hours, depending on how good you are at research and how far you want to go. After you've done a lot of research, you'll be left with a few high-quality stocks in your favourite industry that you can safely put your money into. What are your other choices? Now that you know how the task is done and how long it will take, you can save time if you still want to. Mutual funds are an easy way to invest because you don't have to do all the research and stock picking. Your job will be done by a person who is in charge of the fund. In the same way, you can invest in index funds or exchange-traded funds (ETFs) that track the whole Nifty50 or Sensex and give returns based on that. You can save the time you would have spent analysing stocks by using these.
Jun 08, 2022
Investing in an IPO can be a great way to build wealth with promising companies. However, if last year is anything to go by, IPOs can be extremely tricky to invest in. If you are purely investing in an IPO to benefit from the listing gains, we suggest that you find promising companies, apply to the IPO and sell your shares on the day that it gets listed. However, if you are a long term investor, you can hold on to your gains. In this blog, we'll talk about what an IPO is and the 10 Things to Check Before Investing in them. 1. Read the Red Herring Prospectus. A company files the Draft Red Herring Prospectus with SEBI when it wants to sell its shares to the public to raise money. This document explains how the company plans to use the money it gets from the public and what risks investors might face. So, people who want to invest in an IPO must read this document first. 2. Reasons for Raising Money: It's important to know what the company plans to do with the money it gets from the Initial Public Offering. One should find out if the company wants to pay off its debts or if it wants to raise money to grow the business, or use the money for other business purposes. This shows that the money will be used well in the business, which is a good sign for an investor. 3. Know the business model: Before investing in the Initial Public Offering, investors should know what kind of business model the company has. Once they know what kind of business the company is in, the next step is to find a new market opportunity. This is because the size of the opportunity and the company's ability to get a share of the market can make a big difference in the company's growth and shareholder returns. If investors don't understand what the company does for business, they shouldn't buy into its IPO. 4. Analyzing the background of the company's management and promoters: It's important to find out who runs the business since they are the company's backbone. Investors should look at both the people who started the company and the people who run it since both play important roles in how the company works. The company's management is a big part of what moves the business forward. One should look at the qualifications and length of time that the company's top management has been there. This gives an idea of how the company works. 5. The company's strengths and weaknesses: Before putting money into a company's IPO, you should do a SWOT analysis of the company. The DRHP can be used to figure out what the company's biggest strengths and weaknesses are. Investors should find out where the company stands in the industry it is in. People who want to invest in a business should try to learn as much as they can about the company and the strategies it uses. 6. The company's valuation: Investors should also check the company's valuation, since the offer price could be too low or too high depending on the industries it works in and its financial ratios. 7. The company's health: It's important to look at how well the company has done financially over the past few years to see if the company's sales or profits have been growing steadily. If the company's sales are going up, it might be a good idea to invest in its Initial Public Offering. Before putting money into an IPO, investors need to know how healthy the company's finances are. 8. Investment Horizon: An investor should know what their investment horizon is before putting money into an IPO. They should decide if they want to buy shares in the IPO just to trade them on the day it is listed or if they want to keep them for a longer time. The reason for this is that a trading strategy would depend on how the market is doing right now, while a long-term strategy would depend on how the company is doing in its core areas. 9. Comparable Peers: Investors should also look at who the company's competitors are. The DRHP compares the company to its peers in terms of both its finances and its value. Investors can look at how the company is valued compared to its peers to see if it is priced fairly. 10. The company's potential in the market: Investors should also look at the company's opportunities and threats in the sectors where it operates. This is important for long-term investors to determine if the investment is worth it.
Jun 07, 2022
A well-diversified equity fund, which is usually just called a "diversified equity fund," invests in companies of all sizes, no matter how big or small they are. Diversified Equity Mutual Fund: What is it? A diversified equity fund puts its money into companies of all sizes and in all industries. It spreads investments across the stock market so that investors can make the most money possible while minimising risk. Unit-linked insurance plans (ULIPs), mutual funds, and other investment firms all offer them. There are many different types and sizes of companies on the stock exchange. 1)large caps 2)mid caps, 3)small caps. How does a fund with a wide range of stocks work? A diversified equity fund also invests in companies from different sectors and industries. So, it can take part in the growth of the whole economy and isn't tied to any one sector or industry. They can choose to put their money into businesses from - Pharmaceuticals Technology Engineering Automobiles Power/Services Services for banking and finance Gas and oil Simply put, a diversified equity fund invests in companies from different sectors, industries, and sizes of the market. Diversified equity funds, which include both ULIPs and mutual funds, are created so that investors can profit from the financial growth of companies of all sizes and in all industries and sectors. The rules for investing in ULIPs and mutual funds are different, and investors are told this in product literature and on company websites. Who does it work best for? Diversified equity funds can be helpful for investors who like stocks and have long-term goals like planning for retirement or saving for a child's education or wedding. They can be used on their own or as part of a portfolio with other investments.
Jun 06, 2022
Experts say that reading a company's quarterly earnings is an art that must be honed over time with careful and deliberate work. A company's quarterly earnings report is like an internal compass that shows how it is doing now and how it will do in the future. It also helps figure out how much the company is worth. Still, many regular investors still don't understand how a company's quarterly earnings work. How to read a company's quarterly results? What can you tell about the company from these results? Why do companies even bother to report their quarterly results? Security and Exchange Board of India (SEBI) rules say that every listed company must make its quarterly reports public. This is to protect the interests of investors. As an investor in a company, the quarterly results will help you figure out how the company is doing now and how it will do in the future. You can also tell from the quarterly result if you should invest in the company for the long term. The quarterly results of a big company could have a direct effect on the market for short-term investors or intraday traders. When a big company announces its quarterly results, the markets go up or down depending on the effect. How can you read results for a quarter? If you are a beginner you can focus on three main parameters of the report. These are the sales growth, debt to equity ratio and promoter holding. WIth an increasing sales growth and a high promoter holding, you can know that the company is doing well. Debt to equity ratio tells you whether the company has incurred more debt compared to the previous quarter. Gross sales Gross sales is the total amount of money a business makes in a certain amount of time. Gross sales that keep going up over time are a sign of growing demand and a healthy business. Net sales Gross sales minus discounts, returns, and allowances equal a company's net sales. When putting together the top-line revenues and the statement of income, net sales are often taken into account. This is a better measure of the health of a business than gross sales. Expenses and income Operating income is the amount of profit made by a business after operating costs like wages, depreciation, and the cost of goods sold are taken out. It shows how much money the company is making. On the other hand, other-than-business income is income from sources other than the business. It includes, among other things, dividends and rental income. A steady drop in operating income could mean that the company is losing market share or that fewer people want to buy its goods or services. Things to think about when writing quarterly reports Interest cost To run a business, the interest cost is the money paid for a loan amount. So, if the cost of interest goes up, it means that the company has more debt. What else should you look for in a quarterly earnings report? Investors should also look at things like net interest margins and non-performing assets when it comes to banks. Experts say that investors should also look at how much cash the company has on hand and how many shares have been pledged. Not every company may be declaring their pledged shares every three months. Investors should also look at the asset-liability statement, which shows half of the financial year when they look at the results for the next quarter. Why should investors pay attention to news about earnings? Earnings reports are often one of the most important things that move stocks. When big stocks report earnings, they can shake the market. When the earnings reports come out, the stock market could be at a record high or a record low. When a company's sales go up but it doesn't meet the analysts' expectations, people will sell their shares quickly. So, the report's estimates are also just as important as the report itself. Before analysing the quarterly reports, make sure to compare them with the previous year’s audited report as well. This will help you with understanding the projections for the upcoming quarter as well.
Jun 05, 2022