LEARN TO LOSE A GAME, NOT THE BATTLE (STOPLOSS REDEFINED)

Stock trading is very much like handling a relationship. The ego in a relationship is very much comparable to the loss in a trade. The StopLoss(SL) is very much similar to compromising on the ego part. Its so easy, yet so difficult. We are always in a winning situation even if we lose many of the league matches but win the Finals. The life and particularly the Stock trading runs on this principle. You compromise on your ego and see the game is almost won or atleast the damage is minimised.


Continued ................

PERCEPTION OF STOCK MARKETS-A FUNNY TALE

Before writing about SIP-one of the most beautiful topic and the Evergreen sectors, I couldn't stop myself from writing about this funny tale which somewhere describes how most of the people see the Indian stock markets. The person involved is sort of my client and a close friend. So this funny story starts like this -

"Once two persons set on a journey and stopped somewhere near the village Mahi (fictious) in the western part of our country. They stopped near a large village and decided to settle there for few days. In the morning they called a meeting of the villagers and made an announcement and this announcement read : 'We have come from a far off country and one of us is the King of that place and the other my minister. We are very wealthy and have come here for some specific task. We want you to catch monkeys for us from the interior of the forests and we will pay you guys heavily for this'. The remuneration announced for each monkey was Rs. 1000. To your surprise the villagers got hold of 700 monkeys and got their payments. The same announcement was made but with a remuneration amounting to Rs. 2000. This time 300 monkeys came in the trap and they were again paid off for their hard labour. Few days followed and again a meeting was called and the remuneration was increased to Rs. 5000 as the task was getting more and more difficult day-by-day (monkeys were getting lesser in number). After making this announcement, the King went back to the city and the minister was left. The villagers tried hard but no success. They were sad. They went to the minister to suggest them some way out as they didn't want to lose the 5000 offer. The minister told them that he had 1000 monkeys in his custody, he can release 500 of them but at a price Rs. 4000 and they could easily earn Rs. 1000 on each monkey from the King. The offer was not bad. The villagers were convinced. They did the same. The minister after selling them the 500 monkeys also went back to the city. The poor villagers kept hoping that the King would return but none has returned till date".

King's Profit  :-

Total investment in the story: (1000*700)+(2000*300)= Rs. 13 lakhs

Total returns on his investment: (4000*500)= Rs. 20 lakhs

Total profits made = Rs. 7 lakhs.

This is how the people think about the working of Indian stock markets or the companies listed in the market. They do not understand the mere fact that markets are all about ROI (Return On Investments). You can't exchange a Rs. 100 note for Rs. 200 in the same currency, then why to expect unreasonable returns (200-1000%) on your investments. No sensible business even give these returns. My advice to such people Don't greed, invest right and sit tight. Rest is luck because there is no hard work involved in the stock markets. It's just your brain and instinct that works.

Have a Good Day !!!

SIP - AN EASY WAY TO WEALTH CREATION & COMPOUNDING

SIP (Systematic Investment Planning) - a tool to invest systematically in any asset class and get more than expected returns. The charm and beauty of this tool lies in the very fact that it doesn't come with a pre-requisite of being wealthy but comes with some sort of guarantee to make you wealthy. How ??? We will see in the space that follows. I will keep my discussion confined to equity class only and discard all other asset classes here. When we talk of equity class or the cash market, we tend to remember a rule (10% return on a monthly basis on our investments). By this rule, we count 120% return in an year. Isn't it high ??? Yes, it is high but people do achieve this when they trade, for investors anything between 50-60% return is decent and good enough (reason being the busy schedule of our investors-jobs, family and lots of other preoccupations in life). 50-60% returns, Do you still feel it high ??? Okay, let us strictly confine it to 50% return an annum and then see the magic that SIP does. SIP creates wealth taking help of a mathematical funda called "COMPOUNDING". Mind You !!! You don't have to learn mathematics to take help of compounding, it will start working automatically as soon as you decide to put your money to work.

Let us go back to that 50% return rule & see some heart-stealing calculations.

NOTE: Here it is that 1 lakh amount was invested in a distributed way or all at a once, not necessarily equal amount every month.

This table reveals what ???

• An investment of Rs. 1 lakh every year for a period of 25 years when left to compound @50% p.a. becomes a whopping Rs. 757.5 crores.
• An investment of Rs. 1 lakh just once in a lifetime will yield Rs. 252.5 crores when left to compound @50% p.a. after a period of 26 years.
• An investment of Rs. 1 lakh just once in a lifetime will yield Rs. 49.9 crores when left to compound @50% p.a. after a period of 21 years.
• An investment of Rs. 1 lakh just once in a lifetime will yield Rs. 6.5 crores when left to compound @50% p.a. after a period of 16 years.
• An investment of Rs. 1 lakh just once in a lifetime will yield Rs. 0.86 crores when left to compound @50% p.a. after a period of 11 years.
• An investment of Rs. 1 lakh just once in a lifetime will yield Rs. 0.12 crores when left to compound @50% p.a. after a period of 6 years.

Note:-

With the actual SIP route where your investment in the month of January is also put to work for the remaining 11 months of the year, returns are much higher than what the table above shows. (the SIP calculator below will clear this doubt - amount:8300; rate-50%; time-25 years; return:4000 crores+)

How would we calculate 1 lakh/annum ???

My definition of 1 lakh is saving Rs. 8300 every month from your sources of earning after making all necessary expenses and keeping aside some money for any medical emergency and automobile maintenance.

So by a simple rule, follow any one of the above mentioned approaches to SIP and create wealth to meet all your super luxury needs and desires and create a better world for your future  generations than what you have witnessed.

Advantage of SIP 

When you invest through the SIP route, you always have an advantage of averaging your purchases and take full advantage of the market fluctuations. eg. 100 shares of XYZ @30 on 1   July & 100 shares of XYZ @28 on 15 July brings down the average value of these 200 shares to 29. Same is true for higher levels. Now if 100 more shares are bought@33 on 27 July, the average value of these 3 transactions would be 30.33 (something very similar to our initial purchase value for 100 shares). Your average value is 30.33 and the shares are trading @33 (we just purchased @33), you have made a 10% profit. That's what SIP does for us. While averaging, remember -

• Buy more at lower levels.
• Buy less at higher levels.

Create your own SIP (use this tool from http://money.bhaskar.com/)

http://money.bhaskar.com/personal-finance/calculator-details/mutual-fund/sip-as-per-need/

Use this simple tool to know how much you can make after a certain time @ a certain rate of interest and with a certain investment amount every month.

Have a Good Day !!!

MULTIBAGGERS AROUND THE CORNER

A WORD OF ADVICE-

"Please fall in love with the power, media, infra & the realty sector". They are surely gonna love u back.

• Edelweiss Financials-RJ buys 1 crore shares.
• Media Matrix-Digivision Wireless buys 96.61 lakh shares.
• HDIL-Citygroup Global  buys 40 lakh shares.
• SREI Infra-infra space (budget oriented)
• ZeeMedia-media space
• TV18-media space
• PTC India Financial Services
• NHPC-cheapest PSU
• Firstsource Solutions-RJ holds this in large quantity.
• Ashok Leyland
• Magma Fincorp
• Indiabulls Housing Finance
• J K Lakshmi cement
• Housing finance companies-LICHFL, DHFL, etc.

Disclaimer :

I may or may not have holding in the stocks I have mentioned. The mention above is purely advisory in nature and is not binding on any reader.

HAVE A GOOD DAY !!!

MULTIBAGGERS THEORY

A MULTIBAGGER stock is the one which we get at a throwaway price but finally becomes a jewel in our crown. After reading this definition, everybody will want to have such a stock in his/her portfolio but the question arises how to find such a stock from the list of many listed on BSE or NSE. Lets consider some examples of multibaggers in the profile of people we identify.

• Amitabh Bachan - Just Dial
• Salman Khan - Yatra.com
• Rakesh Jhunjhunwala - Titan , CRISIL,  Praj Industries , United Spirits and (many)^n
• Prof Shivanand Mankekar - United spirits
• Dolly Khanna - Hawkins Cooker, Relaxo Footwears

Now the question that arises is how do we actually decide on multibaggers. Theories of some great investors will help us with this.

HOW TO FIND MULTIBAGGERS :-

Now comes 2 very fine theories on finding multibaggers - "the middle-class theory" and "the midcap/smallcap theory".

TITAN KI KAHANI (Rakesh Jhunjhunwala):-

Utpal Seth is the one who helps Rakesh Jhunjhunwala in picking his multibaggers and a partner in his firm RARE Enterprises.

PRAJ KI KAHANI (Rakesh Jhunjhunwala):-

Such is the story of most of the multibaggers and persons holding them.

Bluechip multibaggers (compounding redefined) :-

PORTFOLIO OF SOME GREAT INVESTORS :-

Rakesh Jhunjhunwala's 2012 return- 1000 Crore

Dolly Khanna

Prof. Shivanand Mankekar

Rakesh Jhunjhunwala

Hope this simplifies your query regarding investments !!!

Disclaimer :

I may or may not have holding in the stocks I have mentioned. The mention above is purely advisory in nature and is not binding on any reader.

HAVE A GOOD DAY !!!

MAGIC OF COMPOUNDING

Investment amount - 100000 (1 lac)/8300 per month
Compound period - Anually
Rate of Interest - per annum

Note :-
A mere 1 lac rupees become 2.6 crores at the end of 25 years when compounding @25% pa.

The concept is simple... Did u get it ???

Investment amount - 100000 (1 lac) every year till the time you want to keep investing/8300 p.m.

Compound period - Anually

Rate of Interest - per annum

Note :-
A mere investment of 1 lac rupees every year for 25 years become 13.2 crores when compounding @25% pa.

Note :

• 7% is the rate of  interest offered by private sector bank "Yes Bank".
• FD rate is 8.50%.
• SIP & MF return is 12-14% (approx).
• 20-25% is the rate we get by private lending of money.
• 25% or more can also be achieved by investments in Equity market.
• Invest in Equity market using a SIP approach and get more than expected results.

Have a good day !!!

THINK WISE, BUY RIGHT & SIT TIGHT

I personally believe that to do something perfectly , one should simply know what not to do while  doing that something. If you are very clear about the hurdles, you will by-pass them and do the task in an enhanced way. When trading, there are also certain fingertips or the thumb rules that one must stick to and we will see it does wonders. I will quickly count some of the "Not-to-do" mistakes while trading or investing and also make you aware of certain interesting facts.

Few amazing principles to boost your trading:-

• THUMB RULE :::- NEVER END YOUR INVESTMENTS IN A LOSS AND IF IT'S AN INTRADAY TRADE, MAINTAIN A STRICT STOPLOSS.
• NEVER BUY OR SELL A STOCK WHEN IT IS MAKING FRESH LOWS OR HIGHS RESPECTIVELY.
• DO NOT EXCEED THE PURCHASE VALUE MUCH MORE THAN THE CAPITAL AVAILABLE WITH YOU FOR TRADING. NOT FOLLOWING THIS RULE MAY INCUR SEVERE LOSSES AND MAY EVEN WIPE OUT YOUR EARLIER PROFITS AS WELL AS SOME PART OF YOUR INITIAL CAPITAL. 
• USE THE CONCEPT OF AVERAGE NOT TO END IN A LOSS BUT TO END PROFITABLY.  IN SIMPLE WORDS, AVERAGE TO PROFIT AND NOT TO REDUCE YOUR LOSSES.
• IN A BULLISH MARKET, DON'T TAKE A SHORT POSITION (ESPECIALLY IN AN INTRADAY TRADE, IF YOU STILL WANT TO EXPERIMENT USE THE  "FUTURES" OPTION)
• AFTER EVERY BULLISH RUN OF 100-200 POINTS IN NIFTY (NSE), WAIT FOR THE CORRECTION TO TAKE PLACE AND THEN CREATE POSITIONS.
• IN A BEARISH MARKET, NEVER LONG POSITIONS UNLESS U FEEL ITS THE RIGHT ENTRY POINT. (SUPPOSE NIFTY IS DOWN 20 POINTS @11AM, WAIT TILL 3:15PM ATLEAST TO TAKE A LONG POSITION FOR A BTST TRADE OR A SWING TRADE).
• INVEST IN COMPANIES WITH SOUND FUNDAMENTALS, STRONG MANAGEMENT AND MINIMUM DEBT. REMEMBER A LOAN OR A DEBT IS NEVER CONSIDERED AN EARNING. IT IS TO BE PAID BACK TO THE LENDER ALONG WITH AN EXTRA SUM OFTEN KNOWN AS INTEREST.
• NOBODY IN THIS WORLD UNDERSTANDS THE MARKETS COMPLETELY. IF SOMEBODY CLAIMS HE DOES, HE IS SURE TO BE THE NEXT WARREN BUFFET.
• RETAIL INVESTORS LIKE ME & YOU CAN'T MAKE THE MARKET MOVE IN EITHER DIRECTION BUT WHAT WE CAN DO IS FOLLOW THE BIG BOYS VERY CLOSELY AND BUY SOMETHING WHEN THEY BUY AND SELL SOMETHING WHEN THEY SELL. BY DOING THIS, IF THE BIG BOYS ARE MAKING BILLIONS; WE CAN ATLEAST MAKE MILLIONS.
• NEVER TRADE OR INVEST WITH THE BORROWED MONEY UNLESS YOU ARE TOO CONFIDENT OF YOUR TRADING SKILLS.
• SWING TRADE (1-15 DAYS) IS THE BEST TYPE OF TRADING THAT SUITS THE INDIAN MARKETS.
• BOOK PROFITS WHENEVER YOU HAVE A PROFIT LYING ON THE TABLE. EVEN IF YOUR MIND DOESN'T LET YOU DO SO, AT LEAST TAKE A STOPLOSS AT SOME DECENT LEVEL COVERING YOUR PROFIT REGION SO THAT AT THE END OF THE DAY YOU DON'T END IN LOSS. eg. YOU HAVE 100 SHARES OF COMPANY xxx @INR X. IT ROSE TO X+5. YOU DIDN'T BOOK PROFITS AND IT CAME DOWN TO X-15 IN THE DAY TRADE. WHEN YOU END YOUR DAY, IT WILL SHOW SOME INR 1500(-) MTM INSTEAD OF A INR 500 PROFIT FOR THAT PARTICULAR TRADE. ALSO YOU WILL END UP PAYING A BROKERAGE FOR INVESTMENT INSTEAD OF A BROKERAGE FOR INTRADAY TRADE.

          BROKERAGE DIFFERENCE:-

          INVESTMENT BROKERAGE= 10 * INTRADAY BROKERAGE

• LOOK FOR QIP (QUALIFIED INSTITUTIONS PLACEMENT) OF SOME VERY GOOD COMPANIES. THEY ARE QUICK BOOST TO YOUR PORTFOLIO. eg. THE BEST EXAMPLE IS OF "YES BANK GLOBAL QIP" DATED 5TH JUNE, 2014 WHICH WAS OVERSUBSCRIBED (5 TIMES THE AMOUNT THEY WANTED).
• STOCK SELECTION IS VERY IMPORTANT. REMEBER NOT EVERY STOCK RISE IN THE RISING MARKET AND ALSO NOT EVERY STOCK FALL IN THE FALLING MARKET.
• THERE IS NO PLACE FOR YOUR "EMOTIONS & FEAR" IN THE MARKET.
• IF YOU ARE TRADING FOR MAKING A PROFIT OF INR x, PLEASE BE PREPARED FOR A LOSS OF INR x TOO.
• THERE IS NOTHING KNOWN AS "TIPS FOR TRADING" IN THE MARKET. HAD IT BEEN THE CASE, MOST OF THE PEOPLE WHO LOVE TO TALK ABOUT MARKET ON PUBLIC FORUMS WOULD HAVE BEEN MAKING HUGE MIONEY (THEIR WEALTH GENERALLY EXCEEDS CRORES IN SOME OR THE OTHER FORM & BY THE RULE OF 50-60% ON INVESTMENTS & 100-120% ON INTRADAY TRADES) BUT THAT'S NOT THE TRUE CASE.
• LISTEN TO RECOMMENDATIONS FROM BROKERAGE HOUSES BECAUSE THEY CARRY SOME SENSE BUT PLEASE DON'T BLINDLY COPY THEM. MODIFY THEIR TRADING RECOMMENDATION ACCORDING TO YOUR PORTFOLIO (CHANGE THE BUYING PRICE, STOPLOSS, TARGET PRICE).
• THE FASTEST & THE SMARTEST WAY TO MAKE MONEY IS TO TRADE FUTURE. BROKERAGE IS SAME AS THAT OF INTRADAY TRADE (LOW BROKERAGE) AND CAN BE KEPT FOR A PERIOD OF 30 DAYS. NIFTY PERMITS 144 COMPANIES TO BE TRADED IN FUTURE. THIS ALSO INVOLVES A VERY SMALL MARGIN TO PURCHASE LARGE QUANTITIES (FIXED LOT SIZE) OF SHARES. eg. IF YOU WANT TO PURCHASE 125 SHARES (LOT SIZE OF SBI) OF SBI, YOU WILL END UP PAYING INR 342875; THE SAME CAN BE PURCHASED IN FUTURE BY PAYING INR 64554 (ONE-FIFTH OF THE TOTAL PRICE). THE ONLY PROBLEM THAT ARISE IN TRADING FUTURE IS "MTM" & "30 DAY BOUNDATION".
• IT IS ALWAYS ADVISABLE TO PLAY A GAME THE RULES OF WHICH ARE CRYSTAL CLEAR TO US.
• MONEY IS PRECIOUS, HARD-EARNED; DON'T LOSE IT.
• NOT EVERY DAY IS A BUYING OPPORTUNITY; WAIT FOR THE RIGHT TIME TO ENTER THE MARKET.

THINK WISE, BUY RIGHT & SIT TIGHT.

Disclaimer :

I may or may not have holding in the stocks I have mentioned. The mention above is purely advisory in nature and is not binding on any reader.

HAVE A GOOD DAY !!!