Obviously, the first thing that successful investors have in common is a good net profit. The question is, what common traits do they have that make them so successful?
First and foremost is method. Their methods may differ widely, but the presence of a methodical approach is true for all of them. All successful investors have their respective ways of organizing relevant investment information and take the right pragmatic decision at the right time, are it on investing or disinvesting – that is, withdrawing or selling off one's stock.
Everyone makes a profit on a few deals if they have been in the game for some time. The question is, how do some people make a profit so often? Simplistic advice like ‘keep left’ or ‘follow a witch or a pendulum’ does not really make sense. Nor is there any single fool-proof method regarding investment strategies. If you want to win you have to play, and make the right moves under the rules of the game. The first move is to get and keep track of stock and corporate information properly.
Focus and not emotionality is what successful people have when going into this business. Startups are normally small or moderate, and that is indeed a good thing because successful investors do not make large investments on anything they have not understood adequately. If you invest time to read and observe the market, your time will turn into money.
They analyze their own portfolios and also those of others results, at least in the beginning. They keep written track of the analysis results. Analyzing means figuring out causes and effects of the events intelligently they are open to mistakes in purchasing and selling of stocks, in speculations on options, on the timings of buying and selling.
If an investors finds him continuously on the wrong side he should be mature enough to reconsider his approach. He can't stick to any particular stock because of emotional investments. A successful investor knows that the market ruthlessly ignores any emotional attachment.
It is common to find successful investors who pay attention to the immediate trail of prices of the stocks purchased, but still do not get swayed by 10% ups or downs. They have set pragmatic tolerance ranges for themselves. They are confident but not overly so. They will never play a sitting duck in risky affairs; though they will surely absorb a certain amount of risk. They are quick to distinguish between the 'no-risk-no-gain' and 'too-risky' lots, and it is often this acumen that makes them successful investors.
They often will move upstream along their documented analysis to reach proper understanding of the stocks they are considering. It is wise to understand one particular stock in every detail, and to use that knowledge to learn the other stocks better.
Work using your head. Remember, Lady Luck does not smile for a lazy bum. And if there's anything that all successful investors have in common, it's that not one of them is a lazy bum.
National Stock Exchange
NSE
Monday, March 30, 2009
Successful Investors – What they have in Common.
Is investment in shares safe?
Any investment is prone to a certain degree of risk. Shares, as a class of investment have the highest element of risk. The only services riskier than shares are lotteries and other games of chance.
These risks arise as a result of factors described earlier.
However, today there is strong legislation, procedures and a regulatory authority - Securities Exchange Board of India (SEBI), which to a large extent prevents risk as a result of misleading the investing public.
How Long to hold on the shares?
Historically, it has been demonstrated that investments in equities offer the best long term returns and hence the highest opportunity to enhance your capital. Thus, the longer you stay invested in the equity markets, the better will be your returns.
However, this holds true for the equity market as a whole, and not necessarily for shares of individual companies. The value of shares of specific companies are subject to various pulls and pressures which could cause a share that is highly valued one day, to drop its value overnight, as a result of unpredictable factors ranging from Government policy to acts of omission and commission by the management of the company.
It is advisable that you periodically, at least once in a year, evaluate your holdings and decide whether to continue with them or change them.
What is an index?
Buying and selling shares involve a fair amount of research. These involve assessing how well the company is managed, how the company is performing compared to others in the industry, how the industry itself is doing, the financial performance of the company, the interest of the lay public in the company, etc.
Which shares to Buy and sell?
An index is an indicator of how the stock market is doing on the whole. An index comprises a basket of stocks. The collective value of these stocks on a given date is taken and given a score of 100. From that day onwards, the value of these stocks is tracked and its score relative to 100 is computed.
The stocks selected are based upon a number of parameters that the creators of the index decide. Equally, the valuation is also done using complex mathematical principles. Periodically, the list of shares used for computing the index also undergoes a change. These changes are decided by the index creators based on the parameters they have set for the stocks for inclusion.
An index shows whether the stock market, on the whole, is appreciating in value or declining in value.
The movement of the index itself is no indicator for individual shares. You may find that a particular share may be increasing in its price even when the index is down and vice versa. The index is only an indicator of the general trend
When settlement does happen?
How are shares traded?
Why are brokers required?
Investing in equities is quite risky. The broker is a professional, who knows the risk and can advise the investor accordingly. Secondly, an exchange will become an unwieldy mechanism if the entire universe of investors were to go and start making bids and offers. Reducing the number of individuals is a way of keeping control.
How does the exchange works?
An exchange has pre-specified timings. During that time, all the members of the exchange link up to a central computer through their remote terminals. The members then place bids to buy equities, or make offers to sell equities. Other members who can match the bid or the offer confirm their acceptance, and the transaction is completed.
What is Mutual Fund
A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders, in equity shares, Government securities, Bonds, Call money markets etc., and distributes the profits. In other words, a mutual fund allows an investor to indirectly take a position in a basket of assets
What is a Systematic Investment Plan and how does it operate?
A systematic investment plan is one where an investor contributes a fixed amount every month and at the prevailing NAV the units are credited to his account. Today many funds are offering this facility.
Which was the First Mutual Fund to be set up in
Unit Trust of
What are the benefits of s Systematic Investment Plan?
A systematic investment plan (SIP) offers 2 major benefits to an investor:
- It avoids lump sum investment at one point of time
- In a scenario of falling prices, it reduces your overall cost of acquisition by a process of rupee-cost averaging. This means that at lower prices you end up getting more units for the same investment
which is the other institutions that have floated Mutual Funds in
Currently public sector banks like SBI, Canara Bank, Bank of India, institutions like IDBI, GIC, LIC Foreign Institutions like
What is NAV and how it is calculated?
NAV is the net asset value of the fund. Simply put it reflects what the unit held by an investor is worth at current market prices. For details on calculation methodology and formulae, please click on our mutual fund glossary
How many Mutual Funds are there in
Presently there are 33 Mutual Funds in
Sunday, March 29, 2009
What is an exchange?
An exchange is a mechanism through which buyers and sellers of equities are brought together. These days, this is largely electronic and done with computers.
What is equity trading?
General Market Advice
1. Never chase a stock.
2. Buy when markets are in the grip of panic.
3. Only buy fundamentally strong stocks, which are undervalued.
4. Buy stocks grown in top line and bottom line over the past years.
5. Invest in companies with proven management.
6. Avoid loss-making companies.
7. PE Ratio and Growth in earnings per share is the key.
8. Look for the dividend paying record.
9. Invest in stocks for sure returns.
10. Stocks have been the high yielding asset class over the past.
11. Stocks are an asset class.
12. The basic property of any asset class is to grow.
13. Buy when everyone is selling and sell when everyone buys.
14. Invest a fixed amount each month.
Last But not least Trust our tips and then invest to earn huge profit
What is Monetory Policy
Monetary policy is the process by which the government, central bank, or monetary authority of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy. Monetary theory provides insight into how to craft optimal monetary policy.
Monetary policy is referred to as either being an expansionary policy, or a concretionary policy, where an expansionary policy increases the total supply of money in the economy, and a concretionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while concretionary policy involves raising interest rates in order to combat inflation. Monetary policy should be contrasted with fiscal policy, which refers to government borrowing, spending and taxation.
Trading basics for the beginners
A share makes the holder a partial owner of the company and different types of shares have different rights associated with them. If you are able to sell off your share at a price higher than your buying price, you make a profit but you also run the risk of incurring a loss if the share price falls. The business you invested in makes profit and they provide you part of it as dividend.
In the share market you are an anonymous player and many have made a reasonable profit. There is no unique formula to ensure consistent gain but before you venture into this market you should know the basics of stock trading.
Trading stocks
Buying and selling of stocks is referred to as trading in the financial market.
You have to approach a broker in order to trade. You can trade either electronically or on the exchange floor. Exchange floor scene must be familiar to you; the NYSE has been on television as part of news coverage innumerable times. It is here that your broker arranges for your shares to be ordered. . The floor clerk locates the floor trader from whom the shares can be bought. Once the price is agreed upon, the deal is finalized.
Electronic transaction is very common today. It is an efficient and fast method of stock trading. Here too you require a broker but you receive confirmations almost immediately .In online investing your broker will connect to the exchange network and search for a buyer or seller according to your order.
How are the stock prices determined?
The stock prices cannot be predicted, they depend on various factors like political unrest, if there is a huge demand for a particular share at a given time, prices can fluctuate, and any event that could adversely affect the company will also cause the share prices to drop.
Remember This before Investing in stock markets
Do you know the company well enough?
What is the company’s reputation in the market?
Have you gone through their annual report?
Do you have the confidence to invest in this company?
Is some negative news about the company circulating?
How are analysts predicting the future?
How is the management of the company?
What are their growth prospects?
Am I aware of the insider activity?
Is it an internationally renowned company?
How is their marketing strategy?
Have there been any changes in the management recently?
How consistent has been their performance?
- Has there been a sudden shift in their production?
Whenever you invest you should be aware of your limits and remember not to exceed them. Share market involves a lot of risk; risk taking could either lead to fortunate gains or to bankruptcy.
• You should avoid investing money more than you can actually afford.
• Know about your investment well and do not blindly depend upon your broker.
• Follow regular stock market quotes to keep yourself abreast of the market swings.
The share provides you with an earning power, gives you partial ownership of a company and the freedom to buy or sell at any moment. But if you are a novice in stock trading you need to play safe and equip yourself with a lot of information. Unless you are a seasoned player you should invest only after surveying all the alternatives and never go beyond your risk tolerance. Know where to draw the line and begin trading in stocks!
Technical Analysis v. Fundamental Analysis
Fundamental Analysis is based on the study of factors external to the trading markets which affect the supply and demand of a particular market. It is in stark contrast to technical analysis since it focuses, not on price but on factors like weather, government policies, domestic and foreign political and economic events and changing trade prospects. Fundamental analysis theorizes that by monitoring relevant supply and demand factors for a particular market, a state of current or potential disequilibrium of market conditions may be identified before the state has been reflected in the price level of that market. Fundamental analysis assumes that markets are imperfect, that information is not instantaneously assimilated or disseminated and that econometric models can be constructed to generate equilibrium prices, which may indicate that current prices are inconsistent with underlying economic conditions, and will, accordingly, change in the future.
Another definition of Fundamental Analysis:
Fundamental Analysis is an approach to analyzing market behavior that stresses the study of underlying factors of supply and demand. It is done in the belief that such analysis will enable one to profit by being able to anticipate price trends. A Fundamentalist is a market observer-and/or participant who relies principally on Supply/demand considerations in price forecasting. Components of Fundamental Analysis:
Must Do Your Own Investing not others
With tens of thousands of mutual funds, Unit trusts, insurance groups, money mangers vying to invest your money you would think the easy route to riches in the stock and futures market would be to invest in a top-performing fund, sit back and wait for the cash to roll in. Not so.
The funds have some problems you should be aware of before you invest your hard earned money with them. Here they are:
- Actually, not many funds perform any better than the averages. If the DJI rises by 25% over 90% of funds will have similar returns. And after they take their 5% management cut you are left with a poor return. If this is the case then why not simply buy a basket of diversified shares of the overall index, as this will perform in line with the overall index, and save your self the management fees?
But what about when the overall index declines by say 15% year on year? Ask your money manger and they’ll tell you the old clichés:
You must take a long-term view. The market corrected this year but next year will be better.
This needn’t be the case, as I will explain later.
Keep this in mind. During the 1974/1975 Bear Market stock indexes declined by over 50%. During the 1987 market crash the index fell by over 30% in the space of a couple of months. From March 2000 to December 2000 the NASDAQ has declined by over 50%. How would you feel if your money manger reported at the end of the year that your hard earned saved money account is down by half?
What about the top ten performing funds? What you will find here is that in order to be a top-performing fund their size is relatively small, this gives them much needed flexibility. So it is actually quite hard to get money into these funds.
Many of the top performing Hedge Funds are open only to a small select few and then close their doors to new money.
- Size. I read recently the Mutual fund Industry is pumping over 1 Trillion dollars per MONTH into the stock market. Some of these monster funds now manage portfolios worth tens of billions of dollars. This alone restricts the funds to large cap stocks (the poorest performing) But most of all when things turn bad they simply can not get out due to their enormous size. For this reason they HAVE to adopt the buy and hold strategy. This is the individual investor’s BIGGEST advantage. We are the speedboat darting in and out of small rivers; where-as the mutual fund is the slow, cumbersome, super tanker. Restricted in its movement.
- Management Philosophy:
Whilst I have up most respect for all professionals sometimes I wonder if some Mutual Fund mangers actually know anything about investing in stocks. In fact I know some do not. When I read the report on the Mutual Fund Manager and he talks about diversifying into over 100 different stocks, being invested fully at all times, not cutting losses for not wanting to time the market, not investing in small cap stocks because of lack of quality" I know most of these rules are set not because they bring superior stock market returns but because of the size of the funds under management and the attitude of the board. How would you feel being told your fund was still invested in Yahoo despite it being some 70% off its high?
Why not get out when it fell by 10%, 15%, and 20%? To buy and hold despite all is a sure way to disaster in the markets. Yet even the funds seem powerless when it comes to this golden rule.
Many Funds are stuck in a time warp. The markets have changed since the 1960’s and will continue to change. What worked for Warren Buffet in the 1960’s - 1990’s has failed for him in the year 2000. You must be willing to go with the flow and accept change. Man Funds will not.
So if many funds perform in line or below the general averages, are too big for their own good and have detrimental attitudes how can the individual investor go it alone and perform much better? In order to beat the Mutual funds by a wide margin you have to "piggy back" on their hard work but exit long before they can.
What Advantages do we the Small Investor Have?
- Flexibility.
Without doubt our number one asset.
We can a favorable share where a massive Mutual Fund buying spree has created an upward trend. We jump in make a big profit. When it starts to look ugly we quickly op off Take the money to the bank
Or if we buy into a share and it goes sour straight away we quickly jump off with a small loss. Preserve your capital is the name of the game.
- Focus.
Most funds are so diversified they will never perform any better than the averages. If you own more than 5 different stocks you are not focusing enough. The BIG money is made by putting large amounts of capital into that one HOT Stock we are lucky enough to find from time to time, not by buying a big bunch if average shares.
If one sector is the HOT sector we can concentrate all our efforts in this sector.
- Variety.
We can invest in Micro cap shares, small, medium, large, options, shorting, margin, etc. We don’t have to answer to any one but our selves. We can use the full range of instruments available.
- Time.
With the advent of the Internet there is no need to spend hour after hour pouring over company financial statements, reports, analysis, etc. If you follow Momentum Share Trading System then trading will not take you more than 10 minutes per day.
The Internet has leveled the platform so much I wonder how many people realize the advantage they now have. Years ago many wannabe investors would subscribe to newsletters in order to manage their own accounts but let some one else tell them what to buy and sell (very contradictory) this would cost from Rs 2000 up to Rs 10000 p.a. A lot of money but now with the filtering mechanisms of the Internet there is absolutely no need to subscribe to a newsletter. Everything you need to know to make sound investment decisions is now available.
For example, with Yahoo financial services you can set up a filter that will present a list of all the shares on the market, which have the strongest 20% earning record, are being accumulated and have been trending upwards. Then, if you so wish, you can go into a company profile and read about their products, sales, debts, management etc. What more do you need? And it’s free.
Years ago this kind of data could only be afforded by the big companies. This is the data they employ hundreds of analysts to sift through every day. Now it’s available to them man on the street at the click of a mouse.
Of course even when you have compiled a HOT list of the best shares you must know how to trade them correctly for maximum return.
A trader must know where to enter a share, where to get out if it doesn’t act right, where to add positions in a share which is acting right, where to exit the trade, how to interpret the trend and much more. With the right system this is easily obtainable. Momentum Share Trading System will show you how to trade like a professional.
Internet trading
Internet trading is getting popular for the convenience of trading stock markets without going anywhere. ICICI Direct, Sharekhan and many other brokerages are providing services of internet trading through their websites. In an internet trading account your Bank account, your demat account and your trading account are linked with one another and you can transfer funds from your bank account and buy shares through your online trading account and you can check the status of your holdings online in your demat account and when you sell the shares through your trading account your demat account is debited by the same quantity and the amount realized is shown as a credit balance in your trading account which can be transferred into your bank account or can be used for further buying.
However, there are certain disadvantages of having an internet trading account.
The online trading companies would not give you any margin and you will have to transfer entire amount before buying any stock whereas in offline trading brokers generally keep only 20 percent margin and rest can be paid when you buy the shares. The brokerage charged by the internet trading websites is generally higher than that charged by the brokers offering offline trading. The biggest disadvantage is the time lag of prices, you would not get live quotes in an online trading account and in stock markets even seconds would matter, you would want to have the live prices to initiate a trade. It depends on the speed of the ISP you are using and the type of connection and if your connection is slow the time lag could range from 2 to 5 minutes.
Now after opening demat and trading accounts you are ready to do your first trade. Do your own research, have a word of advice from your broker and tread forward into the world of financial markets. Happy investing
Choosing a stock broker and opening a trading account
How to choose the right Depository Participant?
As far as cost aspect is concerned a Demate account with a broker is much more economical than a Demate account with a bank. For example, you sell 1000 shares at the rate of Rs. 500 per share then, in case of your account with a broker, the broking house would charge you Rs. 25 for executing your instruction slip and in case of a Bank they may charge you Rs. 200 (i.e.0.04 percent of transaction value of Rs. 5,00,000/-). One more benefit of having a Demate account with your broker is that you may authorize your broker through a Power of Attorney to automatically debit your Demate account with him whenever you sell stocks from your holdings in that account, this saves you from the hassles of filling up and depositing delivery instruction slips with the DP in a very short time. I would recommend having a Demate account with the same broker where you have a trading account. Still, if you feel more secure with a bank to have your Demate account then it should be with a bank which is most convenient when it comes to deposit delivery instruction slips.
Choosing a stock broker and opening a trading account
The regular traders and experienced investors look at the lowest brokerage and highest margin while choosing a stock broker. But for the first time investors, brokerage rates should be secondary and they should look at the research and analysis provided by the broker. A good brokerage has a system whereby you get an access to their research team and research reports released by them and a relationship manager is always accessible for your general queries and help. The brokerage should not be a deciding factor as initially your volume will not be very high and once you get expertise in trading, you can shift to a low brokerage broking house. Opening of trading account is almost similar to opening of a Demate account. You will need to fill up an account opening form along with agreement with the Broker together with the following documents.
Passport size colors photograph
a copy of the PAN card.
An address proof (copy of Passport, Driving License, Ration card, Election identity card, etc.)
Proof of Bank account (a cancelled cheque or bank statement can be given)
Proof of demat account
A passport size color photograph of the nominee (if appointed)
How to open Demat Account and Charges
Opening a Demate account
The first step towards investing in stock markets is to open a Demate account. A Demate account is opened with a depository participant, which may be a stock broker, a Bank or a financial intermediary. To open a Demate account you need to fill up a securities account opening form together with an agreement with the Depository Participant. Following documents should be enclosed with the form.
Passport size colors photograph
a copy of the PAN card.
An address proof (Copy of Passport, Driving License, Ration card, Election identity card, etc)
Proof of Bank account (a cancelled cheque or bank statement can be given)
A passport size color photograph of the nominee (if appointed)
Once these documents are submitted together with duly filled up account opening form, your demat account will be opened in a week’s time and you will receive a booklet containing instruction slips and your beneficiary account number. A DP ID number will also be printed on the delivery instruction booklet which is the unique identity number of your Depository Participant. These delivery instruction slips are used to transfer shares from your account to another account. You will need these when you sell shares through your broker or when you want to transfer shares to some other person.
Charges for opening a Demate account
There are two types of charges on your Demate account. One, annual maintenance charges and two, transaction based charges. Annual charges range from Rs. 100 per annum to Rs. 500 per annum for most of the Depository Participants and transaction charges vary from 0.01 percent to 0.05 percent of the transaction value, some Depository Participants, mostly brokers, charge flat transaction charges like Rs. 10 or Rs. 30 per transaction slip irrespective of the value of trade. Some brokers have come out with a lifetime free Demate account where you do not need to pay for annual account maintenance charges.
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