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ow to monitor your stock portfolio COVER

How to Monitor Your Stock Portfolio?

How to monitor your stock portfolio?

Hola Investors. Today I am going to teach how can monitor your stock portfolio in an easy and effective way.

First, let me clarify that in this post we are going to learn how to monitor the performances of the holding stock in your portfolio.

We are not going to discuss how to track your profits or how much money you have made from the market. There are a number of financial websites and apps that you can use to track your profits or losses.

Here we are going to discuss how to monitor the performance of the holding stocks. How is the company doing? Is the company’s performance improving or declining?

This post has nothing to do with the stock price movement, but to monitor the company’s performance and growth.

As creating a good stock portfolio is important, similarly, it’s equally important to monitor the performance of the holding stocks in your portfolio.

Quick Tips:

There are few tips that I would like to give you first before we start discussing how to monitor your stock portfolio. They are:

1. You do not need to check the stock prices daily:

Until you are involved in Intraday trading, checking the stock price daily won’t help you much. It’s a lot easier and stress-free if you do not check the prices of your stocks daily.

2. Moreover, do not calculate your net profit/loss daily:

The stock market is dynamic and the stock prices change every second. And hence, there is again no use to check your net profit/loss daily.

3. ‘Buy & hold’ is old:

If too much involvement is wrong, in the same way, extra ignorance towards your stocks is also bad. Do not trust blindly on your holding companies. ‘Buy and hold’ strategy has few loopholes and you need to monitor even your best performing stock.

4. Look at unexpected changes:

If there is a drastic rise/fall in the price of any of your holding stock, then you need to investigate the reason behind it.

Now that you have understood the quick tips, lets us study how to monitor your stock portfolio.

How to monitor your stock portfolio?

1. Read the important news about the company:

Keep updated with the latest happenings of the company and the industry. There are a number of factors that can affect the company which can be both domestic (government norms, taxes, duties etc) and international (Currency exchange rates, crude oil, war scenarios etc).

To keep updated with the news you can set google alerts for the companies in your portfolio. All the news related to the company will be directly sent to your email inbox.

Learn how to set google alerts here.

Further, you can also read important news on few financial websites like money control and screener if you create your portfolio on it. These sites will notify you about the news regarding the company.

Also read: 7 Best Stock Market Apps that Makes Stock Research 10x Easier.

2. Check the quarterly results of the company:

Every company in India releases its results quarterly i.e. 4 times in a year. Typically, a company releases its results within 45 days after the end of every quarter (March/June/September/December).

Study the quarterly results of the company in your portfolio. If the results are good, then enjoy. However, if the result is bad, then do not get influenced by the loss of the company in just one quarter. In any business, there will be losses sometimes. What matters is the consistency. Nevertheless, if the company is continuously giving bad results, then you need to reconsider about the stock.

3. Read the annual results:

Company’s annual reports are the best way to evaluate its performance. Using the annual reports, you can compare the company’s performance with its past to check its growth. You can also read the company’s future plans and strategy in the annual result.

Also read: How to do Fundamental Analysis on Stocks?

4. Keep an eye on Corporate announcements:

Read the corporate announcements to remain updated with corporate actions of the company like new acquisition, merger, appointment or resignation of senior management etc. This information can also be found on the company’s website.

5. Monitor the shareholding patterns:

You also need to check the shareholding pattern of the company, mainly the promoters shareholdings.

An increase in the shares of the promoters is a healthy sign. Promoters are the owners of the company and they have the best knowledge of the company. If they are confident about its future growth, they are usually correct.

However, if the shareholding of the promoters is continuously declining, then it’s a bad sign. Investigate further why the promoters are selling their stake.

Besides, do not get afraid if mutual funds, FII, DII are buying/selling the stocks. They buy the stocks on the availability of funds.

Related post: 7 Must Know Websites for Indian Stock Market Investors.

6. Check the promoter’s pledge of shares:

Promoters pledge of share is always a sign of caution. If the pledging is continuously increasing, then be aware. You can check the promoter’s pledge of share on the company’s website.

Although it takes few efforts and time to continuously monitor the stocks in your portfolio, however, it’s worthwhile doing it.

Nevertheless, if you have less number of stocks in your portfolio, say 8-10, then it won’t take much time to monitor your portfolio.

Moreover, the Google alerts and mobile app notifications have made the life of investor lot easier. You can read most of the news and information on your mobile without much effort now.

If you are new to investing and want to learn stock market from scratch, here’s an amazing course for the beginners: INVESTING IN STOCKS- THE COMPLETE COURSE FOR BEGINNERS.

That’s all. I hope this post on how to track your stock portfolio is useful to the readers.

If you have any doubts, do comment below. I reply every one of them.

Tags: How to monitor your stock portfolio, how to monitor stock performance, how to track your stocks, portfolio monitoring, how to monitor your investment portfolio
3 Amazing Books to Read for a Successful Investing Mindset

3 Amazing Books to Read for a Successful Investing Mindset.

3 Amazing Books to Read for a Successful Investing Mindset:

Hi Investors! Today we are going to discuss something different from my usual posts.

In the past few years, since I started investing, I have met a number of people who asked me why I am investing in stocks on my own. Why don’t I just choose a SIP or mutual fund? Why do I put so much work in my brain when someone else can do it?

While I try to explain them the importance of managing their own financials, I find it little difficult with few people.

This is not because of lack of education or their background in different industry/sector. Many of my friends with similar qualifications like me are ignorant towards their own financial situation.

The main reason for these people having such struggles is an unhealthy (or unwilling) mindset towards investing. Their mind is untrained towards the importance of investing and the wonders investing can do in creating wealth.

Therefore, today I am going to suggest 3 amazing books to read for a successful investing mindset.

These books will guide you, motivate you and open your eyes for a healthy mindset for investing.

Here are the 3 books that we are going to discuss in this post.

  1. Think and grow rich by Napoleon Hill
  2. The Richest man in Babylon by George Clason
  3. Rich Dad Poor Dad by Robert Kiyosaki

I personally recommend you to read all of these books as the principles & lesson described in these books can help you a lot to tackle financial problems throughout your lifetime.

3 Amazing Books to Read for a Successful Investing Mindset

1. Think and Grow Rich

think and grow rich by napoleon hill

Think and grow rich is a 1930’s classic that is still the best selling in 2017. The lessons from this book proved out to be time-tested i.e. applicable at any time.

The first edition of this book was originally published in 1937. This book was written by Napoleon Hill at the suggestion of Andrew Carnegie.

Andrew Carnegie proposed to Napoleon Hill to interview 500 greatest men in the 20th century who were rich and successful in their industry. Carnegie offered to provide the fund for traveling and meeting these personalities in exchange of Hill’s time. He wanted Napoleon to study the common traits among all these rich and successful peoples.

It took Napoleon Hill almost 20 years to interview all the 500 people. He interviewed Henry Ford, JP Morgan, Alexander graham bell, Thomas Edison, Theodore Roosevelt and many other famous personalities. He finally summarised his studies from the interview in the book- ‘Think and grow rich’.

In this book, the author Napolean Hill educates 13 principles required in a person in order to become RICH.

Thirteen Principles: The Power of thought, Desire, Faith, Auto-suggestion, Specialized knowledge, Imagination, Organized planning, Decision, Persistence, the Power of the mastermind, the Mystery of sex transmutation, the Subconscious mind, and the Sixth sense.

Let me cover two principles described in the book here. I won’t be covering all as it will kill the fun of reading it:

A) The Power of Thought:

power of thought

In this section, Napoleon Hill describes how your thought can help you achieve what so ever you want in your life.

To explain this, he gave an example of Edwin Barnes, who wanted to do a partnership with Thomas Edition. Let me be clear here. he wanted to do partnership- not ‘work with’ or ‘work for’ Thomas edition.

When the thought was originally generated in his mind, he didn’t know Edison. He lived miles away from where Edison lived. He didn’t have money or resource to meet Edison.

However, the thought was so persistent that even after facing a number of obstacles, several years later, he became partners with Thomas Edison.

He had a partnership in the Edison’s dictating machine as a distributor. In short, his thoughts provoked his desires to achieve what he truly wanted in his life.

B) Burning Desire:

burning desire

Napoleon Hill considers this trait as the most important of all to become rich and successful.

A burning desire is not about wishing, it is about wanting.

A wish might not get fulfilled, however if you want something passionately, you will find a way to get it.

In this section, Hill conveys the readers to ensure that the ‘want’ becomes ‘desire’.

Further, Hill proposes to develop a clear and concise statement of desire – What do you want and when you want it.

If you want money, then be specific about the amount that you want and time frame when you want it. For example, if you want to become a crorepati, be specific that you want to earn 1 crore by 1st January 2020.

Besides, you need to revisit the desire often to imprint it in your mind. Read the statement twice daily, in the morning and in evening.

In addition, you need to create a specific plan to reach your goal and you need to start taking steps immediately.

If you want to meet your desire, you have to sacrifice something. This might be your time, money, fun with friends or anything worthy.

TEMPLATE:
I want to earn ____________ by ______________ and for that I am will to _________________.

Overall, create a burning desire of what you want if you want to become successful.

These are the two out of thirteen principles taught in the book. Apart, there are many important lessons in the book that will help you to develop your mindset for a successful life ahead.

2. The Richest Man in Babylon

The Richest Man in Babylon is one of the best classic personal finance books that I have ever read.

The lessons in this book are pretty simple and effective.

The book consists of different stories from the Babylonian days. Few of stories for the collection are- The richest man in Babylon, Goddess of good luck, The gold lender of Babylon, The camel trader of Babylon etc.

The one story that I particularly liked was the story of a Babylonian slave who was extremely poor with lots of debt. He later learned the rules of gold and with the newly acquired wisdom, he turned out to be one of the richest men in Babylon.

Here are three of my favorite lessons learned from this book:

1- Pay yourself first.

gold

Save at least 10% of what you earn. You have earned the money from your hard work and it’s your right to pay yourself first.

Pay yourself first, and then you give it to anyone you want to, like your landlord, your maid, restaurant owner, laundry guy etc. This is the rule no 1 of money.

Here is an abstract from the book about this rule:

“‘I found the road to wealth when I decided that a part of all I earned was mine to keep.’

‘But all I earn is mine to keep, is it not?’, I demanded.

‘Far from it,’ he replied.  ‘Do you not pay the garment-maker?  Do you not pay the sandal-maker?  And Do you not pay for the things you eat?  Can you live in Babylon without spending?  What have you to show for your earnings of the past month?  What for the past year?  Fool!  You pay to everyone but yourself.  Dullard, you labor for others.  As well be a slave and work for what your master gives you to eat and wear.  If you did keep for yourself one-tenth of all you earn, how much would you have in ten years?’ “

2- Only seek advice from those that are wise and knowledgeable in the subject.

Take the counsel of the better men and learn from their mistakes. Here is an abstract about this rule from the book:

“Counsel with wise men.  Seek the advice of men whose daily work is handling money.  Let them save you from such an error as I myself made in entrusting my money in the judgment of Azmur, the brickmaker.  A small return and a safe one is far more desirable than risk.”

3- “Better a Little Caution Than a Great Regret.”

A little caution with the money can stop you from lots of trouble in future. This rule advocates the readers to invest intelligently as it’s no good regretting later.

Books to read:The Intelligent Investor by Benjamin Graham Summary & Book Review

 In addition, the book also describes the laws of gold, which like the law of gravity is applicable everywhere and in every time period.

Here are the 7 simple rules of money:

  1. Start thy purse to fattening: Save money.
  2. Control thy expenditures: Live under your means. Do not overspend.
  3. Make thy gold multiply: Invest intelligently.
  4. Guard thy treasures from loss: Avoid bad investments.
  5. Make of thy dwelling a profitable investment: Own the property/house you live in.
  6. Ensure a future income: Have insurances.
  7. Improve thy ability to earn: Keep developing. Become wiser and knowledgable

Also read: 10 Must Read Books For Stock Market Investors.

All the lessons learned in this book are effective an easily implementable. I have read this book a number of times and is my personal favorite personal finance book.

I definitely recommend you to read this book. Check out more about ‘The Richest Man In Babylon’ by George S. Clason from Amazon here.

3. RICH DAD POOR DAD

This is the first mind-opening book that I read during my freshmen year in college. The book is a life changer. It made me realize the importance of financial education and how I have been ignoring this all my life.

The book describes the lack of financial education given to the kids. The problem with financial education is that it isn’t taught in school. Hence, the family has the responsibility to teach it.

However, the trouble is that unless your parents are in top 1%, they are going to teach you how to be poor. This is not because the poor don’t love their kids. It’s because they don’t know what they are teaching.

In the book, the author has two fathers. One his original father, who was poor. And the other was his friend’s father, who was rich. Kiyosaki describes how the lessons given by both his fathers were totally contrasting.

rich people

At a very young age, Robert Kiyosaki decided to listen his RICH dad instead of his highly educated POOR dad.

Few of the important lessons learned by Kayosaki from his rich dad are:

1. Always invest in assets: You should increase your assets and reduce liabilities. According to Robert Kiyosaki

  • An asset is anything that puts money in your pocket.
  • A liability is anything that takes money from your pocket.

Assets can be a business, real estate, paper assets like stocks, bonds etc. Whereas liabilities can be your expensive car, the big house bought on the mortgage, iPhone etc.

2. Poor work for money and Rich make their money work for them.

3. Poor only have expenses, middle-class people buy liabilities and rich invests in assets.

Related Post: Rich Dad Poor Dad Summary- Lessons by Robert Kiyosaki

Apart, there are many important lessons in this book which will teach you why Rich are getting richer, and poor will remain poor.

This is an amazing classic by Robert Kiyosaki and highly recommendable to read.

Conclusion:

All the three books mentioned in this post is classic and time-tested. They will open your eye towards the personal finance and help you to create a successful investing mindset. I highly recommend you to grab a copy of each one of them and start reading.

That’s all for today. I hope this post on “3 Amazing Books to Read for a Successful Investing Mindset” is useful to the readers.

Do comment below which one is your favorite personal finance/ self-help book?

SENSEX IN LAST 30 YEARS

75x Returns by Sensex in last 30 Years of Performance.

75x Returns by Sensex in last 30 Years of Performance:

Hi Investors. Today I have brought an interesting insight for the investors. We are going to discuss the Sensex performance in the last 30 years. So, let’s get started.

SENSEX IN LAST 30 YEARS:

Here is the data of Sensex for the last 30 years.

YEAR SENSEX (Closing Pts) 
1987 442
1997 3,658
2007 20,286
2017 33,573

You can get this data from BSE India website using this link.

Here is the chart of Sensex in last 30 years till date.

Sensex in last 30 years of performance

Chart Source: https://tradingeconomics.com/india/stock-market

From the above data, you can notice that Sensex has given multifold returns in the last 30 years. From a mark of 442 in 1987, Sensex is currently at an all-time high with 33,573 points (November 2017).

The BSE index has given an astonishing return of 75 times in its last 30 years.

In short, an investment of 10 lakhs in the BSE Index fund 30 years back, would have turned out to be 7.5 crores by now.

Note: If we compare this return with 4% p.a. returns from the savings account, we will get just 22 lakhs net amount in 30 years.

Overall, Sensex has turned out to be a wealth creator for those who invested in the market in time. Those who invested even in the index fund of Sensex in last 30 years, would have been sitting on a huge pile of wealth in the age of their retirement.

Nevertheless, those who missed this rally should not be disappointed and should invest in the market on suitable opportunities.

Moreover, they should invest actively by becoming an investor rather than a trader or side walker (short-term investor).

Currently, the market is at an all-time high. However, this should not stop the investors from investing in SIPs even if there might be a correction in the market in near future.

Also read: SIP or Lump sum – Which one is better?

Invest for the long term as it has always turned out to be a wealth creator for most of the investors. Long-term investments tend to reward its investors eventually.

For a short term, there will always be fluctuations in the market. If we study the last financial year 2016-17, we can notice that there were a couple of swings in the market due to multiple reasons like demonetization, US Presidential election, Implementation of GST etc.

If you invest for the short term, there will be volatility due to the domestic or global factors.

However, for the long term, bulls become in charge if you have invested in the fundamentally right stock.

Also read: 10 Must Read Books For Stock Market Investors.

India is growing at a very decent pace and in the next 3-5 years it will turn out to be a rising star in the world. I am highly optimistic about the growth of the Indian economy and suggests the investors remain invested in the market for long term.

There is a famous quote used by Motilal Oswal Group that I would like to quote here:

Buy Right, Sit Tight.

Also read: How To Invest Rs 10,000 In India for High Returns?

That’s all for this post about past performance of Sensex in last 30 years. I hope this insight is helpful to the investors.

Do comment below what are your expectations from Sensex in the upcoming year of 2018?

Why Most Indians do not Invest in stocks

#9 Reasons Why Most Indians do not Invest in stocks.

#9 Reasons why most Indians do not invest in stocks:

Hi Investors. Today we are going to discuss why there is less participation of common people in Indian stock market. So, let’s get started!!

I was recently talking with one of my friend, Gaurav who works in a big multinational company. Gaurav didn’t know that nifty has reached its all-time high this Tuesday until I told him so.

Later same day during lunch, when I informed one of my colleagues, Ashish, that nifty has crossed 10k points, he didn’t show any sign of excitement or interest.

In reality, most Indians are like Gaurav and Ashish. They have little or next to zero knowledge/information of stock market.

When Mr. Narendra Modi became the prime minister of India in may 2014, the whole India including the stock market, seemed to roar. The NSE index nifty has given an astonishing return of over 42% since coming of PM Modi in the central government.

Although the stock market has welcomed our PM with a bullish trend, however, it didn’t seem to motivate the participation of common people in the market as much as anticipated.

In India, around 98% population has nothing invested in the stock market. Hardly 2% population of Indians invests in the market with the majority of only two states: Gujarat & Maharastra, out of 29 states.

Related post: Majority of states have very few stock market investors 

If we compare the participation of the common people in stock market around the world, we can find that India’s participation percentage is even below the average. In China, around 10% population of the common people participates in the stock market. Further, in the USA, this percentage is as high as 18%.

Nevertheless, what really worries about the participation of the Indian investors in the market is its minimal growth. The percentage of investors participating in the market currently, is same as 2 decades earlier (in the 1990s). The governing bodies have not been able to attract more retail investors to invest in equity market.

Even in 2017, stock market investing is considered as the rich guy’s games. Most of the retailers who invest in stocks are bankers, businessmen, engineers, lawyers etc, whose average monthly income are in six figures.

Indian stock market is over 140 years old and still, people are searching for reasons that why most Indians do not invest in stocks.

In this post, I’m going to give 9 common reasons why most Indians do not invest in stocks. Make sure that none is stopping you from investing in the Indian stock market.

Further, please mention in the comment box which reason you think is mostly responsible for less participation of common people in Indian stock market.

9 Reasons why most Indians do not invest in stocks.

1. Lack of awareness:

unawareness

Many of the people are unaware towards stock investing. They do not know how much returns they can get by investing in stock market.

A common villager doesn’t know how to earn from stocks and doesn’t understand the power of compounding.

A local retail shop owner does not know what is a demat and trading account.

An old small town electrician hasn’t ever met an investor or trader in his entire life.

This is all because of lack of awareness. In short, unawareness is one of the biggest reasons why most Indians do not invest in stocks.

2. Common Investing myths in India:

MYTHS VS FACTS

Since childhood, everyone hears about how his uncle/cousin/neighbor etc who has lost his entire fortune in the stock market. Stock market investing is considered as gambling in India.

Many people do not invest in the market because they follow the famous investing myths prevailing in the society.

Few of the famous stock market myths which stops a common person from investing in stocks are:

  • Investors who invest on their own are intelligently gifted.
  • Paying a profession is better than making your own investing decisions
  • Investing on your own is very risky etc.

Related post: 7 Most Common Stock Investing Myths.

These myths are the biggest barrier to common people and stock market and a reason why most Indians do not invest in stocks.

New to stock market? Here is an amazing book on Indian stock market for beginners which I highly recommend to read: How to Avoid Loss and Earn Consistently in the Stock Market by Prasenjit Paul.

3. Not willing to take the risk:

risks stock market

The risk is always involved in stock market no matter how many studies you have done and how fundamentally strong the company is. Most of the conservative Indians are not willing to take a risk on their hard earned money and considers 4% return from the savings account as safe. They will only invest if they are assured that their investment is 100% risk-free, which stock market never is. The risks involved in the market stops these people from investing in stocks.

Also read: Is Indian stock market Risky to Invest?

However, one always has to take some risks in order to get some reward. Remember- ‘No Risk, no reward’. Further, there is a famous quote by Warren Buffett that I would like to quote here:

‘Stock market investing is about minimising risks, not avoiding it.’

4. Lack of knowledge/guidance:

lack of knowledge

There is also a segment of people who are willing to invest in stock market but are unable to invest because of lack of knowledge or proper guidance.

They do not know where to start. There is no proper platform for these people to learn about stock market investing. Lack of knowledge stops these segments of people from investing in the Indian stock market.

5. No security in exchanges:

There are a number of past scams in the market. The Indian stock market has got a bad name due to scandals like that of Harshad Mehta and Ketan Parekh.

An Even big company like ‘SATYAM’ was involved in frauds and looting their investors.

Although after coming to SEBI (Securities exchange board of India), these scams numbers have reduced. However, there are still many fraudsters present in the Indian market who tends to make money by cheating innocent investors.

Because of the lack of proper securities in the market, many common people tend to stay away from the market. And this is one of the key reason why most Indians do not invest in stocks.

Also read: 3 Most Common Scams in Indian Stock Market That You Should be Aware of.

6. No proper courses:

There are very few dedicated courses on the stock market. Although NSE and BSE provide few certificate courses, that’s not even close to fulfilling the requirements of the interested aspirants.

Even many MBA, BBA, or BCOM degrees don’t have proper courses on investing/trading.

Ready to start your stock market journey? Check out our amazing course for newbie investors: INVESTING IN STOCKS- THE COMPLETE COURSE FOR BEGINNERS

7. Lack of capital:

In 2012, the Indian government stated that 22% of Indian population is below its official poverty limit. The latest poverty line is targeted at Rs 32 in villages, Rs 47 in cities. Read more here.

When a majority of the population are struggling to meet even the basic needs of life, there it’s logical that the percentage of people with surplus cash to invest will be low. Lack of capital is a major reason why most Indians do not invest in stocks.

8. Unwillingness:

“I don’t have time” – a common statement among the 9-to-5 working people in India, unwilling to take charge of their financial future.

A majority of the population are either too busy in their day job or are ignorant towards investing. They always delay investing in the market, considering they will do so in future. This unwillingness or laziness among the people is a big reason for less participation of Indians in the stock market.

9. Preference towards physical assets like land, gold etc:

People still have a love for gold, lands, FDs etc. Many people consider investing in Real Estate, gold etc easier in India compared to paper assets, as this has been traditionally followed.

Investing in a land in your village, or buying gold jewelry form your local jeweler shop seems simple compared to opening a trading account which will further require the access to internet, computers etc. The natural tendency of Indians towards physicals assets is a big rationale for poor participation in the stock market.

Additional Reasons:

There are many people who enter the market just to try their luck. Once these people lose money in stocks, they practically leave the market forever. These inappropriate ways of investing reduce the total number of active investors/traders in India.

Although, there are few other reasons also like lack of accessibility, low earning of people, volatility etc, however, the main points are covered in the post.

Also read: 6 Reasons Why Most People Lose Money in Stock Market

That’s all. I hope this post on ‘#9 Reasons why most Indians do not invest in stocks’ is useful to the readers.

Further, if there is any other reason which is stopping you from investing in Indian stock market, do comment below.

Invest smart, Invest long.

Fundamental vs Technical Analysis of Stocks cover

Fundamental vs Technical Analysis of Stocks

Fundamental vs Technical Analysis of Stocks in Indian stock market:

There are two common approaches to pick a stock. The first is fundamental analysis and the second is technical analysis. However, fundamental analysis and technical analysis follow a completely different route to pick stocks.

Both fundamental analysis and technical analysis can be used to determine if an investment in stock is attractive or not and to further forecast the future trends of stocks.

For example, if you are evaluating 10 stocks and want to determine which one you should purchase, then you can use either of fundamental vs technical analysis of stocks.

Fundamental analysis checks how healthy the company is compared to its competitors and economy. It studies everything related to the company like its financial statements (Balance sheet, profit loss statement etc), management, competitors, products, economy, industry etc.

Related Post: How to do Fundamental Analysis on Stocks?

On the other hand, technical analysis does not care about the financials or the industry. It evaluates the company based on past trends, prices & volumes. Technical analysts use stock charts to identify future trends and patterns.

technical analysis

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What is the Intrinsic Value of a company?

“The intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.” – Investopedia

In short, the Intrinsic value is the true value of a company.

Fundamental analysts believe that the current stock price of a company may or may not be same as its intrinsic value.

They evaluate companies to find which one is trading below its true intrinsic value using different studies like financial statements analysis, stock valuation, economy analysis etc.

Once they find a company which is trading below its intrinsic value (also considered as undervalued stock), they hold this stock until it reaches its true value. A stock trading below its intrinsic value is considered a good investment opportunity.

Overall, the approach followed in fundamental analysis is to find the intrinsic value of stocks.

If you want to learn fundamental analysis from scratch, I would highly recommend you to read this best selling book- ‘The Intelligent Investor’ by Benjamin Graham. Warren Buffett considers it as the best book ever written on investing.

On the other hand, Technical analysts believe that there is no use to analyze companies intrinsic value as the stock price already reflects all relevant info.

They do not care about the financials of a stock. They predict the future performance of a stock based on its past stock price trends.

If you want to study more about the technical analysis approach, here is a great book to start- ‘A random walk down wall street’ by Burton Malkiel.

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Fundamental vs Technical Analysis of Stocks: Basic Comparisons

Now that we have little understanding of both fundamental vs technical analysis of stocks, let us discuss both there methodologies in details.

Here, we will compare fundamental vs technical analysis of stocks based on different criteria.

1. Basic Principle:

Fundamental analysis analyses all the factors that can affect the stock price of a company in the future like financials, management, industry etc. It evaluates the intrinsic value of the company to find whether the stock is under-priced or over-priced.

Technical analysis reads the past charts, patterns and trends of the stocks to predict its future price movement.

If you want to study value investing for Indian stock market, here is an amazing book which I personally recommend you to read: Value investing and behaviourial finance- Insights into Indian stock market realities by Parag Parikh.

2. Time Frame:

Fundamental analysis approach is used for long-term investments.
Technical analysis approach is used for short-term investments.

3. Data Sources:

Fundamental analysis gathers data from financial statements of the company along with other economic news sources.

Technical analysis gathers data from the stock charts.

4. Indicators:

Fundamental analysis studies assets, liabilities, earnings, expenses etc. It also uses various fundamental indicators like PE ratio, PB ratio, debt/equity ratio, ROE etc

Technical analysis uses charts like candle sticks, price data etc. Various technical indicators that are commonly used are MACD, Simple moving average, EMA, RSI etc.

Also read: The Fundamentals of Stock Market- Must Know Terms

5. Methodology Used:

Fundamental analysis studies the financial data like balance sheet, profit and loss statements and cash flow statements. It also examines other factors while evaluating stocks like competitors, company’s management, industry, economy etc. Fundamental analysis focuses on both past performance and future potential.

Technical analysis studies the market movement and public psychology. It is mostly the analysis of the past price movements of the stock. Technical analysis focuses on the performance chart and the trends of the stock.

6. Strategy:

Fundamental analysis is used to find the intrinsic value of the company to evaluate whether the stock is over priced or under priced.

Technical analysis is used to find the right entry and exit time from the stock.

New to stock market? Check out the upcoming course on ‘How to pick winning stocks?’ here.

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Fundamental Analysis- Pros and Cons:

PROS:

  • Fundamental analysis invests for the long-term and their returns are quite huge. Power of compounding is applied to the long-term investments resulting in good returns to the investors.
  • They invest in financially sound companies which is always a good approach.

CONS:

  • Fundamental analysis is quite laborious and its methodology is lengthy & complex.
  • There is no clear time frame for long term investment.
  • As the future potential of the company is considered in the fundamental analysis, various assumptions are made in this approach.
  • As the entry & exit time is not specified in fundamental analysis, you might buy a good stock at a bad time.

fundamental vs technical analysis of stocks

*******

Technical Analysis- Pros and Cons:

PROS:

  • Technical analysis is fast and the outcomes can be seen quite early.
  • This approach is comparatively less laborious.
  • Entry and exit time for the stock can be specified.
  • Technical indicators readily give buy or sell indication.

CONS:

  • As there are a number of technical indicators, it’s tough to select a good indicator.
  • As technical indicators do not study the financials, you might be investing in a financial unhealthy company.
  • Technical analysis skill requires a lot of accuracy, reliability, and discipline.

*******

Can fundamental and technical analysis be used together?

Yes, fundamental analysis and technical analysis can be used together. Many investors/traders use both the approaches. It makes sense to enter in a fundamentally strong company at a right time. While fundamental analysis helps to find a healthy company to invest, technical analysis tells you the right time to enter or exit that stock.

In short, you can use both fundamental and technical analysis of a stock together.

*******

Conclusion:

Fundamental vs Technical analysis of stocks, both are effective yet quite different methodologies used for research of potentially strong stocks.

It’s really tough to say which one is the better way of investing. Although a number of books have been written on both fundamental and technical analysis, however this debate on the better way of investing is still going on.

My suggestion is to do your own study and make your investing strategy based on your knowledge, preference and time.

Do comment below which investment strategy you follow- Fundamental analysis or Technical analysis.

Also read: How To Invest Rs 10,000 In India for High Returns?

Tags: fundamental vs technical analysis of stocks, fundamental analysis vs technical analysis of stocks, technical analysis vs fundamental analysis which is better, fundamental vs technical analysis, fundamental vs technical analysis, fundamental and technical analysis of indian stocks, fundamental vs technical analysis techniques, fundamental vs technical analysis of stocks in Indian stock market
Successful Stock Market Investors in India

Rakesh Jhunjhunwala Latest Stock Portfolio

Rakesh Jhunjhunwala latest stock portfolio: Rakesh Jhunjhunwala, the big bull of Indian stock market, is one of the most successful investors in India. He has created a huge wealth by investing in Indian stock market.

Starting with the initial investment of only Rs 5,000, currently he is sitting on a huge net worth of around Rs 15,000 crores.

Many of the stocks in his portfolio has holding period of over 5 years and given multiple times returns on his investment.

Also read: 3 Insanely Successful Stock Market Investors in India that you need to Know.

His Idealogy:

Rakesh Jhunjhunwala follows the idealogy of Warren buffet and believes in long term investment.

He strongly advocates the growth of India and it’s rising economy.

Mr. Jhunjhunwala is also believes in learning from mistakes. He often says- ‘Mistakes are your learning friends. The idea is to keep these mistakes small.’

In today’s post, I am going to present top stocks in Rakesh Jhunjhunwala’s latest stock portfolio.

Note:

My sincere request to the readers that please do not copy the portfolio of Mr Rakesh Jhunjhunwala blindly. He has his own strategy of investing and might have bought the stocks when it was selling at a decent price. You do not want to pay double amount of what Mr Jhunjhunwala has paid and expect the same returns.

The motive of this post is to educate the readers with the portfolio of a successful stock investors, so that you can learn few new ideas and create your own portfolio.

However, if you want to buy these stocks, make sure to study the stocks carefully. Do not buy the stocks just because Rakesh Jhunjhunwala has bought these stocks. Study the stocks, make your strategy and then invest.

Rakesh Jhunjhunwala latest stock portfolio:

Company Name Sector Current Price (in Rs) No of stocks (in lakhs) Investment value (Rs in Crores)
Titan Company Ltd Jewellery/Luxury goods 595 740 4,380
Lupin Ltd Pharma 1042 79 830
Escorts Ltd Auto tractors 698 112 780
DHFL Finance- Housing 546 100 546
Delta corp Ltd Construction/ Real estate 213 225 480
CRISIL Ltd Miscellaneous /Ratings 1785 400 714
Rallis India Ltd Chemicals/ Pesticides 229 195 445
Karur Vysya Bank Ltd Private Bank 143 216 310
MCX- Multi commodity exchange of India Ltd Miscellaneous 1063 200 212
Edelweiss Financial Services Ltd Finance 266 90 240
Aptech Limited Computer/software 309 95 297
NCC Ltd Construction & contracting 85 567 490
Federal Bank Ltd Private Bank 117 416 490
Aurobindo Pharma Ltd Pharma 744 65 490
VIP Industries Plastics 262 52 137
Jai Prakash Associates Conglomerate 19.90 250 50

Read more at: Jhunjhunwala is making a killing with contra bets; portfolio stocks up 200% 

titan company

Summary:

Here is a quick review of the Rakesh Jhunjhunwala latest portfolio:

If you want to get in-depth knowledge about Indian Stock Market, I will highly recommend you to read this book: How to avoid loss and earn consistently in the stock market by Prasenjit Paul

That’s all. I hope this post is useful to the readers.

If I have missed any big company name in Rakesh Jhunjhunwala latest stock portfolio, do comment below.

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7 Must Know Websites for Indian Stock Market Investors cover

7 Must Know Websites for Indian Stock Market Investors.

7 must know websites for Indian stock market Investors: The Internet is full of resources. You can find tons of information out there for free. However, as the count increases, it’s literally impossible to remember all the websites that you visit even in a single day.

Luckily, for the Indian stock investors, there are only a few sites which if you remember, will help you to keep yourself updated with all the market news, information, happenings and all.

Please note that there is one such website which every stock investor get ‘used to’ when he/she starts learning the stock market, INVESTOPEDIA. I won’t be discussing this website in this post as it is a jargon than everyone knows.

In this post, I am going to explain 7 must know websites for Indian stock market investors. Further, do read the post till the end, as there is a bonus in the last section.

7 must know websites for Indian stock market Investors:

1. MONEYCONTROL:

Website: http://www.moneycontrol.com/

money control website

Moneycontrol is certainly the most popular website among the Indian stock investor. You can find all sorts of information on this website like market news, trends, charts, livestock prices, commodities, currencies, mutual funds, personal finance, IPOs etc.

Here, you can find the fundamental data of any company along with technical indicators (including candlesticks charts) on money control.

Moneycontrol website also provides a platform to track your investments and to create your own wish list.

Further, the forum provided by this website for discussion is also one of a unique feature of this website. If you are unable to find the latest happenings of any company, just go to the forum of the stock, and read the discussions. (Please do not get influenced by the comments in the discussion section).

In addition, money control also has a mobile app in all platforms- Android, IOS, and windows. The app is amazing because of its simple user interface and great navigation features. If you do not have this app installed on your phone, I highly recommend you to install it now.

2. SCREENER:

Website: https://www.screener.in/

screener website

This is a great website for the fundamental analysis of a company to read its financials.

All the features on Screener are absolutely free. You can find a number of important information about the companies on this website like general info, financial ratios, charts, analysis, peers, quarterly results, annual results, profit & loss statements, balance sheet, cash flows etc.

The best part is the personalized financial reports which are created in such a manner that only the useful information is shown. No clutters! The financial statements of a company are very long, however, screener simplifies the financials in small useful chunks. Anyone can easily read the annual reports, balance sheet etc on this website because of the user-friendly display of the data.

I regularly use this website to check the financials of a company and will also recommend using this website. It saves a lot of time for the readers to navigate through the financials.

Also read: How to use SCREENER.IN like an Expert

3. INVESTING:

Website: https://in.investing.com/

investing market

Investing is a good site if you want to find all the information on the same website simultaneously. You can do both fundamental and technical analysis of stocks on this website.

The different options available on this website are general info, chart, news and analysis, financials, technicals, forum etc.

You can also use a number of ‘tools’ available on this website. The best one is – stock screener. You can use the stock screener to shortlist the stocks based on different criteria like market capitalization, PE ratio, ROE, CAGR etc.

I also use investing for technical analysis as there are a number of technical indicators which are available on this website and easy to use.

If you haven’t visited this website, then go on and check it out.

4. ECONOMIC TIMES MARKET

Website: http://economictimes.indiatimes.com/markets

ET Market

Best website to stay updated with the latest market news. Economic times market provides instant and reliable news. It also posts morning and evening ‘briefs’. In case you missed the news an entire day, you can read all the happenings of the day here.

Further, ET market provides similar information as money control website in terms of features it provides like stock charts, portfolio, Wishlist, expert views, mutual funds, commodities etc.

New to stock market? Confused where to start? Here is a great book on stock market investing, which I highly recommend the beginners to read: ONE UP ON WALL STREET by Peter Lynch.

5. LIVEMINT

Website: http://www.livemint.com/

live mint website

A good website to read a variety of posts regarding the stock market, finance, economy, politics, science, sports etc.

This website will keep you updated will all the happenings in the country so that you do not miss out any important one which might affect your stock selection in future.

Further, this website will keep you entertained with tons of info to read.

6. NSE INDIA

Website: https://www.nseindia.com/

NSE India website

This is the official website of the National stock exchange. You can get the information of all the company listed on this exchange along with their financials on this site. The information provided on this website is up to date and accurate.

As the company has an obligation to submit their financial reports to the NSE, hence you can always find the financial data of any company here, in case you can’t find it elsewhere. You can also read the daily updates of bulk and block deal on NSE website.

Further, along with charts, there are tons of historical data regarding NSE and nifty available on this website.

You can find information about the corporates, domestic and foreign investors, new listings, IPO etc. NSE India also provides courses and certifications.

7. BSE INDIA

Website: http://www.bseindia.com/

bse india website

BSE India is the website of Bombay stock exchange.

This is similar to NSE India. However, you can find more historical data here as BSE Sensex has been incorporated for a longer time compared to NSE Nifty.

In addition, over 5,500 companies are listed on BSE whose corporate actions and financial data can be found on this website. You can also download the complete list of ‘public’ companies from this website.

Also read: How to find complete list of stocks listed in the Indian stock market?

The various information available on BSE India are market info, charts, Public offers, OFS, IPOs, Domestic and foreign investors etc

BSE India also provides training and certifications.

Bonus (As promised)

Here are two common websites which you can visit to know the IPO allotment results.

Whenever you apply for an IPO (Initial public offering), although NSE/BSE will send you a text message/mail about the allotment result, however, their messages are mostly delayed by a day or two. If you want to check the result of IPO allotment in time, you can check it on the following websites. You just have to enter the PAN Card with which you have applied for the IPO.

Link in time website

In addition, here are 6 more popular stock research websites that you should know:

  1. Google Finance: https://www.google.com/finance
  2. Yahoo Finance: https://in.finance.yahoo.com
  3. Rediff money: http://money.rediff.com/index.html
  4. MarketMojo: https://www.marketsmojo.com/
  5. Investello: https://www.investello.com
  6. Trendlyne: https://trendlyne.com
  7. Chittorgarh: http://www.chittorgarh.com

SUMMARY

Here are 7 must know websites for Indian stock market investors:

That’s all. I hope this post on ‘7 must know websites for Indian stock market investors’ is useful to the viewers. In case, you haven’t visited the above-mentioned websites, do check it out.

Further, If I missed any big name, please comment below. Happy Investing.

If you are new to stocks and want to learn how to select good stocks for long-term investment, check out this amazing online course: HOW TO PICK WINNING PICKS? The course is currently available at a discount.

Tags: must know websites for indian stock market investors, top stock research sites, indian stock research sites, stock market websites list, indian stock market websites, 7 must know websites for indian stock market investors, best stock market website for beginners, indian stock market blogs, must know websites for indian stock market investors for research 
how to do fundamental analysis on stocks

How to do Fundamental Analysis on Stocks?

How to do fundamental analysis on stocks? Fundamental analysis of a stock is used to determine the health of a company. It’s recommended to do a proper fundamental analysis of the stock before investing if you are planning for long term investment.

Technical analysis is good to find the entry and exit time in a stock for Intraday or short term. You can book good profits using different technical indicators.

However, if you want to find a multi bagger stock to invest, then the fundamental analysis is the best tool that you can utilise.

To get multiple times return, you need to remain invested in a stock for long term. While the technical indicators will show you exit signs on short term downtrends, however you can remain invested in that stock if the company is fundamentally strong.

In such cases, you will be confident that the stock will grow and give good returns in the future. Short-term market fluctuations, external factors or mis-happenings won’t affect the fundamentals of the strong company in long term.

In this post, I am going to explain how to do fundamental analysis on stocks. Here, I will ellaborate few guidelines that if you follow with discipline, you can easily select fundamentally strong companies.

I have also written a similar post on ‘How to select a stock in Indian market for consistent returns’ that you can find useful in fundamental analysis of stocks.

How to do fundamental analysis on stocks?

Here are 6 steps that you need to follow to analyse the fundamentals of a company in Indian stock market:

1. Use the financial ratios for initial screening:

There are over 5,500 stocks listed in the Indian stock exchange. If you start reading the financials (balance sheet, profit-loss statement etc.) of all these companies, then it might take years.

For the initial screening of the stocks, you can use various financial ratios like PE ratio, P/B ratio, ROE, CAGR, Current ratio, Dividend yield etc.

I have written a post on how to do initial screening using the financial ratios here: 8 Financial Ratio Analysis that Every Stock Investor Should Know

For the stock screening using financial ratios, you can use different financial websites like

How to do screening of stocks using Investing.com?

Step 1: Go to screener

investing.com how to do fundamental analysis on stocks

Step 2: From top menu select Tools -> Stock Screener

Step 3: Select the financial ratio and then edit criteria.
For example, if you want PE ratio between (5, 18) and dividend yield % between (1, 3), you can select the following criteria.

investing stock screener- How to do fundamental analysis on stocks

Screener will shortlist the stocks according to the criteria mentioned. Further, you can also add a number of financial ratios in your criteria like CAGR, ROE etc.

Also read: How to follow Stock Market?

2. Understand the company:

It is important that you understand the company in which you are investing. Because if you don’t, you won’t be able to decide whether the company is performing good or bad, whether the company is taking right decisions towards its future goal or not; and whether you should hold or sell the stock.

A simple way to understand the company is to visit its website.

Go to the company’s website and check its ‘ABOUT’, ‘PRODUCTS’, ‘PROMOTERS/BOARD OF DIRECTORS’ page etc. Read the mission and vision statement of that company.

If you are able to understand the products & vision of the company and find it attractive, then move further to investigate more. Else, ignore the company.

3. Study the financial reports of the company:

Once you have understood the company and found it appealing, you can check the financials of the company like Balance sheet, Profit loss statements and cashflow statements.

As a thumb rule, Compounded annual growth rate(CAGR), sales & net profit increasing for the last 5 years can be considered a healthy sign for the company. However, you also need to check the other financials like Operating cost, revenue, expenses etc.

The best website to check the financial statements of a company that I most frequently use is SCREENER.

Here are few steps to check the financial reports of a company:

Step 1: Go to screener

scrneer

Step 2: Enter the company’s name in search box. The company’s details will open like charts, analysis, peers, quarters, profit and loss, balance sheet etc.

Screener financials

Step 3: Check the company’s financials.

You need to study the financials of the company carefully to select a good value or growth stock for long term investment.

4. Check the debt:

Company’s debt is one of the biggest factor to check before investing in a stock. A company cannot perform well and reward its shareholders if it has huge debt. In short, avoid companies with huge debt.

As a thumb rule, always invest in companies with debt/equity ratio less than 1. You can use this ratio in the initial screening of stocks or else check the financials on the Screener website.

If you want to learn stocks from scratch, I will personally recommend you to read the book: ONE UP ON THE WALL STREET by Peter Lynch- best selling book for stock market beginners.

5. Find the company’s competitors:

It’s always good to study the peers of a company before investing. Determine what this company is doing that it’s competitors aren’t.

Further, you should be able to answer the question that why you are investing in this company and not any of its competitor. The answer should be convincing one like Unique selling point (USP), future prospects, upcoming projects, new plant etc.

You can find the list of the competitors of the company on the Screener website itself.

Just enter the stock name in the search box and navigate down. You will find a peer comparison there. Study the details about the competitors minutely.

screener peer comparison- How to do fundamental analysis on stocks

6. Analyse the future prospects:

Always invest in a company with a long future prospects. Select only those companies to invest whose product or services will still be used 20 years from now.

Moreover, there is no point in investing in a CD or pen-drive making company with no long term (say 20 years) prospects. If you are planning to invest for long term, then the long life of company’s product is a must criteria to check.

SUMMARY:

Here are 6 steps on how to do fundamental analysis on stocks for the beginners

  1. Use the financial ratios for initial screening
  2. Understand the company
  3. Study the financial reports of the company
  4. Check the debt
  5. Find the company’s competitors
  6. Analyse the future prospects

That’s all. I hope this post on ‘How to do fundamental analysis on stocks’ is useful to the readers.

Also read: How To Invest Rs 10,000 In India for High Returns?

Further, If you find this post helpful and want me to write more contents on similar topic, please comment below. Happy Investing.

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Is Indian stock market risky to invest

Is Indian stock market Risky to Invest?

Is Indian stock market risky to invest? Stock market is one of the best place to make money form your investments. There are number of examples of people with average job who ended up being millionaires by investing in stocks.

For example, if you had bought 100 stocks of Bajaj Finserv in Nov 2008 at a price of Rs 100, you initial investment of Rs 10,000 would have turned out to be over 5.4 lakhs in just 9 years. In addition, dividends would also have been credited to your account every year.

Bajaj finserv share price

But this would only had happened if you had hold the stock for a period of 9 years (not selling in between just to book profits).

You can make great fortunes form the market if you have three basic qualities- Discipline, patience and persistence.

Why people think stock market is Risky?

Every investment has some risk involved in it. Depending on the type of risk taken by the investor, the reward is achieved. There is a famous proverb prevailing since a long time in the investment world- ‘NO RISK, NO REWARD’.

Those who are able to get high rewards from the market are the ones who have adopted balanced approach to minimise risk and maximise the reward.

However, there are a number of people who do not invest in stocks just because they think that the Indian stock market is too risky. 

Also read: 7 Most Common Stock Investing Myths

Is Indian stock market Risky to Invest?

The legendary Investor Warren Buffett has said a famous quote about risks- ‘RISK COMES FROM NOT KNOWING WHAT YOU ARE DOING’.

People think stock market is risky because most of them do not understand the movements in the market. The day to day fluctuations in the market makes them uncomfortable.

Many people cannot relate the upward or downward movements of the share price with the company’s performance. Hence, they think it as an another form of gambling, where no one can surely predict the future outcomes, but just speculate the market.

Moreover, due to the couple of past market crashes in the Indian stock market, most Indians are afraid that the stock market is too risky to invest. They do not want to see their investment falling to grounds.

Nevertheless, stock market as a whole has historically been the best investment for long term.

If you need to make money in next two years, invest in something less volatile. But if you want to make fortune in 20 years, invest in stock market.

Although, I agree that there are few risks involved in the market, but these are the risks that are worth taking.

There is a famous movie dialogue from the film ‘ROCKET SINGH- THE SALESMAN OF THE YEAR’ which I would like to quote here:

‘Risk to Spiderman ko bhi lena padta hai’. / Even Spiderman has to take risks. /

Risk vs. Reward

There is always a risk involved in stock market if you invest in stocks with indiscipline and without doing proper research. However, the risks involved in the market can be minimised (if not totally diminished) by following proper discipline and principles while investing.

Further, if you are happy with a 4% simple interest retun on your savings, then you should not invest in the market. Your money is a lot safer in your savings account. It won’t go anywhere and there is no chance to lose that money from savings, unlike stock market . It will idly sit in your bank account and will give you linear returns.

However, if you are not happy with the 4% interest and think that this return will not help you to fight inflation (5-6% per year), then you have to invest your money. Although, there are risks involved, but it’s better to increase your wealth by investing than to degrade its face value by inflation.

Certainly, there are risks involved in stock market investment, but a 15% compounded annual return can help you a lot in fighting inflation than a linear return of 4% on savings.

Also read: How Much Return Can You Expect From Stock Market?

Lessons from the Past:

Whenever people talk about the risks in the market, the famous example they give is the 2008 market crash.

It was the time of economic recession in India. Market fell over 60% from January 2008 to March 2009.

In short, if you had invested Rs 1 lakh at the top of the market (before crisis) and then you had taken out your investment at the end of the crisis, then the net worth left with you would have been equal to Rs 40,000 only. Your invested amount would have diminished by 60%.

Here is a graph of Sensex.

From the past data of over 45 years, 2008 stock market crash was the worst. Please notice the sharp fall in the graph in year 2008-09. This was one of the biggest market crash in Indian stock market history.

Sensex Chart- Is Indian stock market risky to invest

Source: https://tradingeconomics.com/india/stock-market

In addition, here is the records of Sensex from year 2008 to present year-2017. Please note the Opening,  High, Low and closing points of Sensex at different months.

Sensex Records from 2002 to 2017

Source: Historical Indices- BSE (http://www.bseindia.com/indices/IndexArchiveData.aspx)

Now, let us discuss the Sensex points at different time during (and after) the 2008-09 market crash.

Sensex in Jan’08 = 21,206 (HIGH)

Sensex in Mar’09 = 8047 (LOW)

During this period of 14 month, Sensex fell over 13,000 (-60%) points.

However, if you had just remained invested for 2 and half years from the crash date, you would have recovered completely from the losses.

Sensex in Nov’10 = 21,108 (HIGH)

Sensex 2008-09 Crash

Further, if you had remained invest for 6 more years since the crash of 2008-09, you would have made good profits from the market despite the big crisis period of over 14 months.

Sensex in Jan’15 = 29,844 (HIGH)

Overall, from the historical data, we can say that even the worst market crisis in Indian stock market could have been recovered if you had stayed invested for long term. 

No single market, bull or bear, can last forever. Bear market will always be followed by bull market and vice versa.

The worst thing an investor do in such situations is to panic and leave the market; booking heavy losses. 

If you had left the market during the 2008-09 market crash by panic, then you would had to book a loss of 60% on your investment. This could have destroyed your net worth.

However, if you just had patience and had hold the stocks for long term, you could have made wonders.

If you want to learn stocks from scratch, I will personally recommend you to read this book: ONE UP ON THE WALL STREET by Peter Lynch- best selling book for stock market beginners.

Risks Analysis:

It’s true that many of the small caps companies were forced to shut down during the crash due of bankruptcy. However, all the fundamentally strong companies remained intact and recovered quickly after the crash.

There are hundreds of examples of the stocks whose price fell heavily during the stock market crash. However, 9 years later, their price is sky rocketing today compared to the stock price at that time.

Here are the stock prices of 4 common Indian companies that everyone might be aware of.

Had you invested in these companies, you would have created huge wealth. Inspite of the big market crash of 2008-09, its effect are not visible on the stock prices of these companies.

  • Tata Consulting Service

TCS Share price

  • Eicher Motors

Eicher motors share price

  • MRF

mrf share price

  • Hindustan Uniliver

HUL share price

Image Sources: Google

The list of such out-performing common stocks goes on and on. The long term investors have always created wealth for the market, despite the market crashes and corrections.

Also read: How To Invest Rs 10,000 In India for High Returns?

Sensex yearly records from 2000 to 2017.

Sensex Records from 2000 to 2017

Source: Historical Indices- BSE (http://www.bseindia.com/indices/IndexArchiveData.aspx)

From the above table, you can notice that for the long term investors, the rewards have always been greater than the risks.

Sensex has given a return of over 9 times (closing of 3,972 in 2000 to 31,892 in 2017) in a period of 17 years, which time period includes one of the biggest market crash in Indian history.

Moreover, this is the return form just the index of the market, which covers the average of the market.

If you had invested in few good companies from a pile of over 6,000 companies listed in the Indian stock exchanges, you could have easily beat the market.

Your returns would have been much better than the 9 times return of the index in the period of 17 years.

Overall, stock market is risky for the impatient investors. However for the long term investors, stock market has never been risky.

Stock market has always rewarded the long term investors.

What are the real risks involved in the market?

Although stock market is safe for a long term investor, however there are few risks involved in the market. Here are the real risks that every investors should be aware of. These are those risks that turns out to be a wealth destroyer for most of the investors:

1. Speculating the market:

Stock market becomes risky when people starts to speculate. Many a time, people buy stocks just because they get intuitions that the price of that stock is going to rise. Buying stocks on speculations is always a wealth destroyer.

2. Trading in Futures and Options:

Although many people had earned a lot of money by trading in Futures and option. However, the number of people losing money in F&O is relatively high. Never enter futures and options trading without proper knowledge.

3. Entering with no Proper Strategy:

Stock market becomes risky when you do not have any proper strategy while entering the market. A good strategy covers the time to entry, time to exit, total investment amount, portfolio allocation etc.

4. Following Recommendations:

Buying stocks on ‘TIPS’ or recommendations always invites risks for the investor in the market. Moreover, following your broker or friend’s recommendation blindly has always led the investors to regret in future.

5. Not following risk management systems:

A little risk is always involved in stock market. However, by following few risk management systems, you can minimise the risks and maximise the rewards. For example, using ‘STOP-LOSS’ while trading is a good risk management strategy.

6. Trading with emotions:

Trading with emotions is always risky in stock market. Never attach emotions in the market. Do not get dishearten or proud if your stocks are doing bad or amazing in the market. Trade with discipline, patience and persistence.

7. Lack of Patience:

If you do not have patience in the market, you cannot create wealth. Warren Buffett used to say that – ‘Stock market is a place to transfer money from impatient to patient people’. Stock market is risky for impatient people. Most of the time, its the impatient people who turn out to be the losing one, transferring their wealth to the patient people in the market.

8. Non-diversified portfolio:

If you have invested all your wealth in a single stock, then there is a big risk involved in your investment. Market works on emotions. Sometimes, even the best company can become the victim of unfavourable conditions like new government norms, irregular losses/damages etc. Like the old ones used to say- ‘Never put all your eggs in one basket’. Non diversification is risky in stock market.

9. No proper understandings:

If you are investing in a company that you do not understand, you are taking one of the biggest risk in the stock market. How can you decide weather the company is doing good or bad; Weather you should hold or sell the stock; if you do not understand the company? No proper understandings of the company can freeze your decisions and will lead your investments to a big danger.

why most People lose money in stock market

That’s all. I hope this post- ‘Is Indian stock market risky to invest?’ is useful to the readers. Moreover, I hope that it can inspire the people to start investing in the market by managing the risks and focusing on the rewards.

Please comment below what do you think about this topic. Is Indian stock market risky to invest?

Tags: Is indian stock market risky, is stock market risky currently, should I invest in indian stock market, risks in stock market, stock market risks, is Indian stock market risky to invest, should i invest in the stock market today, invest now or wait for correction, is now a good time to invest in the stock market 2017, is Indian stock market risky for short term.

sip or lump sum which is better

SIP or Lump sum – Which one is better?

SIP or Lump sum -Which one is better? Whenever a newbie investor plans to invest in the stock market, the most common question for him/her is whether to invest in Systematic Investment Plan- SIP or Lump sum.

Should he invest his entire savings of Rs 1 lakh in one go (when the time is correct), or should he invest Rs 10,000 systematically for the next ten months?

Many times this question can be quite confusing. Without proper guidance, the stock market beginners are not able to decide which one is a better strategy to invest. Whether to choose SIP or Lump sum.

Which investment approach will generate high returns- lump sum or systematic investment plan?

Have you also come across the same question?

If yes, then continue reading this post because here I am going to explain the difference between SIP & Lump sum and which one you should choose.

There are different scenarios covered in this post to easily understand the approach to be followed by different investors to select between SIP or lump sum. Here is a detailed analysis.

SIP or Lump sum -Scenario 1:

Imagine in the first scenario, you and your friend decided to start an apple farm independently. You both agreed to sow some apple trees in your gardens for a period of one year and then calculate the net growth at the end of the year.

sip or lump sum example 1

You both went to market.

However, you both decided different approaches for your gardens.

On one hand, you bought all the apple seeds at once and sowed it in the garden.

On the other hand, your friend settled to buy the seeds monthly and sowed little every month.

Further, in this scenario, let us assume that the price of the seeds remained unchanged throughout the year.

At the end of the year, what result do you expect? Whose apple garden will have better trees?

Obviously, the one where the seeds got maximum time to grow. You gave entire one year for your trees to grow.

However, your friend didn’t give the full year and the duration was different for the batches of seeds bought in different months. Clearly, your apple garden will give better results.

Now, let us understand this first scenario in a more pragmatic way with the help of an example.

Suppose you invested Rs 1 lakh lump sum amount at the start of the year and your friend invested Rs 1 lakh in SIP i.e. Rs 25,000 per quarter.

Let you invested in a fixed deposit (FD) at 8% ROI and your friend invested in recurring deposit at 8% for a year.

In this case, although you both have invested the same amount, however, you will accumulate more wealth compared to your friend. Let me explain why.

This happened because you invested the whole money for a complete year.

In comparison, your friend invested Rs 25,000 every quarter. So this amount remains invested for 12,9,6 and 3 months respectively (till the end of the year).

Since your friend’s average investment period is small here, hence the interest will be less.

Further, if your friend even has got higher recurring deposit rate, say 9, 10, 11 or 12% rate of return, still, he would not have been able to match your lump sum investment.

Here are the returns on the lump sum vs recurring deposit (at higher rates) for an investment of 1 year:

ROI on Lump Sum Return after 1 year ROI on Recurring deposit Return after 1 year
8% Rs 108,000 9% Rs 105,752
10% Rs 106,408
11% Rs 107,066
12% Rs 107,728

Note: You can use this site for calculations- http://everydaycalculation.com/sip.php

To get a similar return, only at 12.5% ROI or above, your friend will be able to match you.

This illustration proves that for growing your investment, time is most important. That’s why it is said to start investing as early as possible.

Also read: How Much Return Can You Expect From Stock Market?

SIP or Lump sum -Scenario 2:

Now, let us learn further the SIP or lump sum in another scenario.

We have to go back to our apple gardens to understand the prospects of this scenario.

Here, let’s take that the buying strategy of you and your friend remained the same. You decide to buy all the apple seeds at once and sow it at the starting of the year.

On the other hand, your friend settled with monthly investment on apple seeds and decided to buy and sow the seeds monthly.

Now, in this second scenario, let us assume that the price of seeds starts falling every month and kept falling till the end of the year.

As your friend bought seeds monthly, he will be able to buy more number of seeds on the investment amount, because the seeds price kept falling.

Let’s understand this better with an example.

Assume that the price of apple seeds was Rs 300 at the start of the year.

You are your friend, both planned to invest Rs 30,000 in the entire year.

As you bought all the apple seeds at the start of the year, you would have been able to buy (30,000/300)= 100 apple seeds.

Let’s further assume that the price kept falling monthly at a rate of Rs 2 per month. So the price of the apple seeds in the subsequent months will be Rs 298, Rs 296, Rs 294 … Rs 278 (at the end of the year).

Taking the profit of the declining apple prices, your friend will be able to buy more apple seeds by the end of the year.

In this scenario, although you have invested for a longer time, however, your friend will get better results.

This happened because of the lower average cost. The average purchase price of a single seed by your friend will be much lower than what you paid for. Hence, in the same investment amount, your friend will be able to buy more number of seeds.

And therefore, your friend will plant more of apple seeds until the end of the year and will get much better results on his investment compared to you.

Note: This concept is called Rupee cost averaging.

Nevertheless, this is again only one side of the story. Imagine if the price of seeds kept increasing per month. Then what would have happened?

The outcome would have been totally different. You would have easily got much better results compared to your friend in this rising price scenario.

SIP or Lump sum -Scenario 3:

In this third scenario, let us assume that the prices of the apple seeds kept changing (increasing or decreasing throughout the year).

Here, average cost technique is used to calculate the return on your friend’s investment.

However, the return on your investment here depends totally on your entry and exit time.

If the prices were low when your entered and high when you decided to exit, you might have been able to book great profits compared to your friend who would have just got the average profit.

Also read: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

Conclusion:

Here are few of the main conclusions of SIP or lump sum which you can derive from this post.

  • SIP can reduce the market fluctuation risks by Rupee cost averaging.
  • Invest in the lump sum when the market is continuously rising.
  • Invest in SIP when the prices are falling

Overall, it’s not easy to select an investment strategy between SIP or Lump sum. An intelligent investor should choose his own style, depending on his style and preference. In addition, market situation and opportunity also drives the investment strategy from time to time.

That’s all. I hope this post on ‘SIP or Lump sum- Which one is better?’ – is helpful to the readers.

Further, also comment below which investment strategy you prefer- SIP or Lump sum?

New to stocks and confused where to start? Here’s an amazing online course for the newbie investors: INVESTING IN STOCKS- THE COMPLETE COURSE FOR BEGINNERS. Enroll now and start your stock market journey today!

HOW MUCH RETURN CAN YOU EXPECT FROM STOCK MARKET COVER

How Much Return Can You Expect From Stock Market?

How much return can you expect from stock market? Most of the people enter the stock market with the sole purpose of making money. Inspired by the veteran billionaire investors like Warren Buffett, Rakesh Jhunjhunwala, RK Damani etc, they also want to try their knowledge and luck.

However, while most people dream of making huge fortune from the market, they end up losing money. This end is mainly because the newbie investors do not know what return they can expect from the market.

A common investor enters the market with some arbitrary goals to double or sometimes quadruple his/her investment in six months time duration. But in the real case scenario, even the best investors cannot achieve this big goal in that short amount of time.

I do not blame just the retail investors for those surprisingly high return expectations. There are many agencies who inflate their thoughts like media, stock brokers, fraudsters etc.

For example, everyone knows the story of Mr Rakesh Jhunjhunwala about how he bought the stocks of Titan Company at Rs 3, which is currently trading at Rs 600 level. This news, which is commonly circulated by the media drives the high expectations of the common investors from the stock market.

Nevertheless, what about the other stocks in Rakesh Jhunjhunwala’s portfolio? Do you know how much return his other stocks gave? Do you know what percent of net portfolio was allocated for Titan Company by Mr Jhunjhunwala? He has more than at least 20 stocks in his portfolio. If few stocks have given him multiple time returns, then few might also have been in loss. The average portfolio return will surely come down if we calculate the cumulative profits and gains of all the stocks. Still, people ignore to know the complete facts and expect to get huge returns from their investments in six months just like Mr Jhunjhunwala.

Then comes the stock brokers. The brokers encourage the investors to invest in some stocks that they suggest as a multibagger stock ( Multibagger are those stocks which give multiple times returns compared to initial investment). But how come the brokers do not buy the same stocks in bulk and make millions if they are damn sure if it’s going to be a multibagger. Instead, they just advice to buy those stocks to their clients suggesting them that the stocks will make huge fortunes for them in short amount of time.

And lastly comes the fraudsters. Some fraudsters’ claims to give 60-80% return in six month. You can find a number of such stock advisors if you simply google- best stock market recommendations in your area. These fraudsters even claim to give 99% accurate suggestions. Unluckily, many common investors believe them and expect to get 80% returns in next six months.

With all these things going around, a common investor keep his expectations way too high when they enter the stock market. If you say that you have earned 20% annual returns from the market last year, they will laugh at you and ask that why did you entered the stock market for this low returns then. They believe that one should enter the stock market only if they get high returns, say 50% per annum.

However, there are many things that these newbie investors are missing out about the return you can expect from stock market. Let me focus some light on them.

Warren Buffet Performance through Years: 

Everyone knows about Warren Buffett. The greatest investors of all time and one of the richest men on this planet. Let’s take Mr Buffet’s annual return from his company ‘Berkshire Hathaway’ as a benchmark and analyze his returns. Here are the returns of Berkshire over the years:

Source: http://awealthofcommonsense.com/2015/03/buffetts-performance-by-decade/

Source: http://www.marketwatch.com/story/from-6000-to-67-billion-warren-buffetts-wealth-through-the-ages-2015-08-17

From the above table, there are two important points worth noticing:

  1. Warren Buffett has earned an average of 22% return per year for the period of almost 6 decades now.
  2. 99% of his wealth has been accumulated after an age of 50.

Now, you might ask me that how the hell then Warren Buffett became the richest man in the world.

The answer is simple. It’s consistency and patience. Consistency because he got an average return of 22% year after year. Patience because he did it for around 6 decades. That’s an amazing figure considering there will be many bear market, crashes, economic recession etc that would have happened in that long time frame.

Many people can get 40% return in a bull market. But can they do the same in bear market, when the market is going down and making new lows day after day. Can they still get an average 20% return?

Although for few years, Warren Buffett has received a return of around 39% per annum and for some years as low as 5.9% per annum (during the 2008 recession). However, it is the consistent return of 22% per annum that has made him one of the richest people in this world. Moreover, it’s the power of compounding that has played a major role in making him rich. His net worth increased exponentially with time.

There’s another example of a great investor and fund manager- Peter Lynch, whom we can consider to figure out the return can you expect from stock market. Mr Lynch was able to receive an average return of around 29% per year for a period of 13 years, when he was the fund manager at Fidelity Investments. That’s why he is considered as one of the greatest fund manager of all time. However, 13 years is too small compared to 6 decades of consistency shown by Warren Buffett.

If you want to learn stocks from scratch, I will highly recommend you to read the book: ONE UP ON THE WALL STREET by Peter Lynch- best selling book for stock market beginners.

How Much Return Can You Expect From Stock Market?

Taking all these in consideration, we can conclude that an average return of 15-20% per year can be considered good in stock market. Do not try to make money fast. Try to achieve an average return of 20% per year first. Above this, everything is a bonus of your intelligent investment and an added fortune for your portfolio.

Further remember that you get only get 4% simple interest return in your saving account. This return is way much higher than your saving returns.

Performance of Sensex over the years:

Now, let me walk you through the sensex to help you out with what return can you expect from stock market vs actual that this index has given over the years. Here is a graph of Sensex:

From the above graph, you can notice that Sensex has moved from 17,500 level in August 2012 to 32,300 current level (August 2017). Over the period of last five years, Sensex has given a cumulative return of around 85%.

Now, if we consider from August 2002, Sensex was at 3000 level then. Hence, for the last 15 years, Sensex has given a return of around 960% (over 9 times).

Overall, for the long term, Sensex has outperformed all the other investment options like saving, fixed deposits, gold, commodities etc.

Also read: Getting Smart With Investment in Gold.

Conclusion:

From the facts discussed in this post, a good return can you expect from stock market is around 15-20% per annum. This is in context with a retail investor. Any additional return above this can be gained as an added value because of the excellent stock selection and good fundamental and technical study of the stocks in your portfolio.

Further, it’s not just the return that matters. The consistency in getting the returns year-after-year will help you in making huge fortune.

Bonus:

Let me further explain how a consistent return of even 15% per annum for long term can help you to create great fortunes.

Suppose you invested Rs 1 lakh in some good stocks at an age of 25. You remained invested till the age of 60. Therefore, the duration of your investment in 35 years.

Here is your final returns at 15% CAGR (compounded annual growth rate) after 35 years:

Year Year Interest Balance
1 15,000 115,000
2 17,250 132,250
3 19,838 152,088
10 52,768 404,556
20 213,477 1,636,654
30 863,632 6,621,177
35 1,737,072 13,317,552

Note: You can calculate the compound interest returns here- http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

Your Rs 1 lakh investment at an age of 25, turns out to be over 1.33 crores at an age of 60 (considering the annual return of 15%). 

Further, this example shows just one time lump sum investment. Imagine the fortune that you can make if you can keep investing the same (or larger) amount year after year. You can easily create great wealth considering the decent returns from the stocks.

That’s all. I hope this post on – “How much return can you expect from stock market” is useful to the readers. Do comment below what are your expectations from the stock market.

6 Surprisingly Common Financial Mistakes People Make in Their 20’s

6 Surprisingly Common Financial Mistakes People Make in Their 20’s: It is often said that the mistakes you make in your early days come back revolving around to you in future. We all have been a spectator of how lifestyle standards have been raised to a whole another level. Statistics say that we tend to indulge in the reckless shopping’s mostly in our 20’s. Keeping up with the standards of style quotient might be one of the reasons for the adults to not pay attention at their savings. It is a matter of time when you get to realise how roughly life can strike you with its lows.

We don’t mean to scare you in the first place but in this article we have managed to gather some of the most common financial mistakes that people do in their 20’s that can end up making them financially vulnerable in the near future. You can pay your attention at them to know money mistakes to avoid in your 20’s. So, let’s get started.

Common Financial Mistakes People Make in Their 20’s

1. Pursuing a degree you don’t want to on a student loan:

Common Financial Mistakes People Make in Their 20's student loan

You have to admit that in your teen years, you find it very hard to decide what you want to pursue and make your career in. In countries like India we get influenced by the aspirations of our parents and society that eventually ends up getting us admitted in colleges for a degree that doesn’t even ring a bell to us. Most people choose to pay their college fee through loans that they have to repay at a considerable interest rate which can be really burdensome sometimes.

2. Getting influenced by big fat Indian wedding:

Common Financial Mistakes People Make in Their 20's wedding

Accept it or not, it is just one day party in which you blow your entire life savings just by being fascinated by that glittery and sugar coated wedding idea and plan. This is one of the major money mistakes to avoid in your 20’s. The wedding industry is one of the biggest industries of the country with an annual turnover of billions. Now, you need to understand that there are other important things in your life which you can spend wisely on. Have a good wedding but don’t put in your entire financial savings at stake.

3. Not being in a habit to save:

Common Financial Mistakes People Make in Their 20's no savings

Trust us; it is very easy to save a part of your income. With this habit, you would be able to make your future much better. Spending your entire income on things and services could insure you a luxurious lifestyle for now but at the same time, it is also putting you at a risky position in future. Life is really unpredictable and uncertain and you never know what you are going to need in future. Moreover, if you will look for a switch of job in future, you will definitely need some cash in hand to keep your stomach full for a couple of days until you get a hold of your new job.

4. Not keeping an emergency fund:

Common Financial Mistakes People Make in Their 20's no emergency fund

Most people choose to spend their money on shares and stock market without even knowing a bit of it. Instead you should maintain and put enough money in your emergency fund that will back you up in the odd times that might act as a hurdle in your life in future. You must put enough money in the fund for medical expenses and at least 6 month of unemployment. There are various ways and schemes provided by different insurance companies to ensure such funds for you. Sadly, most of the people in their 20’s fail to keep an emergency fund for themselves.

5. Not saving for your retirement:

Common Financial Mistakes People Make in Their 20's

The age group of 20’s is also known as the carefree zone. As the name suggests, most people are unaware and seem careless about their retirement plans. Of course, they must find the time of their retirement far enough to be out of scope but it is actually not. 20’s is the correct time to start your retirement fund. You must make sure to put a little every month in your retirement that would yield an amount adequate enough to feed you and fulfil your needs after your retirement. Another money mistakes to avoid in your 20 is not paying attention on your retirement fund.

6. Spending recklessly on credit cards:

Common Financial Mistakes People Make in Their 20's credit cards

Getting your hands on a credit card is very easy these days. Seems like teenagers in their 20’s cannot keep their hands off these credit cards! With amazing schemes, cash backs and numerous deals going on every day at various places make you spend a fortune through these easy cards. Now, you must remember that the money has to be paid by you only at the end. Most people get caught in their debts of credit cards bill and keep on paying for months and years to completely get rid of those debts. That is why one should remember to spend wisely in their 20’s.

I hope this post on “6 Surprisingly Common Financial Mistakes People Make in Their 20’s” helps the newbies in early 20’s to avoid these common mistakes.

Further, do comment below if you had made any big financial mistake in your 20’s.

Why You Should Start Saving Early featured image

7 Worth-It Reasons Why You Should Start Saving Early?

7 Worth-It Reasons Why You Should Start Saving Early? You may be a good spender or a hoarder of fancy things that grace up the lifestyle of yours but saving a little from what you get every month, comes in very handy for your future endeavours. Major problems in life always come unannounced and offer you a wee time to prepare for it. Nevertheless, it is never too late to figure out a little plan for your saving as it is said that as soon as you start saving, the better are the advantages. Let us guide you with the impeccable benefits of early savings.

Why You Should Start Saving Early?

1. More Saving = Less Unnecessary Spending

Why You Should Start Saving Early

The number of gadgets that you have won’t matter but the savings would. We all know how recklessly we get to spend as soon as we get our hands on those big fat pay checks. Also, half the things you buy aren’t even worth the money and therefore they just increase your reckless spending. If you stay firm on saving a part of your income as soon as you get it, you will make sure that you keep it safe and untouched until when in need. Therefore your own money is actually getting saved from being spent unnecessarily.

2. Gives you a way to live your dreams:

Why You Should Start Saving Early - Enjoying

We tend to have lots of dreams since our childhood to the time when life actually strikes us. Amidst of our busy schedules, those dream plans of ours start fading away. It never actually matter about the number you make but what matters is how much you have lived up to your own dreams. A little spending from the beginning helps in funding us to live our dreams in future to the full extent and worth a reason why you should start saving early. As you see, absolutely nothing comes cheap in the 21st century.

3. Chip in for your own education:

Why You Should Start Saving Early- Education

A good education is termed as an investment and not as expenditure. Anything that you spend for useless things for now can be saved in a fund that will provide you a quality education in future. Even if you are done with your under graduation, does it mean that it is the end of the ‘scope of your learning curve?’ NO. You can go ahead and pursue the degree you always wanted to in your post graduation and can follow your dreams. Nothing worth having comes easy and also for free. Save some money yourself to treat yourself with good education in future!

4. Bad times come without an alarm:

Why You Should Start Saving Early- Uninvited stress

Losing jobs, going downhill on health and family problems are some of the tit bits that life offers to everyone. You never know when you would have to experience the lows of life. All you can do as for now is to prepare yourself for the worst. Speaking of which, you should also make sure to have a strong financial back up for these toxic circumstances. Fixed deposits and saving accounts come in handy for the savings that you need to do. Being financially stable even during the bad times of life gives a great motivation to move forward.

5. Let the bank serve you with interest:

Why You Should Start Saving Early power of compounding

The principal amount that you deposit as your savings in bank is interested after a particular span of time. Moreover, if the interest is compound, you will get to save a heck of money if you will be consistent. The best idea would be to choose a bank that offers you a good interest rate on your savings. The sooner you start to save and deposit in bank, the better will be the final amount. That’s an easy math you can do yourself.

6. Be Ready with Your Retirement Fund:

Why You Should Start Saving Early- retirement

It often gets very hard to maintain your luxurious lifestyle after your retirement. That is going to be the time when you will regret not maintaining a retirement fund in your early days. You must know that there are a number of mutual fund retirement schemes provided by different firms across the globe but choosing the one that is most appropriate to you and at the same time, serve your needs to the fullest should be your pick. You must also make sure to read their policy agreement well enough before going with them.

7. You will be willing to take risks:

Why You Should Start Saving Early- risk taking

Life is all about taking risks but you should be smart enough from the beginning to be able to take the decision of risking things that don’t matter to you anymore. For instance, if you will be looking for a switch to a more decent company in future then you must have a financial backup already. Not having one actually stops you taking worth taking risks in life that have the potential of turning your world around. This way, you would be able to concentrate on your switch and won’t worry about the money.

That’s all. I hope this post on why you should start saving early changes your extravagant lifestyle. Further, do comment below any other reasons that you think should be mentioned on why you should start saving early list.

Growth Stocks vs Value stocks – A logical Comparison

Growth Stocks vs Value stocks- A logical comparison: There are many ways to approach investing in stock markets. However, a growth stock and a value stock are considered very important in deciding the strategy for many investors in a different set of companies. Understanding growth stock vs value stock can help you to pick your investing strategy.

Many a time, you might have wondered why people are buying the stocks which are trading at such a high Price to Earnings (PE) ratio. Further, you might also have thought why most intelligent investors are looking for a low PE. The difference in the stock choosing strategy is itself contradicting and can be confusing for the newbie investors.

Therefore, in this post, I am going to explain the growth stocks vs value stocks so that you can develop a clear understanding of the different approaches of the veteran investors. Further, I have a surprise additional investment approach in the last section of the article. So, make sure you read the article until the end.

GROWTH STOCKS VS VALUE STOCKS

GROWTH STOCKS:

We can define a growth stock as a company which is growing at a very fast rate compared to its industry and market index. These stocks have a large PE ratio. The high valuation of these stocks is justified with the earnings as it grows very fast year after year. Typically, the growths of these companies are around 15% per year, while the rest of the nifty 50 stocks grow at an average of 5-7% per year.

A growth investor doesn’t care whether the stock is trading above its intrinsic value as long as the market price of those stocks keeps rising. As the growth and earnings of those companies are way higher than the peer companies, the investors expect those stocks to trade at a high PE.

Few examples of growth stocks from Indian stock market are- Eicher Motors, Hindustan Unilever (HUL), Colgate etc.

VALUE STOCKS:

A value stock has completely different characteristics than the growth stocks. These companies do not have a high growth rate, rather they grow very slow. However, these stocks trade at a low market price.

The concept of value investing was introduced by Benjamin Graham (the mentor of Warren Buffett), back in 1930’s. In his famous book ‘The Intelligent Investor’, Ben Graham has described the approach for a value investor, along with few other important concepts like Mr. Market & Margin of safety.

Note: If you want to build good fundamentals in investing, I will highly recommend you to read the book- The Intelligent Investor by Benjamin Graham.

Value investors look at investing in stocks as buying the super cheap company through finding its intrinsic value using company’s fundamentals as reported in quarterly and annual reports.

The value investing approach is simple. The value investors look for an opportunity to buy a stock which is way less valued in the market than it’s intrinsic value and buys it. A value investor believes that this stock will rise to its true intrinsic value in future. He holds that stock until it goes back to its normal value.

Few current examples of value stocks from Indian stock market are- HPCL, Coal India etc.

There are a number of financial indicators used to determine an undervalued stock for value investing. Here are two of the most commonly used indicators:

  1. Price to Earnings Ratio (P/E)

The Price to Earnings ratio is one of the most widely used financial ratio analysis among the investors for a very long time. A high P/E ratio generally shows that the investor is paying more for the share. As a thumb rule, a low P/E ratio is preferred while buying a stock, but the definition of ‘low’ varies from industries to industries. So, different sectors (Ex Automobile, Banks etc) have different P/E ratios for the companies in their sector, and comparing the P/E ratio of company of one sector with P/E ratio of company of another sector will be insignificant. However, you can use P/E ratio to compare the companies in the same sector, preferring one with low P/E. The P/E ratio is calculated using this formula:

Price to Earnings Ratio= (Price Per Share)/( Earnings Per Share)

  1. Price to Book Ratio (P/B)

The Price to Book Ratio (P/B) is calculated by dividing the current price of the stock by the latest quarter’s book value per share. P/B ratio is an indication of how much shareholders are paying for the net assets of a company. Generally, a lower P/B ratio could mean that the stock is undervalued, but again the definition of lower varies from sector to sector.

Price to Book Ratio = (Price per Share)/( Book Value per Share)

Read more here: 8 Financial Ratio Analysis that Every Stock Investor Should Know

Both value stock and growth stock investing approach are an effective way to make money from the stocks. There is no fixed way of investing that you should choose and stick to it.

Most of the successful investors have first studied the value stocks vs growth stocks approach and then developed their own unique style.

CONCLUSION: Growth Stocks vs Value stocks

GROWTH STOCKS VALUE STOCKS
A growth stock is bought at a fair price. A value stock is bought at a discount to its intrinsic value.
They have a huge potential for future earnings. Earnings growth is small. However, the value investors make profits when the stock reaches its true intrinsic value.
They have higher PE ratio. Value stocks have low PE ratio.
They give low or no dividends. Value stocks give good dividends.

Here is a chart for the PE ratio of growth stocks vs value stocks vs industry-

growth stocks vs value stocks plot

BONUS SECTION: INCOME STOCKS

This is the third way to invest apart from the value stocks and growth stocks. An income stock approach is investing in those stocks which pay a high, regular and increasing dividend.

The high dividend yield of these stocks mostly generates the overall returns.

Dividend Yield

A stock’s dividend yield is calculated as the company’s annual cash dividend per share divided by the current price of the stock and is expressed in annual percentage.

Dividend Yield = (Dividend per Share)/(Price per Share)*100

For Example, If the share price of a company is Rs 100 and it is giving a dividend of Rs 10, then the dividend yield will be 10%. It totally depends on the investor weather he wants to invest in a high or a low dividend yielding company. Read more: The Fundamentals of Stock Market- Must Know Terms

The dividend yield of income stocks is higher compared to the peers in industry and market index.

While investing in an income stock, you should always choose in a fundamentally strong company. Otherwise, if the profit decreases in future, the dividends will also decrease.

Also read: 10 Best Dividend Stocks in India That Will Make Your Portfolio Rich.

That’s all. I hope this post about ‘Growth stocks vs value stocks’ is helpful to the readers. Further, do comment below which investment strategy you follow: Growth or value?

New to stocks and confused where to start? Here’s an amazing online course for the newbie investors: INVESTING IN STOCKS- THE COMPLETE COURSE FOR BEGINNERS. Enroll now and start your stock market journey today!

Tags: growth stocks vs value stocks, definition and example of growth stocks vs value stocks, difference between growth stocks vs value stocks

What is the Right Time to Exit a Stock cover

What is the Right Time to Exit a Stock?

What is the Right Time to Exit a Stock? When should you sell the stocks and book profit? This is one of the most important questions which come to every beginner who enters the stock market.

Do you remember the story of the brave Abhimanyu from Mahabharata. He went through a fatal end just because he knew how to enter a ‘chakravyuh’ but didn’t know how to exit.

Similarly, the selling time of a stock is as important as the entry time. Therefore, in this post, I am going to explain the exit strategy for an intelligent investor. Be with me for the next 5-6 minutes to learn the right time to exit a stock for maximum returns.

What is not the Right Time to Exit a Stock?

Imagine a scenario.

You bought 20 stocks of a company at price Rs 500 today. Further, let’s also assume that you have done a good research and the stock is fundamentally very strong.

Next morning, the stock price zooms to Rs 550 (+10%). What will you do? Will you sell the stock and exit?

Now, let’s move to two days hence. The stock price now rose to Rs 590 (+8%). What will be your next move?

When prices of the stock rise like this, the ‘greed and fear’ becomes in-charge of your actions. Here, you might think that let’s book the profit. You have already gained Rs 90 per share (+18%). What if the stock prices fell tomorrow? It’s better to book some profits right now and you will enter again in the stock when the price is low.

But, while doing so you are missing out few points. Let me highlight them:

  1. You have researched the stock carefully and the stock has a potential to give huge returns. It might become a multi-bagger in the future. Why do you want to book a profit of +18%, when you can get +1000% profits?
  2. You might also be thinking that you will enter the stock again when the price is low. What if the stock price never comes down? I mean, the company is fundamentally strong and might give brilliant results in future. There are a number of stocks whose price has never fallen much and hence has never given the buyers a better opportunity to buy again. Why do you want to jump from the running train and want to catch it again?
  3. Let’s imagine the scenario that you re-entered the stock. Do you know in such scenario you have to give the extra brokerage charge and other charges (almost 4 times)? I mean, you have to pay all the charges 2 times when you first bought and sold the stock. And next 2 times, when you re-enter and will sell in future. Total 4 times brokerage. Do you really think it’s worth paying 4 times the brokerage just to book a profit of +18%?
  4. Lastly, do you know that you have to pay a capital gain tax of +15% for short-term gains? For long-term investment (over 1 year), the capital gain tax is nil 10% (Since April 1, 2018).

Overall, it’s not logical to sell the stocks if fundamentals are strong just to book some short-term profit. Look at the bigger picture. Haven’t you ever wondered why the great investor’s like Warren Buffet, Rakesh Jhunjhunwala, RK Damani etc always invest for a long term? How will you get a multi-bagger stock if you never gave your stock the opportunity to grow?

Also read: 6 Reasons Why Most People Lose Money in Stock Market

Let me explain further with an example.

I bought the stocks of TITAN Company at a price of Rs 314 per share in November’16. The company is fundamentally very strong and the stock was selling at a discount during that time because of demonetization.

titan company- right time to exit a stock

On June 5, the price of the stock rose +18% in a day. A positive news regarding GST was out which said that the taxes in jewelry sectors was going to be reduced. The news was taken enthusiastically by the people and that’s why the stock price rose too high of Rs 561 that day.

But I didn’t sell my stocks. You might argue that I should have booked a profit (+70% from the time of my entry). However, if you see from my perspective, it wasn’t the right time to sell.

There were a couple of reasons why I didn’t sell my stocks at that time. First, the rise in sudden price was due to good news. However, the fundamental of the company didn’t change. The company will continue to give good results in future.

Second, I might never get the stock at such bargain price again like the price during the demonetization period.

Third, I didn’t really need the money that time. If I had to sell my stocks, then I had to search again for a better stock to invest, which would have taken a lot of my time & energy.

And it seems my decision was right. The stock did correct its price. However, after a month, the stock price is back again at the same high price and is continuing the positive trend. No damage is done!!

Want to learn more about stock market? Here is a best selling book on stocks- Beating the street by Peter Lynch which I highly recommend you to read.

Next, you might say that the above case is a typical situation. I didn’t explain what is the right time to exit a stock?

Here are the three cases when you should actually sell the stock.

What is the right time to exit a stock?

  1. When the fundamental of the stock changes: Exit the stock when the fundamentals of the company are not the same anymore like when you bought the stock. For example, the company starts underperforming quarter-by-quarter; the non-performing assets (NPA) of banking companies start increasing at a high rate; the management of the company is changed and is inefficient etc.
  2. When you find a better stock: If you find a company whose fundamentals are better than your current stock and is giving better performance consistently, then it can be the right time to exit a stock. Moreover, this case is applicable when you do not have extra money to invest from your budget. In such scenario, you should sell the previous stock and grab the better opportunity.
  3. When you need the money: Do not sell the stocks just to keep the money in your saving account. Sell the stocks when you need the money like paying for a new house, new car, and your kid’s tuition fee etc. There cannot be a better time to exit a stock than when you need the money most.

Also read: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

In all the other scenarios, the holding period of a good stock should be forever. Do not mind the minor fluctuations. Invest in good stocks for long term and enjoy the ride.

charlie munger quote- what is the right time to exit a stock

I hope this post is helpful to the readers. Do comment below what you think about this exit strategy.

How To Invest Rs 10,000 In India for High Returns

How To Invest Rs 10,000 In India for High Returns?

How To Invest Rs 10,000 In India for High Returns? Investing is the best way to grow your money. Gone are the days when people kept their fortune (gold) buried below their land. Everyone is now interested to make more money through their investments.

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen

However, when I look around, a very few people know how to invest their money intelligently. Most are even not aware of the investment options available to them in India. Today, I am going to suggest the best answer on how to invest Rs 10,000 in India for maximum returns. Therefore, be with me for the next 8-10 minutes to start your journey of financial investment as a successful investor.

There are a number of investment options available in India to invest Rs 10,000 or more. Here are the few options and the expected average returns in a year duration:

  1. Savings: 4–6% per year
  2. Fixed Deposit: 6–8% per year
  3. Mutual funds: 10–18% per year
  4. Stock Market: 15–25% per year

Besides, other investment options available in India are Real estates, gold, silver, forex, cryptocurrencies, commodities like petroleum etc. However, for an investment of Rs 10,000- these are little out of scope.

So, how to Invest Rs 10,000 In India for High Returns? Among all the options mentioned above, Investment in the Stock market and Real Estate are the ones that have consistently out-performed all the other investment options in long duration. However, investing in real estate won’t be possible with an amount of Rs 10,000 until you take a lot of credits.

Hence, Stock market is the best option available for investment of Rs 10,000 to get maximum returns.

Also read: Sensex has given 9x returns in last 20 years; it is time to be a buyer now

Here is a graphical comparison of returns on Stocks, bonds, gold etc for a period of over 200 years.

stock vs bond vs gold

(Source: http://www.aaii.com/files/images/articles/9298-figure-1.jpg)

Note: Although the above graph doesn’t show returns from Indian stock market, however, stocks (in general) follow the same trend compared to other investment options all over the world. Please ignore the figures in the chart.

Now. let us analyze the past of Indian stock market and find out -how much return you might have got, if you had invested Rs 10.000 in a few famous companies, a few years ago.

  • Eicher Motors (over 80 times returns in the last 10 years)

Products: Royal Enfield, Eicher Trucks etc- 

If you had invested Rs 10,000 in Eicher motors 10 years back, then currently your return would have been over Rs 8,00,000 i.e. 8 lakhs. I wish my dad had bought the stocks of Eicher motors instead of Royal Enfield ‘bullet’ bike 10 years ago 🙁

Eicher motors multibagger stocks How To Invest Rs 10,000 In India for High ReturnsEicher motors share multibagger stocks How To Invest Rs 10,000 In India for High Returns

  • Page Industries (over 50 times return in last 10 years)

Products: Innerwear & Leisurewear (JOCKEY) etc- 

If you had invested Rs 10,000 in Page Industries 10 years back, currently you would have been sitting of a huge pile of over Rs 5,00,000 i.e 5 lakhs. Wish people had paid more attention to their underwears :p

Page industries stock multibagger stocks How To Invest Rs 10,000 In India for High Returns

Also Read: How to follow Stock Market!

  • MRF (Over 17 times return in last 10 years)

Product: Tyres-

If you had invested Rs 10,000 in MRF 10 years ago, you would have got a handsome return of Rs 1,70,000 i.e. Rs 1.7 lakhs now. Just if any bike servicing guy had noticed how many people are using MRF tyres and had bought few stocks of MRF Tyres a few years back, he would have been a rich happy man by now.

If you want to get in-depth knowledge about Indian Stock Market, I will highly recommend you to read this book: How to avoid loss and earn consistently in the stock market by Prasenjit Paul

MRF multibagger stocks How To Invest Rs 10,000 In India for High Returns

MRF stock price multibagger stocks How To Invest Rs 10,000 In India for High Returns

  • Symphony (Over 12 times return in last 5 Years)

Products: Domestic air coolers, industrial air coolers, and water heaters

If you had bought the stocks of SYMPHONY worth Rs 10,000 just 5 years ago, you would have got a return of over 1,20,000 i.e. 1.2 lakhs now. Huh, we enjoyed the air cooler but ignored the company 5 years back. Our bad 🙁

Symphony multibagger stocks How To Invest Rs 10,000 In India for High Returns

Symphony share price multibagger stocks How To Invest Rs 10,000 In India for High Returns

Eicher Motors, Page Industries, MRF, Symphony– all are common companies in the Indian market, which every Indian might already know. Most of the people have directly or indirectly used their products. Further, we can also notice that all these multi-bagger companies (companies which have given multiple time returns) have provided a great product/service to their customers, which resulted in constant growth in sales and profits.

Also Read:

How To Invest Rs 10,000 In India in Stock Market?

Here are few tips on how to invest Rs 10,000 in India in stocks to get maximum returns:

  • Do the research carefully:

Invest in the company, not the stock. If the company is doing great, the stock will also perform well. Research the company carefully before buying a stock.  Understand the company first. Learn about its product and services. Study the company’s fundamentals. If you want to read more about how to select a stock, you can find an excellent post here: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

  • Invest in just one or two stock:

Everywhere there is a hullabaloo about diversification while investing- ‘Do not put all your eggs in the same basket’. However, in reality, the concept is different if we expect maximum returns from small investments. Do not diversify your portfolio when you are investing just Rs 10,000. Instead, invest in just one or two great stock.

Diversification is used when you are investing a huge amount of money like Rs 50k or above. It’s the big bets which can help you to get great returns. Diversification kills the profit when the investment in small.

Let’s understand this with an example. Suppose, you invested Rs 10,000 in a good stock. The stock gave a return of +50% percent in a year. Then, the total return amount will be Rs 15,000. Now, let us assume another scenario in which you invested Rs 10,000 in 3 stocks. The return on the stocks after a year are +10%, +50%, and +15%. The overall return amount will be Rs 12,500 (+25%). All the three stocks cannot give similar returns and one of them might be fundamentally strongest. If only you had invested in the fundamentally strongest among the three, you would have been able to get a double return (from 25% to 50%) on your investment.

In addition, there is not much to lose for small investment like Rs 10,000. People diversify their portfolio so that they won’t lose lakhs of rupees (and go bankrupt) if their investment strategies failed. However, if you are planning to invest just Rs 10,000; then the reason for investment must be that you have extra savings and you want to get a good return on the investment. In such cases, go for a big sure shot.

Quick Note: If you do not have a big risk appetite, then ignore this tip and diversify your investments. 

warren buffet- How To Invest Rs 10,000 In India for High Return

  • Invest in what you know: 

You don’t need to find an unknown hidden stock to get multi-bagger returns. There are a number of common well-known stocks (Eicher motors, Symphony, Page Industries, MRF etc) which have given multiple times returns in the past and will give in the future. Look for a growing company around you. Study if they are listed on the stock exchange. Learn the fundamentals of those stocks. And if they are fundamentally healthy, invest in the stocks. This is an effective way to find multi-bagger stocks, even for regular investors.

This concept was introduced by the legendary fund manager Peter Lynch in his best selling book ‘ONE UP ON  WALL STREET’.

  • Invest in Mid-caps:

These companies have the potential to become a large-cap company in the long term frame. They have a high growth rate compared to the large caps which have already reached a saturation and the chances of large caps giving multiple time returns are highly unlikely. In addition, Mid-cap companies have the good capital to stay out of debt and live a long life. A good growing mid-cap stock can easily become a multi-bagger.

Few people advice to buy penny stock or the small-cap stocks for getting high returns. However, for the small caps, the chances of the company growing broke is also high. Most small-cap companies are not able to sustain in harsh economic conditions which is sure to occur once or twice in the long-term period. Therefore, investing in small-cap companies has more risk than reward.

That’s all. I hope this post ‘How to invest Rs 10,000 in India for maximum returns’ is useful to the readers. In addition, do comment below if you have any doubts or suggestions on how to invest Rs 10,000 in India in the stock market. I will be happy to read your feedback. #HappyInvesting

Quick Note: If you are new to stocks and confused where to start, here’s an amazing online course for the newbie investors: INVESTING IN STOCKS- THE COMPLETE COURSE FOR BEGINNERS. Enroll now and start your stock market journey today!

Best Stocks for Long term Investment in India

Best Stocks for Long term Investment in India.

Best Stocks for Long term Investment in India. In this post, I am going to describe three great stocks which anyone can keep in your portfolio for the long term. I have selected these stocks from different sectors in order to diversify the portfolio.

The stock selection is based on the fundamental analysis. If you want to read more about how I select stock for long term investment, you can read it here: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

Best Stocks for Long term Investment in India:

1. ITC:

itc best stock for long term investment in India 2017

Indian Tobacco Company (ITC) is one of the biggest conglomerate company in India. It has a diversified business which includes five segments: Fast-Moving Consumer Goods (FMCG), Hotels, Paperboards & Packaging, Agri-Business & Information Technology.

ITC was formed in August 1910 under the name of Imperial Tobacco Company of India Limited. Currently, it has over 25,000 employees. Now, let us discuss few of the leading products of ITC:

ITC Ltd sells 81 percent of the cigarettes in India. ITC’s major cigarette brands include Wills Navy Cut, Gold Flake Kings, Gold Flake Premium lights, Gold Flake Super Star, Insignia, India Kings, Classic (Verve, Menthol, Menthol Rush, Regular, Citric Twist, Ice Burst, Mild & Ultra Mild), 555, Silk Cut, Scissors, Capstan, Berkeley, Bristol, Lucky Strike, Players, Flake and Duke & Royal.

Many of the FMCG sector companies are facing competition with Baba Ramdeo’s Patanjali. But, I am damn sure that Patanjali will never enter the cigarette’s sector as by doing so they will lose their core values. Hence, ITC will continue to have a monopoly in this sector of the market.

Other businesses

  • Foods: Aashirvaad, Mint-o, gum-o, B natural, Sunfeast, Candyman, Bingo! and Yippee!. ITC is present across 6 categories in the Foods business namely Staples, Snack Foods, Ready-To-Eat Foods, Juices, Dairy Product and Confectionery.
  • Lifestyle apparel: ITC sells its products under the Wills Lifestyle and John Players brands.
  • Personal care products include perfumes, haircare and skincare categories. Major brands are Fiama Di Wills, Vivel, Essenza Di Wills, Superia and Engage.
  • Stationery: Brands include Classmate, PaperKraft and Colour Crew.
  • Safety Matches and Agarbattis: Ship i Kno and Aim brands of safety matches and the Mangaldeep brand of agarbattis (Incense Sticks).
  • Hotels: ITC’s Hotels division (under brands including WelcomHotel) is India’s second largest hotel chain with over 90 hotels throughout India.
  • Paperboard: Products such as specialty paper, graphics, and other paper are sold under the ITC brand by the ITC Paperboards and Specialty Papers Division like Classmate product of ITC well known for there quality.
  • Packaging and Printing: ITC’s Packaging and Printing division operates manufacturing facilities at Haridwar and Chennai and services domestic and export markets.
  • Information Technology: ITC operates through its fully owned subsidiary ITC Infotech India Limited, which is a SEI CMM Level 5 company.

itc best stock for long term investment in India 2017

Source: ITC- Wikipedia

ITC Revenue source

Fig: ITC Gross Revenue  (Source: ITC Annual Report 2017)

Now that we have studied about product and services of ITC, let’s move forward to find out the company’s financials to understand how healthy the company it.

Financial Study of ITC:

ITC is a large-cap company with market capitalization of over 410,000 crores.  It is currently trading at a PE of 39 against the industry PE of 40.5. The return on equity (ROE) for the last 3 is above 25%.

Let’s first look at the annual results of ITC.

Source: https://www.screener.in/company/ITC/

The annual results are showing a good yearly growth of ITC.

From the report, we can notice that the sales, operating profit, and the net profit of ITC are consistently increasing for the last 10 years. Moreover, the net profit has almost doubled in the last 5 years. ITC has been maintaining a healthy average dividend payout of 57.86% for last 3 years. Although dividends are not criteria to choose best stocks for long-term investment in India, however, a good consistent dividend is a sign of a healthy company.

Further, in the latest press release, the management of ITC has told that ITC will continue to give similar results in the future. The sales of ITC are expected to double from the current by the year 2020.

Now, let’s study the balance sheet of ITC to find out further.

Here, we can notice that the debt of ITC is very small compared to its total assets. Therefore, ITC can be considered as a virtually debt-free company.

Overall, studying the company minutely, it can be concluded that ITC is fundamentally very strong and one of the best Stocks for Long-term Investment in India. You should keep ITC in your portfolio for at least the next 3-4 years to get a good consistent return.

2. HDFC BANK:

Stocks for Long term Investment in India 2017

HDFC Bank is India’s leading banking and financial service company. It is India’s largest private sector lender by assets. It has 84,325 employees and has a presence in Bahrain, Hong Kong, and Dubai.

HDFC Bank is the largest bank in India by market capitalization and was ranked 69th in 2016 BrandZ Top 100 Most Valuable Global Brands. HDFC Bank provides a number of products and services which includes Wholesale banking, Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal Loans, Loan Against Property and Credit Cards.

The total revenue collected by HDFC bank in 2016 was around Rs 74,373 crores. The net profit in the same financial year was Rs 12,817 crores.

Source: HDFC Bank – Wikipedia

Now, let’s look at the financials of the company to check its fundamentals.

A financial study of HDFC Bank:

HDFC bank is a large-cap company with a market capitalization of Rs 430,900 Crores. It is currently trading at a PE of 29 against the Industry PE of 26. The return on equity (ROE) for the last three years is averaged 19.5%.

From the annual results of HDFC Bank, we can notice that the sales and profit are consistently increasing over the last decade.

The net profit has more than doubled in the last five years.

Note: when you study the Earnings per share (EPS) of HDFC bank, you will notice that EPS fell in 2012 (compared to 2011). However, in actual, this is because of the stock split. HDFC Bank split its share in the ratio 10:2 in July 2011. While doing the fundamental analysis of a stock, you should give extra care to stock splits and bonus issues.

Now, let’s check the balance sheet of HDFC Bank.

Source: https://www.screener.in/company/HDFCBANK/

Here we observe that the compounded sales growth of HDFC bank is around 24% for the 10-year average and around 19% for the last 3 years. In addition, the average compounded profit growth for the last three years is 19.73%.

Further, while investing Stocks for Long-term Investment in India in the banking sector, you should always check the gross non-performing asset (NPA) percentage. As a thumb rule, companies with gross NPA less than 2% is considered worth investigating. For HDFC Bank, the gross NPA is around 1.05%, which is good.

Overall, HDFC has shown amazing results in the past and the company’s future also looks very healthy. This makes HDFC a good stock for long term investment in India in the banking sector.

If you are new to stock market and want to learn stocks from scratch, I will highly recommend you to read this book: ONE UP ON THE WALL STREET by Peter Lynch- best selling book for stock market beginners.

3. ASIAN PAINTS:

Stocks for Long term Investment in India

The paint industry is an evergreen industry and you should always keep a good stock from this sector in your portfolio.

Whatever may be the economy of the country, new houses will be consistently made, and new companies will regularly open. And in all these, a paint company will be required.

Asian Paints is one of the largest Indian paint company and manufacturer. Since its foundation in 1942, Asian paint has come a long way to become India’s leading and Asia’s fourth-largest paint company, with a turnover of Rs 170.85 billion. It operates in 19 countries and has 26 paint manufacturing facilities in the world, servicing consumers in over 65 countries.

As of 2015, it has the largest market share with 54.1% in the Indian paint industry. Asian Paints is the holding company of Berger International.

Asian Paints is engaged in the business of manufacturing, selling and distribution of paints, coatings, products related to home decor, bath fittings and providing of related services.

Source: Asian Paints Ltd – Wikipedia

Now, let us look at the financials of the Asian Paints.

The financial study of Asian Paints:

Asian paints is a large-cap company with a market capitalization of Rs 107,175 crores. It is currently trading at a PE of 59 compared to the industry PE of 55. The return on equity (ROE) for the last three years is averaged to be 29%.

Here are the annual results of Asian Paints.

Source: https://www.screener.in/company/ASIANPAINT/consolidated/

Here, we can notice a positive trend in the financial growth of Asian Paints. The sales and profits are consistently increasing year-by-year. The net profit of Asian paints has doubled itself in the last 5 years and has become more than 6 times in the last 10 years.

Here, we can also notice that Asian paint is a virtually debt-free company. The total debt of Asian paints is around Rs 37.21 crores against the net worth of Rs 6,950 crores.

Overall, Asian paints is a fundamentally strong company with a healthy growth rate and should be considered worth investing as one of the great stocks for long-term investment in India.

Conclusion:

All the three stocks explained in this post- ITC, HDFC Bank, and Asian paints are large-cap companies. They have almost a monopoly in the market with a huge moat. The management of these companies is transparent and effective. In short, these three stocks are few among the best stocks for long term investment in India.

I hope this post “Best Stocks for Long term Investment in India” is useful to the readers. Do comment below what are your opinions about these stocks. Happy Investing.

Quick Note: The stocks discussed in this post are for educational purpose only and focuses to teach the steps and strategies to evaluate stocks. It should not be treated as an advisory or recommendation. 

Want to learn how to select good stocks for long term investment? Check out our amazing online course for the stock market beginners: HOW TO PICK WINNING PICKS? The course is currently available at a discount.

Disclaimer: This post is a personal research and opinion of the author and should not be taken as an advisory. Please study the stock carefully before investing or take the help of your financial advisor.