How to use google alerts to monitor your portfolio?
Regularly monitoring the stocks in your portfolio is as important as picking good stocks. Many a time, the stock undergoes drastic price movement due to a sudden news or change in the company’s fundamental. And if you are not monitoring your portfolio regularly, then you might have to book heavy losses.
In one of my earlier post about how to monitor your stock portfolio, I have explained that in order to monitor your portfolio, you need to remain updated with the important news regarding the companies in your portfolio like corporate actions, announcements (example- mergers and acquisition, buyback, bonus etc), quarterly results, annual results etc
I also explained how Google alerts can be a very powerful tool for monitoring your stocks.
In this post, I’m going to explain how you can make your life as an investor very simple by using google alerts.
What is google alert?
Google Alerts is a content change detection and notification service, offered by the search engine company Google.
In simple words, if you set an alert for any company on google alerts, then Google will send you all the important news published on the web related to the company directly in your email.
Each morning when I wake up, I find mailbox filled with dozens of emails from the Google related to all the stocks which I am either holding, tracking or interested in. I’ve set alerts for all these companies so that I do not miss out any important news. Here’s how my inbox looks:
These alerts have made my life a lot easier as in order to monitor the stocks, all I need to do is to go through the mails. Moreover, even if I miss reading few emails someday because of any reason, I’m relaxed that I can read them anytime when I’m free.
What’s the best point of using google alerts is that unlike newspapers or financial websites where you have to search for all the important news related to your stocks, google alerts directly deliver the relevant news to your email. No time wasted!!
Further, if you missed any news on the financial websites or web, it’s too hard to track it back or re-read the news after few days. There are tons of news published every day and it’s really difficult to find the news that you missed long back.
Because of all these reasons, I use google alerts to monitor my stock portfolio. I will highly recommend you to set google alerts for the stocks in your portfolio to monitor them easily.
How to use google alerts to monitor your portfolio?
Here are the steps to set google alerts for the stock you want to monitor:
Add the list of the companies you want to track by entering it in the box.
Enjoy the alerts.
Note: No matter how many google alerts you set for the companies you are investigating or already invested, however, if you do not check your emails regularly, then there’s no point setting the alerts. In such cases, where you do not check your emails daily, stick to the traditional way of monitoring your portfolio by reading financial websites/magazines/newspapers etc.
Apart from the google alerts, I also study the financial websites and newspaper every day in order to carry out new stock research or to remain updated with the latest happenings. Google alerts are a good tool for monitoring your portfolio, however, when you’re researching the stocks, you have to put lot more efforts.
That’s all. This is how simple it is to set Google alerts and monitor your stocks.
I hope this post on “How to use google alerts to monitor your portfolio?” is useful to the readers.
If you need any help regarding setting google alerts, please comment below. I’ll be happy to help you out.
What is the process of IPO share allotment to retail investors?
The year 2017 was a blockbuster year for the Indian IPO’s. As many as 152 IPOs hit the market last year, raising a total of $11.6 Billion. Few of the big names that offered their initial public offering last year were BSE, CDSL, Avenue Supermart (Dmart), SBI life insurance, Cochin shipyard etc.
Now, the old investors already know what is an IPO and how its allotment process works. However, for the newbie investors, many a time it looks like a mystery.
For example, here are the IPO details of Apollo Micro Systems Limited IPO (Apollo Micro Systems IPO):
»» Issue Open: Jan 10, 2018 – Jan 12, 2018 »» Type of Issue: Book Built Issue IPO »» Issue Size: Equity Shares of Rs 10 aggregating up to Rs 156.00 Cr »» Face Value: Rs 10 Per Equity Share »» Issue Price: Rs 270 – Rs 275 Per Equity Share »» Market Lot: 50 Shares »» Minimum Order Quantity: 50 Shares »» Listing At: BSE, NSE
Almost all the points mentioned above can be understood logically. However, let me explain few of the important ones in the IPO issue detail.
From the term issue date, you can understand that you have to apply for that IPO between those issue dates.
Next, the minimum order quantity is 50 shares, which is same as the market lot. This means that you cannot apply for less than 50 shares for this IPO. If you apply for 30 shares, then your application will be rejected. Further, you can buy the shares only in the lot of 50. This means that you can buy the shares in the numbers of 50, 100, 150, 200… which is basically 1 lot, 2 lot, 3 lot, 4 lot… etc
Further, from the issue price, you can understand that you have to place the bid between Rs 270 to 275, for each share. The upper level of the issue price is called the cut-off price (here Rs 275).
You can understand all these points just by reading the IPO details.
But what about the allotment? What is the process of IPO share allotment to retail investors?
Why some people receive allotment and others don’t? How exactly are the stocks allotted to the retail investors? This is what we are going to discuss in this post.
Nevertheless, before we learn the process of IPO share allotment to retail investors, there are few things that you need to understand first.
What does the over-subscription of an IPO mean?
The over-subscription of an IPO means that the demand of the IPO exceeds the total number of shares offered by the company.
For example, in the IPO of Apollo Microsystems Ltd which is discussed above, the shares offered by the company were 4.14 million. On the other hand, the IPO received the bids for 1.02 billion shares. Overall, it was over-subscribed nearly 247 times.
For QIBs, the discretion of IPO shares allotment is done by merchant bankers. Further, in the case of over-subscription, the shares are allotted proportionately to the QIBs.
For example, if a QIB applied for 10 lakh shares and the IPO got 5 times over-subscribed, then it will get only 2 lakh shares.
2. The process of IPO Share Allotment to Retail Investors:
For the IPO application, retail investors are allowed to apply with a smaller worth between 10-15k to 2 lakhs.
For example, in the Apollo Microsystems Ltd,
Issue Price: Rs 270-275 Minimum order quantity was Rs 50.
Therefore, it a retail investor wants to apply the shares at a bid of Rs 270, then the total application amount will be= Rs 270 * 50 = Rs 13,500.
Further, he/she can apply for the maximum of Rs 2 lakhs. This means that for Apollo Microsystems, the RII can get maximum of 14 lot (Each lot of 50 shares).
Now, how the process of IPO share allotment to retails investors actually happens?
First of all, the host calculates the total number of demand. After calculating the demands, here are the two possible scenarios-
1. Demand is less than or equal to the shares offered:
If demand is less than or equal to the offered retail proportion of the IPO shares, then full allotment will be made to the RII’s for all the valid bids.
2. Demand is more than the shares offered:
If demand is greater than the allocation to the retail proportion of shares offered, then the maximum number of RII’s will be allotted a minimum bid lot.
These are called maximum RII allottees and is calculated by dividing the total number of equity share available for the allotment to RII by the minimum bid lot.
Let us understand this with the help of a simple example:
Suppose there are 10 lakh shares offered to the retail investors and the minimum lot size is 50.
Then, the maximum retail investors that will receive the minimum bid lot = 10 lakhs/50 = 20,000.
This means that this 20,000 people will receive at least 1 lot.
Note: In case of over-subscription, allocation lower than a minimum lot is not possible. If the minimum lot size is 50, you will not be allotted 30 shares. Anyone who is allotted the share will receive at least 50 shares.
In the case of over-subscription, again there are two possibilities:
A) In case of a small over-subscription, the minimum lot is distributed among all participants. Then, the rest available shares in the retail portion will be distributed proportionately to the RIIs, who have bid for more than 1 lot.
Let’s say for the above example, 18,000 people applied for the allotment. However, among all the applicants, 5000 people applied for 2 lots (1 lot consists of 50 shares).
Hence, total no of shares applied = (13,000* 1lot) + (5,000* 2lot) = (13,000* 50) + (5,000* 100) = 11.5 lakhs
Here, we have oversubscription as the total shares offered to the retail investors is 10 lakhs. In such scenarios, first 1 lot of 50 shares will be allotted to all 18,000 applicants. Then the remaining 1 lakh shares are allotted proportionately to all those who have applied for more than 1 lot.
B) In case the RII applications are greater than the maximum RII allottees (big over-subscription), then allotted bid lot shall be determined on the basis of draw of lot i.e lottery.
Let’s say for the same example discussed above, 1 lakh people applied for the allotment. In such scenario, who will get the allotment will be decided by the lottery.
Nevertheless, the draw of lots is computerized and hence, there is no provision for cheating or partiality. Everyone has the equal chance to get the allotment.
Overall, in case of oversubscription, the allotment totally depends on your luck.
3. Process of IPO Share Allotment to HNI
High net worth investors are those people who invest a large amount of money (greater than 2 lakhs) in an IPO. In case of oversubscription, HNIs are also allotted the shares proportionately. Further, many a time, the financial institutions provide funding to HNIs in order to invest it in IPOs.
That’s all. This is the process of IPO share allotment to retail investors, QIBs and HNIs.
BONUS: How to maximise the chances of getting an IPO?
Many a time, the IPO you’ll be applying will be over-subscribed. In such cases, even if you applied for a full quota of Rs 2 lakhs, still, there’s no guarantee that you’ll get even a single lot.
In the same example of Apollo Microsystem limited discussed above, it got over-subscribed 247 times.
Then what to do in such cases?
Here are two basic advise to maximise the chance of IPO share allotment to retail investors. First, fill the application correctly and second, apply at the cutoff price.
That’s all. I hope this post about the process of IPO share allotment to retail investors, QIBs and HNIs is useful to you.
If you have any questions regarding the allotment process, please comment below. I’ll be happy to help you out.
Tags: retail investors Sipo rules, sebi guidelines for ipo for retail investors, process of IPO share allotment to retail investors, new ipo allotment rules sebi,what is the process of IPO share allotment to retail investors, share allotment procedure
Suppose there are two people – Rohan and Rahul, who wants to buy a milk distribution business and both have several options available in their locality. However, both Rohan and Rahul, follow a different approach.
Rohan goes and visits the owner of the business. He discusses the business- how it works, how are the sells, how much profit the business generates in a year, how many vendors they have etc.
Next, Rohan studies the financial statements of the company. He analyses the assets and liabilities of the companies balance sheet. Then, he studies the year wise revenue and profit generated by the business through the Income statement. He also looks at the net cash flow of the business from the cash flow statement.
Overall, Rohan analyses the business for weeks and comes to a decision of buying that business.
On the other hand, Rahul heard from somewhere that the prices of milk are going to rise in the future. In order to not miss the opportunity, he buys some milk distribution business with expectations that the milk prices will rise soon and he will make good profits from his business.
What do you think? Who will get better and consistent returns from his investments? Rohan or Rahul?
Yes, you are right. !! Rohan!
Why? That’s what we are going to discuss in this post.
Investment vs speculation-
The difference between investment vs speculation is amazingly described by Benjamin Graham, the father of value investing, in his book “THE INTELLIGENT INVESTOR”.
Here is a quote from the book about investment vs speculation:
“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” -Benjamin Graham
According to Benjamin Graham, there are three equally important elements which should mutually exist in an investment:
You must thoroughly analyze a company, and soundness of its underlying business before you buy its stock.
You must deliberately protect yourself against serious losses;
And you must expect adequate returns, not extraordinary performance.
On the other hand, speculations are those which doesn’t go through proper analysis, do not consider the safety of principle and expects inadequate returns.
Few key differences between investment vs speculation:
An investor properly analyses the worth of the stock based on the value of the business before investing. On the other hand, a speculator gambles that a stock will go up in price based on just the market price. If the market price of that stock is not available, the speculator won’t make any decisions.
For the investment, returns are stable and recurring. On the other hand, the returns of the speculators are uncertain and erratic.
Investors have a modest return expectation from their investment while speculators have an unrealistic high return expectation.
Investors buy with an intent of receiving returns along-with safety of their investments. Speculators buy assets with an intent of making profits.
Why do people speculate in the stock market?
Speculating is nothing new to the financial world. For generations, people have been speculating in casinos, horse-race or gamble among each other in expectations to make quick high returns.
People speculate in the stock market because it is exciting and sometimes can be rewarding.
Nevertheless, most of the wealth created by speculations are temporary and moreover, non-repetitive. In most of the cases, this happens only when the people get lucky. But, are you?
Why speculating the in the stock market is dangerous?
Just like casinos or horse racing bets, the share market is also not made to profit the common people.
If you take the case of any casino, it is made in such a way that the house always wins and snitches the money from the majority of the people (if you do not count few of the lucky ones).
In a similar manner, the stock market is also made in such a fashion that if you are speculating in the market, the winners are always the brokers, stock exchange or the 5% of the intelligent investors.
The most common myth in speculation: If it worked, it means that you’re ‘right’
Most people think that the best way to test of an investment technique is simply to find out whether it “worked” or not.
If it worked, then people conclude that their investment technique was ‘right’, no matter how dumb or dangerous that investing tactics was.
Nevertheless, for building a wealth over the long term, you need a reliable technique. Just because it ‘worked’ this time, doesn’t guarantee its future performance.
Being temporarily ‘right’ won’t help you much over the long term if your technique is not sustainable.
Thinking that you’re investing when you’re actually speculating: There are a number of people who don’t know how to pick a fundamentally strong company or how to invest systematically in the market. That’s why, many a time, they are convinced that they are investing, whereas in actual, they are speculating.
Speculating become more dangerous when people get seriously involved in it. Going to casinos one or two times a year, won’t hurt you much. However, if you start taking it seriously and start visiting regularly, then the rest is all up to your fate. Similarly, speculating in the stock market by getting seriously involved is quite dangerous to you, both financially and emotionally.
No strict limit to the amount of speculations: Even the best gamblers take a limited amount of money to the casino floor and keep the rest of their money safe in their locker. Not everyone can be a conservative investor. However, if you are planning to take speculative risks is expectations of amazingly high returns, be it a small part of your total portfolio. Fix a maximum permissible amount, say 10%, to put for your speculations.
Both investing and speculation involve risk and reward.
However, the investors are interested in making returns with the safety of their investments and hence reaches to their decision only after a proper analysis. On the other hand, speculators care more about profits, ignoring analysis, safety, and adequate return expectations.
If you want to get consistent returns from the market then you should start investing instead of speculating.
Speculating in the stock market is the worst way of accumulating wealth.
Should you invest in stocks when the market is high?
The Indian stock market hit the record high yesterday (15 Jan’18) when NSE Index nifty touched 10741.55 points for the first time in the Indian history.
People who have already invested in the market are enjoying the fun ride. But what about those who haven’t entered the market or are planning to invest?
With stock market indexes at the all-time high, it’s certain that those who are new to stocks or just started to put money are confused what to do next? Here are the two common questions that might be running in their head:
Should I wait for a market crash or correction?
Or Should I enter the market? I have already missed out the last few months and what if there is no market crash and the bull market continues? I don’t want to miss this opportunity.
Overall, the main question is whether this is the right time to invest in stocks or should you wait for some correction.
Should you invest in stocks when the market is high?
If you think rationally, then it makes more sense to not invest in the market if it is going to crash tomorrow. Why invest in stocks if its price to going to come down tomorrow and then you can buy the stocks cheap. Putting your money in the market at the wrong time is one of the biggest concern for most of the investors.
But how much certain are you that the market is going to crash tomorrow or in near future?
If you know the fixed date or even the fixed month, please share it with me. I’ll sell my entire portfolio, hold my money and buy the stocks only after the crash.
Here’s a quote from the star fund manager, PETER LYNCH. He is known to deliver 29.2% annual returns for 13 consecutive years while he was managing the magellan fund at Fidelity Investments.
The quote is from Peter Lynch’s best selling book ‘ONE UP ON WALL STREET‘, which I’ll highly recommend you to read.
In the book, Peter Lynch argues that those who spend more time analyzing the economy and predicting the market crash, are simply wasting their time. They can get more benefits from the market if they spend the same time researching the stocks.
Honestly speaking, no one ever knows when will be the next big market crash. Even the greatest market experts and economists had failed to do so. Otherwise, whey would have been the richest person in the world, not Warren Buffett, the Oracle of Omaha.
Now, once you are certain that you cannot predict the future and hence, do not know if there will be a market crash tomorrow, let’s take a different approach and rule out the decision of not investing in stocks.
Let’s recap what we discussed till now. First, you do not know that when will be the next big market crash. And second, you know that market is capable of giving good returns on your investment.
Currently, the bulls are in control of the Indian share market and however, the bull run may or may not continue in the future. The bull market may end next month or might long for the next few years.
With all these uncertainties, the best approach that you can take is to invest intelligently in the market.
Do not look at just the market indexes. Even in the bull market, there are a number of companies which are at 52-week high and 52-week low.
It’s easier if you just look at the stock and ignore the market (for some time). If you find a good stock which is currently trading at a reasonable price and you believe that the company is capable of huge future growth and giving high returns to the investors, then invest in the company. There are over 5,500 listed company and not all of them can be over-priced at once.
The index nifty and Sensex comprises of the 50 and 30 large companies from NSE & BSE. Hence, they are totally capable of ignoring the performance (and valuation) of many of the large/mid/small companies listed on the market. A sample of 50 companies cannot give the exact outlook of all the 5,500 listed companies.
Find some good companies and invest in them, regardless being the market high or low. Even during the bear market of 2015-16, there were many stocks which gave multiple times returns.
There is a common saying in the western world about the stock market investment:
“TIME IN THE MARKET IS MORE IMPORTANT THAN TIMING THE MARKET.”
This means that remaining invested in the share market for the longest time is better than to wait for the perfect time and enter late.
Do not wait too long to get started. You need to remain invested longer in the Indian stock market if you want to create wealth. The Indian stock market is at record high from the last feb’2016. And if you haven’t invested since then thinking that the market is at the all-time high, you have already missed 11 months of the bull run, where may have already created huge wealth for many.
If you feel the market is at ‘high valuation’ don’t buy the market, buy stocks. Buy companies with comfortable valuation. India still has large number of small market-cap companies with significant business; keep an eye on changing profile of ‘chor companies’, you are not late?
1. Even the worst stock market crash couldn’t destroy the wealth of the long-term investors:
I know most of the investors get panicked when they hear the word ‘CRASH’. No matter how much reasons I give to invest, however after reading this word, you might be re-thinking that I shouldn’t invest now. Maybe the market will crash soon as the market is at the record high. I will invest in the market later.
I wish making decisions to invest was that easy. No one can predict the precise date of the stock market crash. And If we can’t control or forecast something, it’s not that important to discuss.
Nevertheless what we can do, is to read the historical data.
Let’s analyze the worst stock market crash in the Indian history- 2008 Stock market Crash.
The biggest crashes were on two consecutive days- 21 Jan and 22 Jan during the 2008 recession time. On both these days, the BSE Index Sensex fell over 2,000 points. Moreover, there were 7 trading days when the Sensex fell over 1,000 points in 2008.
I wasn’t involved in the market at that time (too young), however, I can imagine the panic. The stock market experts say that every investor is destined to see at least two big stock market crashes in his/her career. I hope it counts as one 😉
The point to note here is that even the worst Indian stock market crash would not have been able to destroy the wealth of the long-term investor.
In the above chart, notice that even if you have invested at the peak of 2008 and had remained invested for 8–10 years time horizon, you would have received decent returns from the market.
Further, as I already stated above, you cannot predict when the next crash will happen. It may be within a year, or maybe after 5 years, or maybe after decades, who knows?
Moreover, what if we are at the stage of 2005 when the stock market was still at an all-time high but at the beginning of the bull run?
Those who didn’t invest in 2004/05 thinking that the market was at high, missed the bull run phase of over 3 years. And just for your information, the NSE benchmark index Nifty gave a return of 36.3% (2005), 39.8%(2006) and 54.8%(2007) in that bull run.
In 2017, nifty gave a return of 28.6% to the investors and people think its huge (The below graph is updated upto July’17).
I cannot say whether there will be a market crash or not in the future. But what I can say is that the Indian economy is going through a major boom. And if you do not invest in stocks, you might miss one of the biggest stock market rally.
2. You will never be able to find the perfect moment:
Today the market is high. And that’s why you are not investing. Tomorrow, when the stock prices will be falling and many of the companies will be making their all-time low, will you have the nerve to enter the market?
It’s really tough to buy the stock at the exact bottom and sell at the top. To be honest, those who are able to do it are often lucky. Moreover, it’s not repeatable. Even if you’re able to do it once, you definitely cannot repeat it again and again.
If you are waiting to enter the market when it’s at the bottom, then it’s really difficult. Similarly, if you are trying to exit from the market, thinking that the market is high, how can you be certain that it’s the top?
Overall, do not try to time the stocks, in spite try to stay for a long time in stocks. AS ALWAYS, TIME IN STOCKS IN BETTER THAN TIMING THE STOCKS.
What approach should the old-investors follow?
For those who have already invested in the stocks, do not move out of the market, just because the market is high or your stock is at the 52-week high.
If you are investing for long-term (8-10 years or more), then surely you will find few times when the market is at high. Are you always going to quit that time? Most of the greatest investors are known to hold the stocks for 10-15 years, and not to sell them in between even when their stocks hit new highs a couple of times in this period.
The world’s most renowned investor, Warren Buffet bought the stocks of Coca-cola in the late 1980s (around 1988-89) and is still holding that stock for over 27 years now.
The Big bull of India, Rakesh Jhunjhunwala bought the stocks of Titan Company in 2002-03 and is still holding the stock. Certainly many a time the market was at its high in the period of last 15-16 years. But being a long-term value investor, Rakesh Jhunjhunwala didn’t sell the stock, just because the market was high.
In short, do not exit from the stock just because the market is high. You might never be able to enter the stock again at the same discount price where you entered first.
The stock market indexes- NIFTY & SENSEX are high, isn’t a valid reason to not invest in the share market.
While investing in share market, look at the company, not the Index. If you are able to find a good stock at a reasonable price and believe that the company has huge future growth potential, then invest in it.
You cannot predict whether there’s gonna be a crash or a long bull market ahead.
The key to success in stocks in to minimise the risks, not to avoid it. If you invest in stocks intelligently, then you can minimise the risks, even in the crash, correction or bear market. However, if you avoid the market, then you won’t be able to get any benefits; even if there is a bull run in the market.
Quick Note: According to the World Bank’s Global Economic Prospects, India is likely to regain the position of the fastest growing economy in 2018. India’s growth rate is expected to accelerate to 7.3% in the year. Still not want to invest in the growing economy of the country? Read more here.
What’s the golden rule for wealth creation for the new and old investors?
Invest for the long term. Find fundamentally strong stocks and hold it tight without getting influenced by the public sentiments. Do not wait for the ‘bestest’ time to enter the market. Many had failed to time the market and you will too.
You may call this a conservative approach. However, if the long-term investment has worked for most of the successful stock market investors and had created huge wealth for them, then it can definitely create decent wealth for us too.
THAT’S ALL! I hope this post is useful to the readers.
Let’s end this article with one of my favorite quotes on investing:
“THE BEST TIME TO INVEST WAS YESTERDAY. THE SECOND BEST IS TODAY. AND THE WORST IS TOMORROW.”
3 Best Stock Screeners For Indian Stocks That You Should Know:
There are over 5,500 companies listed on Indian stock market. While investigating for good companies to invest, if you start reading the financials of each and every single stock, then it might take years.
Moreover, it doesn’t make sense to read the balance sheet, profit & loss statements or cash-flow statements of all the listed companies, if you can filter them out based on just a few preliminary filters like debt or growth rate.
And that why stock screeners can be a very useful tool for the investors (and traders) to reduce lots of hassle.
In this post, we are going to discuss 3 best stock screeners that every Indian stock investors should know.
What is a Stock Screener?
A stock screener is a tool to shortlist few companies from a pool of all the listed companies on a stock exchange using filters. The investors specify the filters and the stock screener gives the results accordingly.
For example, if you want to find a list of companies whose
Market capitalization is greater than 10,000 Cr
Price to earnings is between 10 to 25.
Last 3 years average return on equity is 20%
And debt to equity ratio is less than 1
Then, you can apply all these filters in a stock screener to get the list of the companies which fulfills the above criteria.
Stock screeners are very useful as it can save you a lot of time. You do not need to go through all the listed companies to shortlist few good ones. You can just apply the basic filter to get the list of few good ones that you want to investigate further.
Overall, the stock screener will help you to find good performing stocks according to your specifications with a single click.
Here is the list of the 3 best stock screeners for Indian stocks that every Indian investor should know. Further, please read this post until the end, as there is a bonus in the last section.
3 Best Stock Screener That You Should Know
Here is the list of the 3 best stock screeners for Indian stocks that you should know and bookmark on your browser:
The screener is a very simple yet powerful website for stock screening. The query builder of Screener allows the user to apply a number of filters to shortlist stocks based on PE ratio, market capitalization, book value, ROE, profit, sales etc.
The results of the stock screener can be customised and moreover, the screen can be saved for the future use.
Investing is also a very powerful website for stock screening. You can find the list of all the companies trading on NSE and BSE here.
There are a number of filters available on INVESTING for screening the stocks like ratios, price, volume & volatility, fundamentals, dividends and technical indicators. Moreover, it’s a very useful site if you follow the top-down approach.
You can select the industry which you want to research about and then apply a number of filters like PE, P/Book value, ROCE etc for shortlisting the best stock in that industry.
For example, if you are studying the chemical industry, then simply select this industry option. You will get the list of the companies in this industry. Next, you can apply different filters for screening the best one, according to your preference.
I have explained in details how to use ‘INVESTING.COM’ and ‘SCREENER.IN’ for effective stock screening on my online video course- HOW TO PICK WINNING STOCKS? Feel free to check it out. The course is currently available at a discount.
Edelweiss is another simple stock screener which has lot more criteria to filter companies based on valuation, market performance, shareholding pattern, management effectiveness etc and to apply these filters on the same tab to find specific stocks.
The filters are easy to use and the results are customised & downloadable.
Bonus: Few other useful stock screeners
As always, I never end a post without some bonuses. Here is the list of few other useful stock screeners that you should also know.
That’s all. I hope that this list of the best stock screeners for Indian stocks is useful to you.
If I missed the name of any other useful stock screener that deserves to be on this list, feel free to comment below. I’ll add them to the bonus section above so that the readers can get more benefits.
Now, moving forward to stocks, we can easily found a number of companies whose share price increase 10-20%+ in a day. For example:
The key question here is how much can a share price rise or fall in a day? Is there a limit to this change or the share price can explodingly increase or decrease to any price in a day?
Moreover, how does the stock market really works? How much can the market plunge or crash in any day?
I’m going to answer all these questions in this post. By the end of this post, you will understand how much can a share price rise or fall in a day i.e. what’s the maximum gain/loss possible in a single day?
However, to answer this question, you’ll need to understand the concept of price band and circuit breaker.
Price bands are used to control the extreme volatility in the stocks. It is a specific limit beyond which the share price of a company cannot rise or fall.
Different stocks have different price band which ranges from 2%, 5%, 10% and 20%.
This band is decided by the stock exchange based on the price movement history of the share. Further, the price band on a particular day is based on the previous day closing price.
Let’s say, there is a company ABC whose price band is 10% and the closing price of last day is Rs 100.
Here, the upper price band will be 10% greater than the last day closing price (Rs 100). Therefore, the upper price band = Rs 110.
Similarly, the lower price band will be 10% lower than the last day closing price (Rs 100). Therefore, the lower price band = Rs 90.
Overall, on that day, the share price of company ABC can move between Rs 90 to Rs 110. The share price cannot go beyond this limit.
In case, the stock hits its lower/upper circuit, then its trading is suspended for the day or until the share price comes below the circuit range.
When the stock hits the upper price band, then the investors who had already bought the stock have an advantage (as there are only buyers in this scenario). On the other hand, when the stock hits the lower price band, then the investors are in trouble as they couldn’t find buyers (only sellers in this scenario) until normal trading starts in that stock.
Here are few examples of companies with different price bands:
In addition, if the stock price keeps hitting the limit, the stock exchange may reduce its price band to decrease the volatility. You can find the list of the companies whose price band changes from the next trade date on the NSE/BSE website.
Here’s an example of the list of companies with changed price band on 9th Jan 2018.
The Indian stock exchanges have implemented the index based circuit breakers according to the guidelines of SEBI w.e.f 02 July 2001.
According to the SEBI rules:
The circuit breakers for the indexes will be applied at 3 stages, whenever the index crosses 10%, 15%, and 20% level.
The stock exchanges calculate these Index circuit breaker limits for 10%, 15% and 20% levels based on the previous day’s closing level of the index.
When these circuit breakers are triggered, it will result in a trading halt in all equity and equity derivative markets nationwide. This means that if the index crosses its first stage of 10%, the trading will halt in entire India.
Moreover, this circuit breaker can be triggered by the movement of any of the market index whichever crosses the limit level first. Let’s say Sensex fell above 10% and nifty is still at 9.7% down, in this scenario, the circuit breaker is triggered as Sensex has breached the level. The circuit breaker does not require all the indexes to breach and either one crossing the level will trip the circuit breaker.
After the first circuit filter is breached, the market will re-open with the pre-open call auction session after a specified time. The extent of market halt and the pre-open session is given below:
Let’s understand the concept of circuit better with the help of the same example discussed in the starting of this post.
On May 18, 2009, the Sensex opened at 10.73% or 1305.97 points higher at 13479.39. And The Nifty was locked at 4203.30, higher by 14.48% or 531.65 points. The trading was halted for two hours as the index touched the upper circuit one minute after trading began.
However, as soon as the market re-opened the indices hit the upper circuit again, and trading was halted for the entire day today. The S&P CNX Nifty hit the upper circuit of 20.53%, whereas the Sensex rocketed up by 2,110.79 points at 14,272.63, up 17.34 percent. Read more here.
How much can a share price increase in a day depends on its price band. There are four price bands for stocks in India- 2%, 5%, 10% and 20%, which is decided by the stock exchange.
If the price band of a company is 10%, then it can rise or fall, only 10% on that entire day of trading.
Further, the indexes also have circuit breakers which work on 3 stages- 10%, 15%, and 20%. In case, the limit is breached by any either, the circuit breaker is tripped and all the trading on the stock exchange comes to a halt. The trading will re-open according to the specified guidelines of the SEBI.
That’s all. I hope this post is useful to the readers. Happy Investing.
The Dhandho Investor- ‘Heads I win, Tails I don’t lose much’ – Book Review
Recently, I was traveling from Pune to Mumbai, a 3+ hour journey by bus. It was a beautiful journey with good scenery by the window seat and a decent road. But what made it even better was re-reading one of my favorite book on Investing- The Dhandho Investor’ by Mohnish Pabrai.
I choose to read this book because it is just 208 pages long and I was sure that I can read the book completely in one sitting. The book is very insightful and one cannot put it down once he had started reading this book.
In this post, I’m excited to give you the review of the same book- ‘The Dhandho Investor’ by Mohnish Pabrai.
About the author:
Mohnish Pabrai is an Indian-American Investor, businessman, and Philanthropist.
He is the Managing Director of Pabrai Investment funds, an investment fund based on the similar model to that of Warren Buffett’s Partnerships in the 1950s.
Since inception in 1999, this investment fund has given an annualized return of over 28% and hence has consistently beaten the S&P 500 Index.
What is ‘Dhandho’?
Dhandho is a Gujarati word, which means ‘Endeavour that creates wealth’. In simple words, a dhandho investor is a ‘wealth creator’.
“LOW RISK, HIGH RETURNS”
This is the central concept of this book.
Moreover, Mohnish Pabrai’s idea to invest in businesses with low risk and high returns makes perfect sense. Isn’t the main aim of any investment is to get the maximum returns with minimum risks?
Mohnish Pabrai explains this concept with the help of a few case studies in the first few chapters. Here, he explained different successful investor who followed this low-risk framework to get the highest returns.
The case studies include the stories of Patels (who own over $40 billion in the motel assets in the United States), Richard Branson of Virgin Company, Laxmipati Mittal of ArcelorMittal- world’s largest steelmaking company and few more. These stories presented in the book are really inspiring and broadens the reader’s eyes towards low-risk investing.
The Dhandho Framework:
In the book, Mohnish Pabrai describes 9 principles of the dhandho framework for low risk and high returns. Here are the principles:
Focus on buying an existing business
Invest in simple businesses
Invest in distressed businesses
Always invest in business with durable moats
Few bets, big bets, and infrequent bets
Fixate on arbitrage
Margin of safety – always
Invest in low-risk, high-uncertainty businesses
Invest in the copycats rather than the innovators
I won’t go into detail about these principles here, as it will kill the fun of reading the book. Nevertheless, you have already got the basic idea of this framework.
What did I like about the Dhandho Investor?
The principle that I liked the most is ‘Few bets, big bets, and infrequent bets’. Here, Mohnish Pabrai suggests that every once in a while, you’ll encounter overwhelming odds in your favor. In such times, act decisively and place a large bet. These are the adjacent scenarios of “Heads I win; tails I don’t lose much”.
The Dhandho Investor is an amazing book to deepen the basics of value investing principles. The book is quite simple to read and complex investing principles are simplified in an easy-to-understand manner. The Dhandho framework mentioned above helps in investing in low-risk businesses with high returns.
Overall, it’s a great read. I will highly recommend you to read this book to learn the principle of ‘low risk and high return’. You can buy this book on Amazon here.
That’s all. I hope this book review on ‘THE DHANDHO INVESTOR’ by Mohnish Pabrai is useful. Happy Investing.
How to track your stock portfolio in Google Sheets?
There are a number of free financial websites and mobile apps where you can track your portfolio to calculate your gain/losses etc. For example- money control, ET markets, market mojo etc.
However, if you a small investor in India and aren’t involved in frequent trades, intraday, or futures and options, then all you need is a simple sheet to track your stocks and the dividends received.
In addition, these sheets can also provide more privacy and security to your portfolio compared to mobile apps.
The good news is that it’s really simple to create and track your stock portfolio in google sheets. And in this post, I’ll teach you precisely how you can use google finance functions to create such sheets step by step.
Pros and cons of using google sheets to track stock portfolio:
Pros of creating a portfolio in google sheets:
Live updation of the current share price of stocks.
Easy tracking of dividends received.
Simple tracking of net changes in the portfolio.
Cons of creating a portfolio in google sheets:
Dividends are to be entered regularly (whenever you receive it).
In case of stock splits or bonuses, you need to make the changes manually.
How to track your stock portfolio in Google Sheets?
If you do not know, Google offers ‘GOOGLE FINANCE’ which keeps most of the important stock data (like current price, PE, market cap etc) from the stock exchanges (BSE and NSE). You can easily pull all the stock data in google sheets to track your portfolio.
To use this free facility, all you need is a google account (which I guess most of you will already have).
We are going to use few google finance functions to get the stock data like its current price, 52-week high price, 52-week low price, market capitalization etc.
As explained in the above video, you can find the symbol of a company by a simple google search. Just search, “Stock name + Share price” on google and you will get the following result. The symbol is highlighted in the below picture.
Ex: Ashok Leylands: ASHOKLEY
In case, you are not able to find the symbol using the simple google search (or it is not working), you can go to google finance and search for the company in its search bar. You will get a numerical symbol, which you can use instead.
Tags: how to track your portfolio using google sheets, track portfolio using google sheets, google sheet portfolio, google finance functions on google sheets, google finance functions, google finance stock tracker, google sheets stock template
The Best Ever Solution to Save Money for Salaried Employees:
Not having enough savings in the bank account is one of the biggest problems that majority of people are facing in India. Especially the youth.
Living on pay-check to pay-check and relying on the credit cards to pay even for the basic amenities of life is a common scenario nowadays.
But how can we solve this problem? How can a salaried employee save enough money to buy his dream car or dream house, without being a cheapskate or without cutting money on coffees?
The answer is simple. I’ve been implementing this solution for a long time since the pocket money’s in my college days to the paycheck that I get from my first job.
And the solution to save money for salaried employees is:
“Pay your self first.”
Now, this is not a new concept and in no way, I want to take credit for sharing this notion. I read this concept for the first time in the book ‘THE RICHEST MAN IN BABYLON’ by George Clason. Then I found the same concept of saving money in Robert Kiyosaki’s book ‘RICH DAD, POOR DAD’.
If you haven’t read the book ‘The Richest Man in Babylon‘, I highly recommend you to read this book. It is one of the best classic personal finance book that I have ever read.
The idea is simple.
Keep a fixed part of your salary for yourself. Say you keep 3/10 or 30% of your salary for yourself only.
You are not giving this to your landlord, or to the automobile company for your bike/car EMI, or to Dominos to eat a pizza or to anyone else. You keep this money only to yourself.
Nonetheless, you can spend the rest 70% of your salary in any way that you want.
I am not asking to not to go to a party or to eat in the cheap restaurants or not to renew your Gym membership. Enjoy your life. Saving few bucks by not drinking a cup of tea/coffee won’t make you a millionaire.
Just do not party with your 30% share of income that you kept for yourself. You have earned this money after a lot of hard work and you deserve to pay yourself first.
Keep this money with you only. It’s not your liberty, it’s your right.
Quick note: Saving money is just the beginning. If you want to become a millionaire, you have to start investing in the right way. Nevertheless, how to invest is a topic to discuss in another post. In this post, I just want to focus only on the first step to get rich. And this can be done by saving money. You can’t invest if you do not saved first.
(Please do not be this guy ;p)
That’s all. I hope this solution to save money for salaried employees is helpful and you can also start saving from today.
If you liked this idea, please share this post with at least one of friend who needs to learn the concept of paying yourself first 😉
When I was a child, I used to play ‘Chess’ with my grandfather. And my favorite strategy was to mimic his moves. I enjoyed watching my grandpa taking a lot of time to decide his next move and on the other hand, I just copied what he did earlier.
Many a time, this strategy worked for a long part of the game. However, in the end, I had to come up with my own ideas, otherwise, I would have lost the games. The point was that I was always a step behind. And if you want to win, then you have to think ahead, instead of clinching to the back.
The same is applicable to the share market.
What is copycat investing?
Copycat investing is simply tracking the investments of the big players in the market and replicating their buy/sells.
These big players have already proved their expertise in the market in the past and hence, it makes sense the keep an eagle-eye on their investments.
This type of investing is also called as side-car investing or coat-tailing investing.
There are a number of ways by which a regular investor can track the buying or selling of the ace investors of the market for copycat investing. Few of the easy ways are discussed below:
Company disclosure: Each company has to disclose the names of all the investors who hold more than 1% of stakes in the company on their quarterly reports. You can read these reports to find the names of the big investors if any.
Block/bulk deal: You can find the details about the investors involved in the block deal and bulk deal on the stock exchange websites. These details are published daily. You can read more on how to find block/bulk deal details here.
Monthly portfolio disclosures of equity funds: The equity funds release their monthly portfolio. As most of these funds are managed by the ace investors, you can track their portfolio from these monthly disclosures.
Investment blog/ fansites/ News channels: There are a number of fansites and investment blogs who track the investments of their favorite investors. You can subscribe to these sites. Moreover, many a time, the news channels and financial websites also highlight the top picks of the big investors of the market.
Social media: Sharing information of the newest investment is not new to the social media. You can follow these big players social profiles like Twitter, where many a time these players release their latest picks.
A well-picked Real Estate Stocks Portfolio should give over 200% return than NIFTY in 1-2 years. I hold 3 of them… pic.twitter.com/Q6TWLWf7xs
Here are the few reasons why it’s not a good strategy to blindly invest in the shares of ace investors like Rakesh Jhunjhunwala, Dolly Khanna etc:
1. You both do not have the same financial situation.
The big investors can easily remain invested in that stock for a long period of time say 5-10 years. On the other hand, you might need to raise fund in hurry sometimes in order to buy a new home, pay for children’s school, emergency fund etc. An early exit from the stocks in such situation may lead you to book heavy losses.
2. An expert has diversified portfolio:
While trying to copy the stocks of the ace investors, you need to understand that those big investors have a diversified portfolio. For example, let’s say that Rakesh Jhunjhunwala has 20 stocks in his portfolio. His portfolio is well-diversified and the risk is mitigated.
On the other hand, if you buy just 1 stock on which Rakesh Jhunjhunwala invested recently, your risk-level won’t be same as that of Mr. Jhunjhunwala. You will have a high risk. In such scenarios, it’s better to copy the entire portfolio. Copying one stock from Rakesh Jhunjhunwala and other from Dolly Khanna, won’t help you to diversify to reduce the overall risks in your portfolio.
3. Not knowing the WHYs of Investment:
If you do not know the reason why you have invested in that stock, then you will not believe in the company for long-term. In such scenarios, if the company doesn’t perform well soon enough, you might lose faith on your investment and exit early from the stock.
One busy week and you might never know when these big investors left that stock. It’s difficult to precisely copy the actions of these investors. Most of the big players in the market are full-time investors or fund manager. A regular investor with a 9-to-5 job does not have so much flexibility to remain actively involved in the market.
5. You do not know their exit strategy:
You may copy the portfolio of the big investors but how are you going to understand their exit strategy?
Maybe they planned to remain invested for 10 years and your investment goal is just for 2-3 years. Or maybe they are planning to exit just after booking a small profit of 50-60% as they do not believe in the stock for long-term, but you bought the stock for a long-term perspective. How will you understand these? It’s foolish to enter in a stock without having an exit strategy.
6. Delayed information:
While copycat investing, it’s really important to know the entry and exit point of the ace investors. Any delay can be a great decider of the returns. You might know that the big investor has invested in that stock. But if you do not know the entry price and willing to enter at twice the price at which he/she entered, then this delayed investment can greatly affect the overall returns.
7. Ace investors can make mistakes:
The big investors are also humans and capable of making mistakes. However, they can afford the losses as they have planned everything. But can you afford the same loss?
Overall, theoretically, it sounds good to mimic the portfolio of big investors in the share market. However, in practical, copycat investing is tough. A retail investor cannot match the resources, opportunities, and flexibilities available to these big investors.
The best you can do it to keep an eye on the investments of the ace investors and then make your own investment strategy for that stock. Tracking stocks is a good idea, however, not doing your homework before investing can definitely hurt your portfolio.
New to stocks? Want to learn how to select good stocks for consistent long-term returns? Here’s an amazing online course which is definitely worth checking out: HOW TO PICK WINNING STOCKS? The course is currently available at a discount.
I hope this post on copycat investing helps the readers. Happy Investing.
Tags: Copycat investing, is copycat investing good, copycat investing India, risks of copycat investing
The Little Book That Beats the Market Book Summary:
“Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.”
― Joel Greenblatt, The Little Book That Beats the Market
The little book that beats the market is a classic value investing book, which was originally written in 2005.
This book educates a magic formula, which is simple yet effective and if patiently practiced, then is guaranteed to make profits in long run.
About the Author:
Joel Greenblatt is an American investor, hedge fund manager, and a writer. He started an investment company named ‘Gowtham capital’ in 1985. This firm has given an impressive 40% annualized return for a duration of 20 years from 1985 to 2006.
Joel has dedicated the book ‘The little book that beats the market’ to his children and hence is written in a simple story-telling format, which anyone can read and easily understand.
‘The little book that beats the market’ became an instant best-seller when published and over millions of copy of this book has been sold.
Joel is a long-term investor and generally holds the stocks for more than a year in his portfolio. He believes that the market can be erratic in short term, however, for the long-term stock market is quite efficient.
In addition, Joel has also created a website for magic formula investing which you can visit here.
The Little Book That Beats the Market Book Summary:
The book focuses on a magic formula which is based on two financial ratios- Return on capital and Earnings Yield.
1. Return on capital:
ROC = EBIT/ (Net working capital + Net Fixed capital).
Here, ROC is the ratio of the pre-tax operating earnings (EBIT) to tangible capital employed (Net working capital + Net fixed capital).
Joel Greenblatt has described why he used ROC in place of the commonly used financial ratios like ROE (Return on equity) or ROA (Return on assets). This is because, first of all, EBIT avoids the distortions arising from the differences in tax rates for different companies while comparing.
Second, net working capital plus net fixed capital is used in place of fixed assets as it actually tells how much capital is needed to conduct working of the company’s business.
Return on capital tells how efficient the company is in turning your investments into profits.
2. Earning yield:
Earning yield = EBIT / Enterprise value
Here, enterprise value is the market value of equity (including preferred shares) + net interest – bearing debt.
Earning yield how much money you can expect to make per year for each rupee you invest in the share.
Overall, ROC tells how good is the company and Earning yield tells how good is the price.
The little book that beats the market is a nice read and an excellent place to start reading if you have never invested in stocks before.
The book is written in a very simple language and the concepts described in the book are time-tested.
You might think that why should I read the book when I have already given you the magic formula. This is because I have just explained a single chapter from the book. Think how much knowledge you can gain by reading the entire book.
Moreover, as the name of the book suggests, it’s a very little book with just 179 pages. You can easily read the book over a weekend and strengthen your financial concepts.
I highly recommend you to read this book, especially if you are a beginner. You can buy the book from Amazon. Here’s the link.
That’s all. I hope that this post on ‘The Little Book That Beats the Market Book Summary’ is useful to the readers.
Do comment below which is the best share market book that you have ever read.
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Shareholding pattern- Things that you need to know
While most of the newbie investors already know the importance of checking the financials, debts, management, competitive advantage etc, however, the shareholding pattern is something that most of them ignore.
Nevertheless, there are a number of important learnings that you can find out by simply reading the company’s shareholding pattern.
In this post, we are going to discuss the things that you should know about the shareholding pattern of the stocks in the Indian stock market.
Every company discloses its shareholding quarterly. You can find the shareholding pattern of the listed companies on the stock exchange websites, company’s official website or the financial websites like money control.
The Shareholding pattern shows how the shares of the company are distributed among its different entities.
The two main distribution of the shareholding pattern of a company is- 1) Promoter and promoter’s group 2) Public shareholdings.
Promoters Shares: They are the owners of the company. They occupy most of the seats on the board of directors and management committee. The relatives of the owners who own the shares of that company come under promoter’s group.
Public shareholding: They constitute of the Institutional shareholdings or financial bodies like mutual funds, financial institutes, insurance companies etc. FII (Foreign institutional investments) and FDI (Foreign direct investments) make a huge part of this distribution.
Lastly, general retail investors like you and me also come under the public shareholding pattern.
In addition, the individual entities who hold more than 1% of the public shareholdings are also disclosed by the company in its shareholding pattern.
Here’s an example of the Shareholding pattern of Prima Plastics:
Quick tip: When you are reading the shareholding pattern of a company, always compare the pattern of that quarter with those of the previous quarters to check how holdings have changed.
Promoter’s share and Institutional shareholdings are the ones that one should notice carefully as they make most of the bulk of the shareholding pattern.
For example, FII holds a big chunk of the free float market cap of a company. If FII exited any stock in a hurry, because of any reason, the stock price may fall (selling of such huge amount of shares by FII might create a panic among the public).
On the other hand, when FII starts investing in a small company, that stock comes to the notice of the people and generally, its price starts to rise. Here, investments by FIIs are taken positively by the public.
Further, holdings of mutual funds or insurance companies show how much the stock is favored among the big players. Few stocks are the darlings of the fund managers and can be found in the portfolio of most of the mutual funds. This is favorable for the stock as the optimism of the high qualified fund managers creates positive vibes among the investors.
1. A high stake in the shares of the promoters is a positive sign. On the other hand, low stakes of the promoters show the less confidence of the promoters towards their own company.
2. A decently high FII stake is again taken as a positive sign. Moreover, an increase in the FII share is even a better sign as FII commits only when they are optimistic about the company and its future growth.
3. Although a high stake of promoters is favorable for the company. However, a very high shareholding pattern by the promoters is not good.
A moderately high diversified holding and a good presence of the institutional investors indicates that the promoters have a little room to make and carry out random decisions which may hurt the shareholder’s interests. Therefore, a diversified holding is a good sign for the investors.
4. In case of the shareholdings of the promoters changes (increases or decreases), the investors should pay attention to the purpose and method of the shareholding pattern change.
For example, the purpose to buy/sell the stakes can be to pay off debt, new acquisition, to strengthen the balance sheet etc Similarly, the method of increase/decrease the promoter’s shareholding can be by issuing new share, offloading etc.
4. If the shareholding of the promoter’s increases, it can be taken as a positive sign. Promoters are the insiders and they have the best knowledge about the company.
If the promoters are optimistic about the company and are increasing their holdings, this means that they are confident about the company’s growth as they know best about the companies future opportunities and strategies.
6. On the other, if the shareholding of the promoter is decreasing, it cannot be always taken as a negative sign. Maybe, the promoters are planning for a new venture, new acquisition, a new company or just to buy a new house. Everyone has the right to use their asset when they need it.
No! Jeff Bezos was selling the shares to fund his Blue Origin rocket company, which aims to launch paying passengers on 11-minute space rides starting next year. Overall, the company fundamentals remained the same. Just because the promoter holdings decrease, doesn’t mean a danger sign.
7. However, if the promoters shares are continuously decreasing without any clear reason, then you might need to investigate further and take cautionary actions.
There’s one more concept that you need to understand along with the shareholding pattern of a company. It’s the pledging of the shares.
Shares are assets and hence it can be considered as a security in the form of collateral for taking loans. Many a time, the promoters keep their shares as a collateral for raising funds. Companies disclose the promoter’s share that has been disclosed as debt collateral in their quarterly reports.
A high pledging of shares by the promoters is risky for the investors.
Why is pledging risky?
Pledging of the shares is the last option for promoters to raise fund.
In the scenario, when the share price of these companies starts to fall, the collateral amount submitted by the promoters also decreases.
For example, let’s say that the promoters pledged their 1 lakhs shares each worth Rs 60 to get the fund. Overall, his total collateral amount is Rs 60 * 1 lakh shares = Rs 60 lakhs.
Now, if the share price of the stocks falls to Rs 40, then the collateral amount will decrease to Rs 40 * 1 lakh shares = Rs 40 lakhs.
If prices of these shares fall below a threshold, promoters have to increase their pledging of shares in order to make up the difference. In the above case, the promoters may have to pledge more shares as they are missing the threshold by (60-40) = 20 lakhs.
Further, if the company continues to fail to make debt payments, then the lender might also sell the shares to recover the collateral amount. This may lead to further fall in the share price.
Therefore, huge share pledging is really dangerous from the investors perspective.
Nevertheless, pledging of the share may not always result to be bad for the company. In cases where the company has a steady cash flow and making good profits, the promoters may be able to get off the pledge soon enough with a better financial situation for the company.
However, as an intelligent investor, it’s good to stay away from companies with promoters pledging of shares.
New to stocks? Here’s an amazing online course for fundamental investment- HOW TO PICK WINNING STOCKS? The course is currently available at a discount.
That’s all. I hope this post on the shareholding patterns of the company is useful to the readers.
Further, if you have any questions, feel free to comment below.
TAGS: What is shareholding pattern, how to read shareholding pattern, shareholding pattern importance, shareholding pattern analysis
“A great company is not a great investment if you pay too much for the stock.“ – Benjamin Graham, father of value investing.
Valuation is one of the most important aspects of investing in stocks. You might be able to find a good company, but if you not evaluating its price correctly, then it might turn out to be a bad investment.
There are two basic ways to do the valuation of stocks:
The absolute valuation tries to determine the intrinsic value of the company based on the estimated free cash flows discounted to their present value.
The discounted cash flow model (DCF) is the most common approach for the absolute valuation.
However, there are few limitations of using absolute valuation as you will require to make few assumptions and the results are only as good as inputs.
Nevertheless, this post is not focused on the absolute valuation and we’ll discuss more in another post where you will require to understand a lot of complex terms like future free cash flow projections, discount rate (weighted average cost of capital- WACC) etc to find the estimated present value.
In this post, we are going to discuss how to do the relative valuation of stocks.
Relative valuation of stocks is an alternative to the absolute valuation.
It’s an easier approach to determine whether a company is worth investing or not.
Relative valuation compares the company’s value to that of its competitors, industry average or historical performace to find the company’s financial worth.
It’s similar to comparing the different houses in the same locality to find the worth of a house. Let’s say if most of the 3BHK apartment in a locality costs around 70 lakhs and you are able to find a similar 3 BHK apartment which costs 50 lakhs, then you can consider it cheap.
Here, you do not find the true worth of the apartment but just compare its price with the similar competitors.
There are a number of financial ratios that you can use to do the relative valuation of the Indian stocks. Few of the most common ones are described below:
1. Price to earnings (PE) ratio
This is one of the most famous relative valuation tool used to investors all across the world.
The concept of PE ratio is described beautifully in the Benjamin Graham’s book “THE INTELLIGENT INVESTOR”, which Warren buffet considers as one of the best book ever written on investing. I will highly recommend you to read this book.
PE ratio is calculated by:
P/E ratio = (Market Price per share/ Earnings per share)
However, PE ratio value varies from industry to industry, therefore always compare the PE of companies only in the same industry.
As a thumb rule, a company with lower PE ratio is considered under-valued compared to another company in the same sector with higher PE ratio.
2. Price to book value (P/BV) ratio
The book value is referred as the net asset value of a company. It is calculated as total assets minus intangible assets (patents, goodwill) and liabilities.
Therefore, Price to book value (P/B) ratio can be calculated using this formula:
P/B ratio = (Market price per share/ book value per share)
As a thumb rule, companies with lower P/B ratio is undervalued compared to the companies with higher P/B ratio. The P/BV ratio is compared only with the companies in the same industry.
3. Return on equity (ROE)
It is the amount of net income returned as a percentage of shareholders equity. ROE can be calculated as:
ROE= (Net income/ average stockholder equity)
It shows how good is the company in rewarding its shareholders. A higher ROE means that the company generates a higher profit from the money that the shareholders have invested. Always invest in companies with high ROE.
For estimating the relative value of stocks, you need to set an accurate benchmark. The companies that you are comparing should be from the same industry and it’s even better if they have similar market capitalization (for example, a large-cap should be compared large-cap companies).
Let’s say that there are 5 companies in an industry and the average price to earnings ratio of the industry turns out to be 20.
Now, if the price to earnings value of the company that you are validating is 15, then it can be estimated to be relatively cheaper compared to the stocks in the same industry.
Similarly, you can use multiple financial ratios to find the relative value of the stocks.
No valuation technique can be perfect. There are few limitations of relative valuations which are discussed below:
The relative valuation approach does not give an exact result (unlike discounted cash flow) as this approach is based on the comparison.
It’s assumed that the market has valued the companies correctly. If all the companies in the Industry are overvalued, then the relative valuation approach might give a misleading result for the company which you are investigating.
Where to find the relative multiples for comparing Indian stocks?
I’ve already discussed most of these websites in my earlier posts. You can read more about them here.
In this post, I’m going to converse about a new website which I hadn’t discussed in any of my earlier articles. It’s Equity Master.
Equity master is an amazing website for stock research. While researching a company, you can get its 5-year data from the factsheets.
Similarly, if you want to compare two companies, this option is all available on the Equity master.
Just go on ‘Research it’ on the top menu bar and click on ‘Compare company’. Enter the name of the two companies and you’ll get the comparisons.
Here is the result that you will get if you compare Hindustan Unilever with Godrej Consumers:
It’s an amazing website. Just play around and get familiar with the website.
Relative valuation of stocks is a good alternative to the absolute valuation. You can use this approach for a simple yet effective stock picking.
If you want to learn how to invest in Indian stock market from scratch, feel free to check this amazing online course for beginners- “HOW TO PICK WINNING STOCKS?” The course is currently available at a discount.
That’s all for this post. I hope it is useful to you.
Please comment below if you have any questions. I’ll be happy to help.
Tags: Relative valuation of stocks, relative valuation steps, relative valuation advantages, relative valuation model
“I buy lesser-known, high quality businesses to derive maximum portfolio value. I don’t shy away from smaller companies like other ‘knowledgeable people’ do. And I don’t buy a lot of great companies with clean balance sheet, honest management and clear business visibility. If you invest in such companies, even bank FDs would beat your portfolio returns.” – Porinju Veliyath
Porinju Veliyath is known as a small cap investor. He believes that if the business is good, investors should not care much about the market capitalization. Most of the companies in his portfolio do not pass muster with large institutional investors, however, has given him multiple times returns.
Here is the latest Porinju Veliyath stock portfolio. Most of the stocks in his portfolio are small stocks. Therefore, do not be surprised if you haven’t heard the names of the most of these companies earlier.
Porinju Veliyath Stock Portfolio list with his latest holdings:
While the portfolio of most of the big investors is filled with common names, the Porinju Veliyath stock portfolio consists mostly of lesser-known stocks.
Nevertheless, from Porinju Veliyath stock portfolio, you can learn that every successful investor has their own strategy and there is no fixed strategy to create wealth and achieve success in the stock market.
That’s all. I hope you have found the Porinju Veliyath success story inspiring.
Want to learn how to select good stocks for long term investment? Check out our amazing online course: HOW TO PICK WINNING PICKS? The course is currently available at a discount.
If you want me to cover the portfolio or success story of any other successful stock investor, do comment below.
#21 biggest Wealth Creator of 2017- Up to 1,450% return in a year
2017 has been a good year for the Indian share market investors.
The benchmark index nifty has given an astonishing return of 28.75% in 2017. Many of the investors have been able to beat the market and had multiplied their wealth in this time period.
In this post, I’m giving you the list of top 21 biggest wealth creators of 2017. Four of the shares from this list has given over 1,000% returns. HEG Ltd tops this list with giving 1,450% return to its investors in a single year.
#21 biggest Wealth Creator of 2017
Here is the list of the biggest wealth creator stocks in 2017:
Last Market Price
1-Year Price Change (%)
California Software Company
Soril Holdings Ventures
Sanwaria Agro Oils Ltd
Bhansali Eng Polymers
Goa Carbon Ltd
Weizmann Forex Ltd
Aditya Consumer Marketing
Goldstone Infratech Ltd
Shalimar Wires Ind
Eldeco Housing And Ind
Disclaimer: This post is just for informational purpose and should not be taken as any kind of stock recommendation. Please study the stocks before investing or take the help of your financial advisor.
How to get RICH? Rich Dad’s Cashflow Quadrant Summary:
‘RICH’ always fascinates the people. The fact that the 5% of the population holds the 95% of the total wealth is really captivating. What engages the people more is why only a certain group of people are able to become rich?
There are a certain group of people who achieve financial freedom in their 30s. On the other hand, there are many people who never enjoy the rich life no matter how much hard work they do. Why does this happen?
Our working society is broadly divided into 4 kinds of people depending upon the work they perform. They are:
Employee – They have a job i.e. they work for someone
Self-employed- They own the job
Business owners- They own a system/process
Investors- They make their money work for them
Each quadrant has their own advantages and disadvantages. Moreover, our society needs all kind of these people to work efficiently.
Let’s discuss few of the characteristics of each cashflow quadrant to understand them better.
Tagline: “I need a safe and secure job with benefits.” Core-value: Security
Majority of people work in this quadrant. This is the default way of living and probably the most difficult quadrant to get rich.
The reason why most people work in employee quadrant is that they are programmed to do so from the childhood. Most of the people get the same suggestion from their Mom/Dad while growing up- “Study hard, find a high paying job and have a secured life.”
There is very few proportions of children who get advice to open their own business or to start investing, from their parents.
Moreover, our school, colleges, and university are also designed to create employees, who need security, live from pay-check to pay-check and want allowances.
For this group of people, job security is more important than the financial freedom.
Although you can become RICH working in this quadrant also, however it’s quite tough compared to the other cashflow quadrants.
Tagline: “If you want to do it right, you’ve to do it by yourself.” Core-value: Perfectionism
They are sometimes also referred to ‘Solo-People’. They own their job and many a time do all their work as they believe is ‘perfectionism’ and do not trust anyone else with the job.
Few examples of self-employed are doctors, lawyers, retail shop owners, small company owners etc.
They trade their time for money.
As compared to employees, who enjoy the benefits of medical allowances and paid leaves, the earnings of a self-employed are affected in case he fell sick. The self-employed people have to devote more time if they want to earn more. Their income is directly dependent on how much work they can do.
Their time is money.
In addition, for the self-employed people, their freedom is more important than the financial success.
Tagline: “I’m looking for the smartest people in my company”. Core-value: Make people work for them
This is one of the best quadrants to get RICH. This group of people owns the system or process, where people work for them.
According to Forbes, big companies are the ones with over 500 employees. However, it the recent time, this rule is not completely valid. There are a number of big companies now, which do not require 500 employees to work. For example, WhatsApp is a multi-billion company with even less than 50 employees working there.
As compared to self-employed, who can’t stop working if he wants a regular income, the business owners do not need to trade his time with money as he owns the system. Even in their absence, their employee will work for them.
Tagline: “I’m looking for a good investment.” Core-value: Makes their money work
Investors are the forth and the highest level of the cashflow quadrant. You cannot jump into this quadrant without being successful in one of the three quadrants discussed above.
The investors are one of the most financially free group and they make their money work for them. They invest in businesses, stocks, real estates etc.
Most of the time, the investors do not need to get directly involved in the working of the business or assets where they invest, and hence they get plenty of time and freedom.
Which side of Cashflow Quadrant should you be?
Now that you have understood the core values of people from each of the quadrants, here is a quick difference between the people on the right side and the left side of the quadrant.
Left side of quadrant
Right side of Quadrant
Employees (E), Self-employed (S)
Business owners (B), Investors (I)
Difficult to get rich
Easy to get rich
Their core value is Security.
Their core value is FREEDOM.
This side consists of 95% of the population with less than 5% of total wealth.
This side consists of 5% of the population with more than 95% of total wealth.
They trade time with money.
Their money is not dependent on time. They make their money work.
Here is the conclusion for the working class distribution in different quadrants:
If you have a job, then you are an Employee (E).
If you own a job, then you’re Self-Employed (S).
If you own a system/process where others work for you, then you’re a Business owner (B).
If your money works for you, then you’re an Investor (I).
It’s possible to become rich on all four quadrants or remain poor in any.
However, it’s comparatively easy and fast to become rich when you’re working on the right-hand side of the quadrant i.e. business owner and investor side.
Nevertheless, you do not need to shift to another quadrant entirely at once. You can keep your feet to two or more quadrants.
For example, if you are an employee, you can still jump to the right side by starting to invest. You can be
Employee + Investor
Employee + Business owner
Self-Employed + Investor
However, the best way to get rich is when you’re entirely on the right side of the cashflow quadrant i.e. you are a “BUSINESS OWNER + INVESTOR”.
In addition, when you try to jump quadrants, make sure to learn the new skills and mentality as every quadrant requires a specific skill. Depending on how long you’re in the last quadrant, it can be pretty tough to jump to next one.
Nevertheless, you can always acquire the new skill required to jump to the right side.
#19 most important Financial ratios for investors:
Reading the financial reports of a company can be a very tedious job. The annual reports of many of the company are over 100 pages which consist of a number of financial jargons.
If you do not understand what these terms mean, you won’t be able to read the reports efficiently.
Nevertheless, there are a number of financial ratios that has made the life of investors very simple. Now, you do not need to make a number of calculations and you can just use these financial ratios to understand the gist.
In this post, I’m going to explain 19 most important financial ratios for the investors. We will cover different types of ratios like valuation ratios, profitability ratios, liquidity ratios, efficiency ratios and debt ratios.
Please note that you do not need to mug up all these ratios or formulas. You can always google these terms anytime (or when you need). Just understand them and learn how & where they are used. These financial ratios are created to make your life easier, not tough.
Let’s get started.
19 most important Financial ratios for investors:
These ratios are also called price ratios and are used to find whether the share price is over-valued, under-valued or reasonably valued.
Valuation ratios are relative and are generally more helpful in comparing the companies in the same sector. For example, these ratios won’t be of that much use if you compare the valuation ratio of a company in an automobile industry with another company in the banking sector. Here are few of the most important Financial ratios for investors to validate a company’s valuation.
1. P/E ratio:
Price to earnings ratio is one of the most widely used ratios by the investors throughout the world. PE ratio is calculated by:
P/E ratio = (Market Price per share/ Earnings per share)
PE ratio value varies from industry to industry.
For example, the industry PE of Oil and refineries is around 10-12. On the other hand, PE ratio of FMCG & personal cared is around 55-50. Therefore, you cannot compare the PE of a company from Oil sector with another company from FMCG sector. In such scenario, you will always find oil companies undervalued compared to FMCG companies.
A company with lower PE ratio is considered under-valued compared to another company in the same sector with higher PE ratio.
2. P/B ratio:
The book value is referred as the net asset value of a company. It is calculated as total assets minus intangible assets (patents, goodwill) and liabilities.
Price to book value (P/B) ratio can be calculated using this formula:
P/B ratio = (Market price per share/ book value per share)
Here, you can find book value per share by dividing the book value by the number of outstanding shares.
As a thumb rule, a company with lower P/B ratio is undervalued compared to the companies with higher P/B ratio. However, this ratio also varies from industry to industry.
3. PEG ratio:
PEG ratio or Price/Earnings to growth ratio is used to find the value of a stock by taking in consideration company’s earnings growth.
This ratio is considered to be more useful than PE ratio as PE ratio completely ignores the company’s growth rate. PEG ratio can be calculated using this formula:
PEG ratio = (PE ratio/ Projected annual growth in earnings)
A company with PEG < 1 is good for investment.
Stocks with PEG ratio less than 1 are considered undervalued relative to their EPS growth rates, whereas those with ratios of more than 1 are considered overvalued.
This is a turnover valuation ratio. EV/EBITDA is a good valuation tool for companies with lots of debts.
Here, EV = (Market capitalization + debt – Cash)
EBITDA = Earnings before interest tax depreciation amortization
A company with lower EV/EBITDA value ratio means that the price is reasonable.
5. P/S ratio:
The stock’s price/sales ratio (P/S) ratio measures the price of a company’s stock against its annual sales. It can be calculated using the formula:
P/S ratio = (Price per share/ Annual sales per share)
P/S ratio can be used to compare companies in the same industry. Lower P/S ratio means that the company is undervalued.
6. Dividend yield:
Dividends are the profits that the company shares with its shareholders as decided by the board of directors. Dividend yield can be calculated as:
Dividend yield = (Dividend per share/ price per share)
Now, what dividend yield is good?
It depends on the investor’s preference. A growing company may not give good dividend as it uses that profit for its expansion. However, the capital appreciation in a growing company can be large.
On the other hand, well established large companies give a good dividend. But their growth rate is saturated. Therefore, it depends totally on investors whether they want a high yield stock or growing stock.
As a rule of thumb, a consistent and increasing dividend over past few years should be preferred.
7. Dividend payout:
Companies do not distribute its entire profit to its shareholders. It may keep few portion of the profit for its expansion or to carry out new plans and share the rest with its stockholders.
Dividend payout tells you the percentage of the profit distributed as dividend. It can be calculated as:
Dividend payout = (Dividend/ net income)
For an investor, steady dividend payout is favorable. Moreover, dividend/Income investors should be more careful to look into dividend payout ratio before investing in dividend stocks.
Profitability ratios are used to measure the effectiveness of a company to generate profits from its business. Few of the most important financial ratios for investors to validate company’s profitability ratios are ROA, ROE, EPS, Profit margin & ROCE as discussed below.
1. Return on assets (ROA)
Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. It can be calculated as:
ROA = (Net income/ Average total assets)
A company with higher ROA is better for investment as it means that the company’s management is efficient in using its assets to generate earnings. Always select companies with high ROA to invest.
2. Earnings per share (EPS)
EPS is the annual earnings of a company expressed per common share value. It is calculated using the formula
EPS = (Net Income – Dividends on Preferred Stock) / Average Outstanding Shares
As a rule of thumb, companies with increasing Earnings per share for the last couple of year can be considered as a healthy sign.
3. Return on equity (ROE)
ROE is the amount of net income returned as a percentage of shareholders equity. It can be calculated as:
ROE= (Net income/ average stockholder equity)
It shows how good is the company in rewarding its shareholders. A higher ROE means that the company generates a higher profit from the money that the shareholders have invested. Always invest in companies with high ROE.
4. Net Profit margin
Increased revenue doesn’t always mean increased profits. Profit margin reveals how good a company is at converting revenue into profits available for shareholders. It can be calculated as:
Profit margin = (Net income/sales)
A company with steady and increasing profit margin is suitable for investment.
5. Return on capital employed (ROCE)
ROCE measures the company’s profit and efficiency in terms of the capital it employes. It can be calculated as
ROCE= (EBIT/Capital Employed)
Where EBIT = Earnings before interest and tax
Capital employed is the total number of capital that a company utilizes in order to generate profit. It can be calculated as the sum of shareholder’s equity and debt liabilities.
As a rule of thumb, invest in companies with higher ROCE.
Liquidity ratios are used to check the company’s capability to meet its short-term obligations (like debts, borrowings etc). A company with low liquidity cannot meet its short-term debts and may face difficulties to run it’s business efficiently. Here are few of the most important financial ratios for investors to check the company’s liquidity:
1. Current Ratio:
It tells you the ability of a company to pay its short-term liabilities with short-term assets. Current ratio can be calculated as:
Current ratio = (Current assets / current liabilities)
While investing, companies with a current ratio greater than 1 should be preferred. This means that the current assets should be greater than current liabilities of a company.
2. Quick ratio:
It is also called as acid test ratio. Current ratio takes accounts of the assets that can pay the debt for the short term.
Quick ratio = (Current assets – Inventory) / current liabilities
The quick ratio doesn’t consider inventory as current assets as it assumes that selling inventory will take some time and hence cannot meet the current liabilities.
A company with the quick ratio greater that one means that it can meet its short-term debts and hence quick ratio greater than 1 should be preferred.
Efficiency ratios are used to study a company’s efficiency to employ resources invested in its fixed and capital assets. Here are three of the most important financial ratios for investors to check the company’s efficiency:
1.Asset turnover ratio:
It tells how good a company is at using its assets to generate revenue. Asset turnover ratio can be calculated as:
Asset turnover ratio = (sales/ Average total assets)
Higher the asset turnover ratio, better it’s for the company as it means that the company is generating more revenue per rupee spent.
2. Inventory turnover ratio:
This ratio is used for those industries which use inventories like the automobile, FMCG, etc.
A company should not collect piles of shares and should sell its inventories as early as possible. Inventory turnover ratio helps to check the efficiency of cycling inventory. It can be calculated as:
Inventory turnover ratio = (Costs of goods sold/ Average inventory)
Inventory turnover ratio tells how good a company is at replenishing its inventories.
3. Average collection period:
Average collection period is used to check how long company takes to collect the payment owed by its receivables.
It is calculated by dividing the average balance of account receivable by total net credit sales and multiplying the quotient by the total number of days in the period.
Average collection period = (AR * Days)/ Credit sales
Where AR = Average amount of accounts receivable
Credit sales= Total amount of net credit sales in the period
Average collection period should be lower as higher ratio means that the company is taking too long to collect the receivables and hence is unfavorable for the operations of the company.
Debt or solvency or leverage ratios are used to determine a company’s ability to meet its long-term liabilities. They are used to calculate how much debt a company has at its current financial situation. Here are the two most important Financial ratios for investors to check debt:
1. Debt/equity ratio:
It is used to check how much capital amount is borrowed (debt) vs that of contributed by the shareholders (equity) in a company.
As a thumb rule, invest in companies with debt to equity ratio less than 1 as it means that the debts are less than the equity.
2. Interest coverage ratio:
It is used to check how well the company can meet its interest payment obligation. Interest coverage ratio can be calculated by:
Interest coverage ratio = (EBIT/ Interest expense)
Where EBIT = Earnings before interest and taxes
The interest coverage ratio is a measure of the number of times a company could make the interest payments on its debt with its EBIT. A higher interest coverage ratio is preferable for a company as it reflects- debt serving ability of the company, on-time repayment capability and credit rating for new borrowings
Always invest in a company with high and stable Interest coverage ratio. As a thumb rule, avoid investing in companies with interest coverage ratio less than 1, as it may be a sign of trouble and might mean that the company has not enough funds to pay its interests.
If you are new to stock market and want to learn to select good stocks for investing, here is an amazing online course on HOW TO PICK WINNING STOCKS for beginners. Check it out now.
That’s all. I hope this post on the most important Financial ratios for investors is useful to the readers.
In case I missed any important financial ratio, feel free to comment below.
Tags: key financial ratios, most important Financial ratios for investors, must know financial ratios, most important Financial ratios for investors to stock research, most important financial ratios to analyze a company, ratio analysis for investment decision, list of investment ratios, key financial ratios formulas
Buying your first stock is one of the most exciting things that you will ever do. Although there are a number of people who are able to feel this excitement in their early 20s (few even earlier), however, many of the people in India are not able to have this joy till quite a long time.
As the new year, 2018 is almost on the door, the best new year gift that I can give to my readers is to help them make their first stock market investment and buy their first stock.
Therefore, in this post, we are going to discuss how to buy your first stock.
First of all, I would like to clarify that I am not going to discuss the technicalities like how to open trading and demat account, which broker to chose etc in this post. I have already written about these on one of my earlier blog post which you can find here.
In today’s post, we are going to discuss the mindset required to buy your first stock. What approach you need to follow to buy your first stock in Indian share market.
Please make sure that you read the post until the very end as there’s a bonus in the last section of this post.
Now, before we explore how to buy your first stock, here are few basic guidelines that you need to know before you start investing.
Basic guidelines before you start investing in stocks:
#1 It’s not necessary that you find a multi-bagger on your first Investment:
Even Mahendra Singh Dhoni was out on a duck on his first ODI International match. As a matter of fact, he failed in 5 of his first ODI’s before hitting his first big ton and later becoming one of the most successful captions of Indian cricket team.
It always feels good if your first investment gives you two or multiple times return. However, it’s not that bad if your first stock didn’t turn out to be a winning stock. How many batsmen do you know who hit a hundred in his first match or a new bowler who took a wicket on his first ever ODI over?
Not performing well in the first match doesn’t mean that these players are not talented or they hadn’t practiced. Moreover, failing on the first match doesn’t stop them from becoming ultra successful in their career.
In short, you do not need to find only a multi-bagger stock to make your first investment. It’s more important that you learn and start your investment journey. You will found tons of opportunity in future once you get some experience and confidence.
#2. Do not be afraid of losing small money. Be afraid of not winning large sum:
If you think that you shouldn’t invest in stocks just because might lose hundreds (or thousands) in the beginning, you are never gonna make a huge success in any of your investments in future.
Of course, you are going to lose. I do not know a single investor who has never lost any money in some of their investments.
However, if you are not willing to enter the stock market just because of the fear of losing small money initially, you won’t be able to make the big successful investment which will give lakhs in returns in future.
It’s okay to make mistakes as long as you are not making too many of them. Do not be afraid of making small loses. Be afraid of not being able to catch the big ones.
#3. You’ll never be fully prepared:
Find me an investor who knew everything before his first investment. I bet, you can’t.
Investment is a lifelong learning and there will be always more to learn. You are not supposed to learn everything before buying your first investment. Because if that’s the case, many people won’t be able to buy any stock before their 30s, or maybe 40s.
Let me give you an example. For last few years, there is a bull market in India. Now, those who started investing in this period, have no idea what it feels like to invest in a bear market and how to safeguard their money in the bear market.
Moreover, they cannot be prepared for it as they have only read about this financial situation in books, but never had faced it. So, should it stop these new investors from investing in the stock market just because they are not fully prepared? No, there are many things that you cannot learn from the beginning. Your journey will teach you most of the things.
Still not convinced? Let me explain it with the analogy to Cricket. If a batsman is stubborn that he will only enter the cricket playground once he perfects all types of cricket shots like an uppercut, straight drive, leg glance, square drive, cover drive, pull, square cut, sweep shot, reverse sweep etc, then it might take him years to play his first match.
I understand that there are few exceptions like Sachin or Kohli, however, most of the batsman has their own strength, some are good in offside and some are good in leg side shots. If they have been waiting to achieve absolute perfection before entering the playground, then they might never have been able to make up for the International cricket team.
Perfection is the enemy of progress. You won’t be able to buy your first stock if you are looking to learn everything before even you start investing.
How to buy your first stock?
Now that you have understood the basic guidelines before investing, here are few pieces of advice that can help you to buy your fist stocks:
1. “INVEST IN WHAT YOU KNOW” -Peter Lynch
This is one of the best advice that I learned during my initial days in the stock market after reading the book ‘ONE UP ON WALL STREET’ by Peter Lynch. The book really taught me how to buy your first stock.
You do not need to find an XYZ Chemical company which creates products like vinyl sulphone ester, that you have no idea of what it does.
Just look around and you won’t find it difficult to search for companies. From toothpaste, hair oil, edible oil, shampoo to cars, banks, shoes, clothes, petrol pumps etc, everything has a company behind it.
Cars → Tata Motors, Maruti, M&M etc Banks → ICICI, Yes Bank, HDFC Bank, Axis Bank, SBI, IOB etc Personal care —> ITC, Colgate India, P&G India, Dabur, etc Shoes → Bata, Khadims, Shree leathers etc Petroleum → HPCL, IOCL, BPCL etc…
You have grown up with the names of these companies. Why not study them and invest?
Many of the common companies has given amazing returns to its investors. Don’t believe me?
Ever heard of Bullet bikes (Royal Enfield)?
This bike has a craze among many of the youngsters (even older people too). A common name which anyone could have noticed.
However, had you invested in the parent company of Bullet i.e. Eicher motors, you would have been madly happy with your investment by now.
Eicher Motors has given a return of over 1,000% in last 5 years.
Similarly, You also might have heard about JOCKEY, the innerwear &underwear company. Its parent company is PAGE INDUSTRIES. Search its return on google and you’ll amazed.
Still not satisfied? Here’s another company which you can’t argue that you haven’t heard of- TITAN COMPANY. Few of the child companies of TITAN are Fast track, Sonata, Tanishq, Titan eye etc.
Everyone in Indian knows about these brands and also might have noticed the crowd in their showrooms. But have you ever tried searching whether the company is listed on the stock exchange or not? The company has given over 2.5 times return last year. Check it out on google.
Here are few other common companies which you might also have heard of that has given uncommon long-term returns- Bajaj Finance, Symphony, MRF, HPCL, TVS Motor etc.
Overall, you can find a good company if you just look around.
You might be a beginner, however, if you are keeping your eyes opened, you too can find a great company to invest easily.
Ask anyone how to buy your first stock and this is the logical answer that you will get.
Let’s imagine you are going to a party and there’s a food on the table which you have never tasted or are not sure about it. What will you do? Will you take a large spoon and stuff your mouth full of it or will you just taste it with a little spoon first? Now, unless you’re a badass foodie, the second approach seems more reasoning.
In the same way, when you are buying your first stock, invest small. Buy 10 stocks or invest under 5k. There are many benefits of investing small.
First of all, you will learn how the technicalities like how to buy/sell using the trading account and you can be much confident while investing as the amount is not that large.
Second, let’s take the worst case scenario before we move to the bright one. It’s very rare case that you can lose entirely 100% in delivery. Most probably, even if your stock selection does not turn out to be what expected, you will lose 40-50% of your initial investment. When your initial investment is small, let’s say 5k, then losing 2-2.5k will not affect you much financially and moreover, will not hurt your morale.
Third, if your stock turned out to perform well, you can always increase the investment amount. As mentioned above, the aim is not to fear the market by making small losses. The real aim is not to miss big opportunities.
#3. Do not worry a lot about brokerage and other charges:
I have seen a lot of people worrying too much about their brokerage account. Where should I open my demat and trading account? How much will be the brokerage? Which is the cheapest broker for beginners? etc.
It’s same as a batsman in Cricket worrying too much about his ‘bat’ than how he is actually going to perform. Well, it’s true that bat is an important part of your performance. However, the batsman can always change his bat if he plays well.
In the same way, your first broker need not be your last broker. You can always change your broker anytime if you are not satisfied with the services. Focus more on selecting stocks than selecting brokers.
I’m not suggesting to totally ignore the broker and get registered with any brokerage firm. Just find a reputed broker which provide the facilities that you are looking for and do not worry much about the brokerage.
Unless you are investing in lakhs or are involved in frequent trading, the brokerage charges won’t affect you much financially. Obviously, they are going to have some impact on your profit, however, it’s okay to give 0.5% of your investment to the broker than wasting 5-6 months just to search for the cheapest broker.
When you are learning how to buy your first stock, focus more your ‘first stock’ than your ‘first brokerage charge’.
The article would be incomplete if I didn’t explain this.
Many a time you might have noticed that you take one of your friends to play some game (which he has never played before), but yet he is able to beat you. This is called beginner’s luck.
Beginner’s luck is applicable is almost all part of life, including the stock market.
It might happen that your first stock turned out to be exceptionally well-performing stock and you might get a return of 30-40%, just within a month.
Do not let this influence you. Do not increase your investment amount drastically just because this one turned out to be good. Wait for some time and monitor the outcomes of few of your other investments before investing big. Make a strategy and stick to it without getting influenced by the beginner’s luck.
When you’ll buy your first stock, it will give you a lot of satisfaction. This is because you have now entered the exciting world of stock and market and you are aware that you have over 5,500 other options available if this one doesn’t work. You have learned how to buy the stock and all you need now to improve your approach to gain good profits.
When buying your first stock, follow the following three guidelines:
Invest in what you know.
Do not worry a lot on brokerage charges rather focus on stocks.
Further, do not hurry up that you’ll miss the train. Take your time. Start small and continuously increase your investment amount.
Finally, learn from your mistakes.
There are a number of mistakes that you can do while buying your first stock. You might book profit soon and sell the stock too early. Or you might hold it for a long time without any returns. There are a number of outcomes possible. Learn from your mistakes. Moreover, do not repeat them. Take your first investment as a challenge. Either win or learn.
Ready to invest in stocks? If you’re a beginner and want to learn stock market investing from scratch, here’s an amazing online course for beginners: HOW TO PICK WINNING STOCKS? The course is currently available at a discount.
Before I end this post on ‘how to buy your first stock’, I want to include the 3 golden rules that you need to know. Now that you have decided to buy your first stock, you should also know how to make a huge amount of money from the Indian stock market.
These three golden rules are:
And Invest for long
All you need to do is to start as soon as possible, invest consistently (moreover, continuously increase your investment amount) and remain invested for the long term. That’s the key to make tons of money from the stock market.
That’s all. I hope this post on ‘how to buy your first stock’ is useful to you. If you agree with what I discussed here, please share the post with at least one person who needs help to enter the stock market.
In addition, if you have any questions, please comment below. I’ll be glad to help.
Tags: how to buy your first stock, first-time investment, how to buy your first stock for beginners, how to invest in stocks, how to buy your first stock in India, when and how to buy your first stock, buying your first stock, how to buy your first stock in Indian share market
As a matter of fact, the customized financial reports presented by the screener website is quite friendly and easy to use.
If you search any stock on the stock screener, you will get a number of important information about the company like an overview, chart, analysis, peers, quarters, profit & loss, balance sheet, cash flow, and reports.
The best part is that you can read all the financial statements of the company for the last 10 years, all in one place (without scrolling down or changing the tabs).
Here is an example of the pieces of information that you can get about ‘TITAN COMPANY’ on Screener.
However, there’s one more powerful tool that many of the people are not using on the Screener website.
It’s the query builder.
Most people know how to use screener.in to read financials but do not know how to write a query in the query builder.
First of all, if you do not know what is a query, it can be defined as follows:
What is a query? A query is a request for data or information from a database table or combination of tables. For example, if you want a specific type of stocks from a table of all the stocks listed, you can write a query to request that information.
Query builder can be used in a number of ways. You can use it for the stock screener or find stocks with specific criteria. Personally, I use it quite often to screen the stocks.
In this post, we are going to cover how to use screener.in website efficiently using query builder. Here, we will discuss the basics of the query builder. However, once you know how to use the query builder, you can write complex queries to the query builder.
Here are the topics that we are going to cover in this post:
1. How to find small-cap, mid-cap and large-cap companies? 2. How to find penny stocks? 3. How to find debt free companies? 4. How to find debt-free large-cap companies? 5. How to find low PE stocks? 6. How to find high dividend stocks? 7. How to find list of companies within a specific price range 8. How to run multiple queries on the query builder? 9. How to create your own screen?
Now, before we cover all the topics mentioned above, you need to learn where and how to use query builder.
You can find the query builder on the Screener website. Here are the steps to find the query builder.
2. Login using your username and password. If you do not have an account on the screener, make a new one using your email id. It hardly takes a minute.
3. Once, you are registered/ logged in, scroll down to find the query builder.
How to use query builder?
In the query builder, you can write the queries to find the data/ information. The queries can either be of one line or multiple lines.
For example, if you want to find the companies with Price to earnings ratio less than 15, you can write the following query in the query builder.
Price to earnings < 15
Here’s the result that you will get.
This is the example of a one-line query.
Now, if you want to find the list of companies whose Price to earnings ratio is less than 15 and Price to book value is less than 3 (should fulfill both criteria), then you can write the following query:
Price to earnings < 15 AND Price to book value < 3
Note: This is an example of multiple line query as we are using two filters. Whenever you use a multiple line query, use an ‘AND’ after the end of every line. Further, you do not need to add ‘AND’ on the last line of query.
Here’s the result that you will get.
Now that you have understood how to use query builder, let’s write few simple queries to shortlist the companies mentioned earlier.
How to use SCREENER.IN like an Expert using Query Builder?
How to find small-cap, mid-cap, and large-cap companies?
We are going to use market capitalization to find small-cap, mid-cap and large-cap companies here.
Although there’s no fixed market capitalization range to classify companies into small cap, mid-cap or large-cap companies, however, as the thumb rule, we can use the following range:
Small cap companies: Market capitalization < 500 Cr Mid cap companies: Market cap- between 500 Cr and 10,000 Cr Large cap companies: Market cap > 10,000 Cr
Now, how can you use the above information to find small-cap, mid-cap, and large-cap companies?
You just have to write a query using market capitalization range to get the result.
For example, if you want the list of small-cap companies with market capitalization less than 500 crores, write the following query in the query builder:
Market capitalization < 500
You will get the following result.
Similarly, if you want to find mid-cap companies, write the following query
Market capitalization > 500 AND Market capitalization < 10000
This query will limit the market capitalization between 500 to 10,000. Here is the result that you will get.
Now, can you guess the query to find the list of large-cap companies?
Yes, here’s the answer:
Market capitalization > 10000
You will get the following output for this query.
As already mentioned above, the values of market capitalization taken here is not a hard and fast rule. You can write different queries depending on your criteria. If you want the list of those companies whose market cap is large than 50,000 crores, you can write the following query.
Market capitalization > 50000
Similarly, you can write a number of queries depending on your requirements.
How to find penny stocks?
Penny stocks are the companies with very small market share price. Typically, the share price of these companies is less than Rs 10. Further, they also have a small market capitalization (below 100 crores).
You can run a simple query on the Screener query builder to find penny stocks. Here’s the query:
Current price < 10
Moreover, if you want to add the market cap filter in this search, you can write the following query:
Current price < 10 AND Market capitalization < 100
This query will give you the list of all the companies with current price of less than Rs 10 and market capitalization of less than Rs 100 Crores.
If you are investing in a company for long-term, make sure that it’s debt free. Or at least that it doesn’t have more debts than its asset. The profitability and growth of a company are highly affected if it has a huge debt.
To find the debt-free companies you can use the ‘debt to equity’ ratio.
Debt to equity ratio: It measures the relationship between the amount of capital that has been borrowed (i.e. debt) and the amount of capital contributed by shareholders (i.e. equity). Read more here.
If the debt to equity ratio is equal to zero, it means that the companies are debt free.
If the debt to equity is equal to 1, it means that the debt is equal to equity.
Now, most of the companies will have some debt as many a times the company require additional money to carry out different works like expansion, R&D etc.
However, as long as the debt is less than equity, the company can be considered decent.
Here, we are going to use debt to equity = 0 to find the debt-free companies. (However, feel free to use debt to equity < 0.5 to find the list of companies with low debts.)
Here’s the query:
You will get the following output:
Note: You can also use ‘debt=0’ query to find debt-free companies in India.
How to find debt-free large-cap companies?
To find large-cap debt-free companies, you just have to write a 2-line query given below:
Market capitalization > 50000 AND Debt to equity ratio = 0
Note that you can take the market capitalization of the company accordingly. I took the company with the market cap greater than 50,000 Cr here.
How to find low PE stocks?
If you want to find the companies within a specific PE ratio, you can write a simple query. For example, if you want the list of the companies whose PE is less than 12, you can write the following query:
Price to earnings < 12
Please note that the list is a generic one and will give the name of the companies across all industries.
How to find high dividend stocks?
To find the list of high dividend stocks, you can use dividend yield in the query.
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.
For example, if you want to find the list of all the companies whose dividend yield is greater than 4%, you can write the following query:
How to find companies between a specific price range?
You can use the Screener’s query builder to find the list of all the stocks within a specific price range.
For example, if you want to find the list of all the companies between Rs 80 to 100, you can write the following query:
Current price > 80 AND Current price < 100
This will give you the following list of companies.
You can use this query to find the specific price range stocks accordingly.
How to run multiple queries on the query builder?
All the cases explained above are simple to find the specific type of stocks like debt free, penny stocks or high dividend stocks.
Is that all? How to use SCREENER.IN query builder more efficiently?
You can write multiple lines of queries on the query builder to filter companies with different criteria.
For example, if you want to find the list of a company fulfilling the following criteria:
Market capitalization greater than Rs 30,000 crores
Debt to equity ratio of less than 0.5
Current market price range is between Rs 100 and 300
The dividend yield is greater than 1.5%
Then you can write the following query:
Market Capitalization > 30000 AND Debt to equity < 0.5 AND Current price > 100 AND Current price < 300 AND Dividend yield > 1.5
This is the result that you will get for the above query.
How to create your own screen?
You can use different ratios to create your own stock screen. These different ratios can be ROE, ROCE, PEG, Sales growth, Profit growth, Current ratio, PE ratio, P/BV ratio etc.
You can create your own screen using these different ratios to shortlist a few good companies.
Here is an example of a query to screen the stocks:
Market Capitalization >500 AND Sales growth 5Years >15 AND Profit growth 5Years >15 AND Debt to equity <1 AND Net cash flow last year >0 AND PEG Ratio <1 AND Promoter holding >30 AND Pledged percentage <15 AND Average return on equity 5Years > 12 AND Average return on capital employed 5Years > 12
NOTE: THIS IS JUST AN EXAMPLE TO TEACH YOU THE BASICS, NOT A RECOMMENDED QUERY.
Generally, I do not use a general query to filter the companies for the whole list, but use specific queries for specific industries. Different industries have different characteristic ratios.
In a similar way, you can create your own screen with the help of different ratios. This can help you save a lot of time and energy.
Query Builder is a simple yet powerful tool that can make your stock research 10 times simpler. Writing queries in the query builder is easy as discussed above.
Although there are lot many uses of Screener website, however, the most useful ones are covered in this post. Feel free to play around and create your own queries.
If you want to learn more stock research tricks, feel free to check out my online course- HOW TO PICK WINNING STOCKS? The course is currently available at a discount.
That’s all. I hope this post ‘How to use SCREENER.IN efficiently?’ is useful to the readers. If you have any questions, please comment below.
Tags: How to use screener website, stock research how to use screener, screener query builder, how to use screener query builder, how to use screener for query, best stock resarch website how to use screener, screener india
Can you tell, what is the difference between block and bulk deal here?
In this post, I will explain the difference between block and bulk deal in simple words. Please read this post until the end because in the last section I will also explain where you can find the block/bulk deal information in NSE/BSE at real time.
So, let’s get started.
What is the difference between block and bulk deal?
In a block deal, either aminimum number of 5 lakh shares or an investment amount of Rs 5 crores should be executed.
Here, the transaction is between two parties when they agree to buy/sell shares at an agreed price among themselves.
The deal happens through a separate trading window and hence not visible to regular market
A block deal should be done at the beginning of the trading hour- from 9:15 AM to 9:50 AM for a period of 35 Minutes.
As per the guidelines of SEBI, the price for the block deal should be between +1% and -1% of current price or last days closing price of that share.
A bulk deal happens when the total quantity of shares bought or sold is greater than 0.5% of the total number of shares of a listed company.
It is carried out through the normal trading window provided by a broker. It is visible to everyone.
The broker has to give information to the exchanges about the of the bulk deal within one hour.
Who are involved in bulk/block deal?
The bulk/block deals are considered to be ‘RICH PEOPLE’ thing.
Most of the block deals or bulk deals are carried out by mutual funds, foreign institutional investors, venture capitalist, banks, HNI, insurance firm, etc
What are the effects of bulk/block deals on the price of the share?
There are a number of people who try to clone the portfolio of successful investor through monitoring their block/bulk deal.
Although a single block/bulk deal may or may not bring much change in the share price of that company. However, several continuous bulk/bock deals in the company are taken positively by the public and share prices of that company generally rise.
How to find block/bulk deal information on NSE/BSE?
Block and bulk deal information can be found on the NSE/BSE website.
A simple google search of ‘BSE bulk deal’ or ‘BSE block deal’ will give the full information of all these deals.
Nevertheless, here are the quick links to find block & bulk deal on BSE/NSE website.