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Rakesh Jhunjhunwala Latest Stock Portfolio

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

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

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

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

His Idealogy:

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

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

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

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

Note:

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

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

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

Rakesh Jhunjhunwala latest stock portfolio:

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

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

titan company

Summary:

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

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

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

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

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7 Must Know Websites for Indian Stock Market Investors.

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

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

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

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

7 must know websites for Indian stock market Investors:

1. MONEYCONTROL:

Website: http://www.moneycontrol.com/

money control website

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

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

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

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

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

2. SCREENER:

Website: https://www.screener.in/

screener website

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

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

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

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

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

BONUS: Here’s a video on how you can use SCREENER website to find stocks to invest in Indian stock market.

3. INVESTING:

Website: https://in.investing.com/

investing market

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

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

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

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

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

4. ECONOMIC TIMES MARKET

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

ET Market

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

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

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

5. LIVEMINT

Website: http://www.livemint.com/

live mint website

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

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

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

6. NSE INDIA

Website: https://www.nseindia.com/

NSE India website

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

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

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

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

7. BSE INDIA

Website: http://www.bseindia.com/

bse india website

BSE India is the website of Bombay stock exchange.

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

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

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

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

BSE India also provides training and certifications.

Bonus (As promised)

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

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

Link in time website

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

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

SUMMARY

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

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

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

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

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How to do Fundamental Analysis on Stocks?

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

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

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

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

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

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

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

How to do fundamental analysis on stocks?

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

1. Use the financial ratios for initial screening:

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

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

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

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

How to do screening of stocks using Investing.com?

Step 1: Go to screener

investing.com how to do fundamental analysis on stocks

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

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

investing stock screener- How to do fundamental analysis on stocks

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

Also read: How to follow Stock Market?

2. Understand the company:

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

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

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

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

3. Study the financial reports of the company:

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

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

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

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

Step 1: Go to screener

scrneer

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

Screener financials

Step 3: Check the company’s financials.

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

4. Check the debt:

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

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

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

5. Find the company’s competitors:

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

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

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

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

screener peer comparison- How to do fundamental analysis on stocks

6. Analyse the future prospects:

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

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

SUMMARY:

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

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

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

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

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

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Is Indian stock market Risky to Invest?

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

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

Bajaj finserv share price

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

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

Why people think stock market is Risky?

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

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

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

Also read: 7 Most Common Stock Investing Myths

Is Indian stock market Risky to Invest?

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

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

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

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

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

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

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

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

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

Risk vs. Reward

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

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

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

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

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

Lessons from the Past:

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

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

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

Here is a graph of Sensex.

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

Sensex Chart- Is Indian stock market risky to invest

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

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

Sensex Records from 2002 to 2017

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

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

Sensex in Jan’08 = 21,206 (HIGH)

Sensex in Mar’09 = 8047 (LOW)

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

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

Sensex in Nov’10 = 21,108 (HIGH)

Sensex 2008-09 Crash

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

Sensex in Jan’15 = 29,844 (HIGH)

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

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

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

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

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

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

Risks Analysis:

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

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

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

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

  • Tata Consulting Service

TCS Share price

  • Eicher Motors

Eicher motors share price

  • MRF

mrf share price

  • Hindustan Uniliver

HUL share price

Image Sources: Google

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

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

Sensex yearly records from 2000 to 2017.

Sensex Records from 2000 to 2017

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

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

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

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

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

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

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

Stock market has always rewarded the long term investors.

What are the real risks involved in the market?

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

1. Speculating the market:

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

2. Trading in Futures and Options:

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

3. Entering with no Proper Strategy:

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

4. Following Recommendations:

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

5. Not following risk management systems:

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

6. Trading with emotions:

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

7. Lack of Patience:

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

8. Non-diversified portfolio:

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

9. No proper understandings:

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

why most People lose money in stock market

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

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

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SIP or Lump sum – Which one is better?

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

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

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

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

Have you also come across the same question?

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

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

SIP or Lump sum -Scenario 1:

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

sip or lump sum example 1

You both went to market.

However, you both decided different approaches for your gardens.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SIP or Lump sum -Scenario 2:

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

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

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

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

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

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

Let’s understand this better with an example.

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

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

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

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

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

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

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

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

Note: This concept is called Rupee cost averaging.

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

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

SIP or Lump sum -Scenario 3:

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

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

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

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

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

Conclusion:

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

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

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

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

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

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

How Much Return Can You Expect From Stock Market?

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

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

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

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

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

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

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

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

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

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

Warren Buffet Performance through Years: 

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

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

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

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

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

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

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

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

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

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

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

How Much Return Can You Expect From Stock Market?

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

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

Performance of Sensex over the years:

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

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

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

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

Also read: Getting Smart With Investment in Gold.

Conclusion:

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

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

Bonus:

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

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

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

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

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

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

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

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

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

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

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

Common Financial Mistakes People Make in Their 20’s

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

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

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

2. Getting influenced by big fat Indian wedding:

Common Financial Mistakes People Make in Their 20's wedding

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

3. Not being in a habit to save:

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

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

4. Not keeping an emergency fund:

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

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

5. Not saving for your retirement:

Common Financial Mistakes People Make in Their 20's

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

6. Spending recklessly on credit cards:

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

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

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

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

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

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

Why You Should Start Saving Early?

1. More Saving = Less Unnecessary Spending

Why You Should Start Saving Early

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

2. Gives you a way to live your dreams:

Why You Should Start Saving Early - Enjoying

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

3. Chip in for your own education:

Why You Should Start Saving Early- Education

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

4. Bad times come without an alarm:

Why You Should Start Saving Early- Uninvited stress

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

5. Let the bank serve you with interest:

Why You Should Start Saving Early power of compounding

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

6. Be Ready with Your Retirement Fund:

Why You Should Start Saving Early- retirement

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

7. You will be willing to take risks:

Why You Should Start Saving Early- risk taking

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

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

Growth Stocks vs Value stocks – A logical Comparison

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

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

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

GROWTH STOCKS VS VALUE STOCKS

GROWTH STOCKS:

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

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

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

VALUE STOCKS:

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

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

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

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

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

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

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

  1. Price to Earnings Ratio (P/E)

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

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

  1. Price to Book Ratio (P/B)

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

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

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

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

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

CONCLUSION: Growth Stocks vs Value stocks

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

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

growth stocks vs value stocks plot

BONUS SECTION: INCOME STOCKS

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

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

Dividend Yield

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

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

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

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

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

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

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

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

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

What is the Right Time to Exit a Stock?

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

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

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

What is not the Right Time to Exit a Stock?

Imagine a scenario.

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

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

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

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

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

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

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

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

Let me explain further with an example.

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

titan company- right time to exit a stock

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

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

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

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

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

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

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

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

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

What is the right time to exit a stock?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

stock vs bond vs gold

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

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

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

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

Products: Royal Enfield, Eicher Trucks etc- 

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

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

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

Products: Innerwear & Leisurewear (JOCKEY) etc- 

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

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

Also Read: How to follow Stock Market!

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

Product: Tyres-

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

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

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

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

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

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

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

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

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

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

Also Read:

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

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

  • Do the research carefully:

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

  • Invest in just one or two stock:

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

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

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

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

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

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

  • Invest in what you know: 

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

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

  • Invest in Mid-caps:

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

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

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

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

Best Stocks for Long term Investment in India.

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

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

Best Stocks for Long term Investment in India:

1. ITC:

itc best stock for long term investment in India 2017

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

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

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

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

Other businesses

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

itc best stock for long term investment in India 2017

Source: ITC- Wikipedia

ITC Revenue source

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

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

Financial Study of ITC:

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

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

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

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

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

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

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

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

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

Quick Note: If you are new to stock analysis, here’s a video that can help you understand how to perform fundamental analysis of stocks. I hope this video is useful to you.

2. HDFC BANK:

Stocks for Long term Investment in India 2017

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

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

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

Source: HDFC Bank – Wikipedia

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

A financial study of HDFC Bank:

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

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

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

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

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

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

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

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

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

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

3. ASIAN PAINTS:

Stocks for Long term Investment in India

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

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

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

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

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

Source: Asian Paints Ltd – Wikipedia

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

The financial study of Asian Paints:

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

Here are the annual results of Asian Paints.

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

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

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

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

Conclusion:

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

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

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

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

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

Getting Smart With Investment in Gold.

Gold Investment Quotes by Famous Investors:

“If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold.”— Robert Ringer

“People view gold as emotional, but when they demythologize it, when they look at it for what it is and the opportunity it represents, they are going to say ‘We really should own some of that’. The question will then change to ‘Where do we get the gold’?” – Thomas Kaplan (Over $2 Billion Invested in Gold)

Do you know that India Ranks 1 in the highest gold jewellery consumption in the world? India and China account for 44% gold jewelry consumption globally.

This alone proves that the Indian men and women are highly interested in buying gold jewelry. Further, gold is also treated as a sign of royalty in India. However, when it comes to investing in gold, now a day, people do not consider it as a good option. With the increase in the paper assets, the gold investment is slightly fading away.

Moreover, most of the investors think that investment in gold is not as rewarding compared to stocks, bonds, and real estates.

Here is what Warren Buffet used to say about gold:

“(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

“I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money, and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.

“You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what it’s worth at current gold prices, you could buy — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils (XOM), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

Also Read: Why Buffett thinks investing in gold is stupid

However, being born in a middle-class family, and listening to my mother continuously talking about the jewellery & rising prices of gold, I differ a little with Warren Buffet’s idea of investing in gold.

Gold has been used as a currency for over centuries in this world. Gold is assumed to be first found in Egypt in 3000 BC. However, gold started acting as a currency only since 560 BC. Nevertheless, gold is one of such rare items which has consistently been in the market and used to buy/exchange items.

I believe that everyone should have a small portion of his portfolio invested in gold. There are various reasons why I believe this, however there are few main points:

Why should you Invest in Gold?

1. Gold has high liquidity:

No matter which part of the country you live in, gold can easily be converted in cash and readily be bought and sold. However, such option is not available with other paper assets like stocks and bonds or physical assets like real estates. Further, there is no or minimal paperwork required in gold investment.

2. Gold preserves wealth:

Here is a chart showing the upwards trend of gold over the last few centuries.

gold investment trade brains

Source: http://goldprice.org/gold-price-india.html

From the year 2006 to 2011, gold has given a return of 29% per annum. Further, if we consider long term, it has given a return of 10% per annum. Overall, gold will preserve your wealth if you hold it for a long-term duration.

3. Hedge against inflation:
Gold acts a great investment to protect your money from inflation. Over the past couple of years, as the purchasing power of Rupee is declining; on the contrary, the price of gold is consistently increasing.

4. Portfolio Diversification:
Gold acts as a great asset for diversification. As gold has a negative correlation with other asset types like stocks bonds etc, gold moves in the opposite direction than these assets. Let me explain this with an example:

Here is a chart of SENSEX over the past few years.

In the above chart, please notice that when the SENSEX was sharply falling in 2008-09, the prices of the gold kept skyrocketing during this duration. Hence, if you had diversified your portfolio with gold investment, you wouldn’t have faced so much loss compared to concentrated investment in stocks.

In short, gold investment can help investors to avoid financial disasters.

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

Apart from the above four reasons, there are few other reasons also which favors gold investment.

For example, in the 21st century, every country has a different currency. Nevertheless, gold can act a commonly acceptable asset anywhere in the world. Further, it’s much beneficial to keep a gold in your pocket than a currency which is not acceptable.

In addition, gold is also a great investment to pass on to your next generation who might not have such luxuries to find gold in abundance.

How to invest in Gold in India?

Now that you have understood the importance of gold investment, I would like to highlight the simple ways by which you can invest in gold in India.

Typically, there are two ways to invest in gold:

1. Physical Gold Investment:

  • Jewellery Buying:

gold investment in jewellery

This is the old and conventional way of gold investment. You might have seen the jewellery of your mother, sister or other members of the family, which is the best example of gold investment through jewelry. Although these pieces of jewellery act more like ornaments, still they are worth considering as an investment.

The pros of buying gold jewelry are its easy feasibility along with zero paperwork.

However, there are also few cons while investing in gold jewelry.  For example, first of all, you need to pay the making charges (10-20% of total cost) along with the price of the original gold. Second, when you will sell the jewelry, the buyer will not consider the making charge. In addition, he will also demand a purchase discount (5-10%). Lastly, there is a high risk of theft and burglary in storing gold jewelry.

  • Gold Coins and Bars:

gold investment in bars and coins

These are a better option for gold investment compared to buying jewelry. There are no making charges involved here. You can buy or sell the gold coins and bars from any Jewellery shops. Further, some banks also sell them.

One of the biggest benefits of investing in physical gold assets is that you won’t need to open an account to start investing. No demat or trading account is required for this type of gold investment, unlike paper assets like stocks or bonds.

2. Paper Gold Investment Options:

  • Gold ETF:

gold investment by gold etf

ETF stands for Exchange traded funds. Gold ETF is a type of mutual fund which invests in gold and units of this mutual funds scheme is listed on the stock exchange.

You can invest in Gold ETF through a demat account. However, this type of investment of gold involves assets management and brokerage charges. Brokerage fee for gold ETF is around 0.25-0.5% and the fund management charges are approximately 0.5-1%.

Because of these charges, the returns on Gold ETF are less than the actual increased value of gold. Gold ETF is directly proportional to the price movement of gold and is not affected by market fluctuations.

  • Equity-based Gold funds:

This type of gold investment involves investing in companies related to mining, extracting and marketing of gold. Market fluctuations affect equity-based gold funds. Further, equity-based gold funds are susceptible to different risks like gold price risk and equity-based risks.

The biggest benefit of paper gold investment options is that there is no risk of theft or burglary here; as compared to physical gold.

How much to invest in Gold?

The portfolio allocation for gold investment varies for different investors according to their investment strategies. In general, small investors should keep 5-10% of their portfolio invested in gold. Gold doesn’t give an as high return as stocks or real estate. Nevertheless, gold investment will help to mitigate the risks in your portfolio.

How to start investing in Gold online?

You can buy gold ETF or gold fund online just like a mutual fund. However, you need to research carefully about the different ETF’s available. Here is the list of few gold ETF schemes available in India:

  1. Birla Sun Life Gold ETF
  2. Goldman Sachs Gold ETF
  3. SBI Gold ETF
  4. IDBI Gold ETF
  5. R*Shares Gold ETF
  6. Axis Gold ETF
  7. Kotak Gold ETF
  8. ICICI Prudential Gold ETF

Also read: Top 10 Gold ETFs in India

That’s all. I hope this post on ‘Getting smart with Investment in Gold’ is useful to the readers. Further, please comment below your opinion about investment in gold.

Is Gold Investment good for a small investor?

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

3 Most Common Scams in Indian Stock Market That You Should be Aware of. There are a number of common scams in Indian stock market which has resulted in many investors/traders to lose their hard earned money. These financial scams, although not known to many, still so common that thousands of people become victims of these swindles.

So, today I am presenting you with three most common scams in Indian stock market so that you can stay away from these rackets and protect yourself from the financial fraud and stress.

3 Most Common Scams in Indian Stock Market


1. Tips and Recommendation Fraud

This is one of the widely used and most common scams in Indian stock market. Here, the fraudsters try to attract the traders/investors by convincing them that they can provide a profit as much as 3-10% per day and 30-40% per month. Please note that Warren Buffet, the legendary investor, has got a yearly return of around 22% to become one of the richest people in the world. And these people are promising such high returns monthly. They further assure the people to give over 90% accuracy on their tips and recommendations.

These fraudsters argue that they have given minimum 40% return to their old clients. When people ask for trial tips before subscribing to their tips and recommendation program, they easily agree. {Although, most of the good companies clearly deny recommendations without complete registration}.

Many people who try these trials become victims of these fraudsters. All the tips provided by them during the trial period are 100% accurate. Seeing the results of the trial period, the traders/investors subscribe to the monthly/yearly recommendation plan of these fraudsters. They pay a high fee to subscribe to these tips. However, after the registration, none of their tips works well.

Now, let us see how these fraudsters are able to provide 100% accurate recommendations during the trial period.

Suppose, these fraudsters agree to give a trial period for 3 trading day. That is, they agree to give 1 recommendation to buy or sell a stock for three trading day. But there is a hidden side to this scheme that the investors do not know. During these three days, they don’t send the tips to just 1 person. They generally send the tips to thousands of people.

Let us say, they started with 1000 people initially to send the tips.

Day1: On day 1, these fraudsters send messages to sell a stock to 500 people and to buy to other 500 people for the same stock. Obviously, either the stock will go up or go down (they generally choose a volatile stock so that the probability of stock not changing price is zero). Therefore, on day 1, they have send a successful tip to 500 people. They, discard the other 500 people for whom the tip didn’t worked.

Day2: On day two, they again send message to sell another stock to 250 people and buy the stock to other 250 people. Obviously, again one group will receive correct recommendation. They again discard the other group whom they sent wrong tip.

Day3: On last day of tip, they send buy suggestion to 125 people and sell suggestion to other group of 125 people. Hence, 125 people will receive a correct tip for three consecutive days.

Now, these 125 people will now think that all the recommendations provided by these fraudsters for three continuous days are correct. Therefore, many of the people from this group will subscribe to the tips and recommendation plan and become a victim of one of the most common scams in Indian stock market. Let us assume that the charge for sending tips is Rs 15,000 for a year. If even 100 people are trapped in this swindle, these fraudsters easily make around 15,000*100 = Rs 15 lakhs.

Soon after subscribing to the tips from these fraudsters, the investors/traders start losing money. The tips aren’t working anymore. Overall, these people lose they money apart from paying a heavy registration fee for taking tips and recommendations.

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


2. Pump and Dump:

Pump and Dump is a micro-cap stock (penny stocks) fraud, where the fraudsters try to inflate the price of these micro-cap stocks by providing misleading information to investors/traders. They try to increase the price of these penny stocks by giving the fake news.

For example, If the fraudsters want to increase the price of XYZ microcap stock, then they will send messages like a big company is taking over a that stock; or that micro-cap stock is giving a bonus of 1:1; or A large-cap is buying 50% stake of that micro-cap stock etc

The fraudsters want the retailers to buy the shares of these stocks as much as possible. Let us see what the main aim of these fraudsters is.

  • First, these fraudsters buy a cheap penny stock at a large volume.
  • Then they send fake messages or emails to millions of investors/traders recommending them to buy that stock.
  • Those who take this news as true, start buying stocks of these companies.
  • Because of this increased demand, the price of that stock starts increasing.
  • When the share price reaches a good price, then these fraudsters sell their stocks and get good returns.

After selling their stocks at high prices, these fraudsters then stop sending email/messages to the people. Moreover, the price of these stocks becomes very volatile, as they are not worth that high price. Hence, soon the price of these stocks falls heavily and the retail investors lose their money.

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


3. Fake messages in the name of brokers.

Many people invest in the stock market on the recommendation of their stockbrokers or advisers. As these people trust blindly on their brokers, they don’t research much about the stock after receiving the recommendation/tips. Instead, they just buy these stocks trusting their advisers.

In this scam, a lot of fraudsters, trap the retail investors/traders by using their trust in their brokerage firm. They send messages in the names of their brokers recommending them to buy certain stocks. As these people, misunderstood the message and think that it is sent by their brokers, they buy the recommended stocks.

However, as the recommendation did not truly send by their brokers. Hence, the stock prices fall soon and these investors/traders lose a huge amount of money.

Let’s see why these fraudsters send these messages to retail investors/traders.

Initially, these fraudsters send the recommendations to buy the same stock to their paid subscribers. Then, they try to inflate the price of these stocks by sending fake messages in the name of registered brokers to general people. When the stock price starts increasing, they suggest their paid subscribers sell the stock and get a good return. Therefore, their paid customers are satisfied with the recommendation and continue to their monthly/yearly paid recommendation plan.

In the end, it’s the retail investors only who end up losing their money by blindly following the fake recommendations. This is the third most common scams in Indian stock market that every investors/trader should be aware of if they want to safeguard their money.


Although, not all advisory company try to loot their customers and some give good guidance and recommendations. Still, it is advisable to stay away from free stocks tips and recommendations of any type. After all, no one cares about your money more than you.

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

Tags: Most Common Scams in Indian Stock Market, Stock market scams in India, 3 most common scams in Indian stock market, pump and dump scam in stocks, scams in stock market India, stock market scams India, common scams in stock market

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

3 Insanely Successful Stock Market Investors in India that you need to Know– My blog ‘Trade brains’ recently got listed in the top 100 stock blogs and websites for stock traders at feed spot. Hurray!! And in this cheerful occasion, I decided to write something different. Something that every stock investors in India need to know.

And then this idea came to my mind. All those who enter the stock market in India has same dreams. They all want to become absurdly wealthy like few of the known richest investors in the world.

However, I strongly believe that if you want to learn something new; then it’s best to learn from one who has already done it.

If you want to become successful in the stock market, then you should learn from the lives of these iconic stock market investor. How was their journey, what principles they follow, how long they have been investing? etc. So, today I decided to write a post about the ones who are insanely successful in Indian stock market.

How many of them do you know?

Everyone who enters the stock market world knows about Warren Buffet. The greatest investor of all time and one of the richest person in this world who made his fortune by investing in stocks. You might also have heard about Benjamin Graham, Charlie Munger, Peter Lynch etc

But do you know about the preposterously successful investors who made tons of money by investing in Indian stock market?

Yes, I can hear the name in your mind. Rakesh Jhunjhunwala. The name which comes instantly on the mouth of every Indian when we hear the term ‘Rich-Indian-stock-market-investor’. But how much do you know about him? And what about the other successful stock market investors in India?

In this post, I am going to tell you about 3 insanely wealthy stock market investors in India. Further, I will recommend you to read this post till the end as I have kept a surprise bonus there. So, be with me for the next 8-10 minutes to learn all about the most successful stock market investors in India.


3 Insanely Successful Stock Market Investors in India

Rakesh Jhunjhunwala

Successful Stock Market Investors in India

Net worth: 2.4 Billion USD
Born: 5 July 1960 (Age 57), Mumbai India
Education: Chartered Accountant
College: The University of Mumbai, The Institute of Chartered Accountants of India (ICAI)
Occupation: Owner of rare enterprises, investor, Film Producer & trader

Rakesh Jhunjhunwala, also known as, “India’s Warren Buffet” and “The Big Bull’, is one of the most renowned and successful stock market investors in India.

The son of an income tax officer, Rakesh joined the stock market after completing his degree as a chartered accountant. Starting with the initial investment of only Rs 5,000, currently, he is sitting on a huge net worth of around Rs 15,000 crores.

Jhunjhunwala today manages the privately owned asset management firm “RARE Enterprises”. The name RARE is derived from the initials of his name and his wife’s name. That is- ‘Ra’ from his name (Rakesh) and ‘Re’ from his wife’s name (Rekha). He is also the chairman of Aptech Limited and Hungama Digital Media Entertainment Pvt. Ltd.

From the very start, Rakesh Junjhunwala’s ‘risk and reward’ taking ability along with impressive imagination & wisdom earned him great profits.

His first ever large income was from selling 5000 shares of Tata Tea which he had previously bought for Rs. 43 per share and selling them at Rs. 143. His later career was marked by his buying of six crore shares of Titan in 2003 at an average price of around Rs 3. The stock is still in his portfolio and currently trading at Rs 530.

Rakesh Jhunjhunwala follows the ideology of Warren buffet and believes in long-term investment. He strongly advocates the growth of India and it’s rising economy. Mr. Jhunjhunwala is also confident in learning from mistakes. He often says- ‘Mistakes are your learning friends. The idea is to keep these mistakes small.’

According to Forbes 2016, Rakesh Jhunjhunwala is India’s 53rd richest person. 

Also read: Forbes- Rakesh Jhunjhunwala
Rakesh Jhunjhunwala Story
Rakesh Jhunjhunwala Success Story from 5k to 1.8$ Billion
5 Secretes that make Rakesh Jhunjhunwala Successful Investor
Rakesh Jhunjhunwala- The Inspiring story & philosophy of India’s most successful InvesTrader

Source: FinnovationZ.com


Radhakishan Damani

Successful Stock Market Investors in India

Net worth: 11.7 Billion USD (-as of May’2018)
Age: 61
Occupation: Investor, Stockbroker, Trader and the Founder & Promoter of Dmart

Radhakishan Damani, also known as ‘Mr white and white’, because of his simple dressing- white shirt and white trousers, is an investor and owner of D-mart. He is also the mentor of billionaire investor Rakesh Jhunjhunwala. RK Damani is known for his low profile and he rarely makes an appearance in public events or press conferences.

On 21st March 2017 i.e. the listing day of Avenue supermart (parent company of D-mart), the stock price rose more than double, from the offer price of Rs 299 and ended up 116% upwards to Rs 648. In the IPO of Avenue Supermart, RK Damani made around Rs 6100 crores in just two days.

RK  Damani owns 52% stake in Avenue Supermarts, and Bright Star Investments – his investment company, holds another 16% stake.

RK’s journey in Indian stock market is truly inspiring. He was not always involved in the stock market. He started his career as a trader in ball bearing, with no intentions to enter the stock market. However, his future has something else reserved for him.

“RK Damani entered the market at an age of 32.”

At an age of 32, post his father’s death, RK was forced to close down his ball bearing business and had to join his brother in the stockbroking business, which was inherited from their father.

RK Damani had no idea of what to do in the stock market then. His knowledge of the stock market was very limited and can be considered next to zero when he entered. He made few mistakes initially by speculating the stock prices. However, he soon understood that the market is a heaven for those who want to make a great fortune in life.

As he was involved in stock broking, he also understood that he can’t make lots of money just by watching other people invest. Finally, he started investing for the long term. Gradually, his judgment began getting right, and within the next couple of years, he was standing as one of the most successful investors in the market.

RK Damani’s strategy is quite simple- Invest for the long term, like 5 to 10 years. RK always sees the future prospects of the company before investing and invests only if the product has a potential far ahead in the future.

Also Read: Forbes- Radhakishan Damani
DMart’s founder Radhakishan Damani: The unlikely retail billionaire
Radhakishan Damani: Man with the Midas touch in the stock markets

Source: LKKN Learning Lessons of Life


Ramesh Damani

Successful Stock Market Investors in India

Net worth: 8000 Crores (1.24 Billion USD)
Age – 61
Education: HR College, Mumbai (Bachelor’s degree in Commerce)
California State University (Master’s Degree in Business Administration)
Occupation – Founder of Ramesh s Damani Finance Pvt Ltd

Ramesh Damani, the investment guru and one of the most successful stock market investors in India, started his journey to riches in 1990’s when Sensex was 600 points. He holds a bachelor’s degree in commerce from HR College, Mumbai and a master’s degree in Business Administration from California State University.

Ramesh Damani works at privately owned Ramesh s Damani Finance Pvt Ltd.

The son of a successful stock investor, Ramesh Damani became a member of the Bombay Stock Exchange(BSE) in 1989. Initially, Ramesh planned his career as a stockbroker. However, later he started enjoying picking winning stocks and switched to become a long-term investor.

Ramesh Damani’s first famous investment was ‘Infosys’. Coming from a techie background in the US, he knew that Infosys has great future potentials. So, when Infosys became public in 1993, he invested Rs 10 lakhs in it. By 1999, this investment has given him more than 100 times return.

“I learned that just because a stock doubles, it is not a reason to sell it.”- Ramesh Damani

The investment philosophy of Ramesh Damani is easy and simple to understand. He is a long-term investor and suggests not to invest for short-term gain. Further, he advises everyone to make an exit strategy clear before making an investment in any stock. He further adds that the economy of a market is hard to predict; however if you have researched the stock carefully, and had made a good strategy, then you can easily make fortunes in the stock market.

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

Also Read- Ramesh Damani: The Stock Picker Who Could’ve Become A Billionaire

Source: The TrakInvest Show


Bonus:

Raamdeo Agrawal

Successful Stock Market Investors in India

Networth – 1,200 Cr
Age -60
Occupation: Co-Founder- Motilal Oswal Financial Services Ltd

Raamdeo Aggrawal, the co-founder of Motilal Oswal Group, is another most respectable stock market investor in India.

He is famous for investing in the legendary stock of HERO HONDA in 1995 when HERO was a small cap with a market capitalization of only 1000 crores. Raamdeo Aggrawal invested around Rs 10 lakh in the shares of the two-wheeler manufacturer at Rs 30 apiece, and held on to them for the next 20 years, till the share price rose to Rs 2,600 apiece. Today the market cap of HERO is above 73,000 crores.

During the last 30 year career, Raamdeo Aggrawal investing strategy is based on QGLB: Quality, growth, longevity and bargain value of a company.

Like most great investors, Raamdeo Aggarwal too follows the principles of long-term investment. Among his favorite books to read are- ‘One Up on Wall Street‘ by Peter Lynch and ‘The Intelligent Investor‘ by Benjamin Graham. Further, he is also excited by Michael Porter’s ideas on the competitive structure.

“After 30 years, I understood economic moat is the mantra of investing” -Raamdeo Agrawal

Raamdeo Agrawal suggests the investors not to be driven solely by market trends and advice to research the stock intelligently before investing.

Also read: Raamdeo Agrawal’s crorepati formula: Invest Rs 10,000 a month for 25 years
Raamdeo Agrawal Success Story Journey from Zero to 1000 Cr

Source: Motilal Oswal Securities

As promised, here is the bonus section. List of few other best stock market investors whom you should know. Further, I have added a link to each of the investors so that you can read further.

Porinju Veliyath, 55
Investor, Founder- Equity Intelligence India Pvt Ltd
Nemish Shah, 62
Co-founder of ENAM
Chandresh Nigam, 48
Managing Director-CEO, Axis Mutual Fund
Chaitanya Dalmia, 42
CIO, Renaissance Group
Chandrakant Sampat, 89
Individual investor
Parag Parikh, 63
Chairman & CEO, PPFAS
Dolly Khanna,
Investor, Homemaker
Sanjay Bakshi, 51
Managing Partner, ValueQuest Capital LLP
Samir Arora, 55
Founder, Helios Capital
Saurabh Mukherjea, 41
CEO (Institutional Equities),  Ambit Capital
Anoop Bhaskar, 50
Head – Equity, UTI Mutual Fund
R Srinivasan, 48
Head (EquitIES), SBI Mutual Fund

Also Read: Forbes India: Wealth Wizards: Top 20 Investors Share Their Philosophy

That’s all. I hope this post- “3 Insanely Successful Stock Market Investors in India that you need to Know” is helpful to the readers. Please share the post if you liked it. Happy Investing.

Further, do comment below who is your favorite Indian stock market Investor?

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

Tags: Most successful stock market investors in India, big investors in indian stock market, top individual investors of india, india best three investors, biggest investors in india, top 3 Successful Stock Market Investors in India, who is the Successful Stock Market Investors in India, successful stock market investors in India

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

7 Best Stock Market Apps that makes Stock Research 10x Easier– Now a day, if you are a stock market trader, then it’s essential for you to stay updated with every minute market movements. The modern stock market traders keep tabs on rising and fall of the stocks on daily basis and sometimes that too hourly.

The high-speed internet and handy mobile apps have made the life of traders simple, faster and efficient. These financial apps help the traders to stay informed and ready all the time.

From checking the real-time streaming market price of the stock, making a virtual portfolio, drawing stocks charts, following market trends to tracking your portfolio; everything is now accessible from your smartphone or tablet.

Therefore, today I am going to present you the 7 Best Stock Market Apps that will make your stock research easier in India. Moreover, all the apps listed here are free. So be with me for the next 5-8 minutes to learn best stock market apps for Indian stock research.

7 Best Stock Market Apps –

1. MoneyControl:

best stock market apps money control

Play store rating: 4.4/5 Stars
Downloads: +5 Million
Available on: Android, IoS, Windows

This is my personal favorite mobile app for stock market news and updates. If you are planning to keep only one stock market app on your smartphone, then I will highly recommend you to have this one. Money control app is simple, yet have tons of information and news.

You can track the latest updates on Indian and Global financial markets on your smartphone with the Moneycontrol App. It covers multiple assets from BSE, NSE, MCX and NCDEX exchanges, so you can track Indices (Sensex & Nifty), Stocks, Futures, Options, Mutual Funds, Commodities and Currencies with ease.

Features:

  • Ease of Use: Easy navigation to all financial data, portfolio, watchlist and message board. Single search bar with voice search for stocks, indices, mutual funds, commodities, news, etc
  • Latest Market Data: Latest quotes of stocks, F&O, mutual funds, commodities and currencies from BSE, NSE, MCX, and NCDEX
  • News: All-day coverage of news related to markets, business and economy; plus interviews of senior management
  • Portfolio: Easy monitoring your portfolio across Stocks, Mutual Funds, ULIPs, and Bullion. Timely updates on performance of your portfolio, and news & alerts relating to stocks you hold
  • Personalized Watchlist: Adding your favorite stocks, mutual funds, commodities, futures, and currencies to monitor. Get timely alerts in form of news and corporate action
  • Message Board: Follow your favorite topics and the top borders to get recommendations. Engage and participate in conversations relating to your portfolio or interest

Download here

Source: Money Control


2. Economic Times(ET) Markets

best stock market apps et market

Play store rating: 4.2/5 Stars
Downloads: +1 Million
Available on: Android, IoS, Windows

This is another of the best stock market apps. I regularly use ET Markets app for reading market news and updates as they provide best latest news.

Features:

  • To track BSE Sensex, NSE Nifty charts live and get share prices with advanced technical charting.
  • Follow stock quotes real time, get tips on intraday trading, stock futures, commodities, forex market, ETFs on the go.
  • One-stop destination for mutual fund news, NAVs, portfolio updates, fund analysis, SIP calculator
  • Simple swipe to build, manage and access your portfolio; get customized news, analysis and data of the Indian stock market
  • To create your watchlist and track them regularly
  • Get analyses/expert views delivered to you, participate in discussions/conversations through comments

Download here


3. Yahoo Finance

best stock market apps yahoo finance

Play store rating: 4.4/5 Stars
Downloads: +1 Million
Available on: Android, IoS, Windows

First of all, after downloading this app, you need to change the settings. In the region settings, select ‘India (English)’ for getting the updates about Indian stock market.

The simple yet dynamic user interface makes it one of the best stock market apps for stock research.

Features:

  • Follow the stocks you care about most and get personalized news and alerts.
  • Access real-time stock information and investment updates to stay on top of the market.
  • Add stocks to watchlists to get real-time stock quotes and personalized news
  • Track the performance of your personal portfolio.
  • Find all the financial information you need with sleek, intuitive navigation
  • Go beyond stocks and track currencies, bonds, commodities, equities, world indices, futures, and more
  • Compare stocks with interactive full-screen charts

Download here


4. NSE Mobile Trading

best stock market apps nse trading app

Play store rating: 4.1 Stars
Downloads: +1 Million
Available on: Android, IoS, Windows

Another one of the best stock market apps in India. This app provides the freedom to trade hassle free anywhere and at any time. After downloading the app, you can get the User ID and Password by your NSE registered Trading Member. Further, you can call 1800 266 0052 (Toll-Free) for assistance

Features:

  • Real-time streaming quotes, with a simple and user-friendly interface for all type of users.
  • A comprehensive trading and market monitoring platform.

Download here.


5. Investar

best stock market apps investrar

Play store rating: 4.0/5 Stars
Downloads: +100,000
Available on: Android, IoS

The simple navigation and interactive charts with zoom features make it one of the best stock market apps. It is a great app for technical analysis on your smartphone or tablet.

Features:

  • Live intraday candlestick chart updates (Stocks/FO) (1-min or 5-min, depending on the subscription type)
  • Live NSE Stocks/F&O updates.
  • Unlimited watch-lists.
  • Technical indicators like (EMA, SMA, MACD, RSI, STOCHASTICS, VOLUME, OPEN INTEREST, ADX, BOLLINGER-BANDS)
  • Pivot-point based resistance & support levels.
  • Push Notifications

Download here


6. Stock Watch

best stock market apps stock watch

Play store rating: 4.2/5 Stars
Downloads: +1 Million
Available on: Android

This is simple, easy and well-categorized app. The friendly user interface makes it the best stock market apps for tracking portfolio and creating a watchlist.

Features:

  • Live Stock Quote: Live feeds ensure the fastest quotes! Stay on top of the Nifty and Sensex with intraday charts and tallies of daily gainers and losers in Indian markets.
  • Stock tips: Get Indian stock tips from market experts
  • Stock Search: On device Search-Suggest feature. Saves you the effort to type out entire company name and helps find stocks faster
  • Stocks Watchlist: Keep a close watch on stocks most critical to you! Update by the tick. Latest and fastest refresh cycles. Sort by Name, Price, Change and % change.
  • Finance/Business News: Get the most relevant news that makes the market across ALL business sources. Check news on Indian markets and stocks, updated regularly
  • Global Indices: Get a snapshot of leading global indices in one place.

Download here


7. Stock Edge

stock edge

Play store rating: 4.7/5 Stars
Downloads: +500,000
Available on: Android, iOS

Stock Edge helps Indian Stock market traders and investors do their own research and take better decisions by providing them with end-of-day analytics and visualizations and alerts.

Features:

  • Daily Updates Section for filtered major market tracking with News, NSE & BSE Corporate Announcements, Forthcoming events, & Corporate Actions and more.
  • FII/ FPI & DII Cash and Derivatives with strong historical data visualization Daily, Monthly & Yearly.
  • Opportunity Scans: Price Scans, Last week high/ low, Last Month high/ low, 52 weeks high/low, 3 days price behavior etc
  • Track what Big Indian Investors are doing. Use MyInvestorGroup section to create your own group of Investors with their multiple names/entities etc
  • Sector Research: Sector List, Industries in a sector, Companies in a sector/Industry, Price Movement of last 30 days presented in a simple graph, Gainers, Losers etc.

Download Here


BONUS:

1. Trade Brains -Learn to Invest

trade brains learning app

Play store rating: 4.6/5 Stars
Available on: Android

Trade brains is a FREE financial education app focused on teaching stock market investing and personal finance to the DIY (do-it-yourself) Investors. Trade Brains app will guide you on how to invest in the Indian stock market with simple, easy-to-understand and original contents.

Features:

  • Pocket guide for stock market Investment
  • Step-by-step stock investing lessons.
  • Easy to understand contents of various investment concepts and strategies.
  • Best Investment quotes.
  • Any content can be shared with a simple click.
  • Bookmark your favorite content to read/revise later
  • Topic requests by the users.

DOWNLOAD HERE


2. Market Mojo

best stock market apps market mojo

Play store rating: 4.5/5 Stars
Downloads: +50,000
Available on: Android

This is a new yet powerful app for stock market research. Market Mojo is great for fundamental analysis of stocks. It offers pre-analyzed information on all stocks, all financials, all news, all price movement, all broker recommendations, all technicals and everything that matters in the Indian stock markets.

Features:

  • The Mojo Quality rank reflects the company’s long-term performance vs its peers.
  • Its Valuation determines how the stock is valued at its current price
  • The current financial trend indicates if the company is currently on a growth path and its ability to generate profits.
  • The Portfolio Analyser evaluates every hidden opportunity and risk in the portfolio and tells the investor what he should be doing rather than what he should be just tracking. Every portfolio goes through our test of seven parameters-Returns, Risk, Diversification, Liquidity, Quality, Valuation & Financial Trend

Download Here


That’s all. I hope this blog post ‘7 Best Stock Market Apps that makes Stock Research 10x Easier’ is useful to the readers.

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

Please comment below which Stock market app is your favourite?

Basics of Market Capitalization in Indian Stock Market.

Basics of Market Capitalization in Indian Stock Market. Let’s start this post with a general question. The stock prices of two famous Indian companies are given below.

MRF= Rs 69,780

HDFC Bank= Rs 1,650

What do you think? Which company is bigger?

If you think that MRF is a bigger company as its share price is too big compared to HDFC bank, then you need to read this post completely.

You cannot judge the size of the company just by looking at its share price.

To understand the answer of the question about which company is bigger, you need to understand the concept of market capitalization. So, be with me for the next 8-10 minute to learn everything about market capitalization in Indian stock market.

Here are the contents which are going to cover in this post:

  • Classification of companies in Indian stock market.
  • What is Market Capitalization?
  • How are companies classified using market capitalization in Indian stock market?
  • What are large, mid and small cap companies? – With examples
  • How to track the performance of different classifications of companies in Indian Market?
  • What are Blue Chips stocks?
  • Top 10 blue chips companies in Indian stock market.

Let’s get started.

Market Capitalization in Indian Stock Market

Classification of companies in Indian stock market:

Any company in Indian stock market can be classified in one of the following categories:

  1. Large Cap
  2. Mid Cap
  3. Small Cap

market capitalization in indian stock market

Here cap means capitalization. Although there are few other categories also like Mega-cap, Microcap etc, however, they aren’t used much in classifying the stocks.

These companies are classified based on their market capitalization, which we are going to discuss next.

What is Market Capitalization?

Market capitalization shows the size of the company and its aggregate value. Let us define market capitalization now:

Market Cap or Market capitalization refers the total market value of a company’s outstanding shares. It is calculated by multiplying a company’s outstanding shares with the current market price of one share.

Market Capitalization = (Total no of outstanding share) * (Price of one share)

**Outstanding Shares refers to all shares currently owned by stockholders, company officials, and investors in the public domain.

For example, let us assume for a company ABC,

Total number of outstanding shares= 1,00,000
Current price of 1 share= Rs 1,500
Market capitalization = 1,00,000* 1,500 = Rs 15,00,00,000

Therefore, the market capitalization of company ABC is Rs 15 Crores.

Now, let us move back to our original question. Which company is bigger? HDFC Bank or MRF?

We need to find the market capitalization of both these companies to figure out which one is bigger.

MRF
Total Number of outstanding shares 42,41,143
Current market price of one share Rs 69,780
Market Capitalization Rs 29,635 Crores
HDFC Bank
Total Number of outstanding shares 270,95,42,308
Current market price of one share Rs 1,650
Market Capitalization Rs 4,30,532 Crores

From the above table, we can notice that the market capitalization of HDFC bank is around 15 times that of MRF. Hence, HDFC bank is a much bigger company than MRF.

The skyrocketing share price of MRF is insignificant when we compare the total number of outstanding shares of MRF with HDFC bank.

In short, the share price cannot decide the size of a company. It’s the market capitalization which is used to classify the companies based on size.

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

How are companies classified using Market Capitalization in Indian stock market?

There is no hard and fast way rule (criteria) to define the classification of the companies based on the market capitalization. If you refer to different financial websites, the range of market cap will vary for different capitalization. However, in general, here is the commonly accepted classification of companies based on the market capitalization in Indian stock market.

Market Capitalization Classification
Less than 8,500 Cr Small cap
Between 8,500 Cr to 28,000 Cr Mid Cap
Greater than 28,000 Cr Large cap

Quick Note:  The above table is based on the latest circular by SEBI (Dec 2018). Here’s the link to the list of Average Market Capitalization of listed companies during the six months ended 31 December 2018 available on AMFIIndia Website.

Why there is no fixed market capitalization range for classifying companies?

Bombay stock exchange (BSE) uses the 80-15-5 rule to classify the companies in large cap, mid cap or small cap. Now, let me explain this 80-15-5 rule. The rule classifies the different companies listed on the exchange based on the decreasing order of their market capitalization in Indian stock market.

  • The largest market capitalization which covers up to 80% of the total market cap of all the listed company on the BSE is categorized as large cap company.
  • The next set which covers the 80-95% of the total market capitalization of all the listed company on the BSE is categorized as mid cap company.
  • Lastly, the set which covers 95-100% of all the listed company on the BSE is categorized as small cap company.
% of Total Market Capitalization Classification
 80% Large Cap
15% Mid Cap
5% Small Cap

Since the share price and market caps are dynamic; hence, there is no fixed market cap segment limit for classifying companies.

A few years ago, companies with a market capitalization around 10,000 crores- were considered to be large cap company. Now, they are mid cap company for this market cap. Most small cap companies are start-ups or in developing phase. They have a high growth opportunity. However, due to high failure rates of small caps, they also have a high risk.

Also read: S&P BSE Mid Cap and BSE Small Cap Index

What are large, mid and small cap companies?

“Every large cap company was a mid cap/ small cap once. However, every small cap company is not certain to become a mid/large cap.”

Large Cap companies:

They are the big and well-established companies. Most of the large-cap companies are leaders in their sector and have a huge market presence. Many of the large-cap companies are listed in Sensex 30 and Nifty 50. These companies have a very large capitalization to survive in adverse economic conditions. Here is the example of a few large-cap companies:

Company Name Industry Last Mkt Cap
Price (Rs cr)
Asian Paints Paints & Varnishes 1,153.95 110,686.63
Axis Bank Banks – Private Sector 504.6 120,949.11
Bharti Airtel Telecommunications – Service 365.9 146,264.87
Coal India Mining & Minerals 245.4 152,329.82
HDFC Bank Banks – Private Sector 1,678.55 430,532.82
Hero Motocorp Auto – 2 & 3 Wheelers 3,660.30 73,095.03
ICICI Bank Banks – Private Sector 291.5 186,912.15
Infosys Computers – Software 943.35 216,682.27
ITC Cigarettes 310.85 377,601.40
Kotak Mahindra Banks – Private Sector 985.45 187,552.70
M&M Auto – Cars & Jeeps 1,376.05 85,471.26
Maruti Suzuki Auto – Cars & Jeeps 7,237.20 218,621.38
Reliance Refineries 1,435.00 466,581.02
SBI Banks – Public Sector 288.85 230,314.68
Tata Motors Auto – LCVs & HCVs 443.1 150,470.15
Tata Steel Steel – Large 507.4 49,279.47
TCS Computers – Software 2,360.65 465,149.07
Wipro Computers – Software 256.85 124,987.03

Mid Cap companies:

These represent mid-sized companies that are relatively riskier than large-cap as investment options, yet they are not considered as risky as small-cap companies. These companies have the potential to become a large cap in a few years and have enough finance to survive harsh economic conditions.

Here are a few examples of mid-cap companies:

Company Name Industry Last Mkt Cap
Price (Rs cr)
Adani Power Power – Generation & Distribution 52.3 20,171.79
Aditya Birla F Retail 226.75 17,499.84
Ajanta Pharma Pharmaceuticals 1,043.05 9,181.24
Amara Raja Batt Auto Ancillaries 746.85 12,757.13
Apollo Tyres Tyres 226.8 12,974.09
Bank of India Banks – Public Sector 92.45 24,931.34
Bata India Leather Products 1,368.25 17,585.78
Berger Paints Paints & Varnishes 309.95 30,097.23
Castrol Lubricants 167.1 16,528.24
Future Consumer Food Processing 49.6 9,521.53
Future Retail Retail 445.4 22,385.73
Glenmark Pharmaceuticals 635.25 17,924.73
HEG Electrodes & Graphite 2,219.50 8,868.93
Jubilant Food Miscellaneous 1,349.90 17,814.50
Muthoot Finance Finance – Investments 592.75 23,747.25
NALCO Aluminium 54.5 10,167.62
PNB Housing Fin Finance – Housing 891 14,921.18
Tata Global Bev Plantations – Tea & Coffee 204.9 12,931.85
Tata Power Power – Generation & Distribution 73.35 19,839.51
TVS Motor Auto – 2 & 3 Wheelers 497 23,611.83
United Brewerie Breweries & Distilleries 1,399.20 36,995.57

You can find the list of more mid-cap companies here.

Small Cap companies:

These companies have small market capitalization and usually includes the start-ups or companies in the early stage of development. Small cap stocks are potentially big gainers as they are yet to be discovered within the sector. However, the risk level is high while investing in small-cap companies.

Here are a few examples of small-cap companies:

Company Name Industry Last Mkt Cap
Price (Rs cr)
Bombay Dyeing Textiles – Processing 83.2 1,718.37
Career Point Computers – Software – Training 100.75 182.69
D-Link India Computers – Hardware 99.95 354.87
Eros Intl Media & Entertainment 224.6 2,121.35
Everest Ind Cement – Products & Building Materials 362.4 558.93
Fineotex Chem Chemicals 31.45 350.04
Gati Couriers 128.85 1,267.50
Godawari Power Steel – Sponge Iron 93.35 318.42
Indraprastha Hospitals & Medical Services 52.95 485.41
Jayshree Tea Plantations – Tea & Coffee 100.35 289.79

You can find the list of small-cap companies here.

Here is a summary of the large-cap, mid-cap, and small-cap companies.

Criteria Small Cap Mid Cap Large Cap
Risk Very high High Low
Return Very high High Low
Liquidity Low High Very high

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

How to track the performance of different classifications of companies in Indian stock market?

You can track the performance of the companies of different classification of the various financial websites like Money control, BSE India, NSE website etc.

It would be best if you use the BSE India website for tracking. Here is a link, which you can use: http://www.bseindia.com/sensexview/indexview_new.aspx?index_Code=82&iname=BSE30#

  • S&P BSE Sensex is used to show the performance of the large-cap companies.

S&P Sensex midcap

What are Blue Chips stocks?

Blue chips are the nationally recognized, well established and financially sound companies.

These are the stocks of those reputed companies who are in the market for a very long time, financially strong and have a good track record of consistent growth and returns in the past many years.

Blue chip companies have huge market capitalization and are generally leaders in their market.

For example- HDFC bank (leader in the banking sector), Larsen and turbo (leader in the construction sector), TCS (leader in the software company) etc. Few other examples of blue-chip stocks are Reliance Industries, Sun Pharma, State bank of India etc.

These companies have stable performance and are very less volatile. That’s why blue-chip stocks are considered safe to invest compared to other companies.

Why are they called ‘Blue chip’ stocks?

The term ‘Blue chip’ has been derived from ‘Poker’ game.

In poker, blue chips are considered to be most valuable.

Mr Oliver Gingold, who used to work in Dow Jones, is credited to bring this name in the stock market. He used this name first time in 1923 referring it with few most valuable companies of that time. Later, the term ‘blue chips’ became popular to cite the reputed companies of the stock market.

Blue-chip stocks are known to give good consistent dividends to their shareholders.

These companies have a huge liquidity, which means that there are a large number of buyers and sellers in these stocks. So, they can be easily bought or sold anytime.

Besides all these pros of the Blue chip stocks, there are few cons too.

It’s not necessary that these companies will always perform. There are a number of examples of companies which were a blue chip in the past but are not anymore. Although most of them survive harsh economic conditions, nevertheless few blue chips stocks are financially hit hard by recessions and extreme adverse conditions.

In addition, as these companies have already achieved great success, therefore a large growth possibility is very less for such stocks. So, it will be very less likely to make quick returns or sharp profit in these stocks.

However, the chances of a sharp downfall are also very less in blue-chip stocks. Therefore, they are considered very less risky.

Few of the good properties of these stocks are- stability, consistent returns, good financial backup, less volatility and high liquidity.

Overall, Blue chip stocks are a good option for a safe long-term investment.

Top 10 Blue Chips stocks in Indian stock market.

Here is the list of top 10 blue chips stocks in Indian stock market.

S. No Company Sector
1 Reliance Industries Refineries, Oil & Gas
2 TCS Software company
3 HDFC Bank Non-public sector banking
4 ITC Cigarette, Hotels, Consumer products
5 ONGC Oil drilling & Exploration sector
6 Infosys IT Software
7 SBI Public sector bank
8 HDFC Financial company
9 HUL Consumer products
10 Coal India ltd Mining

Conclusion:

The various companies can be classified based on the market capitalization in Indian stock market as large, mid and small-cap companies. A thumb rule for classifying them is shown below:

Market Capitalization Classification
Less than 8,500 Cr Small cap
Between 8,500 Cr to 28,000 Cr Mid Cap
Greater than 28,000 Cr Large cap

The selection of a company to invest depends totally on your preference. If you looking for a steady long-term investment, select large-cap companies to invest. On the other hand, if you are looking for high profits and quick returns, then you should invest in small or mid-cap companies.

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I hope this post ‘Basics of Market Capitalization in Indian Stock Market’ is useful to the readers. Do comment below if you have any doubts or suggestions.

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

“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” -Warren Buffett

So, you are interested in the stock market and want your money to grow. You have read a number of investment blogs, financial magazines and subscribed to the Stock TIPS and recommendations from different brokers.

However, you are afraid to take the next step. You know that over 90% of people lose money in stock market. Most of them lose because they do not do their homework first and rely mostly on their brokers to select a stock to invest in Indian stock market. Therefore, you decide to take the matters in your hand and intelligently select a stock to invest in Indian stock market. You know that by doing so, either you will win or you will learn. No, a third way.

If you are one of such investor and want to smartly select a stock to invest in Indian stock market for consistent returns, then you are at the right place. In this post, I will explain to you 8 steps with questions to be answered to select a stock to invest in Indian stock market to avoid loss and get consistent returns. So, be with me for the next 10-15 minutes to learn the secret to intelligently select a stock to invest in Indian stock market.

8 steps to select a stock to invest in Indian stock market:

1. Does the company have good fundamentals?

To find the answer to this question, there is a 2-minute drill to find a fundamentally strong company. Using this drill, you can filter the healthy companies so that you can proceed to investigate further. If the company is not fundamentally strong, there is no need to learn more about its products/services, competitors, future prospects etc.

You can move to the next steps only once you confirm that the company has given good past performance and is worth investing in. For this 2-minute drill, you need to look into the financials of the company. Here are 8 financial ratios and their trend that should be carefully noted in this step:

    1. Earnings Per Share (EPS) – Increasing for last 5 years
    2. Price to Earnings Ratio (P/E) – Low compared to companies in the same industry
    3. Price to Book Ratio (P/B) – Low compared companies in the same industry
    4. Debt to Equity Ratio – Should be less than 1 (Preferably debt<0.5 or Zero-Debt)
    5. Return on Equity (ROE) – Should be greater than 20%
    6. Price to Sales Ratio (P/S) – Smaller value is preferred
    7. Current Ratio – Should be greater than 1
    8. Dividend – Increasing for the last 5 years

If you are not familiar with these financial ratios, you can read more here: 8 Financial Ratio Analysis that Every Stock Investor Should Know

Once you are confident that the company fulfills most of the criteria mentioned above, then study the financial reports of the company. Reading financial reports (Profit & loss statement, balance sheet, and cash flow statement) can take a little time. That’s why first make sure that the company passes the 2 min drill before you start investigating further. I have written a detailed post on how to read financial statements of a company, which you may find useful.

These financial results, however, gives the past growth. You cannot decide whether the company will perform the same or better in the future based on just past trends. Therefore, you need to consider other important factors while evaluating to select a stock to invest in Indian stock market. These factors are discussed in the next steps.

2. Do you understand the products or services offered by the company?

select a stock to invest in Indian stock market 5

After filtering the companies according to their financial fundamentals, you need to investigate about the company. Understand the company first. Learn about its product and services. It’s important that the company is easy-to-understand and has a fairly straightforward business model.

You might ask why is it so important to understand the company. Let’s comprehend this with the help of an example. Let’s say you have to choose a classmate who you will ‘buy’ by paying him what he would earn in the first twelve months of working. In return for which he will give you a quarter of his earnings thereafter for the rest of their lives. Whom will you choose?

While choosing, you must be thinking to select the one who is most likely to have a great income in the future. Further, will you will not choose a guy/girl whom you know nothing about. As you don’t know that person, there is no way that you can predict how much he/she will earn in the future. The same goes for the stocks. If you can understand the stock, you can easily take a good decision whether to buy, hold or sell the stock at any time. Hence, always invest in the companies that you understand.

There are a number of companies that everyone knows and understand. From toothpaste, soaps, towels, t-shirts, jeans, shoes to bikes, cars, airlines, banks; there is a company behind every product. Invest in such companies. Do not buy the stock of ‘ABC Pharmaceuticals’ without knowing what medicines/products it produces.

3. Will people still be using this product or service in 15-20 years from now?

The next step is to ask about the life of the company. Always look for a company with a long life. Such companies have huge growth potential and the power of compounding applies to such companies. Some companies have a life of just a few years.

For example, do you think people will be using soaps in 20 years from now? The answer is ‘Yes’. It’s been there for over 100 years and will surely continue in the future. Maybe the fragrance will change, but the soap will be there. Now, take another example. What do you think about a pen-drive or USB manufacturing company? Do you think that people, 20 years from now, will still use pen drives? The answer is no. Overall, select only a stock to invest in Indian stock market that will last for the next 15-20 years.

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

4. Does the company have a low-cost durable competitive advantage?

“I like businesses I can understand. We’ll start with that. That narrows it down about 90% …There’s all kinds of things I don’t understand, but fortunately there’s enough I do understand. You got this big, wide world out there. Almost every company is publicly owned…You got all American business, practically, available to you. Now, to start with, it doesn’t make sense to go with things you think you can[‘t] understand. But you can understand some things. I can understand this. I mean you can understand this. Anybody can understand this. I mean this is a product that basically hasn’t been changed much…since 1886…and it’s a simple business. It’s not an easy business. I don’t want a business that’s easy for competitors. And I want a business with a moat around it. I want a very valuable castle in the middle. And then I want…the Duke who’s in charge of that castle to be honest and hard working and able. And then I want a big moat around the castle, and that moat can be various things.”

Warren Buffet (Source: Warren Buffett On Economic Moats)

Invest in companies with ‘MOAT’

This ‘MOAT’ concept was popularized by Mr. Warren Buffet. A moat is a deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defense against attack. Some stocks have a similar moat around them. That’s why it’s really tough for its competitors to defeat them in its sector.

For example, Colgate! It has become such a common name in Indian homes that Colgate is considered as a synonym to toothpaste. Another example is Cadbury– the chocolate producing company. This company is dominating its industry and the people are even ready to pay a lot more to buy its products. Similarly, Tata Motors has got a moat in ‘truck’ sector. Tata Trucks has been in dominating in Indian automobile sector for last 5 decades.

select a stock to invest in Indian stock market 1

In addition, while selecting an ‘unbreathable moat’ look for such companies in which the switching cost is high. For example, Banks. How rarely people change their bank accounts just because the competitor is giving 0.5% more interest rate. Coal India, ITC, Asian Paints are few of the other Indian companies with big moats.

5. What is the company doing that its competitors are not?

Find the unique selling point of the company. Learn what this company is doing which it’s competitors are not.

To understand better, let us analyze the Indian automobile sector. There are a number of automobile companies in India. However, when we consider the passenger vehicles (Cars and SUVs), Maruti Suzuki is the leading company in India. There are a number of competitors against Maruti in this sector like Tata Motors, Hyundai, Honda, Ford etc.

Nevertheless, Maruti Suzuki is dominating because of the easily available service centers that it provides. Maruti’s service center can be found on every corner of the streets. It’s really simple and easy to get a Maruti car serviced even in small cities. On the other hand, try to get your ‘FORD’ car serviced. You will rarely find any authentic ford service center around you. That’s why people prefer buying Maruti cars in India.  And hence, Maruti Suzuki is able to increase its sales consistently and give good returns to its shareholders.

select a stock to invest in Indian stock market 7

Overall, investigate first what the company is doing that its competitors are not before you select a stock to invest in Indian stock market.

6. Does the company have big debt?

select a stock to invest in Indian stock market 2

Big debts in a company are same as the big hole in the boat. If the hole in the boat is not filled soon, then it won’t be able to cross the long sea and will definitely sink. When you select a stock to invest in Indian stock market, read its financial documents carefully. Avoid companies with big debts. Many times, the accountants use the financial loopholes to hide the debt in their annual results. However, if you read the financials minutely, you will be able to find these debts, as the financial sheet always needs to be balanced.

While investing the companies in the banking sector, look for its Non-performing assets (NPA). Avoid companies in the banking sector with huge NPA’s.

 7. Is the company’s management efficient and qualified?

select a stock to invest in Indian stock market 4

This is one of the most crucial questions to ask before you select a stock to invest in Indian stock market. The management is the soul of the company. A good management can prosper the company to new heights. On the other hand, a bad management can lead to the downfall of the company. Hence, it’s really important to research carefully about the management of the company that you plan to invest in Indian stock market. First, do some research, and find out who is running the company. Among other things, you should know who its CEO, CFO, MD, and CIO are along with their qualifications and past experience. Next, here are a few points to check the efficiency of the company:

  1. Strategy and goals:

    Go through the Vision, Mission and Value statement of the company. Together, mission and vision guide strategy development, help communicate the company’s purpose to shareholders and inform the goals and objectives set to determine whether the strategy is on track. Hence, these defined future statements for the company can help an investor to decide whether to select a stock to invest in Indian stock market or not.

  2. Length of tenure:

    This can help to judge the stability in the management of the company. A long length of tenure of the top management with the steady growth of the company is a good sign. However, sometimes, a change in management is considered an adept signal when the last management was not performing well. Nevertheless, the long tenure of good management is the sign of a healthy company.

  3. Insider buying and share buybacks:

    The insiders of the company have the best knowledge about the company’s performance. The management and the top officials can understand the future aspects of the company and if they believe that the company will outperform in the future, they are mostly correct. Therefore, the insider buying and share buybacks are signals that the owners trust in the future of the company and it’s a good company to select a stock to invest in Indian stock market.

    In addition, the other scenario, where the insiders or CEO is selling the stocks, is an independent activity and cannot be treated as a bad signal. We cannot judge the company’s future is bad just because the insiders are selling the stocks. Maybe, the insiders need money to start another venture. Or maybe, the insiders are selling the stock to buy a new house. Maybe, the insiders are selling the stock to just enjoy the money. Everyone has the right to sell stocks when they need it.

    In short, the insider buying and share buybacks are signals of good company. However, we cannot judge the company’s future based on the insider’s selling the stock. Please note, if the insiders are selling their complete lot of stocks, then it’s a matter to investigate further.

  4. Perks and compensations to staff and workers:

    If the company is giving good perks to its staff and employees, then again it’s a sign of good management. The results of a company depend a lot on the performance of its staff and employees. Happy employees will give their best performance. However, if there is continuous workers strikes or increasing worker union demands, then it means that the management is not able to fulfill the needs of its workers and employees. Such cases are a bad sign for investors in the company.

  5. Financial ratios ROE and ROCE:

    The management’s efficiency can also be judged using a few financial ratios. Return on Equity (ROE) and Return on Capital Employed (ROCE) are the best tools to judge the management’s performance and the resulting potential for future growth in value.

    ROE is the percentage expression of a company’s net income as it is returned as a value to shareholders. This formula allows investors and analysts an alternative measure of the company’s profitability and calculates the efficiency with which a company generates profit using the funds that shareholders have invested.

    ROCE is the primary measure of how efficiently a company utilizes all available capital to generate additional profits. Source: Investopedia

    A high and steady ROE and ROCE for the last few couples of years is considered a sign of good management. As a thumb rule, invest only in companies with the ROE and ROCE of above 20% continuously for the last 5 years.

  6. Transparency:

    This is the last, but one of the most important factor while judging the management. The integrity of the management is the key to the growth of the company. It’s the management’s duty to give a ‘fair’ quarterly and annual results to its shareholders. Just as the management announces the good results of the company; in the same way, the management should come forward in the times of bad results to explain its reasons to its shareholders. A good management always maintains the transparency of its organization.

 8. Is the company constantly in the news and overly popular?

select a stock to invest in Indian stock market 3

The stock market is based on the sentiments of the people. Consistent news affects the expectations and decisions of the public. Stocks, which are popular in news, can be inflated by the hype of the media. As people expect great results from such companies, even after giving good returns the stock prices of such companies falls. That’s why try to avoid buying stocks of such companies for easy returns. The hot stocks are subjected to market volatility and the boring stocks are the one, which gives the best returns.

Few other quick tips to select a stock to invest in Indian stock market:

  • Cheap isn’t always good, and expensive isn’t always bad:

    While investing in growth stocks, sometimes it’s okay to invest the stocks with high P/E ratio. Some growth stocks have huge future potentials and can give multiple times returns. Moreover, while selecting an undervalued stock, you should investigate further why the stock is undervalued. Many companies sell cheaply because they do not have much growth opportunity in the future. For example, Coal and mining sector.

  • Invest in mid-cap companies:

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

  • Past results do not guarantee future performance:

    Do not rely totally on the financial reports to select a stock to invest in Indian stock market. The report shows the past performance of the companies. However, the future growth depends on various aspects of management, competitors, industry etc.

These are the key points to consider while choosing a stock to invest. Now, let us summarize the 8 steps with questions to be answered to select a stock to invest in Indian stock market:

1. Does the company have good fundamentals? 2-minute drill to filter companies using financials.

2. Do you understand the products or services offered by the company?

3. Will people still be using this product or service in 15-20 years from now?

4. Does the company have a low-cost durable competitive advantage?

5. What the company is doing that its competitors are not?

6. Does the company has low debt?

7. Is the company’s management efficient and qualified?

8. Is the company constantly in news and overly popular?

That’s all! I hope you have understood all the steps and questions to be answered before you select a stock to invest in Indian stock market.

Let me know what you think about this procedure in the comment box below. In addition, if you have any doubts regarding any point mentioned in this article, then feel free to comment below. I will be happy to help you out. #HappyInvesting.

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