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Most Successful Stock Market Investors in India cover

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!

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best stock market apps

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?

market capitalization in Indian stock market COVER

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.

Ready to start your journey to become a succesful stock market investor? If yes, then here’s an amazing course for newbie investors: HOW TO PICK WINNING STOCKS?

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.

Investing Instincts (Quiz)

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.

New to stocks? Confused where to start? Here’s an amazing online course for fundamental investment- HOW TO PICK WINNING STOCKS? The course is currently available at a discount.

The Power of Compounding- Secret of Making Money

The Power of Compounding- Secret of Making Money: Benjamin Franklin once wrote somewhere: ”’tis the stone that will turn all your lead into gold Remember that money is of a prolific, generating nature. Money can beget money, and its offspring can beget more.

At a very young age, I was introduced to the concept of the power of compounding by my grandfather. He told me a story to explain it better which I am going to narrate here:

One upon a time, there lived an honorable king in a prosperous country. He was well known all over the country for his trustworthy words as he always kept his promise no matter what. Because of this nature of the King, he was widely regarded by people in his kingdom.

All the people in his kingdom were very happy and leading a peaceful life. However, there was a cunning burglar in his capital city. Once, when he was trying to steal some jewels from one of his minister’s house, he was caught red handed. He was presented in front of the King. At that time, the king was playing ‘CHESS’ with one of his minister.
The punishment for stealing in that country was death. Nevertheless, the burglar knew about the honorable nature of the king. He demanded one last wish from the king. The king agreed and said that if it was in his power and good will, he will fulfill his wish.

The burglar said, “O Brave and honorable King! I knew that the punishment for stealing in this country is death. However, I tried to steal some jewels only because I could not see my family suffering from hunger. After I am gone, I just wish them to have enough food to carry on their lives for few days before they manage it themselves.”

Then he further added, “My wish is simple. As I disturbed you while you were playing chess, I want my wish to be related your game. I only wish for one grain of rice for the first square of the chessboard, two grains for the second square, four grains for the third square, eight for the fourth square and so on for all 64 squares.“

The King granted the burglar’s wish without much thinking and regarded it as a small wish. He happily accepted his wish and promised that he will only be prosceuted after his last wish was fulfilled. However, a week later, the king’s treasurer informed the King that even his whole kingdom doesn’t produce as much rice as promised. The quantity of rice promised might not even be produced by combining many countries.

In the end, the King was forced to give his kingdom and all his possessions to the burglar, as he could not keep his promise. That is the power of compounding.

I was amazed when I realized what wonders compounding can do. I still remember my grandfather’s words after the story “The strongest force in the universe is Compound Interest.” Although later, I found out that these words weren’t his words but were originally Einstein’s words. However, hearing this from my grandfather at that young age was quite inspiring.

Another book that I read at a young age- ‘Think and Grow Rich’ by Napoleon Hill. This is the number one self help motivational book that I have came across. I definitely recommend everyone to read this book.

The Power of Compounding:

The power of compounding can be explained as: “Power of compounding is reinvesting or compounding of income on the initial amount invested and also on the accumulated interest over previous years to grow the amount invested year over year.”

Now, you might be thinking what’s so great about the power of compounding. Even a fifth grader knows the term. Yes, you might argue that. However, there are things that the fifth grader doesn’t know and if he understands it, he can set the whole world on fire.

Let’s see how the concept of compounding works. Suppose Rajat invested Rs 1,00,000 at the age of 20 and locks all his investments till retirement. Arvind, however, doesn’t make any investment till he is 40. At 40, he invested Rs 1,00,000 and locks it till the age of 60. The table below tells you how their investments would turn out when they both are 60, assuming that the growth rate is 15 percent per annum. The results are eye-opening.

the power of compounding

On retirement, Rajat will get over Rs 2.6 Crores while Arvind will only get Rs 16 lakhs. Therefore, over 16 Times Growth in the Investment for Rajat compared to Arvind. That’s the power of compounding

Compounding is a simple, but a very powerful concept. Why powerful? Because compounding is similar to a multiplier effect since the interest that is earned by the initial capital also earns an interest, the value of the investment grows at an exponential rate rather than an arithmetic linear rate. The higher the rate of return, the steeper the curve.

Here is a chart of returns on compound interest vs simple interest. The principal amount is Rs 1 lakhs and an annual returns on both simple and compound interest is 15%.

the power of compounding trade brains

I am glad that I received this financial advice at a very young age. This financial knowledge has changed my life and still changing. I hope you understand this concept and the next time you plan to borrow money on credit cards, remember that compounding is working against you.

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What kind of Investor you are cover

What kind of Investor you are? Find out here.

What Kind of Investor you are? In the book ‘The Intelligent Investor’, Benjamin Graham has described two types of investor- Defensive Investors and Enterprising investors. Following is their description by Graham:

“We make a basic distinction between two kinds of investors — the “defensive” and the “enterprising”.

The defensive (or passive) investor will place his chief emphasis on the avoidance of serious mistakes or losses. His second aim will be freedom from effort, annoyance, and the need for making frequent decisions.

The determining trait of the enterprising (or active, or aggressive) investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than average.”

The Intelligent Investor (By Benjamin Graham)

Although a lot has changed between Graham’s times to the modern investment period, nevertheless the type of investors has remained the same. Even in this modern time, there are two types of investors- an active investor and a passive investor. However, there is also a lot of room between active and passive investors where a many investors reside in today’s world. Let us now discuss the key qualities of all these investors.

A passive investor is ‘buy and hold’ investor. Typically, the holding time for these investors is forever. They buy a stock and then forget it for a very long time. Sometimes these types of investors may face huge occasional losses because of ‘recessions’ or ‘market crash’ which they are not aware of as they are not actively involved.

For example, during the 2008 market crash, many passive investors did not take their money out of the market and hence their investments suffered huge losses.

However, for a long run, these investors turn out to be winners. The 2008 market crash recovered after 2 years and those who remained invested for long time turned out to be the victors in the end.

Recommended book to read: The Richest Man in Babylon (The Success Secrets of the Ancients – the Most Inspiring Book on Wealth Ever Written)

An active investor is a day trader. Day traders buy and sell the stocks throughout the day to get profits. As they as actively involved, they are awarded great profits throughout the day.

However, these investors incur many frequent charges due to a large number of transactions. In addition, day trading can also be very stressful, as these traders have to devote lots of time in the active trading.

What kind of Investor you are day trader

Fortunately, there are many people whose investment style lies in between those of an active investor and a passive investor. These people are not day traders but are actively involved in the market.

Typically, What Kind of Investor you are depends on three factors. Time, preference and knowledge.

Factors determining what kind of Investor you are:

TIME:

Let us understand this with an example. Suppose you are an employee, have a family &kids. You love to travel and party with friends. Then it is very unlikely that you will be able to give a huge amount of time for investing. You might choose a passive investment strategy. This will give you lots of time to remain actively involved in your personal and social life.

Now, let us take another example. Here, you are highly interested in stock market and you give plenty of time for your investment. Then, you fall into the category of an active investor.

However, these are not the only scenario possible for the investors. For instance, say you are willing to give 5-10 hours per week for your investments. Then, you lie somewhere between an active and passive investor.

Preference:

This is based on your inclination towards the market. Some people are highly interested in stock market and prefer to give all their free time in analyzing the stock market. Then they are actively involved.

However, if you enjoy having a party in your free time instead of reading the market  news or economic times, then you are passively involved. In this case, you do not think about your investment during these times.

There is also a third possibility based on the preference. Suppose you like to party in your free time.  Nevertheless, during the party, you also like to discuss the prices of the stocks and its trends with your friends. In this case, you are again somewhere between an active and a passive investor.

Knowledge:

How much knowledge you have also influenced your style of investing. If you are new to investing and do not have enough knowledge, you may be inclined to passive investing. However, as you gain more knowledge, you may prefer to get more actively involved in your investing.

Overall, the style of an investor can be defined by considering the amount of time he has, his desire and preference towards investment and his level of financial knowledge. These three factors can help you determine how actively or passively you are involved in your investment.

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: What kind of Investor you are, active vs passive investors, What kind of Investor you are active or passive, different kinds of investors

Stock Market Timings in India cover

Stock Market Timings in India.

Stock Market Timings in India. There are two major stock exchanges in India- Bombay stock exchange (BSE) and National stock exchange (NSE). However, the timing of both BSE & NSE is the same.

First of all, you need to know that the stock market in India is closed on weekends i.e. Saturday and Sunday. It is also closed on the national holidays. You can find the list of the holidays of the stock exchange here:

https://www.nseindia.com/global/content/market_timings_holidays/market_timings_holidays.htm

The normal trading time for equity market is between 9:15 am to 03:30 pm, Monday to Friday.

The trading time for commodity (MCX) market is between 10:00 AM to 11:30 PM, Monday to Friday.

The normal trading time for Agri-community (NCDEX) market is between 10:00 AM to 05:00 PM, Monday to Friday.

In addition, there is no lunch break or tea break in the Indian stock market timings.

The timings of the Indian stock market are divided into three sessions:

  1. Normal session (also called continuous session)
  2. Pre-opening session
  3. Post-closing session

Now, let us discuss all these sessions to further understand their importance in the stock market timings in India.

Also read: Indian Stock Market Holidays 2018

Stock Market Timings in India.


NORMAL TRADING SESSION:

  • This is the actual time where most of the trading takes place.
  • Its duration is between 9:15 AM to 3:30 PM.
  • You can buy and sell stocks in this session.
  • The normal trading session follows bilateral matching session i.e. whenever buying price is equal to the selling price, the transaction is complete. Here transactions are as per price and time priority.

PRE-OPENING SESSION:

The duration of the Pre-opening session is between 9:00 AM to 9:15 AM. This is further divided into three sub-sessions.

  • 9:00 AM to 9:08 AM :
    • This is the order entry session.
    • You can place an order to buy and sell stocks in this duration.
    • One can also modify or cancel his orders during this period.
  • 9:08 AM to 9:12 AM :
    • This session is used for order matching and for calculating the opening price of the normal session.
    • You cannot modify or cancel buy/sell order during this time.
  • 9:12 AM to 9:15 AM :
    • This session is used as a buffer period.
    • It is used for the smooth translation of pre-opening session to the normal session.

Opening price of the normal session is calculated using multilateral order matching system. Earlier, the bilateral matching system was used which caused a lot of volatility when the market opened. Later, this was changed to multilateral order matching system to reduce the volatility in the market.

However, most people do not use the pre-opening session and only use the normal session for trading. That’s why there is still huge volatility even in the normal session after the pre-opening session.


The time between 3:30 PM to 3:40 PM is used for closing price calculation.

  • The closing price of a stock is the weighted average of the prices between 3:00 PM to 3:30 PM.
  • For the indexes like Sensex & nifty, its closing price is the weighted average of the constituent stocks for the last 30 minutes i.e. Between 3:00 PM to 3:30 PM.

POST-CLOSING SESSION:

  • The duration of the Post-closing session is between 3:40 PM to 4:00 PM.
  • You can place orders to buy or sell stocks in the post-closing session at the closing price.If buyers/sellers are available then your trade will be confirmed at the closing price.

NOTE: Pre-opening session and the Post-closing session is only for the cash market. There are no such sessions for future & options.

Overall, the stock market timings in India can be briefed as:

9:00 AM to 9:15 AM Pre-Opening Session
9:15 AM to 3:30 PM Normal Trading Session
3:30 PM to 3:40 PM Closing Price Calculation
3:40 PM to 4:00 PM Post-Closing Session

Stock Market Timings in India

Pic credit: http://www.bseindia.com/markets/equity/session_timings.aspx?expandable=0

In addition, if you are unable to trade between this time periods, you can place an AMO (Aftermarket order). There is no actual trading here but you can place your buy or sell order.

Further, the Indian stock market also opens a special trading session during Diwali, the festival of light. This is known as ‘Mahurat Trading’. Its trading time is declared a few days before Diwali. However, generally, Mahurat Trading timing is in the evening. You can find more details about mahurat trading here: 60-minute ‘Muhurat Trading’ on BSE, NSE this Diwali  

Also read: Are you ready for ‘Muhurat Trading’ this Diwali?

BONUS

By the way, if you are new to investing and want to learn how to start investing in the Indian stock market, check out this video. I’m sure it will be helpful to you!

That’s all. I hope this post on the ‘Stock Market Timings in India‘ is helpful to the readers. If you have any doubts regarding the Indian stock market timings, feel free to comment below. I will be happy to help you.

6 Reasons Why Most People Lose Money in Stock Market cover

6 Reasons Why Most People Lose Money in Stock Market

6 Reasons why most people lose money in stock market. Many a time while watching the market news you hear the words like ‘Oh, the market is bullish’, ‘Sensex went up 100 points’, ‘Nifty banks are doing great this year’ etc. Then you see your portfolio and talk to yourself ‘Why the hell am I losing money?’

Don’t worry. This is not just your scenario. It is a known fact that about 90% of people lose money in the stock market. But do you know why? Why your portfolio is at a loss when the market is upward, why most of the stocks you bought are underperforming;  why aren’t you able to beat the market? If you go through all these thoughts, then you are one of those 90% people.

So, today I am going to give you top 6 reasons why most people lose money in the stock market. Be with me for the next couple of minutes to uncover this mystery.

6 Reasons why most people lose money in stock market

1. Not doing enough research and investing based on ‘TIPS’.

why people lose money in stock market 1

This is the first and the biggest mistake that people do when they start investing in the stock market. They easily trust the tips they hear from a friend, colleague or from a financial magazine that they just read. Moreover, most people blindly follow the recommendations from their brokerage firm which later turn out to be a major loss on their investment.

Now, you can argue with me that what’s wrong with taking tips and suggestion. Your friends and the brokerage firm has more experience than you and surely can help you in getting good returns. But if you think like that, then you are missing the point. No one else cares about your money more than you do. You can easily rule out the broker’s recommendations as they will only earn when you trade. They don’t care whether you win or lose.  They are getting their brokerage fee as long as you are buying or selling. Hence, they will always try to give you suggestions so that you can trade more and frequent. And the more you trade, the more brokerage fee they will get.

Now, let’s come to the suggestions from the friends and colleagues.  There are few things that a beginner should understand that no one is going to tell them. First, All your friends will always boast about their profits & returns. Second, none of your investor friends will tell you about their losses and bad investments. It’s sometimes a matter of pride. Overall, you will think that your friends or colleagues are always doing great, but they are not. You might take their suggestion thinking that they have researched a lot about that company and they are always right in investing. However, in the end, you will end up losing your money.

Hence, the only way to invest intelligently is by doing enough research before investing. Moreover, it’s not tough to research the company on your own. Finding an undervalued stock is an art which you can develop with practice and patience.

2. Trying to make money quickly

why people lose money in stock market 2

This is the second biggest mistake that people make while investing in stock market. People are always in a hurry to make money. They always want to become rich quickly. Always want to be like ‘Warren Buffett’ – Rich and Powerful. However, what they don’t understand is that Mr Warren Buffett has made the majority of his fortune after his 50’s. It’s a fact that he got more than 90 percent of his wealth after the age of 50 and has accumulated a large sum through his long-term investments for a period of over 5 decades. Success in stock market needs time and patience.

But this is not how the people invest. They enter the market. Then select a stock which they heard on a news channel that ‘It has a huge growth potential’ and they invest heavily in it. Then they pray that their money becomes 5-10 times. However, it turns out that they lost 30-40% of their investment. So, out of frustration, they quit investing in stocks and start searching for another way that can make them rich quickly. This is how the non-achiever in stock market thinks and loses money in the market.

If you want to read, I will highly reccomend you to read the book: One Up On Wall Street: How To Use What You Already Know To Make Money In the Market. This is my favourite book on stock market.

3. Sudden overexposure to market and non-diversification

why people lose money in stock market 3

This happens a lot of time in the stock market. A common person has accumulated a lot of savings over the period. Then he hears how his neighbour has doubled his money by investing in the stock market. Suddenly he also gets interested in share market. He started thinking that if his neighbor who is a Salesman, can get so many returns from the stock market, then why can’t he? Hence, he decides to enter the stock market with a huge amount of money that he has saved during all those years of hard working.

And this is where he fails. The point is, you can enter stock market whenever you want; however, to enter the market without prepared it totally stupid. Think of this like going to the forest without knowing how to hunt. You need to develop the art first. You need to understand the market and enter once you are at least a little prepared.

In addition, non-diversification is also one of the biggest mistakes that most people do. People are so confident about their stocks that they think it’s illogical to invest in multiple stocks which may average out the profits. True, it might average out the profits; but it also reduces the risk. Remember, it’s always about minimizing risk and maximizing the profits. Like over-diversification minimizes the profits, in the same way, non-diversification maximizes the risk.

4. Holding onto losses while booking profits early

why people lose money in stock market 4

Let us imagine a scenario. You have bought 5 shares. Three of them are doing great while two of them are underperforming. What will you do? What will you sell first? The shares that are doing great or the one who is defeating?

‘Sell the winners and hand on to the loser stocks’. The majority of the amateur investors follow this rule. They think that it’s safe to sell the stocks first which are giving them good profits and hold the loser stocks. In this way, the loser stocks will get time to recover and they might get their initial investment back. Moreover, in the meantime, they can get some profits by selling their good stocks.

However, this is the wrong approach. In this way, you are limiting your upper level and increasing your lower level. That is, you are limiting how much you can get profits as you have already sold your good stocks. But, you can suffer even great loss as the loser stocks are still in your portfolio.

If you want not to lose money in the stock market, then you should use the opposite approach. You should limit your lower level and maximize your upper lever. This can be achieved by holding to your winners and cutting your loser stocks.

5. Lack of patience

why people lose money in stock market 5

Patience is the key to success in stock market. The only thing that you need to do in the stock market is to buy good stocks and give it time. This is the only way to make money here.

However, most people who lose money in the stock market do not have patience. Although many of these people are able to find a good stock, they aren’t able to get good profits from them. Why? Because they don’t have patience. They can’t even give 2-3 years time to their stocks to grow. They want a quick result.

However, this is not the only problem with such investors. In some situations when their stocks lose 20-30% of its worth, they become highly impatient and sell their stock quickly. If just they have held their stocks for a couple of months, they could have got good returns of around 40-50% on their investments. Here, the lack of patience misfires on their intelligence of choosing a decent stock.

6. Blindly following the crowd.

why people lose money in stock market 6

This is the last reason that I want to mention that why people lose money in stock market. BLINDLY FOLLOWING THE CROWD.

Imagine a scenario. Your neighbour bought a stock which increased its value by 50% in few days. Then you colleague bought the same stock and the stock has now risen to around 80% appreciation from its initial value. Everyone is talking about that stock and it’s making a lot of noise in the news. What will you do now? All your known people are getting great returns by investing in that stock. Will you invest in that stock too?

If you blindly follow everyone and buy that stock, then you are most likely to lose money. Everyone has some plans and strategies for their investment.  You just can’t read the exit strategy of your neighbour. Maybe when you thought to buy, he was planning to sell the stock in a few days thinking it as overpriced. But you just can’t know this.

What you can do is to read about the company’s fundamentals, its financial reports and figuring out why is it in news so much. And after studying the company completely, if you are satisfied, then only invest in that stock. NEVER INVEST BLINDLY FOLLOWING THE CROWD.

BONUS VIDEO:


Apart from the above, there are other couples of reasons also like investing in futures and options, frequent trading, lack of self-control etc that are responsible for most people losing money in stock market.

I hope this post about ‘6 Reasons why most people lose money in stock market’ is useful for the readers. If you have any suggestions or reviews, feel free to comment below. I will be happy to reply.why people lose money in stock market 7

Besides, here is an infographic on why most people lose money in stock market. Feel free to share it with your friends so that they can also avoid loss in the market.

why most People lose money in stock market

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: 6 Reasons why most people lose money in stock market, reasons people lose money in stock market, Common reasons why most people lose money in stock market, why most people lose money in stock market, why 90% people lose money in stock market

10 Reasons To Start Investing In Stock Market Today

10 Reasons To Start Investing In Stock Market Today.

10 Reasons to start investing in stock market. Most of the people at some time have thought to start investing in stock market. However, they are afraid to take next steps as they have always heard how a closed kin or Uncle has lost almost all his money in stock market.

Since, a very long time our family members, friends and media have told us to stay away from the market. The common misconception that ‘Stock investing is like GAMBLING’ has become more of a fact than myth. Moreover, maybe this could be the reason why even less than 2% population of India is actively investing in the stock market.

Hence, today I am going to give you 10 great reasons to break this barrier and start investing in stock market. So, be with me for the next few couple of minutes to enjoy this roller coaster ride that may open your eyes towards investing in stock market.

Top 10 reasons to start investing in stock market.

1. To keep pace with inflation:

Inflation is a state where the prices are rising and value of purchasing power of money is decreasing. Inflation occurs in an economy when there is an expansion of the total amount of money. Overall, Inflation is not desirable for an economy.

Let us understand inflation with an example. Suppose you have Rs 5 lakhs in your account and you want to buy a car, which also costs Rs 5 lakhs currently. Then you changed your mind, deciding to buy the car next year, and kept your money in the saving account. The bank is giving you a decent interest of 5% pa. Now, let us fast forward to next year. You went to the bank and came home happily with your money that has become Rs 5.25 lakhs now. Then you went to the car showroom. But boom! You get the shock. The price of that car has now increased to Rs 5.3 lakhs. The car, which you could have easily bought last year, is now not affordable to you. That is inflation.

The inflation in India for last few years has been around 4-5%. The return on the saving account (Interest rate) is around 4-6% per annum. Hence, a saving account cannot beat the inflation. Overall, if you want to beat the inflation, you have to invest your money intelligently. And the stock market is the best place for intelligent investors. If you buy stocks of decent companies, you can easily get a return of between 10-25% depending on how good the stock is and how much time you invested in choosing the stock. Therefore, investing in stock market is a great option if you want to keep pace with the rising inflation.

2. Most growth potential:

For the past couple of decades, Stocks and real estate are the two investments, which have constantly beat all other forms of investment. Whether it is bonds or commodities like gold, silver, petroleum etc. stock market has been able to outperform all these investments with the best returns on the investments. Hence, with the tremendous growth potential in the stock market, it is always advisable to invest in stocks.

3. Investing makes your money work for you:

Money is important. We need money in every aspect of life. Most people say that they do not work for money and money is the cause of most problems. However, lack of money is the cause of most problems and investing is the solution to this problem. If you invest your money in good companies, you just have to sit idly and do nothing. Your money will grow itself as the company prospers. In the meanwhile, when your money is growing by itself, you can use your time in whatever way you want. In this way, you can make your money work for you.

4. Stock Investing takes as little amount as buying a burger:

There is a common misconception among many people that they need a huge sum to start investing in the stock market. However, that is not true. You can start investing with as little money as required to buy a burger. There are a number of stocks whose price is less than Rs 100. You can invest an even very small amount of money and start getting good returns. This option is not available in other for other forms of investments like gold or real estate. In addition, remember a little bit of things everyday ads up to a big result.

5. You do not need to be a genius to invest in the stock market:

If you can understand 5th standard math, then you can understand stock market’- Peter Lynch.

Lynch is one of the most renowned fund managers famous for giving around 30% return for a continuous period of 13 years at Fidelity. He always motivates common people to invest in stocks and believes the stock market is for everyone. You do not need to be a mastermind or rocket scientist to invest in stock market. Unlike starting most business or start-ups, the stock market requires only a little money, math, time and interest. Anyone can get huge returns by investing in the stock market.

If you are new to investing and want to stay away from common myths and mistakes in stock market, I will highly recommend you to read this book: One Up On Wall Street: How To Use What You Already Know To Make Money In the Market. It is one of my favourite books on stock market.

6. Stock investing is a lot easier now:

It is easy to invest in stocks in India now and hardly requires any expertise to buy stocks online. Trading with the online brokerage account is a lot simpler now. Moreover, with the increase in financial websites and apps; finding and selecting stocks is also easy now. You do not need to go through all the boring financial newspaper and magazines now and need not to rely on newsletters to get companies financial reports now. Now, you can easily find them on the company’s website or on the financial websites.

7. Tax benefits from the government:

There are a number of tax benefits in investing in stock market. India has the provisions of tax-free return from equity, in case share is held for more than 1 year. The long-term capital gains tax in India is zero. From the updated rules in Budget 2018, the long-term capital gain tax is 10% for gains exceeding Rs 1 lakh. Still, this is better than the return of 6.5% from FDs, which is again taxable up to 10-30% depending on your tax slab. That’s why it is a popular quote- ‘The rich pay less tax’.

8. You do not have to dig deep.

Everyone knows about Eicher motors, the parent company of ‘Royal Enfield’. The company makes famous ‘bullet’ bikes. Many old and young people have a dream to own a ‘bullet’. If only people have bought a large volume of stocks of ‘Eicher motors’ when it launched the ‘Royal Enfield’ bikes, they would have been a millionaire by now. Eicher motors have given around 129,000% return since 2002; The price appreciated from Rs 22 (in September 2000) to Rs 29,000 current price (May 2017).

There are a number of other examples of common stocks as well that has given more than several hundred percents returns over the last few years. For example, Symphony, Suzuki, HPCL, Titan Company etc. These companies are well-known to the common people. Overall, people can easily find such growing companies around them. Even a famous company like Titan can give you great returns. You are not supposed to find a very rare and un-heard petroleum or metal company. You just have to be willing to look around enough and notice them.

9. To create a secondary source of income:

It has always been taught in our school- ‘Get a high paid safe and secure job’. What is not taught is what will happen if the company is shut down or you are fired. We should always have a backup. For public in India, stocks help to create this additional source of income. Most of the people are entirely busy with their office their entire life. For those people, Investing in the stock market can be their second source of income. Through the value appreciation and dividends, they can steadily grow additional income. That is why people need to start investing in stock market.

10. The power of compound interest:

Stock Investing allows you to take advantage of compound interest, which grows your wealth exponentially. Most of the bank savings account gives you a linear simple interest. However, with investing in stock, you can get compounded returns. The famous scientist Albert Einstein once said- “Compounding is the eighth wonder of the world”. The world greatest investor, Warren Buffett, is known to have a compounded return of around 22% for the last 5 decades. Moreover, this compounded return for a long time has made him one of the richest men on earth. The power of compounding is one of the major reasons why people should invest in stock market.

Apart there 10 reasons, there are also other couples of reasons to start investing in stock market. Nevertheless, they are out of the scope for the beginners and you can only realize them once you enter the stock market world.

I hope the post is useful for the readers. If there is an additional reason to invest in the stock market that I missed or you want to add to the list, feel free to comment below. I will be happy to include them also. Happy investing!

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: 10 Reasons to start investing in stock market, Reasons to start investing, Reasons to start investing in stock market, top reasons to start investing,

Different Charges on Share Trading

Different Charges on Share Trading Explained- Brokerage, STT & More

Different Charges on Share Trading Explained. Brokerage, STT, DP & More- There are a number of charges involved while trading in India i.e. buying or selling of shares. Some of them are common like brokerage charge & STT, while there are many whom the investors are not afraid of. In this post, I am going to explain all of the different charges on share trading. Some of them are brokerage charge, Security transaction charge, stamp duty etc. But before we learn about them, there are few basics things that we need to understand first.

So, be with me for the next 8-10 minutes to understand the explanation of all the different charges on share trading.

Following are the things that you need to know first:

1. Intraday Trading and Delivery:

  • When you buy & sell a share on the same day, then it’s called an Intraday trading. For example, you bought a share in the morning and sold it before the market closes on the same day, then it will be considered as an intraday
  • On the other hand, when you buy a share and hold it for at least one day, then it’s called a delivery. For example, you bought a share today and sold it any day but today then it will be considered it as a delivery. Here you can sell the stock tomorrow, or the day after that, or a week later, a year later or 20 years later.

 2. Full-Service Brokers and Discount Brokers:

  • Full-Service brokers are the traditional brokers who offer full-service trading like stocks, commodities, currency along with research and advisory, sales and asset management, investment banking all in one account. For example, ICICI Direct, Kotak Securities etc.
  • Discount brokers are who offer high speed and the state-of-the-art execution platform for trading in stocks, commodities and currency derivatives. They charge a reduced commission and do not provide investment advice. For example, Pro stocks, Zerodha, Trade Smart Online etc.
  • In general, a full-service broker charge between 0.01% – 0.50% brokerage charge on Intraday and delivery.
  • The discount brokers charge a flat fee (fixed fee of Rs 10 or Rs 20 per trade) on intraday and delivery trading. There are also a couple of discount brokers who do not charge any fee on delivery trading.

It is important to note that you have to pay a brokerage charge on both times of trading i.e. while buying a share and selling a share. There are some brokers (very few) who charge brokerage fee only at one side of transaction i.e. either on buying or selling.

Let’s take an example to understand the brokerage charge better. Suppose there is a brokerage firm called – ABC. Now, ABC charges a brokerage fee of 0.05% on intraday trading and 0.30% on delivery trading. The total charges on both tradings can be given as-

Intraday Trading Delivery
Brokerage charge= 0.05% of total turnover Brokerage charge= 0.30% of total turnover
If we buy a single stock worth Rs 100, then
Brokerage charge = 0.05% of Rs 100 = Rs 0.05
If we buy a single stock worth Rs 100, then brokerage charge = 0.30% of Rs 100 = Rs 0.30
Total brokerage charge on trading (for both buying and selling) = 2 * 0.05 = Rs 0.10 Total brokerage charge on trading (for both buying and selling) = 2 * 0.30 = Rs 0.60

As the competitions in the brokers are increasing, the brokerage charges are decreasing. In coming days, these rates can even reduce further.

Apart from brokerage charge, there are also an additional couple of charges and taxes to be paid while share trading. For example, Security transaction tax, service tax, stamps duty, transaction charges, SEBI turnover charges, depository participant (DP) charges and capital gain tax.

Let’s understand the other different charges on share trading and taxes involved first. Then we will see an example for further understanding.

Different Charges on Share Trading-

Security Transaction Tax (STT):

  • This is the second biggest charge after the brokerage charge.
  • For delivery trading, STT is charged on both sides (buy & sell) of trading.
  • For intraday trading, STT is charged only when you sell the stock.
  • In general, for delivery, the STT charge is around 0.1% of total transaction (on each side of trading)
  • For intraday, the STT charge is around 0.025% of the total transaction (while selling).

Service Tax:

It is same for intraday and delivery trading. Service tax is equal to the 15% of whatever brokerage charge you paid.

Stamp Duty:

This is charged by the state government. Different states have different stamp duty. Here is the stamp duty of two of the Indian states-

  Intraday Delivery
Maharashtra 0.002% 0.01%
Delhi 0.0025% 0.0025%

Stamp duty is also charged on both sides of trading (buying & selling) and are charged on the total amount (turnover).

Transaction Charges:

  • This is charged by the stock exchanges. Transaction charges are charged on both sides of the trading and are same for both intraday & delivery.
  • National stock exchange (NSE) charges a transaction fee of 0.00325% of the total amount.
  • Bombay stock exchange (BSE) charges a transaction fee of 0.00275% on total amount.

SEBI Turnover Charges:

  • Here, SEBI stands for Securities exchange board of India and it is the security market regulator. SEBI makes the rules and regulations for the exchanges.
  • It is charged on both sides of transaction i.e. while buying and selling.
  • The SEBI turnover charge is 0.0002% of the total amount and is same for both intraday and delivery trading.

Depository Participant (DP) Charges:

  • There are two stock depositories in India- NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited).
  • Whenever you buy a share, it is kept in an electronic form in a depository. For this service, the depositories charge some fixed amount.
  • They don’t charge the investors directory but charge the depository participant. Here, the broker company or your demat account company is the depository participant (DP).
  • DP acts as a linkage between the depository and the investor as the investors cannot approach depository directly. So, overall the depository charges the depository participant and then the depository participant (DP) charges the investors.
  • DP charges are a flat of between Rs 10 to 35 depending on your broker and this is also charged only for delivery trading (not for intraday)

Capital Gain Tax:

  • This is the most important tax to understand for a trader.
  • There are two types of Capital gain tax – Short-term capital gain tax and Long-term capital gain tax.
  • When you sell a stock before 1 year of buying, then it is considered as a Short-term. Here a flat 15% of the profit is charged as short-term capital gain tax.
  • When you sell a stock after 1 year of buying, then it is called long-term capital gain tax. There is no tax on long-term capital gain.
  • For a short-term capital gain tax, the delivery trader has to pay flat 15% and it doesn’t matter what tax slab they are in. But this doesn’t apply to an intraday trader as they have to pay capital gain tax according to their tax slab.
  • As the long-term capital gain tax is nil, the big investors try to get maximum profit from it by investing for long term.

If you want to read further in details, I will recommend you to read this book: Everything You Wanted to Know About Stock Market Investing -Best selling book for stock market beginners. 

Now, let us see an example to understand these different charges on share trading and taxes involved better. Suppose there are two traders- Rajat and Prasad. Here Rajat is a delivery trader who invests in long-term i.e. for 2-3 years. On the other hand, Prasad is an intraday trader.

They both have their accounts in same brokerage company named ABC. The brokerage charge for ABC is 0.05% on intraday trading and 0.30% on delivery trading. Also, let us suppose that both Rajat and Prasad have invested a total of Rs 10,000 in the shares of Tata Motors. In addition, they both live in Maharastra.

Now the different charges and taxes paid by them for complete trading i.e. from buying to selling the shares can be given as-

Rajat

Delivery Trader (Long term)

Prasad
(Intraday Trader)
Total Investment Rs 10,000 Rs 10,000
Exchange NSE NSE
Brokerage Charge 0.30% of Total Amount
= 0.30% of Rs 10,000 = Rs 30
Total brokerage charge= 2*30 = Rs 60
0.05% of Total Amount
= 0.0% of Rs 10,000 = Rs 5
Total brokerage charge= 2*5 = Rs 10
STT 0.1% of total amount
= 0.1 % of Rs 10,000 = Rs 10
Total STT = 2*10 = Rs 20
0.025% of total amount
= 0.025 % of Rs 10,000 = Rs 2.5
Total STT = 1*2.5 = Rs 2.5
Service Tax 15% of brokerage charge
=15% of Rs 60 = Rs 9
15% of brokerage charge
=15% of Rs 10= Rs 1.5
Stamp Duty (Maharashtra) 0.01% of total amount
= 0.01% of Rs 10,000= Rs 1
Total stamp duty = 2*1= Rs 2
0.002% of total amount
= 0.002% of Rs 10,000= Rs 0.2
Total stamp duty = 2*0.2= Rs 0.4
Transaction Charges 0.00325% of total amount
= 0.00325% of Rs 10,000= Rs 0.325
Total stamp duty = 2*0.325= Rs 0.65
0.00325% of total amount
= 0.00325% of Rs 10,000= Rs 0.325
Total stamp duty = 2*0.325= Rs 0.65
SEBI Turnover Charge 0.0002% of total amount
= 0.0002% of Rs 10,000= Rs 0.02
Total stamp duty = 2*0.02= Rs 0.04
0.0002% of total amount
= 0.0002% of Rs 10,000= Rs 0.02
Total stamp duty = 2*0.02= Rs 0.04
DP Charge Rs 15 NIL
Capital Gain Tax 0 Pays according to tax slab

 

Overall, here is the summary of all the charges and taxes paid by Rajat and Prasad.

  Rajat Prasad
Brokerage Charge Rs 60 Rs 10
STT Rs 20 Rs 2.5
Service Tax Rs 9 Rs 1.5
Stamp Duty (Maharashtra) Rs 2 Rs 0.4
Transaction Charges Rs 0.65 Rs 0.65
SEBI Turnover Charge Rs 0.04 Rs 0.04
DP Charge Rs 15 0
Capital Gain Tax 0 Pays according to tax slab
Total Charges Rs 106.69 15.09 + Capital Gain Tax

On the first glance, it looks cheap to invest in intraday as the total charges are comparatively less here. But you should note that the frequency of trading for intraday traders is quite high. So, they have to pay these charges again and again.

Also, let us take a scenario where Prasad chooses to sell his stocks after 2-3 days as the prices were quite low on that day and he was expecting some price increase on next days. In such case, Prasad turns from an intraday trader to delivery trader. Hence, his total charges also changes from Rs 15.09 to Rs 169.69.

Let us also assume that Prasad makes a profit of Rs 100 on selling. So, the capital gain tax that he has to pay will be equal to 15% of Rs 100 i.e. Rs 15. Now his situation turns out like this-

Total Charges Rs 106.69
Short term capital gain tax Rs 15
Total Charges Rs 124.63
Profit Rs 100

Here, although Prasad’s profit is Rs 100, still his expenditure is Rs 124.69 on different charges. Overall, Prasad is in loss of Rs 24.69.

Hence, charges and taxes are a very important part of trading and should not be ignored. You might think that you are in profit, but the real profit is the one which is left after deducting the charges and profit. I hope the traders will keep this in mind before trading the next time.

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: Different Charges on Share Trading Explained, Different Charges on Share Trading Intraday, Different Charges on Share Trading long term, Different Charges on Share Trading in delivery trading, common different Charges on Share Trading 

Fundamentals of stock market- key financial ratios

The Fundamentals of Stock Market- Must Know Terms

Here are the few key financial terms that a stock market investor must know. Although the list is long, it will be worth to know these terms to get a good grasp on the fundamentals. Here it goes:


Promoter’s shares: – The company shares that are owned by the promoters i.e. the owners of the company is called Promoters shares. The public cannot own these shares.


Outstanding shares: The company’s shares that are owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Public (retail investors), foreign institutional investors (FII), Domestic institutional investors (DII), mutual funds etc. can own outstanding shares.


Market Capitalization: – Market Cap or Market capitalization refers to the total market value of a company’s outstanding shares. It is calculated by multiplying a company’s shares outstanding by the current market price of one share. The investment community uses this figure to determine a company’s size, as opposed to using sales or total asset figures. In general, market capitalization is the market value of company outstanding shares.

Market Capitalization = No of outstanding shares * share value of each stock


Book value: – It is the ratio of total value of company assets to the no of shares. In general, this is the value which the shareholders will get if the company is liquidated. Hence, it is always preferred to buy a stock with high book value compared to the current share price.

Book Value = [Total assets – Intangible assets (patents, goodwill..) – liabilities]


Earnings Per Share (EPS): This is one of the key ratios and is really important to understand before we study other ratios. EPS is the profit that a company has made over the last year divided by how many shares are on the market. Preferred shares are not included while calculating EPS. In general, Money earned per outstanding shares.

Earnings Per Share (EPS) = (Net income – dividends from preferred stock)/(Total outstanding shares)

From the perspective of an investor, it is always better to invest in a company with higher EPS as it means that the company is generating greater profits.


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 the company of one sector with P/E ratio of the company of another sector will be insignificant. However, you can use the 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)

It’s easier to find the find the price of the share as you can find it from the current closing stock price. For the earning per share, we can have either trailing EPS (earnings per share based on the past 12 months) or Forward EPS (Estimated basic earnings per share based on a forward 12-month projection. It’s easier to find the trailing EPS as we already have the result of the past 12 month’s performance of the company.

If you want to read further in details, I will recommend you to read this book: Everything You Wanted to Know About Stock Market Investing -Best selling book for stock market beginners. 


Price to Book Ratio (P/B): 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)


Dividend yield: – It is the portion of the company earnings decided by the company to distribute to the shareholders. 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. It can be distributed quarterly or annually basis and they can issue in the form of cash or stocks.

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 whether he wants to invest in a high or a low dividend yielding company.

Also Read: 4 Must Know Dates for a Dividend Stock Investor


Market lot: – It is the minimum no of shares required to purchase or sell to carry a transaction.


Face value: – It is the price of the stock written in the company’s books when issued during IPO. It is the amount of money that the holder of a debt instrument receives back from the issuer on the debt instrument’s maturity date. Face value is also referred to as par value or principal.


Dividend % – This is the ratio of the dividend given by the company to the face value of the share.


Basic EPS: – This is nothing but Earnings per share.


Diluted EPS: – If all the convertible securities such as convertible preferred shares, convertible debentures, stock options, bonds etc. are converted into outstanding shares then the Earnings per share is called Diluted earnings per share. The less the difference between Basic and diluted EPS the more the company is preferable.


Cash EPS: – This is the ratio of cash generated by the company per diluted outstanding share. If Cash EPS is more the more the company is preferred.

Cash EPS  = Cash flows / no of diluted outstanding shares


PBDIT:  Profit before depreciation, interest, and taxes.


PBIT: – Profit before interest and taxes


PBT: – Profit before taxes


PBDIT margin: – It is the ratio of PBDIT to the revenue.


Net profit margin: – It is the ratio of Net profit to the revenue.


Assets: – Asset is an economic value that a company controls with an expectation that it will provide future benefit.


Liability: It is an obligation that the company has to pay in future due to its past actions like borrowing money in terms of loans for business expansion purpose.

Assets = Liabilities + Shareholders equity


Asset turnover ratio: – It is calculated by dividing revenue to the total assets


Debt to Equity Ratio: The debt-to-equity ratio measures the relationship between the amount of capital that has been borrowed (i.e. debt) and the amount of capital contributed by shareholders (i.e. equity). Generally, as a firm’s debt-to-equity ratio increases, it becomes riskier A lower debt-to-equity number means that a company is using less leverage and has a stronger equity position.

Debt to Equity Ratio =(Total Liabilities)/(Total Shareholder Equity)


Return on Equity (ROE): Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders has invested. In other words, ROE tells you how good a company is at rewarding its shareholders for their investment.

Return on Equity = (Net Income)/(Average Stockholder Equity)


Price to Sales Ratio (P/S): The stock’s price/sales ratio (P/S) ratio measures the price of a company’s stock against its annual sales. P/S ratio is another stock valuation indicator similar to the P/E ratio.

Price to Sales Ratio = (Price per Share)/(Annual Sales Per Share)

The P/S ratio is a great tool because sales figures are considered to be relatively reliable while other income statement items, like earnings, can be easily manipulated by using different accounting rules.


Current Ratio: Current ratio is a key financial ratio for evaluating a company’s liquidity. It measures the proportion of current assets available to cover current liabilities. It is a company’s ability to pay its short-term liabilities with its short-term assets. If the ratio is over 1.0, the firm has more short-term assets than short-term debts. But if the current ratio is less than 1.0, the opposite is true and the company could be vulnerable

Current Ratio = (Current Assets)/(Current Liabilities)


Quick ratio:  The name itself tells quick means how well the company can meet its short-term financial liabilities.  The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.

Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities.


Note: This content is published by a guest author- Anjani Badam.

The Intelligent Investor by Benjamin Graham Summary & Book Review COVER

The Intelligent Investor by Benjamin Graham Summary & Book Review

The Intelligent Investor by Benjamin Graham, also referred as the bible of the stock market, was originally written in 1949 by Benjamin Graham, a legendary investor and also known as the father of value investingBen Graham was also the mentor and professor of well-known billionaire investor, Warren Buffett.

The 2006 revised edition of the book ‘The Intelligent Investor’ has added commentary by Jason Zweig, a famous wall-street investor, and editor. These added commentaries are used to relate Graham’s idea to the present world. It highlights that the book has time-tested techniques. The book has over 600 pages (although originally around 450-500 page but the added commentaries in revised edition increased the width of the book). Overall, it’s a classic book with added quick notes.

Why You Should Read This Book:

Warren Buffett (worth over 73.1 billion dollars) says- ‘This book is by far the best book on investing ever written’. Needless to mention that this book is Warren Buffett’s all-time favorite. He also admitted that the book helped him in developing a conceptual framework for his future investments and capital allocations. Further, he made the following remarks about the book in its preface:

  • Investing doesn’t require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework.
  • Pay special attention to chapters 8 & 20.
  • Outstanding results are based on three things – Effort, Research, amplitudes of the market (This book will allow you to profit from them, not participate)

NOTE: If you want to buy this book, I highly recommend you to buy through Amazon at this link. It’s currently on sale here- THE INTELLIGENT INVESTOR by Benjamin Graham

The Intelligent Investor by Benjamin Graham book has many valuable concepts and a must read for all the stock market investors. The first few chapters of the book are dedicated to the general concepts of the market. As the book was originally written in 1949, the book also consists of lots of details about the bonds, preferred stocks & inflation.

The next few chapters describe the methods to analyze stocks using ratios, balance sheet, cash flow etc. The second half of the book is of more importance for the stock investors as it explains the different strategies of the defensive & enterprising investors, along with chapters on management, dividend policy, and case studies.

Please also read: 10 Must Read books for the Stock Market Investors

The three main points covered in the books:

Although there are lots of proven concepts covered in the book, however, the key three points in the book- the intelligent investor by Benjamin Graham is summarized here:

1. Investing vs. Speculating:

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” – Benjamin Graham

Let’s understand this concept with the help of an example. Imagine you are planning to buy a printing press. Now, to buy this company you can use two approaches.

First, you visited the company, calculated the asset value of the printing shops, checked the total income and cash flow of the company, verified the effectiveness of the managers, calculated the total assets & liabilities and then lastly come up with a final price for the printing company.

The second approach is that you met with the owner and decided to pay the price whatever he is asking for.

From the example, we can establish the difference between an investor and a speculator. The Investor follows the first approach while the speculator follows the other. Here is the key difference between these two:

Investor Speculator
Goes through proper analysis Does not meet these standards.
Considers the safety of principle ——–
Gets adequate returns ——–

Here is the quote about Speculators by Benjamin Graham:

the intelligent investor summary 5

2. The margin of Safety:

This is another one of the pronounced concept introduced by Benjamin Franklin. He says that one should always invest with a margin of safety. Let us understand this by an example.

Imagine you are in a construction business. You took an order to make a bridge, which can hold up to 8 tons. Now, as a constructor, you might consider making the bridge with an additional 2 tons of holding capacity so that it will not collapse in some extraordinary situation. Overall, you will make the bridge with a total of 10 tons of holding capacity.

Here, your additional 2 tons is the margin of safety.

In the same way, while investing we should consider this margin of safety. It is the central concept of value investing.  If you think a stock is valued at Rs 100 per share (fairly), there is no harm in giving yourself some benefit of the doubt that you may be wrong with this calculation. And hence, you should buy at Rs 70, Rs 80 or Rs 90 instead of Rs 100. Here, the difference in the calculated amount and your final price is your margin of safety.

Here is the quote about the importance of margin of safety by Benjamin Graham:

The Intelligent Investor by Benjamin Graham

3. Mr. Market

In the book ‘The Intelligent Investor’, Graham tells a story about a man he calls Mr. Market. In the story, Mr. Market is a business partner of yours (Investors). Every day Mr. Market comes to your door and offers to either buy your stake of the partnership or sell you his stake to you.

But here’s the catch: Mr. Market is an emotional man who lets his enthusiasm and despair affect the price he is willing to buy/sell shares on any given day. Because of this, on some days he’ll come to the door feeling jubilant and will offer you a high price for your share of the business and demand a similarly high price if you want to buy his. On other days, Mr. Market will be inconsolably depressed and will be willing to sell you his stake for a very low price, but will also only give you the same lowball offer if you want to sell your stake.

On any given day, you can obviously buy or sell to Mr. Market. But, you also have the option of completely ignoring him i.e. you don’t need to trade at all with Mr. Market. If you do ignore him, he never holds it against you and always comes back the following day.

The intelligent investor will attempt to take advantage of Mr. Market by buying low and selling high.  There is no need to feel guilty for ripping off Mr. Market; after all, he is setting the price. As an intelligent investor, you are doing business with him only when it’s to your advantage. That’s all.

The key point to note here is that though Mr. Market offers some great deals from time to time. Investors just have to remain alert and ready when the offers come up.

Now, like Mr. Market, the stock market also behaves in the same manner. The market swings give an intelligent investor the opportunities to buy low and sell high. Every day we can pull up quotes for various stocks or for the entire market as a whole. If you think the prices are low in relation to value, you can buy. If you think prices are high in relation to value, you can sell. Lastly, if prices fall somewhere in the grey area in between, you’re never forced to do either.Mr. Market and Stock Market:

So, this is a value-oriented disciplined investing. Don’t fall victim to irrational exuberance if the underlying fundamentals of the company are strong. In short, do not react to the hyperboles of the market’s daily fluctuations. Don’t panic, don’t sell.

The Intelligent Investor by Benjamin Graham

Other key points from the book The Intelligent Investor by Benjamin Graham on the Investor and market fluctuations:

  • A common stock portfolio is certain to fluctuate over any period of time. The investor should be prepared financially and psychologically for this fluctuation. Investors might want to make a profit from market level changes. But this can lead to speculative attitudes and activities which can be dangerous. Anyways, if you want to speculate do so with eyes open, and knowledge that you will probably lose money in the end.
  • Graham’s Opinion on aggressive investing: The low probability of aggressive picks will out-weigh the gains collected over a long period of time. ‘The aggressive investor will expect to fare better than his passive equivalent, but his results may well be worse.’

That’s all. I hope this post about the ‘The Intelligent Investor Summary & Book Review’ is helpful to you. I will highly recommend you to get a copy of this book and start reading. There are many valuable concepts by Benjamin Graham that new and old stock investors should learn.

If you need any further help with the book or have any doubts- feel free to comment below. I will be happy to help you. Happy Investing!

The Intelligent Investor by Benjamin Graham

 
financial ratio analysis 1

8 Financial Ratio Analysis that Every Stock Investor Should Know

8 Financial Ratio Analysis that Every Stock Investor Should Know. The valuation of a company is a very tedious job. It’s not easy to evaluate the true worth of a company as the process takes the reading of company’s several years’ financial statements like balance sheet, profit and loss statements, cash-flow statement, Income statement etc.

Although it really tough to go through all these information, however, there are various financial ratios available which can make the life of a stock investor really simple. Using these ratios they can choose right companies to invest in or to compare the financials of two companies to find out which one is better.

This post about ‘8 Financial Ratio Analysis that Every Stock Investor Should Know’ is divided into two parts. In the first part, I will give you the definitions and examples of these 8 financial ratios. In the second part, after financial ratio analysis, I will tell you how and where to find these ratios. So, be with me for the next 8-10 minutes to enhance your financial knowledge.

So, let’s start the first part of this post with the financial ratio analysis.

If you are a beginner and want to learn stock market, I will highly recommend you to read this book first: Everything You Wanted to Know About Stock Market Investing


Quick note: You don’t need to worry about how to calculate these ratios or remember the formulas by-heart, as it will be already given in the financial websites. However, I will recommend you to go through this financial ratio analysis as it’s always beneficial to have good financial knowledge.


financial ratio analysis trade brains

Financial Ratio Analysis that Every Stock Investor Should Know:

  1. Earnings Per Share (EPS):

    This is one of the key ratios and is really important to understand Earnings per share (EPS) before we study other ratios. EPS is basically the profit that a company has made over the last year divided by how many shares are on the market. Preferred shares are not included while calculating EPS.

    Earnings Per Share (EPS) = (Net income – dividends from preferred stock)/(Average outstanding shares)

    From the perspective of an investor, it’s always better to invest in a company with higher EPS as it means that the company is generating greater profits. Also, before investing in a company, you should check it’s EPS for the last 5 years. If the EPS is growing for these years, it’s a good sign and if the EPS is regularly falling or is erratic, then you should start searching another company.

  2. 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 the company of one sector with P/E ratio of the 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)

    It’s easier to find the find the price of the share as you can find it at the current closing stock price. For the earning per share, we can have either trailing EPS (earnings per share based on the past 12 months) or Forward EPS (Estimated basic earnings per share based on a forward 12-month projection. It’s easier to find the trailing EPS as we already have the result of the past 12 month’s performance of the company.

  3. Price to Book Ratio (P/B)

    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)

  4. Debt to Equity Ratio

    The debt-to-equity ratio measures the relationship between the amount of capital that has been borrowed (i.e. debt) and the amount of capital contributed by shareholders (i.e. equity). Generally, as a firm’s debt-to-equity ratio increases, it becomes riskier A lower debt-to-equity number means that a company is using less leverage and has a stronger equity position.

    Debt to Equity Ratio =(Total Liabilities)/(Total Shareholder Equity)

    As a thumb of rule, companies with a debt-to-equity ratio more than 1 are risky and should be considered carefully before investing.

  5. Return on Equity (ROE)

    Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. ROE measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders has invested. In other words, ROE tells you how good a company is at rewarding its shareholders for their investment.

    Return on Equity = (Net Income)/(Average Stockholder Equity)

    As a thumb rule, always invest in a company with ROE greater than 20% for at least last 3 years. A yearly increase in ROE is also a good sign.

  6. Price to Sales Ratio (P/S)

    The stock’s price/sales ratio (P/S) ratio measures the price of a company’s stock against its annual sales. P/S ratio is another stock valuation indicator similar to the P/E ratio.

    Price to Sales Ratio = (Price per Share)/(Annual Sales Per Share)

    The P/S ratio is a great tool because sales figures are considered to be relatively reliable while other income statement items, like earnings, can be easily manipulated by using different accounting rules.

  7. Current Ratio

    The current ratio is a key financial ratio for evaluating a company’s liquidity. It measures the proportion of current assets available to cover current liabilities. It is a company’s ability to pay its short-term liabilities with its short-term assets. If the ratio is over 1.0, the firm has more short-term assets than short-term debts. But if the current ratio is less than 1.0, the opposite is true and the company could be vulnerable

    Current Ratio = (Current Assets)/(Current Liabilities)

    As a thumb rule, always invest in a company with a current ratio greater than 1.

  8. 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 whether he wants to invest in a high or a low dividend yielding company.

    Also Read: 4 Must-Know Dates for a Dividend Stock Investor

If you want to read further in details, I will recommend you to read this book: Everything You Wanted to Know About Stock Market Investing -Best selling book for stock market beginners. 

Now that we have completed the key financial ratio analysis, we should move towards where and how to find these financial ratios.

For an Indian Investor, you these are 3 big financial websites where you can find all the key ratios mentioned above along with other important financial information:

I, generally use money control to find the key financial ratio analysis. The mobile app for Money control is also very efficient and friendly and I will recommend you to use the mobile app.

Now, let me show you how to find these key ratios in Money Control. Let’s take a company, Say ‘Tata Motors’. Now, we will dig deep to find all the above-mentioned rations.

Financial ratio analysis -Steps to find the Key Ratios in Money Control:

  • Open http://www.moneycontrol.com/ and search for ‘Tata Motors’.
    financial ratio analysis 3
  • This will take you to the Tata Motor’s stock quote page.
    Scroll down to find the P/E, P/B, and Dividend Yield.
    financial ratio analysis 4financial ratio analysis 2
  • Now go to the ‘Financials’ tab and select ‘Ratio’ option [i.e. Financial  Ratio]
    Scroll down to find all the remaining financial ratios.
    financial ratio analysis 5

That’s all! These are the steps to do the key financial ratio analysis. Now, let me give you a quick summary of all the key financial ratios mentioned in the post.


Summary:

8 Financial Ratio Analysis that Every Stock Investor Should Know:

  1. Earnings Per Share (EPS) – Increasing for last 5 years
  2. Price to Earnings Ratio (P/E) – Low compared to companies in the same sector
  3. Price to Book Ratio (P/B) – Low compared companies in the same sector
  4. Debt to Equity Ratio – Should be less than 1
  5. Return on Equity (ROE) – Should be greater than 20% 
  6. Price to Sales Ratio (P/S) – Smaller ratio (less than 1) is preferred
  7. Current Ratio – Should be greater than 1
  8. Dividend Yield – Depends on Investor/ Increasing preferred

In addition, here is a checklist (that you should download) which can help you to select a fundamentally strong company based on the financial ratios.

Feel free to share this image with ones whom you think can get benefit from the checklist.

5 simple financial ratios for stock picking

I hope this post on ‘8 Financial Ratio Analysis that Every Stock Investor Should Know’ is useful for the readers. If you have any doubt or need any further clarifications, feel free to comment below. I will be happy to help you.

dividend dates explained

Dividend Dates Explained – Must Know Dates for Investors

Dividend Dates Explained – Must Know Dates for Investors:

There are lots of investors in the stock market who buys a stock only for their dividends. A regular, consistent and increasing dividend per year is what these investors are looking for. In general, those investors who are planning for their retirement or a long-term investment with some yearly returns invest in dividend stocks.

What is a ‘Dividend’?

A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property. A company’s net profits can be allocated to shareholders via a dividend. Larger, established companies tend to issue regular dividends as they seek to maximize shareholder wealth in ways aside from supernormal growth.

Souce: Investopedia

Here is the list of some of the highest dividend paying companies in India: 10 Best Dividend Stocks in India That Will Make Your Portfolio Rich.

The timing of buying/selling is the most important factor for receiving dividends. You don’t want to buy these stocks if you won’t be getting any dividend. For example, if you buy these stocks after a certain time, the previous seller might get the dividend as he was holding the stock when the company was recording the name of the shareholder before distribution of dividends.

Therefore, it’s very important that you monitor the dates during the press conference by the company’s board of directors. It’s during the press conference (corporate announcements) when the company announces how much dividends they will give to the shareholders and the dates when the stockholders will get their dividends.

Also read: How to follow stock Market, 10 Must-Read books for Stock Market Investors

Understanding the dates mentioned in the corporate announcement is quite important for the investors as it decides the timing of trading of these dividend stocks. And this post for explaining those dates only. So, be with me for the next 5-8 minutes to understand the dividend dates explained for newbies.

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

Must Know Dividend Dates for Investors

In general, there are 4 important dividend dates that every investor should know. They are:

  1. Dividend Declaration Date
  2. Record Date
  3. Ex-Dividend Date
  4. Payment Date

Among the all four, the Ex-Dividend day is of uttermost importance. You will understand the importance of this date as you read this complete article on the dividend dates explained.

dividend dates explained 2

For now, let’s understand all these dates first:

1. Dividend Declaration Date:

This is the date on which the company’s board of directors declares the dividends for the stockholders. The conference includes the date of dividend distribution, size of the dividend and the record date.

2. Record Date:

On the dividend declaration day, the company also announces the record date. The record date is the date on which your name should be present on the company’s list of shareholders i.e. record book, to get the dividend. Shareholders who are not registered as of this date on the company’s record book will not receive the dividend. According to the company, you are only eligible to get the dividends, if your name is on their book till this record date.

3. Ex-Dividend Date:

The Ex-dividend date is usually two days before the record date. In order to be able to get the dividend, you will have to purchase the stock before the ex-dividend date. If you buy the stock on or after the Ex-dividend date, then you won’t get the dividend, instead, the previous seller will get the dividend.

After the company sets the date of record, the ex-dividend date is set by the stock exchange. So, the two days before the record date is generally used by the stock exchange to give the name of the shareholders to the company. The investors who buy the stock on or after the ex-dividend date won’t be listed in the record book of the company. So, if you purchase a stock on or after the ex-dividend date, you won’t receive a dividend until it is declared for the next time period.

4. Payment Date:

This is the date set the by the company, on which the dividends deposited are paid to the stockholders. Only those stockholders who bought the stock before the Ex-dividend date are entitled to get the dividend.

So, I hope you have understood all the dividend dates explained above. As I already mentioned earlier, the Ex-dividend date is the most important date among all. I will summarize the above dividend dates explained here:

Type Declaration Date Ex-Dividend Date Record Date Payment Date
Notes The date the dividend is announced by the company The date before which you must own the stock to be entitled to the dividend. The date by which you must be on the company’s record books as a shareholder to receive the dividend. The date the dividend is paid to shareholders.

Now, let me give you an example of the company’s board of director’s press conference so that you get a good knowledge of the above dividend dates explained.

Hindustan Zinc Dividend:

“Shares of Hindustan Zinc will turn ex-dividend on Wednesday. The company is paying ₹27.50 a share as second interim dividend for fiscal 2016-17. The record date for the dividend is March 30. 2017” (You can read the complete news here.)

In the above announcement, the company announced two important points-

  • Dividend =  ₹27.50 per share
  • Record date = March 30, 2017

The expected Ex-dividend date should be 28th march, 2017 i.e. those investors who buy the stock of Hindustan zinc before 28th Match will be entitled to receive the dividend.

Further, if you want to know the dates of the upcoming dividends payment date, you can get it from the money control website: www.moneycontrol.com/stocks/marketinfo/dividends_declared/

I hope this post about ‘Dividend dates explained’ is helpful to the readers. If you have any doubts or need any further help on the topic ‘dividend dates explained’ feel free to comment below. I will be happy to help you out.

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!

dividend dates explained 3

What is the minimum money I need to start stock trading in India

What is the minimum money I need to start stock trading in India?

What is the minimum money I need to start stock trading in India?

This is one of the most asked questions by the beginners when they start investing in stock market. Different newbie investors  ask the same questionin different formats. It goes like this:

What should be the ideal amount to start investing in the Stock Market?

What is the minimum money I need to start stock trading in India?

I want to invest in stock market but I do not know how much to invest?

What should be the minimum amount can I invest in stock market for long term?

I want to invest in stock market, but I don’t have much money. Is there any any minimum number of stocks that I must buy?

The general answer to all these questions is ‘there is no minimum money required to start investing in the stock market in India.

You can buy stocks for even less than Rs 10 also if you find an interesting one (Indian stock exchanges BSE & NSE has a number of stocks pricing less than even Rs 10). You don’t need to have thousands or lakhs to start trading in India. Any amount from which you can buy a stock is decent enough to start trading, no minimum money to start trading in stock market required.

Here is a list of 10 popular companies whose stock prices are less than Rs 100 (as time of writing this post).

S.No Company Price (In Rs)
1 Idea Cellular 86.70
2 Federal Bank 92.70
3 Ashok Leyland 82.50
4 Tata Power 85.55
5 Crompton Greaves 79.50
6 IDBI Bank 75.10
7 National HyroElectric Power Corporation (NHPC) 32.25
8 Reliance comm 36.80
9 SAIL (Steel Authority India Ltd) 63.85
10 Bombay Dyeing 83.50

You can easily invest in these companies.  Funny, the stock prices of these companies are even less than the Ola or Uber ride fare that you take in your hometown.  Still, people speculate that buying stocks are expensive. In addition, you can also find a complete list of stocks who price range from Rs 1 to 100  here: http://money.rediff.com/companies/price-sorted/10-100

So, the answer to the question of ‘what is the minimum money I need to start stock trading in India?’ is that there is no minimum money limit required for starting stock trading in India.

minimum money I need to start stock trading-2

However, is this all that you wanted to learn from the topic of the post? I don’t think so.

The next big question should be then ‘How much should I invest in the stock initially -if there is no minimum money I need to start stock trading?.

The answer is that if you are new to the market and still in the learning phase, it is always recommended to start small. Invest as low as possible and focus on learning. Anything between Rs 500- Rs 1000 is good enough. You really don’t want to lose thousand of money at the start of your investment journey (and then promising angrily to yourself that you won’t ever return to the market).

But, this doesn’t mean that you should take this amount as a strict rule for your initial investment. Suppose, if you found a stock, which is bit costlier, say Rs 1200. But you have done your homework, read the stock fundamentals, and are confident that the stock will give a good return in the future, then, you should go for it. Anyways, as a thumb rule for the beginners, anything between Rs 500- Rs 1000 can be used as the first stock market investment amount.

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

The best advantage of this thumb rule is that you won’t lose too much if the things don’t work out as you imagined. Maybe, you misinterpreted the stock or did the fundamental study wrong, or the stock price fell due to some bad fortune. Still, you won’t be affected too much financially by the loss. Nonetheless, this investment will teach you a few lessons. As the saying goes:

Failures are the best teachers.

From your first investment, you will learn a lot. Remember, it’s not always about winning. You should always remember this famous quote ‘Sometimes you win, & sometimes you learn’. Further, from your first investment, you will learn more important things. You will learn what things to do and moreover, you will learn what things not to do. Besides, losing a small money won’t affect your morale and you can come back in the game again, and next time even more prepared and informed.

On the other hand, if you win i.e. the stock performed well, then congratulations. You have done a good job! 

Your first investment teaches you a great lesson if it is a failure. On the other hand, if your first stock is a winner, it gives a tremendous joy and becomes a memory for the lifetime. Both ways, you’re gonna receive something. Either a lesson or joy.

For my case, I bought three stocks during my first investment. Out of three, two performed well and the third underperformed for three continuous months. Although the overall portfolio was in profit, still the returns were not as good as I expected. Therefore, I sold the third stock after the third month. (Quick spoiler: The third stock became a multi-bagger in next two year. But, I don’t have any regrets.)

For beginners, I will suggest following their stock portfolio for three-five months before investing heavily in the market. The initial big profits on your stock might give you a great confidence to keep buying additional stocks. But you shouldn’t be greedy at that moment.  You must remember that for beginners, it’s more important to learn how to do value investing, that to earn money. And once you have learned the basics, the game is yours.

Also read :

minimum money I need to start stock trading-4

100 minus your age rule

There is a famous rule regarding how much you should invest in the stock market and widely known as ‘100 minus your age rule’. The rule is based on the principle of gradually reducing your risk as you get older. The rules go like this. The percentage of the stock holding in your net worth should be equal to 100 minus your age.’

For example, Let’s say your age is 20 and your total savings till date is Rs 1000. Then, the amount that you should invest in the stock market should be (100-20) = 80% of your total net worth. In other words, you should invest Rs 800 in the stock market if you are of age 20 from a total saving of Rs 1000.

You can read the complete post about ‘100 minus your age rule’ here.

The X/3 Rule:

This is another popular rule for beginners to reduce the risk while investing. The rule says to invest the only x/3 amount in the beginning if x is the total amount you intended to invest in a stock. After a few weeks, you can invest your next x/3 amount to the stock if it’s doing good. And finally the last x/3 again after another few months.

For example, if you intend to invest Rs 10,000 in a stock, don’t buy from the whole amount all in one go. Invest only 10,000/3=  Rs 3,333 initially. If you find your investment growing, then you can add Rs 3,333 in the next round of investment and the last Rs 3,334 in the final round. The rule greatly minimizes the risk and helps in averaging out the purchase price.

Anyways, a minor problem with this rule it that it reduces the focused amount. Therefore, the final profit might be little less than expected if the whole amount was invested at the same time. Still, it’s a great rule for a stock market beginners and helped a lot of newbies to reduce their risk and losses significantly.

There is one more rule called the ‘75% profit rule’. However, it is more like a hypothesis that a rule. It states that if 75% of stocks in your portfolio are doing good, then you can invest further. For example, if you have bought 4 stocks and 3 of them are doing good, then it means that your strategy is working and you can increase your investment. The chances of all the stocks in your portfolio(4/4) working great is very limited. Even Warren Buffett, the greatest investor of all time, has some stocks in the portfolio which gives him negative returns.

In short, if 75% of your stocks are doing great, it means that your strategy is good and it’s not the luck that is driving your portfolio. In other words, if you have only one stock in your portfolio and its growing fast, there might be a luck factor. But if 7 out of 10 stocks in your portfolio are growing, it’s more because you did your research correctly.

That’s all. These are the basics tips and tricks for the beginners to invest in the stock market.  Also remember the answer to the original question ‘what is the minimum money I need to start stock trading?’ is that there is no minimum money you need to start stock trading. That is no lower limit for that minimum money you need to start stock trading.

One more thing I would like to add to this post. There are also some additional charges while buying a stock online and the buyer has to pay them. They are generally less than 1% of the amount of the transaction. The additional charges are brokerage charge, Service charge, STT etc. Therefore, you also have to keep these charges in mind during buying a stock. Although these are a very small amount, still they will add up in the final amount of the stock that you bought.

Hence, for all those who are asking ‘What is the minimum money I need to start stock trading in India?’, the answer is that there isn’t a minimum money you need to start trading in India. Anything that suits you is good enough for the market. Any money at which you can buy a stock works fine for entering the market. Any amount that you are ready to invest, is great to start stock trading in India.

minimum money I need to start stock trading-3

Lastly, I hope my post ‘What is the minimum money I need to start stock trading in India’ is useful for the readers. If you need any further clarification or have any doubts, feel free to comment below. I’ll be happy to help you out.

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!

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top 10 warren buffett quotes on investing

Top 10 Warren Buffett Quotes on Investing.

Top 10 Warren Buffett Quotes on Investing:

Warren Buffett, the most renowned investor of all time and one of the richest man on earth. He’s is probably the most famous figure when it comes to investment. The veteran investor and CEO of the Berkshire Hathaway, the American multinational conglomerate holding company are known for his investing prowess. This clever stock picker has also an amazing his wit & sense of humour.

As the world’s best investor, the people are constantly looking at Warren Buffett for investment advice. A quick google search will give you millions of results about the famous quotations by the legendary investor. The philanthropist investor, who is pledged to give 99% of his total worth to the philanthropic cause, has many of the famous quotations on investing which are worth sharing. So, today I have brought these list of the top 10 Warren Buffett quotes on Investing. Here it goes.

 Top 10 Warren Buffett Quotes on Investing.

“Price is what you pay. Value is what you get.”


“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”


“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”


“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”


“Risk comes from not knowing what you’re doing.”


“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.”


“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”


“Cash combined with courage in a time of crisis is priceless.”


“If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.”


“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”


Wanna read more from the greatest investors himself. Here is a book that I highly recommend you to read: Gems from Warren Buffett – Wit and Wisdom from 34 Years of Letters to Shareholders

I hope the quotes from this oracle of Omaha has some impact on the readers and they can also brighten their path from the lights of this great investor. I have included most of the best quotes by Warren Buffett in the top 10 Warren Buffett quotes on investing list.

Further, if you think of any other quote which you want to add to the list, please comment below. I will be happy to respond to the comments on the post ‘the top 10 Warren Buffett quotes on investing’.

top 10 warren buffett quotes on investing

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How to trade in ICICI Direct? Buy:Sell Stocks

How to trade in ICICI Direct? Buy/Sell Stocks

How to trade in ICICI Direct? Buy/Sell Stocks– ICICI direct is one of the best online broker websites for buying or selling a stock on the stock market. Using ICICI direct, you can buy or sell a stock within two minutes using your phone/laptop. The brokerage charge for the ICICI direct is decent and the interface is very user-friendly to easily understand how to trade in ICICI direct.

In this post, we are going to discuss how to trade in ICICI direct. So, be with me for the next 5-10 minutes to learn the basics of trading with ICICI direct.

For those of you who are here for a quick answer, here is the video on how to trade in ICICI direct which can help you to learn the trading process fast. But, I do recommend you to read the complete post in order to get an in-depth knowledge of trading in ICICI Direct. Here it the video –

Youtube Video:

Source: ICICI Direct

First of all, you need to know that the market opens from 9:30 AM to 3:30 PM from Monday to Friday, excluding a few national holidays like Independence day, Republic day etc. You can get the complete list of holidays in a year from BSE/NSE website. So, basically, you can place an order to buy the stocks during market days when the market is opened from 9:30 Am to 3:30 PM. At this time you can place orders to buy the stock at the current market price or you can set a limit price (Say you want to buy a stock whose market price is 90, only when the price falls to 88. Then you place a limit price 88 against the market price which is 90).

You can also place orders outside the market timings i.e. before 9:30 AM or after 3:30 PM. But the order will be executed only when the stock market opens. Although these are advantageous for those who can’t place an order during the market time, there are few disadvantages of placing the orders after market timings.

For example, you won’t know the opening price of the stocks for the next day, so it might open at a higher price the next day which may lead you to reset your order price or cancel (and you might even not be able to buy the stock). So, it would be preferable to place orders for the stocks only during the market time so that you have the full information on the current market price of the stock.

Now that you know about the background of the stock market timings, let’s move towards the topic of the post – how to trade in ICICI direct? Buy and sell stocks.

If you need help in opening your stock brokerage account, feel free to check out this awesome website- Nifty Brokers

Step by step guide for How to trade in ICICI direct:

Step 1: Login to your ICICI Direct account

First, you need your account credentials to login in the ICICI direct. If you open a 3-in-1 (Saving+Demat+Trading) account in ICICI Direct, you can have the access to buy/sell and hold your stocks using the same account. Therefore, if you are new to trading, I will suggest you open a 3-in-1 account in ICICI Direct.

After you have opened your account in the ICICI direct, you will get your username and password to log in. The first step is to the google and search, ‘ICICI Direct’. Open the first link that comes in the search engine (www.icicidirect.com). Then click on login in the top right-hand corner. The website will ask your credentials like username, password, and date of birth/pan card. After entering the correct details, you can enter inside your ICICI direct account.

STEP 2: Allocate funds for buying stocks

The next step after logging in your ICICI direct account is to allocate funds in the trading account.

The concept of allocating funds in very simple. Let’s say you have Rs 50,000 in your saving accounts in ICICI bank (or any other bank linked to your trading and demat account). And you want to buy stocks worth Rs 500. Then, you need to transfer that amount from your saving account to the trading account so that you can place the order of the stock worth Rs 500. This can be done by allocating the fund.

‘Allocate fund’ option can be found on the landing page after logging and is highlighted here.

Typically, this step of allocating funds can be done within a minute if you have a 3-in-1 ICICI Direct account. The steps are as follows:

  • Go to the option Secondary, Market Equity, ETF (Note: if you want to buy IPO, Mutual funds then you have to go to other option).
  • Select ‘ADD’ option and enter the amount you need to add.
  • Then, click on ‘Submit’.
  • You can see the allocated fund in the ‘Current Allocation’ after submitting.

Step 3: Place order for the stock

This is the third and final step for purchasing stocks using ICICI direct. After allocating the fund, you should select the option ‘Place order’, which is present in the equity option. This option is highlighted here:

After selecting the place order, you have to follow the following steps. The steps are simple and can be performed within a minute:

  1. First, select the ‘Cash’ option in the Product.
  2. Next, you have the option to select the stock exchange. You have two options- NSE (National stock exchange) or BSE (Bombay stock exchange). You can choose anyone and it doesn’t make much difference as prices are almost the same on both exchanges and follows an almost the same trend. (I generally prefer NSE.)
  3. Then you can view your limit on how much money you have to buy the stocks. This is the allocated money which you added in step 2. If you need more money, you can add amount by allocating extra funds.
  4. Now enter the stock. For example, if you want to buy a stock of ‘Tata Motors’, start typing ‘tata mot..’ on the stock option. The drop-down options will appear and you can select your stock from the list.
  5. Next, you need to enter the quantity. the number of stocks that you want to buy.
  6. After that, you have to select that option for order validity. Here you have three options – DAY, IOC or VTC. If you want to place an order for that day only, you should select Day. If you are placing a limit price and want to continue the placed order for the next few days, then you can select VTC 0valid till cancellation. (Prefer ‘day’ order)
  7. Next, you have to select the Order Type. There are two options here – Market and Limit. I have already explained these earlier in this post. If you want to buy the stock at the current market price select ‘Market’ option. If you want to buy the stock at a limit price, select the ‘Limit’ option.
    For example, let’s say that Tata motor’s stocks are currently trading at a market price of Rs 469.10. If you want to buy that stock at market price, then you should select the ‘Market’ option. If you want to buy the tata motors stock only when the price is Rs 465 or lower, select ‘limit’ option.
  8. If you have selected ‘limit option’ in the Order Type, then you need to enter the ‘Limit Price’ in the next step. (This is Rs 465 in the previous example of Tata motors).
  9. The last option is the stop loss trigger price. You can leave this option blank and is not a must-fill option. This is an order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor’s loss on a position in a security. You can study more about stop trigger price here.
  10. Finally, select ‘Buy Now’

After clicking on ‘Buy Now’, you will be directed to a confirmation page. You need to confirm the details. And Tada!!!! You have bought a stock! Congratulations!!!!

If you want to re-confirm the stock that you’ve bought, you can do check by selecting the option ‘TRADE BOOK’ in equity. The option is highlighted here.

So, that’s all. This is the process of How to Trade in ICICI Direct.

Quick Note: After the trade in complete, it generally takes two-three days for the stock to reflect in your portfolio. Do not worry if can’t find the stock in your portfolio on the very next day since you executed the trade. It will eventually show up. The process takes T+2 days for transferring it from the previous owner to your account.

That’s all. I hope this post is useful to the readers. If you have any doubts or need any additional help, feel free to comment below. I will be happy to help you out.

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: How to trade in ICICI Direct, How to trade in ICICI Direct in India, buy stocks how to trade in ICICI Direct, How to trade in ICICI Direct demat account, How to trade in ICICI Direct trading account

10 Must Read Books For Stock Market Investors.

10 Must Read Books For Stock Market Investors

Although there are tons of website and millions of books on the topic ‘stock market’, however for the beginners (and sometimes even for the seasoned investors), it’s really hard to find a decent book that can build good fundamental knowledge on the stock market basics.

It’s really important to understand the basics regarding stocks before entering the market as lack of knowledge in this field almost always leads to a huge financial loss. Further, many times, loss of capital also leads to a decline in the morale of the investor.

Therefore, today I am going to present the names of 10 must read books for the stock market investors. So, be with me for the next few minutes while I give you a brief introduction (and short review) for each of the 10 must read books for stock market investors that are listed in this post. Here it goes:

Note: Please read this article until the end as there is a bonus waiting for you in the last section.

10 Must Read Books For Stock Market Investors:

1. One Up On Wall Street

This book is ranked one on my list of 10 must read books for stock market investors.

Peter Lynch, the author of this book, is one of the most successful fund managers with an average annual return of 30% on his portfolio for a period of 13 years. (A great record for a mutual fund manager).

This classic book explains all the important basics that a beginner should know before investing. From preparing to invest, how, when, whys to the long-term investment approach, everything is covered in this book. Here, Peter Lynch describes his stock picking approach for winning stocks.

In the book, Peter Lynch also describes the 6 different types of stocks in the market and how to approach them. You can read regarding the Peter lynch’s stock categories in details here: Six Different Types of Stock in Indian Market according to Peter Lynch

In short, go to amazon and buy this book. This book needs to be in your hand if you want to learn all about stock investment basics from scratch.

You can read a detailed review of this book here.

2. The Intelligent Investor


This is also known as the bible of the stock market. A must-read book written by the legendary Benjamin Graham, a.k.a. the mentor of the greatest investor of all time- Warren Buffet.

The book explains the fundamentals of the stock market from the view-point of value investors. There are three main concepts covered in this book.

First, the investing approach for a defensive investor and enterprising (aggressive) investor. The other two concepts introduced by Graham in this book are- Mr. Market and Margin of Safety for easy explanation of the market behavior and risk management.

I will highly recommend you to read this evergreen classic book on the stock market. There are many concepts that you can learn by reading this book. I have already read this book 2 times.

A little advise. This is the oldest book in my list of ’10 Must Read Books For Stock Market Investors’, compared to the publication date of other books. As this book was written way back, you might feel like reading the 1940’s story. Further, it might be a little tough to maintain the momentum in the starting as few chapters are irrelevant to Indian stock market (you can ignore those chapters). However, the knowledge gained from completing the book will be worth it.

You can read a detailed review of ‘The Intelligent Investor’ here.

3. Beating the street


Another classic by Peter Lynch, the star mutual fund manager of the Magellan fund at Fidelity Investments. An Excellent book for individual investors looking to tap the stock market for long-term value investment opportunities. A good reference to go back to when trying out investing on your own.

It explains the fundamentals of picking your stock in a very simple language and hence listed in my 10 must read books for the stock market investors.

4. Common Stocks and Uncommon Profits


One of my favorite book regarding growth stock investment appraoch. This book was published almost the same time as ‘The Intelligent Investor’ by Ben Graham.

  • The book explains the investment philosophy of how ‘Philip Fisher’ finds growth stocks that lead to massive gains if held for long term.
  • The important chapters is the book- What to buy, where to buy & When to sell.
  • Philip Fisher also explains about the 15 points to look for in a common stock.
  • A great read for growth stock investors.

When most of the stock market investors were focusing on value, Philip Fisher was the one of the first investors to focus more on growth. I won’t go into too much detail as to spoil the fun reading this book. This amazing book finds forth rank in my list of the 10 must read books for stock market investors.

You can read a detailed review of this book here.

5. The little book that beats the market


The book ‘The little book that beats the market’ describes a ‘MAGIC FORMULA’ for selecting stocks. This formula gave brilliant returns when applied by determined and patient investors.

The magic formula given by the author is an efficient way of selecting the stocks. The formula consists of two key factors. They are: Earning yield & Return on Capital. If you consider these two key factors for any stock market before investing, then the result will surely be amazing. Bdw, this formula is also applicable in the Indian stock market.

(Note: The book is really small with just 176 pages and hence the smallest book in our list of 10 must read books for stock market investors. A good read for short vacation or a weekend.)

You can read a detailed review of this little book here.

6. The Warren Buffet Way


This was one of the best books to learn Warren Buffett investing strategy! It gives a deep insight into the Warren Buffett way of investing in stocks.

Hagstrom covers all the necessary aspects to achieve similar success like Buffett that you can apply immediately to your own portfolio. The good thing about The Warren Buffett Way is the author tends to stay away from high faulting words that makes it understandable to anyone willing learn value investment.

With the classic Warren buffett investment strategies, the book found its way in the list of the 10 must read books for the stock market investors.

7. Stocks to Riches


A must-read book for Indian Investors. This book is written in a very simple and understandable language. The author ‘Parag Parikh’, writes the whole truth about stock markets in this book.

If you want to avoid the stock market beginner’s mistakes, then you should definitely read this book before entering the market. Remember, learning from your own mistakes is not free in the stock market world as a lot of money is at the stake.

This book is written in such a manner that even a fifth grader can understand. This makes this book a classic book of all time and in my list of 10 must read books for stock market investors.

8. Learn to Earn


This book gives you a great insight into the market, economy, and capitalization. Very well written & can be easily understood by people who don’t have commerce background. A great book to read if you are starting your journey in the stock market world.

9. How to avoid loss and earn consistently in the stock market


The author of the book Prasenjit Paul, explains the scenario of the Indian stock market and the winning strategies used by him for consistent returns from the market.

The book explains the basic of Investing in Stock in very simple and lucid terms. It also gives you a 2-min strategy to shorlist/reject stocks before detailed analysis. It’s good to first read this book and then invest. The book found a definite spot on our list of 10 must read books for the stock market investors.

Note: You can read a detailed interview with the author Prasenjit Paul here.

10. Stocks for the long run


One of the best book for the practical advice on investment which includes valuable excursion into the history of markets –

  • A good read for anyone wanting to invest for their long-term future without going to the other extreme of ‘buy and hold’ forever.
  • The book gives the reader a deep appreciation of the historical returns on stocks and bonds.
  • The author, Jeremy Siegel, makes a convincing case, that for long-term growth stocks are the best asset class to hold.
  • The book also states that actively managing a portfolio or trying to time the market is counterproductive, which can be indicated by historical returns of actively managed funds versus passive indices.

A very informative book and the last book in my top 10 must read books for stock market investors list.

Summary:

Here is a quick recap of all the books listed above.

Feel free to share it with your friends who you think can get benefits from this video:

Note: If you want to buy these books, I highly recommend you purchase online through Amazon at this affiliate link. They are currently at best price at sale here only through Amazon.

Books Amazon Link
One up on the wall street Buy Now
The Intelligent Investor Buy Now
Beating the Street Buy Now
Common Stocks and Uncommon Profits Buy Now
The Little Book That Beats the Street Buy Now
The Warren Buffet Way Buy Now
Stocks to Riches Buy Now
Learn to Earn Buy Now
How to Avoid Loss & Earn Consistently Buy Now
Stocks for the Long Run Buy Now

BONUS:

Here are few other books for investors which are also worth checking out. (Although this post is about 10 must-read books, however, I just cannot miss mentioning these books here).

Also read: 3 Amazing Books to Read for a Successful Investing Mindset.

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

If you think I missed any important book or recommend any additional book in the list, feel free to comment below. I will be happy to read it and write a review about it.

How to buy a stock in Stock Market? Step-By-Step Explanation.

How to buy a stock in stock market? Now a day, buying a stock is as simple as recharging your mobile or transferring money. All you need is a computer with internet connection, a bank account and some money in that account, obviously.

If you have seen movie Guru (in which Abhishek Bachchan was in leading role based on the life of Dhirubhai Ambani), the scenario of the stock market might scare you. But it was something like 50-60 years back. Now, no physical appearance, no much paper works are required. You can buy a stock sitting in your room in front of your laptop and that too within 2 minutes. How? That’s what I am going to teach you now. How to buy a stock in stock market? Just be with me for the next 5-10 minutes.

Buying shares online is the easy task, but I believe first you need to find that right stock that you should buy. There are few basic works which you should go through to find the best stock for you:

Read and Research:

There are tons of websites on the internet where you can get tutorials for stock market basics and about how to buy a stock in Stock Market? For beginners, I will recommend following websites of moneycontrol, economic times and Investopedia – Sharper Insight. Smarter Investing, Learn how to follow Stock Market and trends- Trade Brains

There are few books which are must-read for the beginners in the stock market. They are:

  • The Intelligent Investor
  • One Up on the wall street
  • Beating the street
  • Common Stocks and uncommon profits

You can read further about Indian stock market from the following useful links:

Now after learning the basics, the main tasks begins. You need to learn how to follow the stock market, their trends, their fluctuations etc.

Get good financial knowledge:

A good financial knowledge is a key for the success in the stock market. You need to understand the fundamentals before entering the stock world. The basics of Earnings per share(EPS), P/E Ratio, Book Value, P/BV, Dividend, Return on Equity(ROE), Return on capital employed(ROCE), debt/equity ratio etc should be known to you before you analyze a stock. You can read further about from these links: Investment BasicsSix Different Types of Stock in Indian Market according to Peter Lynch

Make your dummy portfolio:

A portfolio is nothing but your collection of stocks from different or same sectors. A portfolio shows how many shares you are owning from which sector. Generally, a good portfolio maximizes the profit and minimizes the risk. You can learn how to create your portfolio from this link: How to create your Stock Portfolio?

Follow the stock you’re interested in for few days:

The last step before buying a stock from the stock market is to learn how to follow stocks in the stock market. You should know how to track stocks so that you can buy/sell them at the best time. I advise the beginners to at least follow the stocks for 1 month before buying them. You can learn how to follow a stock from this link: Learn how to follow Stock Market and trends- Trade Brains.

Want to learn more? Here is a best selling book on stock market which I will highly recommend to read: Beating the street by Peter Lynch

Now that you know all the basics for the stock market, you can move further on How to buy a stock in Stock Market?


How to buy a stock in Stock Market?

The basics requirements for buying a stock in the stock market are:

  1. Stockbroker: General people can’t go to a stock exchange and buy/sell stocks. Only members of the stock exchange can buy and sell and they are called the brokers. Every broker should be registered on the Securities and exchange board of India(SEBI). There are a number of brokers/ sub-brokers which you can choose for trading. Some online brokers are Sharekhan, Kotak Securities, ICICI Direct, 5paise and India Bulls.
  2. Saving Account: Obviously you need a saving account for trading in the stock market.
  3. Demat A/C: It’s very simple to open a demat account. Now a day, the banks even offer you to open a 3-in-1 account, i.e. all three Saving+ Demat+ Trading account, by filling few forms just once. The 3-in-1 account will save your timing a lot and I recommend you to open a 3-in-1 account if you want to start trading in the stocks. You can open it in banks like ICICI, SBI, Kotak etc.

    You can decide your online broker for opening demat account depending on the different factors like brokerage charges, facilities offered, annual maintenance charges etc. Here is a link which you may find useful: Compare Online Share Brokers In India And Find Best Stock Broker In India.


    Note: If you open a 3-in-1 account you won’t need to find a stockbroker as the trading account is already included in it.

  4. Laptop and Internet connection: Obviously, the soul of modern era which is a must for all the online facilities.

how-to-buy-a-stock-in-stock-market

NOTE:

The documents required to open a 3-in-1 account are PAN card, Aadhar Card (for address proof) and an ID proof (generally Aadhar/Pan card can also be used as ID card). Once you opened your demat account, you will receive your username and password, and then you can start trading using your account

Also Read:

How to trade in ICICI Direct? Buy/Sell Stocks
How to buy a Stock using SBI demat account?

I hope this post about ‘how to buy a stock in Stock Market’ is useful for the readers. Feel free to comment below or message me if you have any doubts or if you need any further help.

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!