It can be seen that many of us are investing in fixed deposit schemes for the sake of steady income and security . The country's largest public sector bank , S. B. _ I , currently pays 7 percent interest per annum on a three-year fixed deposit . At the same time , many listed companies
The dividend yield is more than this . In that way , taking a little risk and investing in high dividend yielding company shares has the potential to earn more returns than fixed deposits . In that way, there are those among us who invest in stocks for dividend income .
Public sector stocks that give high dividend income ..!
Mostly public sector company stocks are mostly giving high dividend yield . _ A company reports dividend income as a percentage and in rupees . My NMDC Company has given 375 % dividend as interim dividend on 14th February . The face value of share is Rs.1 . Here 375% is Rs 3.75 as dividend is given on face value only . High dividend paying companies pay interim dividends every quarter ; The final dividend will be paid at the end of the financial year . Dividend yield is the ratio of the purchase price of the stock to the dividend called .
The formula for this
Dividend yield = ( Total dividend paid during the financial year / Purchase price of the share ) *100
For example , someone has bought a share for 100 rupees . If Rs 10 per share was paid in that financial year then the dividend yield is (10/100)*100 = 10%
Dividend Income:
Things to watch out for ..!
While investing in company stocks for dividend income it is imperative to observe some important points .
1. Interest income on bank fixed deposit investment is guaranteed . But , dividend income is not the same in equity investment ; There is no guarantee for that .
2. Income function:
If the company's earnings performance is suddenly not good, there is a possibility that the company will not pay dividends. If the shares can be sold and spent, there is a possibility that the company's performance is not good, and the share price may fall. Therefore, to reduce this risk, it is necessary to invest the investment amount in different company stocks. By doing this, the risk can be reduced even more if they are separate sectors.
3 . Risk taking capacity: There is a risk that the overall value of the equity investment will decrease if the price of the stock, which is already invested for dividend income, sees a large decline in the price due to a decline in the overall market .
Only those who can bear that loss and have the ability to take risk should invest for dividend income.
But, there is no need to worry too much as this risk will be spread over the long run.
3 . Underpriced Stocks: If the stock price is lower than the stock price , the dividend yield will be even more profitable . In the above example , if the share price is Rs 100 and the dividend paid in the financial year is Rs 10 , then the dividend yield is 10% . This is Rs 80 per share in the financial year Given Rs.10 the dividend yield is (10/80)*100= 12.5 % . Therefore , investing in stocks for dividend income is more profitable when the stock price is low . _
A good dividend paying company is on a growth path; If future growth is good, if the stock price has fallen too much during a general stock market decline, buying more of that stock at a lower price will be more profitable later on.
4. Issuance of bonus shares: In general, the number of shares will increase significantly in the long run when investing in company stocks that regularly issue bonus shares . Then the dividend amount and dividend yield will be higher . For example , a person has bought 100 shares . 100 if the company offers 1:1 free shares Share The will increase to 200 shares . If the same company again gives 1:1 free shares then 200 shares will increase to 400 shares . If the company offers free shares again at 1:1 then the investor will have a total of 800 shares.
A company pays an average annual dividend of Rs.10 per share. An investor buys 10,000 shares at a price of Rs.300Let's assume that he is staying. His investment is Rs. 30 lakhs. If he is given a dividend of Rs.10 per share, he will get a total dividend of Rs.1 lakh. The company is offering free shares on a 1:1 basis. In this case, the price of the stock held by the investors will increase to 20,000. Due to the issue of free shares, the price of the company's stock will decrease in proportion to the number of free shares. Here the share price of Rs.300 will fall to around Rs.150. But this Rs.150 is more likely to rise again gradually. Now the investor will have 20,000 shares. If the company pays a dividend of Rs.10 per share, he will get a total of Rs.20,000*10 as a total dividend of Rs.2 lakhs. The value of the investment will also be approximately 20,000*150 = Rs.30 lakhs.
Hence, while investing for dividend income, looking into companies offering bonus shares can be an additional benefit.
5. Increase in share price:
Apart from the dividend income in stock investment, long-term capital gains can be achieved through the appreciation of the stock price over the long term. Together these two can get double profit. Therefore, those who invest in stocks for dividend income, it would be extra profitable to invest by looking at how the price of those stocks have increased in the last 5, 10 years.
There is no income tax up to Rs 1 lakh in a financial year if the profit is made by selling the shares in stock investment for more than one year. Any gain beyond that is taxed at 10% irrespective of the income tax bracket. That way, you will have to pay less income than the equity investment gains.
Let's take a look at five important stocks with capital gains through dividend income and share price.
Important Stocks to Watch for Investment ..!
1. Indian Oil Corporation ;
One of the Maharatna companies operating under the control of the central government is I. oh _ C is Indian Oil Corporation . _ This company is engaged in oil drilling operations and production . Also , the work of refining petroleum products , transporting it through pipelines and marketing is going on .
India's leading oil refining and petroleum products marketing company has a very high dividend yield . Its dividend yield is 10.5% . Its share price in 2013 was around Rs . It was 50 . Currently Rs . 80 is becoming a tight trade . Three for investors The system offers free shares (Bonus) .
2. R E C :
R. Rural Electrification Corporation is a Central Public Sector Undertaking . This company provides loans for power distribution projects in the country . The dividend yield is 9.89 % .
In the last year 2013 , the share price of this company was Rs . It was 80 . Currently the share price is Rs . 115 and has given free shares to investors twice . _
3. H C L Tech .:
A global leader in IT services . _ It is one of the top 5 companies in India in terms of revenue . Its dividend yield is 4.41% . In the last year 2013 , the share price of this company was Rs . It was 180 . Currently the share price is Rs 1,080 . Three times for investors
Free shares are being offered .
4. Philips Carbon Black ltd:
It is a company belonging to the Sanjeev Goenka Group . It has been running since 1960 . _ It is the largest carbon black manufacturing company in India . The company operates in more than 40 countries . Its dividend yield is 4.91% .
Last year 2013 the share price was Rs . It was 7 . Currently the share price is Rs . It is 110 . It has given free shares to investors five times .
5. Power Grid Corporation :
India 's largest power distribution company . The public sector Maharatina company has a dividend yield of 5.21% . In 2013, the share price was Rs . It was 80 . Currently the share price is Rs . 225 is . _ One time free share is offered to the investors .
Apart from these , public sector mineral production company N. _ M. _ D. _ C , public sector alternative energy company GAIL , public sector housing and rural development company HUDCO , public sector mining company Coal India , and public sector lenders to power companies . Sector company Power Finance Corporation 's dividend yield is attractive . _ These can also be considered for investment . How about box income tax ?
Fixed deposit interest income is subject to income tax in whichever income tax bracket one falls under . Dividends paid by listed companies were exempt from income tax till recent years . Now one has to pay income tax on that income in whichever income tax bracket one
falls under. Hence , there is no difference between Fixed Deposit and Equity Dividend as far as Income Tax is concerned .
When to buy and when to sell on a stock investment ?: Guiding signals ..!
There are two types of stock market investors. A long-term investor is one who examines the growth of the world and the country, the future growth of the company, and the profit margin of the company and selects the role for the investment. Another is a short-term investor. How much is the demand for a stock? Will look at how much supply (supply) is and invest in techniques.
These short-term investors and traders (traders) know what is going on in the derivative (futures and options) market and what signals they are emitting so they can reduce losses and make a profit if they invest in the stock market or sell stocks.
Open Interest
The total number of contracts pending in the Futures and Options (F&O) market is the number of unfulfilled contracts at the end of the trading day called open interest.
Stock Price Rise, Volume & Open Interest Rise ..!
Open interest for a particular stock is high in the F&O market. At the same time, the share price is rising. Also, if the volume (number of shares traded) rises, the number of people investing in that stock increases.
In particular, it means that more and more new people are investing in that particular stock.
The share price may rise in the short term as more people are making long term investments in that stock. The complexity of buying that particular stock can take the rise in share price and the increase in the number of Open Interest & Volume.
Stock Price Rise & Value, Open Interest Decline ..!
If the number of open interest decreases it means that the investment is out of that particular stock. And the reason for the increase in the price of that particular stock means that short covering is happening. That is, the stock price increases as traders buy and sell (short selling) shares.
At the same time, the number of open trusts is declining as contracts close. If the volume also decreases, the problem of selling that particular stock can be taken as the increase in the share price and the decrease in the number of open interest, volume.
Stock Price Decline & Open Interest, Volume Increase.!
As short positions in the stock i.e. short selling increase the share price decreases and the number of open interest and volume increases. In this case the specific role has gone into the hands of the bear.
This means that the share price is going to go down after this. The stock price will see a decline until investors enter a short position. This can be taken as a signal to sell a particular stock and exit.
Stock Price, Volume & Open Interest Low!
If the number of open trusts is declining while the stock price is declining, it means that the stock price is going to return to the ups and downs after a temporary downturn. Decreased open interest means no new short selling. Also, if the volume goes down, this can be taken as a signal to buy a particular stock.
Put - Call ratio
This is a useful indicator to know the overall sentiment of the stock market
Put to Call Ratio. The put-to-call ratio is the value of the total put options traded on a given day, divided by the value of the traded total call options on the same day.
If the put-call rate rises ..!
This put-call ratio
An increase means that traders are putting more money into put options than call options. This can be taken as a signal that the share price is going up.
put - call ratio decreases
This put-call ratio
Decreasing means traders are putting more money into the call options than the put option. This can be taken as a signal that the stock is going down.
The above buy and sell strategies are for short term investors and traders. Long-term investors should look at the fundamentals and techniques of company stocks and make investments.
Stock Investment: Top Down Approach, Bottom Up Approach Which Will Help?
We have often heard mutual fund managers and leading stockbrokers choose to invest in stocks with a top down approach and a bottom up approach.
What it is Top Down Approach, Bottom Up Approach. Based on these we will look in detail at how to choose stocks for investment.
Top Down Approach Mode ..
Top-Down Approach can be referred to as the Top-Down Approach in Tamil. Its operation can be abbreviated as ESC (Economy - Sector - Company). That is, we must first examine the economy. That is, we need to examine whether the domestic and global economic situation is conducive to equity investment. If domestic and international economic growth is positive and positive, the next step is for the sector to decide which sector to invest in. We need to choose the sector that has the potential for bright growth in the future. After selecting the sector you should select the company that will excel in that sector and have the potential for growth in the future and invest in its shares.
Investors who follow the Top Down approach in the investment world are paying close attention to the macro economy and its cycle. Such investors want to invest in consumer-oriented sectors.Bottom Up Approach Method
Bottom-Up Approach can be described as a bottom-up approach in Tamil. This can be abbreviated as CSE (Company -– Sector - Economy). That is, one must first find a company that has the potential for growth in the future. The next step is depending on which sector the company belongs to. It remains to be seen whether its future will be better. The domestic and global economic situation should be examined if the sector is to be better. The decision to invest in that particular stock will be made if that is even better.
The bottom line is that a good corporate equity investment can create wealth for the investor if the economic situation is not good. Economic growth is not good and macro stock indices like Sensex and Nifty are generally likely to fall during periods of sluggish economic growth. At the same time, companies with higher domestic consumption and demand (e.g., increased demand for drugs due to corona spread, increased demand for IT service due to curfew) will be better off. For example, some stocks like ((specific instances like TTK Prestige, Eicher and Indo Count) can be mentioned. These stocks have given good returns during periods when the overall market is not performing well.
When the stock market is up (up or down) due to macro factors, the top up approach helps in choosing the stock investment. The macro factors here include interest rate change, employment, inflation rate, GDP.
International markets plummeted in 2008 during the global economic crisis and financial crisis caused by the US sub-prime problem, such as home loans to the ineligible. Similarly, international stock markets fell in December 2015 as the US raised interest rates after a very long hiatus. The P / E ratio of leading stock market indices tends to fall sharply during such periods. The valuation of the shares will also be attractive. Thus, the shares are available at affordable levels i.e. at affordable prices. The Top Down Approach works best in situations like this.
Investors who follow a bottom-up approach are often the ones who buy company shares and keep it for a long time and make a profit. They are the ones who have the most understanding of the fundamental matters of specific companies.
Which approach is right when?The Top Down approach goes from general to specific. This is the bottom-up approach that goes from exclusive to general.
When there is high volatility in the stock market, the bottom up approach does not work properly. Then it is wise and profitable to switch to a top-down approach.
At the same time, when choosing mid-cap stocks, it is best to follow a bottom-up approach rather than a top-down approach. The reason is that it has little to do with the operations of most mid-cap companies and the sprawling macro-economy. At the same time, when choosing large-cap company stocks, the bottom-up approach is more of a top-down approach.
The Top Down approach seeks opportunities to invest in market cycles. The bottom-up approach is looking for opportunities to invest in the strengths of companies' fundamentals.
Since the financial status of companies and the availability of credit assistance depend on macro factors, both economic factors are scrutinized.
In general, fund managers place a greater emphasis on economic growth but also adopt a bottom-up approach when it comes to stock selection.
Those who choose stocks for investment should choose the top down approach or the bottom up approach considering the circumstances. Only then can the right stocks be selected for investment.
Things to look out for in a departmental study ..!
After selecting the development sector, the sector should look at the production costs and pricing of the products.
It is important to note that not all companies can enter that particular field normally. Stockbrokers and fund managers avoid that sector if even ordinary people can succeed in it. The reason is that if everyone can enter and win, the price of the product will have to be set very low. Then the company's profit margin will be reduced.
In addition, the threat and weakness of the sector should be examined. Investment experts exclude sectors with high government control.
Things to look out for in the selection of companies ..!
When choosing a company for equity investment, it is important to consider the company's expense ratio and profit margin.
It is also necessary to examine the cash flow of the company, the amount of credit, the background of the founders and the management of the company.
Quarterly Results: Important things to look out for in stocks ..!
The listed companies publish its performance as a financial position report on a quarterly basis. It is important that those who have invested in the company and those who plan to invest pay close attention to this financial position statement.
Here are the important things to look for when selecting yours ..!
Poor performance, stock price rise ..!
A company's net sales and net profit decreased significantly during that particular quarter. However, the share price has started to rise after the release of the financial position report.
It remains to be seen what the reason for this is in this case. There are many reasons for the share price to rise as the company performs poorly.
The market expects worse financial conditions, the company has received new orders, plans to significantly reduce the company's debt in the coming quarters, and plans to expand.
Similarly, if the company's share price goes down after the quarterly results are released, you need to know the reason for it and act accordingly.
Long-term investors should not fail to buy and add shares in addition to the downturn, as the future of the company looks good. At the same time, it would be profitable for short-, medium- and long-term investors to withdraw from the stock if the company's future is critical.
Also, keep a quarterly conclusion and do not come to any conclusion. We need to explore whether to continue investing in that stock as the company’s share price continues to fall for 3 or 4 quarters.
Stock related issues ..!
When it comes to equity, one should also look at equity return (EPS), book value, increase / decrease in share capital, founders, foreign financial institutions, domestic financial institutions (mutual funds, insurance companies, etc.) investing / selling. In line with these changes, the company's share price will fluctuate as the quarterly financial position report is released. Among the things said here, rise is seen as positive and decrease as negative.
Shares mortgage
Has the share capital of its founders in the company decreased at the end of the particular quarter? Notice if there is an increase. It is important to be cautious if it continues to decline. This is how the problem arose in Satyam Computer.
Next the founders should also look at the extent to which the shares are mortgaged. It is important to be vigilant as stock mortgages continue to rise.
Those who belong to the company during the particular quarter, it is necessary to know the reason for buying or selling more shares and act accordingly. Founders and company owners are viewed positively if they buy shares. That alone is seen as a disadvantage if sold.
Warak loan of banks
Banks should avoid investing in such banking and financial institution stocks if their net worth is consistently high in financial institutions. It is better to get out of it if you have already invested. It's okay to lose through this.
At the same time, the decision to buy or sell a company share should not be based solely on quarterly results. Investment and sales decisions should be based on the business environment of the company, its future plans, the fundamentals of the company, sales growth, debt consolidation and cost reduction measures.
Whenever Stock market at its peak: 10 features to look out for ..!
The Indian stock market has touched a new high. The Bombay Stock Exchange (BSE) Sensex is up 56000 points and the National Stock Exchange (NSE) Nifty is up 16500 points. After that the market comes from a slight volatility. Mid and small cap stocks contributed the most to this decline. In this situation where the market is at its peak, small investors need to look at some key aspects.
1. Evaluation is very important
Valuation is very important in equity investment. Avoid re-investing in high-value company stocks when the stock market is at its peak. The reason is that prices are not likely to rise much after that.
2. Stop-loss is mandatory in stock trading ..!
Stop Loss is mandatory in daily and short-term trades. Do not trade without it. The reason is that the market may suddenly fall when it is at its peak. Shares of mid-cap and small-cap companies may also fall sharply.
3. Consider Technical Analysis ..!
At what price to buy a share; Technical analysis will indicate at what price to sell. In that sense, it is possible to trade and invest using it. At the same time, keep in mind that there is a three to ten chance of going wrong in Technical Analysis if something suddenly changes depending on the company, the country, and the world.
4. Do not turn a loss into a long-term investment.
Many will buy multiple shares with short-term intent. Those stocks will be at a loss even when the market is at its peak. Do not try to convert those shares into a long-term investment without wanting to sell them at a loss. You can not add wealth by investing in the stock market unless it becomes such a long term investment.
5. Consider the basics of the company
Be sure to look at the fundamentals (Fundamentals) of the companies. That too must be considered when it comes to long term investment. The basics are to look at the credibility of the company's founders, the debt-to-equity ratio, the share capital of the founders, the company's cash flow, net sales growth, net profit growth, and future expansion plans.
6. Do not make a total investment
Never make a total investment as far as stock market investing is concerned. That too should not make this mistake when the market is at its peak. Always divide the amount you plan to invest in a company into three or five parts. Invest this amount at regular intervals. Or invest in a market downturn. Until then, you can see a small return on that amount by keeping that amount in a liquid mutual fund.
7. Dividend investment in multi-sector company stocks
Many are investing in sector-based corporate stocks and sector funds. Investing in a single sector has always been a high risk. It is a good idea to split stock market investments into two categories. Dividing when the market is at its peak will also help reduce risk.
8. Beyond Index Shares!
In general, if the Sensex and Nifty indices are high, we say the market is at its peak. However, many company stocks outside of this index are available for investment at attractive ratings. It can identify such stocks and invest at market peaks.
9. Profit booking
Do not hesitate to take out partial profits if the stock has given you higher returns than expected. This is called part profit booking. The stock market can continue to sustain profits by taking out profits in between investments. Also, it can increase profits.
10. Follow Asset Allocation
Lastly, always invest according to your asset allocation according to your risk taking ability. That is, the asset allocation must be balanced from time to time, whether the market is ups or downs. If your equity investments (company stocks, equity funds) are highly profitable when the market is at its peak, sell them according to the asset allocation and increase your investment in debt based funds.
For example, one is fifty years old. He should have made 50 per cent of the stock market based investment, 30 per cent of the credit market based investment and 20 per cent of the gold based investment according to the Asset Allocation. His Rs. 2 lakh investment of Rs. 1 lakh per share and Rs. 60,000 depending on the loan and Rs. 40,000 Gold was also in the ETF. These investments are valued at Rs. 1.5 lakh, Rs. 70,000, Rs. Suppose it has increased to 50,000. 50: 30 according to his asset allotment; Rs. 1,35,000 as per 20; Rs. 81,000; Must be Rs.54,000. Therefore, to fix the asset allocation one has to sell 15,000 worth of shares in the stock investment, this Rs. 15,000 out of which Rs.11,000 is in loan schemes and Rs. 4,000 should also be invested in Gold ETFs.
Doing so can maintain the return on equity investment and reduce the risk of the investment portfolio.
Growth, Value Share: Investing in What?
SEBI divides the shares into Large Cap. Stocks, Medium Enterprise Shares and Small Company Stocks based on their stock market value. Analysts divide these stocks into Growth Stocks and Value Stocks. Let us look at these two types of stocks in detail.
Development stocks ..!
Growth stock is the stock of a company that has consistently given good returns. These companies often do not pay high dividends to investors. The reason is that the main purpose of these companies is to keep their share prices constantly rising.
These companies will be reinvesting their profits for its growth, expansion and technological facility.
Those who invest in these stocks invest with the intention that this stock will yield more returns than any other stock in the company-based sector, rather than the stock market. Thus, the price of these stocks will be subject to higher inflation. These companies are often hit in the press because of their rapid expansion. Then the share price will fluctuate.
Growth style investment is also known as momentum strategy. This is to chase stock price trends. Investing in stocks that are already performing well in the expectation that they will perform well in the future will also come in growth style. Growth stocks are driven by the rise of the stock market.
Investors who want a capital increase in the long run focus on this method. Investors are investing in growth stocks if the company achieves good growth in the future despite the high rating and stock ratio.
Value stocks
The price of these company shares is available cheaply. These companies are basically very strong. Due to stock market environment or company related issues the share price is currently falling and trading at a cheaper price.
For example, the share price plummeted during accusations that Nestl's Magee contained too much pesticide. But the share price soon recovered as the company was fundamentally strong.
These value companies often divide profits into dividends for investors. Moreover, the share price is not subject to high volatility.
Benjamin Graham, Father of Value Investing, said, “Buy shares in a company just as you would buy shares in a grocery store; Don't buy stocks like you buy perfumes. ”
That is, when we buy vegetables and groceries we place more emphasis on the health of our family and examine its quality and then ask for its price. Because we value the health of our family, but we do not value the quality and price of the perfume when we buy it. We will only notice its scent and attractiveness. Benjamin Graham tells us how to explore and buy groceries as well as explore stocks without succumbing to the tempting news about stocks.
How to determine the value role?
Good business, efficient management and a fundamentally strong company would now be underestimated. Thus, the value of its share will now be cheaper. All equity investors know about PE Ratio. It is the ratio between the price of the stock and its return. Let us see how to choose a value share based on this P / E ratio.
For example, a person buys a share of A for 100 rupees. Assume that the return on this stock investment is Rs.20. The investor pays 5 times as much as the return on the stock. The lower the BE ratio, the higher the return on equity investment.
Let’s take two company shares. Both A and E stocks are trading at the same price i.e. Rs. The PE ratio of stock A is 10 and the BE ratio of stock E is 14. Here’s a look at investing, since stock rating is attractive. Further, the PE ratio of the stock should be compared with the PE ratio of the sector. For example, the PE ratio of Infosys is 35. The average PE ratio of the IT sector is 41. Since Infosys PE is low compared to the industry PE, it has value and attractive share.
Supports the value investment style of renowned investor Warren Buffett. He talks about value investing ‘the price of the stock is the money you pay. Its value is what you get.
If a stock is selected for investment in the value investing system, the return on the stock price will be lower if the company's earnings expectation is lower. Margin of safety is very high in value investing. Margin of Safety is when a stock chooses to invest its next year's fair price. The price will be reduced by 15-20 per cent from this price and the purchase price will be fixed now. It would be safer to buy at such a low price.
Furthermore, value-based equity investing can protect one's portfolio from falling further during periods of stock market downturn.
Development role? Value share?
Growth stock, value stock whatever it is invested in let it be a long term investment. Next that company needs to be fundamentally strong. Many times, investors mistakenly choose penny stocks as value stocks that have fallen in price without a basic strength. Be very careful in this matter. Do not forget to seek the help of an expert if you are in doubt.
It is important to note the price trend of the stock before investing. It is very risky to invest without knowing this.
When it comes to stock market investing it can help you achieve your financial goals in the long run as well as add wealth. In that sense, it is not wrong to invest in Growth stocks and value stocks. Those who want to wait a long time and see good returns should invest more in value stocks. Others can attend and invest. Both of these investments are profitable at different levels of the stock market. So, as an investor is it a growth role? Value share? No need to worry too much about. Due to some issues the value was part of the potential to become part of the growth. Similarly, growth share is likely to become value share due to issues. In general, a stock investment mix is likely to yield good returns if both are equal.
Nifty 50 Value 20 Index
The Nifty 50 Value 20 Index (NIFTY50 Value 20 Index) is a selection of 20 stocks out of the 50 companies listed on the Nifty Index. .
Coal India, ONGC, Powercrete, Sun Pharma, JSW Steel, UPL, Hero MotoCorp, Bajaj Auto, Grossim Industries, Wipro, HU, L, I The index includes DTC, L&T, HDL Tech, Infosys, Tech Mahindra, Indus Ind Bank, Hindalco, TCS and NTPC.
8 Important Features To Consider Before Stock Investing ..!
The return on equity investment lies in choosing the right company stock. It is important to note the 8 key features.
1. Avoid share tips
Many of us have been investing in company stocks based on tips. It is better to avoid that habit. It is a good idea to do some ‘homework’ before starting a stock investment.
That is, it is important to know about the company you are going to invest in by reading the company's website, investment advisory, and stock referral companies' websites.
2. Investment period
You should only invest in company stocks if the investment period is at least three years. The reason is that the share price is subject to that level of inflation. Generally, stock market investments are compared to a roller coaster. Therefore, only those who have the strength to withstand the volatility of the stock price should engage in stock investing.
If your investment period and financial target period is about 3 years, you can invest in stocks of companies that do not have high inflation in stock prices and pay good dividends. Shares of companies listed on the Sensex 30 and Nifty 50 are less likely to be high risk as their balance sheet is good.
If the investment period and the financial target period are more than 3 years and more than 5 years, you can invest in company stocks with more than 150 companies out of 50 stocks in that type of high-risk stock market.
You can invest in high risk stocks if the investment period and the financial target period are more than 5 years. That is, you can invest in mid-cap and small-cap stocks. The longer the investment period, the longer it will take for stocks to rise again.
3. Investment strategies
In general, when it comes to equity investing, there are three main types of investment strategies: value investing, growth investing and income investing.
In a value investing investment style, a company's stock is invested in a position where the valuation is lower than other stocks in the same sector. Warren Buffett, one of the world's leading stock market investors, is making a profit by following this pattern.
The share of companies that continue to excel in generating revenue and profit is called the Growth share. Investing in these stocks is called Growth Investing. The price of these stocks will be higher.
Income Investing is the process of finding and investing in shares of a company that pays high dividends. Dividend refers to the profit growth of a company. A company that consistently pays high dividends to investors can be said to be a good company. Dividend income available in one year is the amount of bank fixed deposit that can be profitable.
Value Investing is ideal for high risk takers. Growth Investing is right for those who take moderate risk. Income Investing is suitable for low risk takers. By investing in a combination of these three types of stock investment styles, one can reduce the risk of the stock portfolio in the long run and provide a higher return.
4. Company Basics
Before investing in a company, it is important to consider the fundamentals of the company. Only if the foundation is strong will a building be sustainable. Who is the founder of a company in that category and how is its sales? How profitable is it? The investment decision should be based on a thorough examination of what future growth will look like.
The future growth of the company of the company you are going to invest in, you should make the decision to invest in that company only if you like the performance of its founders.
5. Debt free company ..!
Try to invest in debt free company stocks as much as possible. There may be a small amount of debt. It would not be a mistake if the loan was purchased to expand the business.
Avoid investing in the company's stock if you have taken out another loan to pay off one debt. The interest payable on the loan will reduce the profitability of the company.
6. Founder's share capital
Consider how much of a company's shares are owned by its founder or founders. If the share capital of the founders is very low then it is necessary to invest considering the reason for it.
If the share capital of the founders continues to decline, it is better to get out of it if you have already invested in that company stock.
7. Investment by investment companies ..
If mutual fund companies, insurance companies, and foreign financial institution investors (FIIs) have invested heavily in a company's stock, that stock may be considered for investment.
These companies will always invest in select stocks that are profitable.
7. Higher stock market value ..!
The market capitalization of a company should be somewhat higher. The lower the value, the higher the risk of investing in a company.
That does not mean investing in stocks with very high market capitalization.
You need to invest in large cap stocks, mid cap stocks, small cap stocks depending on your risk taking ability and investment period. It is always profitable to invest in a combination of stocks with different market capitalization value.
8. High volatility in stock prices
Some company stocks are seen with high volatility. In some company stocks the price may not be very high. It is better to choose stocks for investment according to the risk taking ability of the investor.
In general, a short-term 15%, 20%, 30% decline in stock market investment is all too common. Corona - 19 Even the price of many good company stocks fell by 50% or 60% in the early days of the impact. Therefore, the stock market can fall at any time. It is essential to have the ability to attack it.
Warren Buffett says those with risk aversion should come into the stock market even if the price of a stock drops by 50 percent after investing. Therefore, it is advisable to make a small investment in the stock market first, gain experience thereby and gradually increase the investment amount.
Also, do not hesitate to invest in good company stocks if the overall stock market falls. Also, it is important to have cash ready to invest then.
Dividing and investing
Basically no matter how strong the company is, no matter how good the stock, the total investment should not be put in a single stock. Doing so will greatly increase the risk on equity investment. In response, growth should be done by selecting five sectors and splitting the investment into several company stocks based on them.
Also, do not always make a total investment in stock market investment. Divide the investment amount by 5,6 and make the most of the market downturn.
There is a possibility of higher returns in the long run by splitting the investment in the above mentioned company shares according to the risk taking capacity of the investor.
Stock Investing: If you focus on these 10 aspects you will definitely make a profit ..!
With the change in modern lifestyle, one is forced to invest in corporate stocks by the income beyond the inflation rate and the tax benefit for income. Patience is as important as stock market investment.
For those who trade in the stock market and those who are involved in futures and options called derivatives, a short period of time is enough to make a profit. But, it takes a long time to see the return on investment.
The following 10 factors must be observed in order to make a profit on a stock market investment.
1. Long term investment ..!
The reason many of us come to stock market investing. It is the immense return that it gives. The higher the return on the stock market, the greater the risk. At the same time, that risk spreads over the long term.
The study results show that there is no chance of loss after investing in the Indian stock market for more than a decade. In the long run, the Indian stock market has been yielding an average of 15 per cent per annum. Stock market and company stock returns are unpredictable. The reason is that the change in the share price of a company depends on many things that happen within that company, things that happen internally, events that happen globally.
But there is no doubt that the company's share price will increase significantly in the long run if the company's earnings and profit margins are better.
Everyone says the formula for looking profitable in the stock market is to buy at a lower price and sell at a higher price. But, this is not possible in practice. Truth be told, in the market, it is not so easy to predict stock price fluctuations. At the same time, the share price of a well-performing company will continue to rise in the long run, even if for some reason in between. In that sense, it is possible to identify a good company and invest in it whenever money is available on its stock. Shares of good companies also fall during the downturn in the overall market. Then you can wait and invest. Or you can invest extra then. In doing so there is a chance of getting a good profit on average.
2. Explore the pantry yourself
No matter who recommends it, no matter what the stock, you too should explore the pantry and then make an investment decision. For that it is good to have some knowledge about the economy and the functioning of the stock market.
Any kind of domestic and international economic trends will affect the stock market. It is good to know the basics, such as how the stock price will go down in case of any kind of problem in a company.
It is important to look at a company's past earnings and profit margins and at the same time look at what the prospects are for future growth.
It is always important to do proper research before investing in stocks. But this is rarely done. Investors typically invest in sector stocks based on the company in which they work. This is wrong. The reason is that when a particular sector is affected, so are those who work in that sector. The price of stocks in that sector will also see a decline. In this case, the problem at work, the problem may be the problem of equity investment.
Therefore, it is better to avoid investing in stocks based on the sector in which you work.
3. It is important to buy and sell at the right price ..!
Fundamental Analysis decides which company to buy. Technical analysis allows you to decide at what price to buy and at what price to sell. It is very important to buy at the right price and sell at the right price to see the return on stock investment.
The nature of the stock market is volatile. When the stock market crashes for some reason, the price of good company stocks also falls. Then do not panic or rush to sell stocks that are at a loss or have a slight profit. If what you have invested in is a good company share, and fundamentally a strong company, the situation is right and its price will inevitably rise.
In return for selling, do not hesitate to buy and add when good company stocks are well priced down and available cheaply.
At the same time, when a fundamentally weak company stock price is low, most people should not buy for what they are buying.
4. Continuous investment is important
Stock market investing should not always be done in bulk. If the market collapses too much after making a total investment it will take longer to recover. Thus, the investment amount can be divided into 4,5 and invested at regular intervals.
Better way than this. Is to continue to invest a certain amount each month. In doing so it is very important to choose a good company role. The Ruby Cost Average is likely to yield a good return on average when investing consistently. The amount of investment does not have to be large when investing consistently. Even a small amount can be invested monthly.
5. It is mandatory to divide the investment ..!
Diversification is the oldest method of making a profit on a stock market investment. That is, putting all the eggs in one basket is as risky as putting the entire investment in one company. Do not always invest in only one stock or one sector, assuming it will perform well.
The problem is that the specific sector in which one has invested and the institutional role of that sector is not functioning properly. Therefore, it is necessary to divide the investment into different stocks belonging to the dental sector.
One can greatly reduce the risk by investing in good company stocks belonging to at least 3 or 5 sectors.
For example, (not recommended) investing in shares of DCS, Lupine, DLF, HDFC, Divis Motor Company, etc. .
Some will only invest in large cap stocks, which are very large companies. The risk is lower when doing so. At the same time the income will be less. To see good returns through the stock investment mix you need to diversify the investment in all stock market value stocks. That means investing in large-cap, mid-cap and small-cap stocks. Large cap stocks are ideal for an investment period of 3-5 years. This applies to mid cap stocks with an investment term of 5 to 10 years and small cap stocks with an investment period of more than 10 years.
6. Tips, do not invest based on rumors ..!
Many people invest in stocks based on tips and rumors. Doing so will often result in loss. It is very important to stay away from such things to see the return on stock market investment.
In general, most people in the stock market do not need to invest in that stock just because they invest in it. That is, it is not right to act in a herd mentality. It may pave the way for you to lose your capital.
Warren Buffett, the world's foremost investor, said, "Be afraid when others are greedy, be greedy when others are scared!" That being said it is noteworthy here. That is, stay away when others chase the price of the stock and invest in a higher price; That means investing when others sell in fear when prices fall.
Focus more on Fundamental Analysis of Companies and Technical Analysis of Stocks. Try to learn these. If not here's a new product just for you!
7. It is mandatory to look after the business of the companies
Understand the business of the company you are going to invest in. Then invest in that company. This is how Warren Buffett, one of the world's leading successful investors, made his investment.
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The business model and strategy of the company should be excellent. Also, its products and services should be such that the company can function better in the future as well. And it is good to be very strong financially.
8. Debt free company
Whenever possible you should have all of these components in place for launch to maximize profits. Only then could it have functioned better in a predicament such as the Corona vulnerability.
Debt should be low though. The interest should be low. Get involved in debt consolidation. You can invest in such company stocks.
9. Do not borrow to invest in the stock market
This is a concept that is often stressed by stock market investors. The value of the investment may decrease at any time in the short term as the stock investment becomes more risky. You will also have to pay interest on the loan. In the event of a sudden problem, if the value of the shares is very low, a situation will arise in which they will not even be able to sell them and repay the loan.
One thing investors should never forget. Surplus money should be invested in the stock market. Do not invest in the stock market for any reason that holds for short term demand.
10. It is necessary to oversee the investment
Many people invest in stocks and do not pay attention to it. It is necessary to carry out supervision and review at least once a year, as it is once a year. Stock market investing is not like a fixed deposit. Its value and functionality are subject to change at all times so it is essential to monitor its performance at least once a quarter.
Following the above 10 rules will definitely give you a return on your stock market investment.
Do not wait for the right time ..!
Many stock market investors think they can enter the market (Timing the market) over time. Some are waiting for the market to come down even better when it is down. But, the market goes down a bit and goes up. Still others say the market is at a new high. Now they are waiting for the down payment to buy at a higher price. But then the market goes up without dying.
Therefore, there is no need to look at the time period to invest in company stocks.
Until now no one has predicted the stock market volatility 100 percent; Can't predict. Technical analysis will be somewhat helpful. Predicting the ups and downs of the stock market is impossible for anyone.
Expect a reasonable profit ..!
Some people invest in the stock market looking at 50%, 100% profit per year for unfairness. This is the biggest mistake.
In general, the stock market can be expected to benefit from the numerical gain available by combining the country's GDP growth rate and inflation rate. For example, if the country's GDP growth rate is 7 percent and inflation is 6 percent, one can expect a return of 13% or a maximum of 15% on stock market investment. According to Asset Allocation, it is wise to convert the profit to a different risk free investment when the return is more than 15% per annum.
Profit in Stock Trading: 8 Important Things to Follow ..!
Most of us have to engage in stock trading; There is a lot of desire to make a profit. But in practice the profit margin is very low. The reason is that we do not trade stocks properly.
Let us look in detail at the important aspects that need to be followed to make a profit in stock trading.
Compared to stock investment, stock trading is high risk. The more patience is needed in stock investing, the more speed is needed in stock trading.
When it comes to stock trading, it can be divided into three types. Day Trading is the act of buying and selling on the same day or selling on the same day. Swing trading is the act of buying and holding stocks for a few days to a few weeks. Holding and selling stocks for up to a few months is short term trading.
The following eight things must be considered when trading a stock in any of these three modes.
1. Loss prevention is essential
Stock trading should not be done without a stop-loss. This stop loss is to protect the stock traders from big losses. There is an order called Stop Loss Order when trading the stock.
If the share price falls below a certain level and the stock price starts to fall contrary to their expectation, they can exit the trade with less loss by using this stop loss order. Doing so will save you a lot of big losses and keep you on track to trade the next day.
A good trader will be the one who admits that three out of ten trades can end in failure.
2. It is necessary to follow the technical analysis
Some stock traders trade on the advice of someone. They do not carry out their own technical analysis.
Knowing the technical analysis, what is the demand for that particular stock? Details such as what the volume is will be revealed. Based on this, it is possible to predict whether the share price will go up or down.
It is necessary to know the technical analysis in that category. Let’s go to training class for that; You can buy and read books.
The biggest mistake that can easily get your claim denied is to fail. It will come at a huge loss.
It would be profitable to study technical analysis properly, know the details and go into stock trading.
3. Following the trend
Generally, your friends call the trend in stock trading. That is, trading following the stock market or stock trend can be profitable.
Is the stock market or stock market booming? The risk of loss is 50 percent brighter when entering the trade without knowing whether the trend is on the downside or not.
The market is on the rise. It would be profitable to trade in that direction. Therefore, it is always better to follow the trend and engage in stock trading.
It is imperative to set a stop loss when trading against the trend. Only then can more losses be minimized.
A good trader will not trade anything unless the stock market or the trend of the stock is clear. He would just be watching the fun.
Also, it is always good to trade in stocks with high volume.
4. Not following others
Rumors and suggestions in the market are coming up on various social networking sites like Facebook, WhatsApp and Twitter. Ignoring them all, only traders who engage in stock trading based on their own research make a profit in the stock market.
If you act like a herd, it is difficult to make a profit in stock trading; Loss is more likely. Tips, Suggestions Even if they come, you can make a profit by researching and selecting and trading them.
5. Adhere to a consistent trading system
Profit in Stock Trading Most traders follow the standard exclusive trading method as they see fit. Changing the trading system frequently is the biggest mistake. It will often go to waste and stop.
6. Avoid doing average
If the stock price starts to fall instead of buying in anticipation of the stock price rising, good traders will sell out if the stock price falls below the stop loss.
Some will begin to average it when the share price starts to fall. By this they think they are reducing the loss. But they really add up to a loss.
Lowering the stock price average can be profitable for a long-term investment. But, it will not be so profitable for short term trading.
7. Avoid trading stocks in penny stocks
Well-informed stock traders do not trade in penny stocks called penny stocks.
The reason is that the fundamentals of companies in penny stocks are weak. Also, it is very difficult to accurately predict the trend of those stocks.
8. Taking out partial profit ..!
Those who are good debtors have good returns on a stock trade. They have the habit of taking out partial profits even though they are still likely to climb in the short term. Doing so is good in a way. In practice it can be seen that small profits together become very high profits in a given period of time just like a small drop is a big flood.
We have explained the useful features that will help you to perform better in stock trading. Congratulations on making a profit.
Mandatory rule to follow ..!
If there is continued profit or loss in daily stock trading, it is better to end the trading in a hurry. This is the main rule that must be followed.
A float will come as the profit continues to rise. After that there is a possibility of loss when trading as an assault.
Similarly, it is better to stop trading that day in case of one or two losses. The reason is that the less likely you are to be in a clear mindset in a business that continues to be frustrated by the loss.
Coffee Can Portfolio: Shares for investment, How to choose?
Coffee Can Portfolio Coffee Can Portfolio is a method of investing in stocks that are fundamentally very strong and investing in the long run, just as investing in a company's stock is based on value.
The term coffee can investing was first coined by Robert G. Kirby in 1984, about 40 years ago. In ancient times it was customary in Western America for households to put important items in coffee cans. These cans were hidden under the mattress in the bedroom. The coffee can, which is kept under the pillow or mattress for safety, will be there for years. It has been in high circulation until the banking practice (savings and safe deposit box facility) became popular.
In our town, Indian mothers used to save money in pantry, rice cans, mustard cans, etc., and then use it to invest in gold, land, etc., by putting important items in a coffee can and safely hiding it under the mattress.
Just like putting important items in a coffee can and hiding them under a bed mattress for a long time, investing in well-functioning company stocks and continuing to do so for a long time is called a coffee can investment mix.
How did this investment system come to India?
This method has been very successful in the United States. This investment method has been popularized by Sourav Mukherjee, a leading investment expert who has written a comprehensive book on the 'Coffee Can Investing' method in India The coffee can portfolio is an investment strategy. Of these, the key aspect of this strategy is to minimize risk and maximize profitability by investing in good company stocks for at least 10 years.
Stocks are often bought and sold frequently in this investment strategy. If you buy a stock you should continue to invest for the long term. Almost buy stocks and forget about them for a long time to come.
In this stock investment system, more emphasis is given to stock selection. There is no need to pay much attention to the performance of these company stocks as often as regular stock investing.
Generally, an investment of more than 5 years is considered long-term and an investment of more than 10 years is considered very long-term.
The book Coffee Can Investing describes in detail how Indians can make a profit by following the coffee can investment method.
Coffee can investing is defined as investing in shares of a company that have more than 15 percent return on capital each year. That is, it is an investment approach to creating immense wealth at low risk.
Profitable investment
The stock market is a long-term investment. The stock market has been experiencing high volatility in the short term but in the long run it has been yielding an average return of more than 12% to 15% per annum, higher than the inflation rate.
Also, the dividends and bonus shares they pay when they are the best performing companies may make the stock investment more profitable.
The quality of the stock is of paramount importance in this investment system. That too must be fundamentally strong.
How to choose the role?
1. The company must have been in operation for at least 10 years.
2. The company's revenue growth should be at least 10 percent per annum. This is not the Compound Annual Growth Rate (CAGR). There should be growth of 10 per cent and above every year.
3. Return on capital employed (ROCE) should be at least 15% over the last 10 years.
4. The market capitalization of the company's stock is Rs. Should be more than 100 crore.
5. Must have good brand value.
6. Must have the ability to deal effectively with competing companies.
The cost of raising capital ..!
A company is good if it makes more profit than the cost of raising capital (Cost of Fund / Capital). For example, a company raises capital (debt) at 12% interest. If the profit of that company is 24% then this company can be said to be a good profitable company.
The lower the cost of raising capital, the easier it will be for the company to compete with other companies.
Next one cannot invest in a company’s stock solely on the basis that it has performed well in the past. Investing will only be profitable if that activity and profitability continue in the future. At the same time as looking at a company's performance over the past decade, it should only look at investing in that company's stock if it is confident that the company will perform well in its affiliate / business over the next ten years.
A company that is unique is better suited for investment than a company that is the largest in a particular sector. The reason is that a large company is subject to change. But, uniqueness will remain constant.
A company can keep a fixed price for its products and find out what condition it is in. Only unique companies will continue to sell products at premium prices.
Do not decide to look at the production cost of a company alone. Look at how much it costs its competing companies in the same field.
Only four of the 50 companies listed on the Nifty 50 index are able to choose according to the terms of the Coffee Can Investing System. Those companies are Asian Paints, Lupine Pharma, HDL Technologies and ITC.
Screener Dot's website helps to select company shares under the Coffee Can Investing System (by Sourav Mukherjee). The link is http://bittly.in/IBfdCjPaCcU=.
About 4800 companies are listed on the Indian Stock Exchange. Only about 150 of these stocks are eligible for investment under the Coffee Cane portfolio. Screener Dot's website lets you choose the stocks that are right for you in these companies.
For example, with a market capitalization of over Rs 1,000 crore, ROCE can choose only those stocks with a sales growth of over 20% and sales growth of over 15%.
How to invest?
You can invest in this coffee can portfolio in the form of Systematic Investment Plan (SIP), which is widely used in mutual fund investing. Just as all funds have SIP facility in mutual fund investment, not all companies have equity SIP facility. Only a few leading stockbroking companies offer SIP investment in stocks.
You can invest this number of shares per month in this facility. If your broker does not have this facility then you are the one who has to buy a certain number of shares every month.
You can also invest in bulk once a year in the company stocks you have selected for your coffee can portfolio. Money and bonuses available in addition to salary can be used for this investment method.
Also, you can get high returns in the long run if you buy everything together when you see the price of the shares of the company featured in your coffee can portfolio on the downside of the overall stock market.
Reduce risk ..!
It is necessary to divide the investment into shares of different sectoral companies to reduce the risk on the investment. 10 to 15 shares may be in one's coffee can portfolio. Beyond that it can be a difficult thing to look after and manage the investment mix.
Although a long-term investment, once a year, the investment mix can be scrutinized and the dysfunctional, troubled company in future growth can be excluded from the investment mix.
This coffee can investment combination has the potential to yield more returns than index mutual funds. The reason is that you have researched and selected more good company stocks among the good company stocks listed in the index.
Suitable for whom?
If the market has seen a sharp decline in coffee can portfolio, it will take more years to recover. In that sense, it is possible to have more patience and invest more in market downturns.
Inactive income
This stock investment scheme can be considered if the investment period is at least 10 years. Passive Income is an investment and investment method suitable for long-term prospects. At the same time, if you do not have enough knowledge and experience about stock selection you can create a coffee can portfolio with the help of the best stock market experts / stock brokers.
How much can you invest?
If you like the coffee can portfolio, put only about 10% to 15% of your total investment in the first place. Increase investment if that experience is good.
Since stocks are not often bought or sold frequently in this investment system, the cost of the investment will be limited to the demat annual maintenance fee (approximately Rs.300 to Rs.500) and the stock brokerage fee (typically 0.25% -1% of the transaction amount).
Including new companies that fall under the Coffee Can Investing Regulation into your investment mix can also increase gross returns.
