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.
When will India have a 5 trillion economy !!!
When will India have a 5 trillion economy?
India's gross domestic product (GDP) grew by $ 2.9 trillion in 2019. Trillion is a trillion. India's GDP fell to $ 2.7 trillion in 2020 due to the Govt.
The country's GDP growth slowed to an all-time low of 24.4% in the June 2020-11 quarter due to the Govt curfew and industrial freeze.
India's GDP growth slowed to 7.3% in FY20-21.
In January 2022, India's GDP rose to $ 3.1 trillion. India's GDP growth rate for the fiscal year 2021-22 ending March 2022 will be 9.2 per cent; The federal government predicts that this will be the fastest growth in the world.
India's GDP is projected to increase to 5 trillion by 2025, before the impact of the Corona in 2019. But the impact of the Govt has slowed down India's economic growth. India's GDP is projected to grow by 5.5 trillion by 2025, with an average annual GDP growth of 9.5% in the coming years. If not, India's GDP is projected to reach $ 5 trillion by 2030 alone.
As far as Indian companies are concerned, it is not necessary to make a profit just by exporting manufactured goods and services. Domestic consumption is a lucrative business for many companies as the country is densely populated and various foreign companies are branching out in India. That way you have the opportunity to make more profit when you select and invest in stocks of companies that sell more locally and offer more services.
Share Investment points to be noted
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.
10 Rules for the success Share Market Investment
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, if the company is fundamentally strong then 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 falls 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.
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. 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.
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Bonus stock, stock split: How to pay tax on profits?
Profits from stock market investments should be taxed. If the shares are purchased and sold within one year (12 months), a short-term capital gains tax (STCGT - Short Term Capital GainTax) is payable. Whoever it is has to pay 15% tax. The basic income limit is Rs. Those below 2.5 lakh will not have to pay this tax.
If the stock is sold after one year, it will be subject to Long Term Capital Gain Tax (LTCGT). If the profit is up to Rs 1 lakh no tax is levied. Profits above this should be taxed at 10 per cent without inflation adjustment.
Bonus shares and taxes ..!
Many people are confused about how to pay the tax when selling bonus shares and additional shares obtained through the stock division
Bonus shares are shares that are offered free of charge to those who are already investors. Here the company's share capital will increase. The shareholders did not pay anything to get these. The number of shares would have increased in proportion to the bonus shares issued
For example, suppose a person buys 100 shares of a company on August 1, 2019 at a price of Rs. 100 per share. On February 5, 2020, the company will issue bonus shares at a ratio of 1: 1. At that date, the share price was Rs. Is 110. Following this the total shares will increase to 100 + 100 = 200. At the same time, the share price will halve to Rs 55.
On September 2, 2020, the investor will sell his 200 shares at Rs. Selling at a price of 120.
Generally, we would buy a company stock in several stages and add it to our investment portfolio, and when selling the shares, the first purchased shares will be taken into account as the first sale.
Accordingly, here, the 100 shares originally purchased by the investor are taken as the first sale and since they have been purchased for one year, the profit to be made from these shares is called the long-term capital gain.
Purchase price 100 * 100 = Rs. 10,000
Selling price 100 * 120 = Rs.12,000
Capital gain was Rs. = Rs. 2,000
Long term capital gains tax 10% = Rs. 200
The long-term capital gain available to an investor during the financial year (company shares and equity mutual). He has to pay 10% tax only when it exceeds Rs 1 lakh. Rs. He does not have to pay tax on the profits of the shares sold if he has a long-term capital gain of less than Rs 1 lakh.
As the bonus shares are issued and sold within one year, a short-term capital gains tax is payable on the profits made from them.
The purchase price of bonus shares is 100 * 0 = Rs. 0
Selling price 100 * 120 = Rs.12,000
Short-term capital gain = Rs.12,000
Short-term capital gains tax 15% = Rs. 1,800
So the total tax is Rs. 200+ Rs. 1,800 - Rs.2,000
So, buying 100 shares for Rs.10,000 and getting free shares . If sold for Rs 24,000, the post-tax profit is Rs. 14,000. Tax is 2,000. That is, one year after the bonus shares are issued, it is sufficient to pay 10% of the long-term capital gains tax, in lieu of 15% short-term capital gains tax on 100 shares. That too in the financial year, Rs. 1 lakh is exempt.
Stock Split tax
Stock split is the reduction in the face value of a stock. Here the share capital of the company remains unchanged. Divides the same stock into more shares. For example, one person owns 100 shares of a company on August 1, 2019. Suppose we buy a stock for Rs.100. As on February 5, 2020, the company has a face value of Rs. 10 stock splits by 1: 1 then face value will divide to Rs5. Now the investor will get 200 (100 + 100) shares with 5 face value. On that date, Rs. 110, the share price halved and decreased to 55.
Purchase price 100 * 100 = Rs. 10,000
Selling price 200 * 60 = Rs. 12,000
Capital gain = Rs. 2,000
Long term capital gain 10% = Rs. 200.
Here too, in the financial year, long-term capital gains from institutional stocks and equity funds were Rs. 1 lakh is exempt.15% short-term capital gains tax if the total investment period is less than one year when selling the original shares and shares acquired through share split will have to pay tax.
At the same time, one year has passed since the purchase of the original shares. It has not been more than a year since the share split. In this case, if the total shares are sold, you have to pay 10% of the long-term capital gains on the original shares. Bonus shares pay a short-term capital gains tax of 15% on capital gains.
Taxation of Bonus shares and Stock split
There are 2 types of Capital Gain taxes , 1) LTCG is Long Term Capital Gain 2) STCG is Short Term Capital Gain
LTCG is listed securities like shares , debentures ,bonds, etc in a recognized stock exchange sold holding more than
12 months is nil on the profits upto Rs 1 lakh and beyond Rs 1 lakh profit its 10% without indexation benefit.
STCG is same listed securities in a recognized stock exchange sold holding less than 12 months is 15% on the profit.
Holding period may vary for unlisted shares s 24 months and unlisted securities other than shares s 36 months.
BONUS SHARES are shares allotted for free to the shareholders and the shareholders dont pay anything to buy these
shares and your capital increases. For example if a person buys 100 shares of company on 1/8/2019 t Rs 100 each and on 5/2/2020
the company allots bonus shares in the ratio 1:1 so the total shares 100+100 is 200. On 2/9/2020 he sells all 200 shares at Rs 120 each.
LTCG on sale of original 100 shares which was bought more than 12 months (1/8/2019).
Cost price 100*100=Rs 10,000
Selling Price 100*120=Rs 12,000
Capital Gains =Rs 2,000
LTCG 10% = Rs 200
STCG on sale of 100 bonus shares which was allotted less than 12 months (5/2/2020)
Cost Price 100*0= Rs 0
Selling Price 100*120= Rs 12,000
Capital Gains = Rs 12,000
STCG 15% = Rs 1,800
So total tax LTCG is Rs 200 + STCG is Rs 1,800 = Rs 2,000
Here in Bonus shares company investment made Rs 10,000 and sold for Rs 24,000 , profit before tax is Rs 14,000, taxes paid Rs 2,000.
STOCK SPLIT is the same stock split into more shares where your capital remains same. For example if a person buys 100 shares of
a company on 1/8/2019 at Rs 100 each. On 5/2/2020 the company announces shares split in the ratio 1:1 , so total shares will be 100+100=200
but the stock price on the day was Rs 110 each will be divided by 2 where the stock will become Rs 55 each. On 2/9/2020 he sells all
200 shares at Rs 60 each.
LTCG on sale of 200 shares
Cost price 100*100 = Rs 10,000
Selling price 200*60 = Rs 12,000
Capital Gains =Rs 2,000
LTCG 10% = Rs 200.
Here in Stock split company investment Rs 10,000 and sold for Rs12,000, profits Rs 2,000 and taxes paid Rs 200
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