Stock Investment: How to get started and some basic advice
Stock Investment is the act of buying shares in a corporation. A share represents ownership in a corporation. If done properly, Stock Investment can generate handsome returns. This requires buying into companies whose fortunes are rising. Soon enough, other investors will recognize these companies abilities to grow sales and profits and will also want to become owners. The value of these stocks will then go up noticeably.
To maximize the profit from the stock investment, you need to get in on a company before other investors recognize its potential. Once the media and the stock investing crowd discover this hidden gem, the price of the stock increases considerably. To get information on these companies, investment reports and financial newspapers are a good source.
For the novice, learning how to invest in stocks can be a daunting task. There are thousands of companies that one can purchase shares from not to mention the different business sectors. To make sense of the many developments and possibilities out there, the beginner keeps the approach simple. Heres how to get started:
1. Follow companies that you understand: If you can comfortably sum up briefly what the company does, chances are you’re familiar with their business activities. With a better understanding of the company’s operations and the industry they compete with, the investor will be able to make a properly informed decision. Continue reading “BASIC ADVICE FOR STOCK INVESTMENT”
Personal finance takes the principles of micro-financing and applies them to the needs of an individual or a household. In light of the global economic crisis, wallets and bank accounts are put into shackles, and debts are becoming as hard to manage as they could be. Lucky for those who have had savings since birth – thanks to parents who know their own personal finance practices. For a lot of us who are struggling to survive, there is no better way to start being conscious of money but now.
Measure Your Spending and expenses
The key to managing money is planning your finances, which starts by setting your goals (both short term and long term) and closely monitoring your money flow in lieu of those goals. There are some apps that you could download to your cell phone and use for monitoring your money – Monefy, Microsoft Money, Money Manager, for instance. Some of the features could even be used for free. Continue reading “How to deal with Personal Finance?”
I know you are also unaware of the term survivorship bias and right now scratching your head or googling it. Here’s a Wikipedia link to get information on the Survivorship Bias.
Survivorship bias is the logical mistake we make while thinking or decision-making process about something. We ignore certain facts and fail to think on the opposite side. Which might impact your decisions and outcomes.
Let me explain by some examples.
Startups: Nowadays everyone is thinking about starting a new startup, Including you 😀 . Why? Because startups make you rich in a big way. You can be master of your own destiny and enjoy a lavish life.
Wonderful isn’t it?
You are super wrong. According to the survey done by IBM in collaboration with Oxford University, Only 10% of Startups survive till the age of initial 5 years. God knows how many survive in the long run.
So, If the majority of Startups fail then why we are still thinking of taking risks?
Because the media and the Internet say so. They paint a rosy picture and show interviews of successful start-ups. They show success stories of individuals who seek after their fantasies and beats the chances. you feel so damn motivated after you see an interview with a smart young man, way younger than you, earning in millions. Books and the Internet are filled with articles on how to become a millionaire or how to start your startup?
Nobody talks about the remaining 90%. Everyone feels taboo talking about those. The astounding numbers of failures are not visible to the individuals, and only those who succeed are shown regularly.
The Misbelief: You should follow the successful people and their habits if you want to become successful like them.
The Truth: When disappointment ends up noticeably undetectable, the contrast amongst disappointment and achievement may likewise wind up unnoticeable.
This masterpiece contains articles written and compiled by my favorite trader Richard Wyckoff for his Magazine taken from interviews which he had with Jesse Livermore. Written in the year 1921, it a gold mine as it showcased the trading knowledge of these two trading legends.
The book starts with a quick introduction about the great Jesse Livermore. His two traits were Knowledge and Patience. He believed that Patience can outrun Knowledge in Stock markets in long runs.
This book covers all the most vital standards of fruitful stock trading rapidly and unmistakably:
How Jesse Livermore used to trade?
Which kind of stocks did Livermore use to trade? Prefer to trade the Leading stocks of the strongest sectors and generally the market leaders?
He believed that Stocks have seasons and you need to know which ones are currently in their trending season.
His greatest strength was that he could easily anticipate future trends.
He focussed on Getting plenty of sleep so that he could start fresh in the morning, He used to analyze news, study economics and stocks daily early morning.
He believed in fundamentals and had a full comprehension of the current financial circumstance.
He used to avoid disturbances from the outer world like telephones and replied very few emails. He used to Stay far from other individuals and impacts to keep his mind clear.
He hated Tips and believed that to make big profits you have to hold stocks for longer price swings.
He would give the ticker a chance to tape disclose to him what was truly going on gathering or appropriation. Beforehand he did his homework every morning and if his pre-market analysis varied from the price action on the ticker. He would simply admit his mistake and accordingly take the trading position.
He used to trade only a stock with a possible 10 point swing trade coming with in the desired time.
Cutting losing trades early. He used to cut out his position from the stock if it moves against his position 3 or 4 points.
Averaged or Pyramid bought his wins, not his misfortunes. Adding to winning positions for the initial couple of focuses
Remove stocks that are not climbing and purchase the present best prospect, kept his capital fluid and working.
The Sink or Swim Money Program: The 6 Step Plan for Teaching Your Teens Financial Responsibility
This is a book review for The Sink or Swim Money Program: The 6 Step Plan for Teaching Your Teens Financial Responsibility.
With increasingly high debt becoming a bigger problem in families every year, it is more important than ever that parents teach their children to be financially responsible. While every child is different, and some can learn to be responsible with money at a younger age, parents should make sure to teach their teens how to handle money before they are in college or out on their own.
In The Sink or Swim Money Program, John E. Whitcomb takes parents through a 6 step plan for teaching teens how to be financially responsible.
In Mr. Whitcomb’s book, he takes a humorous look at teaching kids the value of money and making them responsible for their own money and purchases.
Here are a few of the ideas his book focuses on: * Calculating a budget * Work out a contract between you and your teen * How to plan ahead
With this system, the main point is that the teens are given a set amount of money that is to cover their basic needs, that you would normally pay: food, clothing and other necessities. It is a trial and error method, where the kids are given free reign on their money and will quickly learn what they can and cannot do with it.
In addition to the lessons on spending, the book deals with planning for large expenses, such as college, cars, and insurance. It also includes sections on checking accounts, credit cards and tips on saving and earning extra money with lesson plans and sample contracts.
Teaching your kids about finance is very crucial. Money is not everything in life, however, a person works all his life for money. So, bringing in financial literacy and investment habits to your teens and kids is of importance. If you want to find whether your child can be a good investor or has a financially responsible attitude. You must read this article.
Use of Probability of win and Statistics in Trading
Having an ‘Edge’ and trading vs. Gambling
Gambling: The odds are against you and you have to rely on luck to win. For example, take the lottery. Who makes money with the lottery? Well, it’s used by governments to pay for schools, etc. That means that they make a profit on the lottery. If 1 million individuals pay $1.00 each for a ticket, the only way they can make a profit is by paying out less than $1 million. So, the math for the lottery is such that even if some individuals are lucky, they cannot usually exceed $1 million in total winnings among all winners. So, in other words, buying 1 million tickets yourself with $1 million, you would end up with less than $1 million in winnings, even if you have winning tickets. The math has been done and the probability of the game has been fixed against you.
The operators of the lottery have the ‘edge’ in this game. The only way you could possibly win as an individual is by sheer luck. You would have to randomly get one of the winning tickets. You have no control. You cannot repeat any success (in the rare event that you do win). Most of the time you will lose. Statistically, over time, you will pay far more into the lottery than you get out (if you get anything out).
The same principle is used at the casino. All the games in casinos are fixed at specific win/loss ratios which always favor the casinos (the house has the advantage of the ‘edge’). Sure, they may pay out some large sums occasionally (losses to the casino) to a few people, but they collect small steady sums (winnings to the casino). As long as their income exceeds their expenses, they make money. And with the odds fixed, they do, lots of money. All gambling is set up this way. The house always has the ‘edge’ in all gambling. In reality, this edge does not have to be significant. Even 51% winning and 49% losing will make a casino lots of money over time. It’s a numbers game.
How do you get the edge? What really is an edge?
If you design a trading system, test it and it works to make you money, it should do better than randomly entering trades.
The edge is the percentage advantage you have using your proven trading strategy over randomly entering trades in a market.
For example, My system is able to predict days the market goes up 65% of the time and I can buy that market based on my system. Alternatively, I could enter the market each day using a coin toss, giving me 50% accuracy in predicting correct market direction.
Calculating the edge for this example:
Edge = (percentage of win of system) – (percentage of win of random system)
Edge = 65 – 50 = 15%
If my own system is only as good as a random entry system, I need to change systems or make some adjustments on the edge would be zero. We need an edge greater zero to make a system work.
You don’t really need much of an edge. Even a tiny amount is sufficient. Being able to have 51% winners is enough, giving you an edge of 1%.
How to Trade Support and Resistance on a stock chart
Trading happens over exchange with various participants punching the orders round the clock. This cumulative activity creates some price zones or levels. Those levels signify something and are used as a reference by many traders. Those levels are called Support and Resistance levels.
The Invisible magic of price action?
You must have felt that a stock sometimes rebounds from a certain price zone or level many times and you wonder what makes it do so? Most of the times stock reverse from a particular price and you again fail to know why this is happening. This is not a magic. These price levels are called as the support and resistance levels.
How are these support and resistance created?
When trading action takes place in a new script. The psychology of the traders helps create those price zones where they feel the stock is either overbought or expensive(Resistance levels), Price at which stock is cheap and oversold( Support level). As the trading involves a large number of traders the probability of what they think is right level is going to be high. Simply, because of the Wisdom of the crowd principle.
After some time of trading activity, that stock develops a price pattern based on the psychology described above. Now, the new traders or investors base their future prediction of price movement based on the historical price pattern they just saw. They Just see left and find out where the price has normally taken reversal. They utilize Technical Analysis to gauge the price action and predict targets. Continue reading “How to Trade Support and Resistance in Stocks”
Dividend Income Guide and how to calculate dividends
Dividends are usually paid quarterly (in some cases semi-yearly) or annually in installments made by the company to their shareholders as a method for sharing net profits. Some dividends you receive are in certain paisa per share, others pay numerous rupees per share. It means dividend amount is not fixed and vary from stock to stock or quarter to quarter.
The Relative Nature of Dividends
Why do a few organizations pay more than others? It depends to a great extent on their industry specialty, their need to pull in new venture capital, and the aggressive scene with a given condition of the economy.
Also, they are the essential value determinant for a few stocks in the market as a rule. Raise the profit, and the cost in the market will run up to relate with the going rate of return for organizations at that level.
Profits are never guaranteed, they rely upon profits since they are benefits being shared among the proprietors of the company (the Shareholders). We generally, as an Investor look to buy High dividend companies. (When I refer to an organization paying a high dividend I mean the dividend paid in the percentage of the stock’s value, instead of the measure of cash included.)
How to Calculate dividends
Ever been baffled by the headlines in the newspaper which says something like this ” 1800% dividend declared by the XYZ company ” or ” ABC company rewards its shareholders by 500% dividend”. For a newbie or anyone doesn’t understand the calculations is shocking as well as confusing, To clear your confusion the calculations have to be understood. I won’t be explaining most of the terms (You can google 😀 ).
Snapshot 1 shows the data required in the calculation of a dividend. You can use this format to calculate your dividend income. Or you can use the Online Dividend income Calculator below.
Dividend Online calculation:
You can Calculate how much dividend you have received from the online calculator attached below. Just enter the correct information in the Yellow fields and you will get your answers under the Blue fields automatically.
Why should I buy high dividend shares?
Investing in High dividend stocks has few benefits. Rather than depending on price appreciation in the stock price to do the job for you. You can make additional income via dividends. The company does pay dividends to whoever owns their shares, which means they can maintain their stock’s inherent value in the marketplace through a consistent and generous dividend payout strategy.
Another benefit is that Income from dividends from the Indian companies is tax-free. Yes, tax-free income is a reality by means of a dividend income.
You can also use dividend Investment strategy to get better returns from the bank. You can put your money in the bank at 3%, or you can invest in a company that traditionally pays out a 5% return to its investors through its dividends. The choice is yours and does the math – it’s the return on investment that counts, not the number of rupees per share.
You can use Dividend Income to re-invest in the stock with the dividend amount you just received. So, you have increased your position size in the stocks without any additional capital. This will increase your stock holding over a period of time. I will share a reinvestment plan soon.
Which are the best dividend stocks and How should I find them?
Dividend Yield = Annual dividend/share DIVIDED BY Stock’s price/share
The best dividend paying stocks are those which have a Proven performance record. They have a long history of profitability, and thus, stable or even a growing trend in dividend payments.
My observation is that dividend-paying stocks, while certainly subject to the momentum of the overall market, tend to trade in a more narrow range. This is because the price per share is directly linked to the level of dividend, which yields a percentage return.
The best dividend stocks provide a return that competes or outperforms with other forms of highly liquid investments,
particularly bank instruments such as savings accounts and Fixed deposits. The rate is also compared to longer-term government securities and treasury notes
To find the best dividend stocks, find stocks that pay the rate of return you are looking for via their dividend (and not historical price appreciation). Other factors then kick in, especially the history of the dividend itself, the past and current performance of the market overall, and the specific niche in which the company competes.
Whether shopping for a dividend return or price appreciation, the underlying strength and performance of the company are always your first consideration. Fundamental analysis is a must.
You can filter the dividend paying stocks from below links:
Screener.in: Use the Screen tool to find best dividend companies.
Important advice: Dividend stock buying is not for everyone because everyone can’t tolerate the risk factors of being a stockholder. So do your own research or consult your financial advisor before taking any informed decisions.
There are many strategies that can be learned by day traders. Some of the more popular techniques used by day traders are:
This strategy assumes that the stock being traded will continue its current direction, either moving up or falling down. The idea is to buy a security that has been moving and follow the momentum of the trade.
This strategy assumes the stock can no longer continue trading in its current trend and is due for a reversal. The contrarian trader buys stocks that have been falling or shorts one that has been rising because they expect the trend will change. They usually use technical tools which indicate Overbought and Oversold prices. Continue reading “Popular Day Trading Techniques”