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”
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.
is the most exciting yet challenging tasks of earning money through the investment in stocks. There are a lot of misconceptions about investing in stocks.
One of the largest misconceptions of all is that one size fits for all. That isn’t true at all. Other very famous misunderstanding about stock picking is that people think that once they have opted for one strategy after a lot of careful evaluation, they don’t need to change that at all. This is also
Other very famous misunderstanding about stock picking is that people think that once they have opted for one strategy after a lot of careful evaluation, they don’t need to change that at all. This is also the false concept. There is nothing like a perfect stock picking strategy. The most common explanation for not having a perfect stock picking strategy is the change in the economic circumstances of countries which lead to the change in economic conditions of the industries operating in those countries. Such problems totally tilt the balance of attractiveness from one stock to other.
Allocating assets or (capital) amongst different stocks is, therefore, a tricky affair and will always remain a tricky affair forever because of so many uncertainties involved. A lot of theories have been presented about stock picking which may be proven right or wrong.
Introduction and how to perform Fundamental Analysis of Stocks
Fundamental Analysis of Stocks is a method which is employed to determine the value of a stock. In the fundamental analysis, the industry to which the stock is related is analyzed. Analyzing the financial statements of the corporation is the way to do. This approach usually looks at the overall health of the economy in which that industry is operating. In the fundamental analysis of stocks, there are again two approaches used to analyze the industry under study. One approach is zoomed in or top down analysis and the other is known as zoom out or bottom-up analysis. This analysis should not be mixed with technical analysis or quantitative analysis.
Fundamental Analysis of stocks is based on the assumption that markets do not reflect all the available information on the stock prices of different companies. For that matter, there must be corrected seen in each of these stocks after some time and whosoever positions himself in time would get benefit from that correction. Top down or zoom in approach mainly focuses first on the national or international economies health. Then they relate economic performance with that of the industry and then they go to the specifics of the firm under consideration. For the bottom-up method, the approach is totally inverse to that of the top-down approach. In this method, the analyst starts from the firm (no matter how small is the size of the firm) and goes up to study the industry and the economic factors that are affecting the firms’ performance.
Investors invest for one primary reason – to make a return on their money. Compound interest is the friend of an Investor.
What is Compound Interest?
Compound interest is interest that accrues based on the total balance of principal and accumulated interest. Compound interest is a powerful tool for getting the financial glory.
What is the rule of 72?
The “Rule of 72” is a simple, quick and easy way to calculate the length of time in which money doubles at a certain interest rate.The Rule of 72 is a math formula that tells you how long it will take to double the value of the money you invest:
Firstly, Find out your interest rate…
Second… do the math!
72 / interest rate = # of years
Example: $1000 invested at 6% interest rate
72 / 6 = 12 years –> In 12 years $1000 will double at 6%!
Today, CDSL IPO allotment will be done. I have also applied for listing gains.
Wish me Best of luck!! , Congratulations to all those who got allocated today.
Hopes are dim of getting an allotment because the issue was heavily oversubscribed. Reason being it looks to investors as a legitimate IPO. CDSL IPO is from exchange itself. Central Depository Services (India) Limited (CDSL), a subsidiary of BSE Limited operates as a securities depository in India.
Short-term investing is a term we use to describe a position trade, which may last anywhere from several days to several weeks, or even as long as a month or more.
Often times, those interested in day trading incorrectly assume that all trading must be completed on an Intraday basis and/or that all trades must be closed out by the end of the day. While this does often times, reduce the risk of holding overnight, or for durations longer than a single day, sometimes (not always) it can put you into a mindset which can tend to reduce your overall profits in the markets. Often times day traders find themselves “babysitting” cash while looking for favorable trades to place. While this isn’t always bad, it can sometimes tend to reduce your profits from trading.
If you keep an open mind about the markets, certainly it can be seen that there are times when holding a position for longer than a single day can be beneficial to your bottom line. Many times in our morning newsletter, for example, we take up a position early in the week and hold a stock for several days, if not longer. The reason for this is because while Intraday trades can be placed, often times slightly longer duration trades which are based more on technical chart patterns can turn out quite favorable if executed and managed correctly. Continue reading “WHAT IS SHORT-TERM INVESTING”
Let’s first take a look at each style. Investing means that you pore over a company’s financial statements, management, product lines, operational costs, barriers of entry, profit margin etc.. In other words, you look at a company’s fundamentals. If you think the market value of a company’s stock is below its intrinsic value, you buy it. Trading is on the other end of the spectrum… Entry and exit of a position are made based on thorough technical analysis of a stock. Which one is better?
Most of the financial articles and college economy classes teach people how to be an investor at an early age. They will throw tons of econ theories at you and cite Warren Buffet or Peter Lynch as living examples that investing is better than trading. What they do not tell you is that most of the investors lose money, let alone achieving anything remotely like 1 / millionth of what Warren Buffet or Peter Lynch has achieved so far. I still remember that Benjamin Graham, teacher of Warren Buffet, said in his famous book Security Analysis You are better off to buy a well-diversified mutual fund in the long run than pick individual stocks on your own. If you are determined to do it yourself, read on.”
From my experience, trading is more suited than investing for average people like you and me. All the people I know, relatives, friends and next door neighbors who are/were investors suffered huge losses in 2008. The problem is that they did not have huge gains during the Bull Run from 2003 to early 2007 to offset those big losses. Cut the losers and let the winners run. You might have heard of this phrase from time to time. It sounds simple. Nevertheless, very few people can follow that idiom. Most investors do exactly the opposite thing, which is cut the winners and let the losers run. When he has a winner after a number of losses, he would ask himself 500 times a day if that winner would reverse. The more he asks himself, the more worried he is. He ends up prematurely exiting his otherwise a very profitable position. However, when he has a loser, every time that loser bounces back a little bit (sucker rally caused by shorts covering), he sees a light at the end of the tunnel. Yet the position edges even lower. Does he keep asking himself “How is it possible? How it is possible since this stock has such a low PE? Why? Why? ” The position continues to edge lower while he is still pondering why his investments are rotting. I have seen people hold onto gigantic losers that are over 50% under the water. 50% is an understatement in 2008. Before an average Joe, like you and I know what went wrong with the company, the stock has been already crushed unrecognizable.
One reason that an investor cannot cut losers is that he has a very strong conviction when he decides to buy a stock after spending so much time trying to understate the fundamentals of a company. In other words, he is very biased by the time he finishes studying the fundamentals of a company. If, that stock goes against him, he will always fool him into something like “I am a long term investor and these company’s fundamentals are sound.” Before he realizes it, he has a pet. Here are a few classic losers in 2008. They all have sound fundamentals.
Click on the thumbnails to have a better view of these losers
MGM (MGM MIRAGE)
Drys (Dry Ships)
RIMM (Research in Motion Limited)
SIGM(Sigma Designs, Inc.)
A stock moves because of the underlying psychology of many participating traders/investors. It reflects the mental states of all these participants. Technical analysis works like a heart rate monitor that you can use to see what others are thinking and then you make a trading decision based on what you can deduce from the readings. If you are a pure technician, you spend no time reading anything about the fundamentals of that stock. The stock is just an electronic symbol that may show you XYZ symptoms of going lower/higher. You calculate /guesstimate/deduce the probability of the stock moving in your predicted direction. If your answer is 51%, you open a position.
As we can see, one of the biggest mistakes an investor makes is keeping a pet. With a seasoned technician, it cannot possibly happen since he might not even know what this company does. It is just a symbol to him. He can long a stock as easily as short the same stock. He uses solid risk management to avoid big losses, which is cutting the losers. There are good, bad and ugly technicians.
Good technicians follow the idiom, cut the losers and let the winners run.
Ugly technicians cut the winners as fast as the losers. These traders will always be around though. But they are not able to make consistent profits.
Bad technicians slip into the investor mode, which Mr. Market will send them packing as quickly as they entered the market.
When Dick Fuld, the CEO of the now bankrupted investment bank, Lehman Brothers, testified on Capitol Hill, he said “We acted like investors. We did not cut our losses quickly enough to avoid the steep losses.” If you would like to invest in the stock market, buy a mutual fund or an index fund. Most people simply cannot beat those professional fund managers. Most fund managers have a bunch of highly educated people working for them and they spend more than 8 hours a day researching stocks. A lot of people who I met actually believe they can beat those fund managers consistently even if they only spend 1 or 2 hours a day at most on researching stocks.
Of course, this is a perennial debate of trading vs investing. Choose one suitable for yourself.
It’s only natural that everyone should strive to become better at their profession. Professional athletes want to get to the major leagues. Musicians want to play in Bollywood. Professional actors want to star in a blockbuster movie. Likewise, it is the goal of anyone learning about the stock market is to become a better investor.
Learning to invest correctly is the key. That’s why education plays a critical educational role for anyone who aspires to make money in the stock market. A student who enrolls in the program will be equipped with the information needed to help them make intelligent stock market decisions. Continue reading “How to become Better Investor”