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Latest Share Market News: We will give you few sound investment principles which if you will follow in your life, you will do very good in stock markets
(1) Investors should understand that it is not easy to find an undervalued stock…. Making money is not easy anywhere and especially in stock markets. Millions of investors, FIIs, MFs etc. are researching thousands of companies day in and day out…. When we find a 40 bagger stock like Chaman Lal Setia, it means we have beaten millions of investors, FIIs and MFs And it is not an easy task to beat so many people Very deep knowledge of Finance, Ratio etc is needed to find undervalued stocks. And 99%, investors do not have that deep financial knowledge except few basic things like PE, P/B etc. So instead of picking stocks yourself and burning your fingers, find a real expert with proven record….. When you are ill, you go to the doctor…. when you are in legal trouble, you go to a lawyer….. Then why pick stocks yourself when it is not your field ?….. If book knowledge made great investors, then Librarians would be the richest people on the earth…..There is much more to investing than what appears to naked eyes…. In Stock Markets, 99% people lose money and money lost by those 99% is grabbed by the remaining 1% investors…. But if you strictly follow that 1% category, then you also switch from 99% category to 1% category….There is a famous saying which investors should remember –‘If you do not know a Jewel… then Know the Jeweller..!!’
(2) Always invest according to FAIR VALUE of a share… I observed that most investors invest according to irrelevant criteria like `up from 52 week low`, `down from 52 week high`, `Technical Support and resistence` etc etc…. These all things are useless… Always find out what is FAIR VALUE of a share….and then if the share is trading at less than its FAIR VALUE,, then buy it… and if the share is trading above its FAIR VALUE,, then sell it… I see that if a share run up 30-40% in few day, then investors hesitate to buy it and wait for its coming down to invest it as if share price will come down just for that investor so that he can invest in….!!.. Instead the investors should just compare the CMP with its FAIR VALUE and then invest accordingly.
(3) Never buy on Margin…. Also, never take bank loan to invest in Equity… Invest only that much cash in Equity which you do not need for the next 2 years at least
(4) Do not fall in love with IPOs….. IPOs are generally overpriced.
(5) One strange thing I noticed is that if suppose a Rs 50 stock doubles in one month to Rs 100, that stock becomes their favorite and they become eager to invest at Rs 100…. The same investors were not investing in the same stock at Rs 50…. Investors should understand that if a stock doubles very quickly, it should become less attractive for investment….. Pls remember this quote of Warren Buffet–“ You should buy stocks in the way you buy grocery… not in the way you buy perfumes`…….. Also remember another quote of Warren Buffet– `Price is what you pay… value is what you get“
(6) Dont fall in love with only Blue Chip Companies if you came to stock markets to make wealth… Wealth is made in small cap stocks and mid caps stocks… When Rakesh Jhunjhunwala bought Titan, it was a small cap stock… Reliance is trading at 2,000 today… Do you think Reliance can become 20,000 in 3 years? No way….. But QUALITY mid cap shares can multiply 10 or 20 times in few years…. For example, HDFC Bank took 15 years (2003 to 2018) to multiply 40 times (rs 50 to rs 2,000) but my stock Chaman Lal Setia took just 4 years (2014 to 2018) to multiply 40 times (rs 5 to rs 200)…..But I observed that investors track only blue chip companies and waste their Time and Money… Find out strong small cap and mid cap stocks and then hold them tight for years… If you have come to Stock markets, then you came for Multiply your money and not for 10-20% returns… If you want 10-20% returns, then there are other asset class like Bank FD etc.
(7) Another thing I observed is that when an investor buys a stock, he starts tracking the price immediately and expects the price to rise immediately as if the stock was waiting for his entry to rise….. Investors should concentrate on business performance instead of daily price movement….. If business does well, price will eventually follow.
(8) Also I observed that when a retail investor buys a stock and price rises even 10-15%, he sells the shares quickly and books profit… This mindset never allows them to make big money… Warren Buffet bought Coca-cola in previous century and he is still holding it… Had Buffett sold Coca-cola after just 20-30% profits, he would have been still a small investor…. Secret of Fundamental investing is that if you found a real gem then buy it and leave it for many years..do not see its price daily… because if you will track its price daily then there will be a temptation to do something.
(9) One way to end up with $1 million is to start with $2 million and use technical analysis…..!!!… So dont focus too much on Technical Analysis….Fundamental analysis is the main science in stock markets to make money. …If one can make money by just following charts then the wealthiest people on this earth would have been Geometricians/chartists……To give you an example, on April 02, 2014 I gave buy call at fundamental pick – Chaman Lal Setia Exports (BSE 530307) when it was trading at 5.5 (considering split of 5:1 and Bonus after my call) … Now you look at the charts of Chaman Lal Setia Exports as on April 02,2014…. No Technical indicators at that time was saying that it will shoot up… But defying all technical signals, the stock was locked at Continuous Upper Circuit and Multiplied 41 times in less than 4 years.
(10) Don’t invest in Mutual Funds and Real Estate if you are looking for Multibagger returns….Mutual Funds have no history of giving Multibagger returns in 4 years…..After factoring in high inflation in India, real returns by Mutual funds are just 5% – 10% per year…. Future of Real Estate also does not look great after Demonetisation…. I think Real estate boom was driven by Black Money in the past…. In my view, Real Estate will not give much returns in next 5-10 years…. I will suggest you to sell your real estate property which you bought for investment and put that money in Quality Small Caps in stock market…..Commodity and Forex trading I consider as gamble instead of investing…..Biggest wealth in India in the next 5 years (2020-2024) will be made through Quality Long Term Equity Investments….. If you want to do SIP, then also you can do monthly SIP in the same quality small cap stocks for many years….From the point of view of quality of life also, Investing is best career because here your money works and you remain free…. What is the use of making big money/salary if you are bound to spend your day on a chair from 9 am to 6 pm ?… Only money is not important… You should have time also to enjoy that money…. And for how long you will keep on working for your boss to make him rich ?… Work for yourself.. Invest in Stock Market.
(11) You can make future of your children also through long term investing…. Invest 10-20 lacs in quality stocks for your little children…. Or if you do not have that much capital then you can do monthly SIP also in few strong quality small or mid cap stocks….That investment will take care of their education and marriage expenditure…. By 2026 Sensex can hit 1,00,000 (Yes, 1 Lac)…. In October 2013 when Sensex was at 19,000, I predicted that Sensex will touch 30,000 in 2 years (See ‘Previous calls at discussion Board’ Page)…. And Sensex did hit 30,000 in next 2 years…. there are still many small caps which can multiply 10-20 times by 2024 end…. Fundamental Stocks have very less correlation with Sensex/Nifty, which means that Fundamental stocks can multiply in long term even if Sensex doesn’t go up…. Because in Long term, Share prices are decided by earnings of a company and not by Sensex/Nifty….. If Earnings of a company keeps increasing at fast pace, share price will have to go up irrespective of levels of Sensex/Nifty…..In a bull market, retail investors hesitate to buy after a significant run up….And then they wait for a correction to enter (which never comes !)….Remember, Stocks are never too high to buy if general conditions are favourable.
(12) In Quality stocks, Averaging should always be done on downside instead of averaging on upside…. But please remember that Quality stocks are very less in stock market… and a stock does not become quality stock just because it is being recommended on TV or internet, or just because management is coming on TV and showing good order book/projections, or just because your broker is suggesting you to buy it, or just because company is posting good profits, or just because positive news is being flashed in the media about the company …. Never average JUST BECAUSE stock price has fallen because averaging in a bad company can cost you heavily…. It takes many years of experience and intelligence to identify quality stocks.
(13) Trading volumes of a stock has no relation with the potential of a stock….. Rather biggest multibaggers which I found are the ones in which volumes were low when the stock was in initial stage of its journey…. Also, there is a misconception among investors that penny stocks are bigger multibaggers than high value stocks…. This is not true… A 10 Rs stock can become 1 Rs and a 500 Rs stock can become 5000 Rs….. Secondly, A stock can look like low priced but its market cap may be in thousands of crores and on the other side, a stock can look like a high price stock but in fact its market cap may be just few hundreds of crores…. So while selecting Quality Small Cap stocks, focus on market capitalisation and not on absolute price of a stock
(14) Never invest your money based on free tips/SMS or (free/cheap trial offered by some websites) ….. If you will invest in free/cheap tips, You will soon be freed from your money… Remember, you get what you pay for…. By investing in Free/cheap tips, you save advisory fees but you put all your portfolio at risk….You save some money but you lose peaceful sleep…. I will tell you how this trap of ‘Free/cheap’ trial works….. I have heard that some websites offer free trials to investors and then pump the stock price up 10-15% in next few days…. Then they ask those same investors to subscribe for their paid services…. Investors subscribe for their paid services because previous free trial gave them some returns ….. And then those paid stocks fall heavily…. Govt is also planning to ban these ‘Free Trial’ offers because perhaps Govt is also aware of wrongdoing of some websites…..So ‘Free/cheap’ tips can cost you heavily in stock market…..Never invest your money based on tip providers calling you on your mobile or based on SMS received on your mobile…. Also, never invest your money based on your stock broker’s advice.
(15) Never ever do Intraday Trading or Intraday Futures & Options trading…. You can never make money consistently in trading… Eventually you will lose all your money in intraday trading… And even if due to some miracle you made money in intraday trading, you will have to pay fees to your intraday tips provider regularly, brokerage to your broker and 15% tax to government !!… In long term Investing, you don’t need to pay for tips regularly, some brokerage house like Zerodha takes zero brokerage on stocks bought for long term, and govt takes less tax on stocks bought for long term !!
(16) Last but not the least, I observed that investors always hesitate to sell their holding when they are in loss in that particular stock…. Investors should understand that Fair value of a stock keep changing with the change in company fundamentals and external economic environment….. Markets has nothing to do with ‘your buying price’ of a stock…. A stock will not recover from low level just because you are in loss !!…. There are investors who bought Unitech at 500 Rs and did not sell at 400 ‘just because they were in loss’…. Those investors are biting the dust now because Unitech is at 2 Rs now…. So if after some time of buying a stock on your own research you realize that you made a mistake, it is better to sell and cut your losses….. That loss will be recovered in other Quality stocks suggested by experts.
If investors will keep in mind the above mentioned investment principles, then they will do good in stock markets…. Happy Investing.
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