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  • How one can Retire with no less than $1 Million {Dollars}

    How one can Retire with no less than $1 Million {Dollars}

    Warren Buffett is acknowledged because the best investor of all-time due to his self-discipline and conservative method to investing.

    As an alternative of specializing in the quick time period, Warren Buffett focuses on the long run. He additionally has a low urge for food for threat, shopping for corporations that energetic merchants would discover boring past all perception.

    Buffett as soon as described his funding type as, “I’m 85% Benjamin Graham.” (Benjamin Graham is named the godfather of worth investing. His e book, The Intelligent Investor, is revered as a traditional on Wall Avenue. See additionally, 5 books Must Read for Investing ).

    To dive deeper and totally respect Warren Buffett, I like to recommend studying his annual shareholder letters alongside the e book, Buffett: The Making of an American Capitalist.

    This publish will deal with methods to construct a easy Warren Buffett portfolio, so let’s get to it.

    Passive Indexing Advantages

    There are 5 key advantages of setting up a Warren Buffett portfolio that’s passively managed:

    1. You may sleep properly figuring out you might be following the recommendation of the best investor of all-time, Warren Buffett.
    2. By shopping for and holding for many years whereas reinvesting dividends, the facility of compounded returns is realized.
    3. With passive indexing in low price index funds, you might be maintaining charges as little as humanly potential which maximizes returns.
    4. You’re maximizing tax effectivity by shopping for and holding for many years as a substitute of days (solely related when investing in a private portfolio versus a retirement account).
    5. The portfolio is straightforward to implement and straight-forward to comply with.

    Passive Administration Portfolio Holdings

    Warren Buffett’s advisable passively listed inventory portfolio is definitely quite simple. The truth is, there are solely two holdings: the S&P 500 and a short-term US authorities bonds fund. Relying on how younger you might be whenever you begin investing, it might simply be the S&P 500 (extra on allocation under).

    What are the symbols for these two Vanguard funds? You should buy an ETF model or a mutual fund model. I personally use the ETF model, however both one works.

    1. S&P 500 index fund – ETF image VOO (no minimal), Mutual Fund symbols VFIAX($10,000 minimal), VFINX ($3,000 minimal)
    2. Brief-term authorities bonds fund – VFIRX ($10,000 minimal), VFISX ($3,000 minimal). For an ETF, take into account VGSH.

    Buffett, 85 years younger, revealed his easy portfolio mentality in his 2013 annual letter to firm shareholders (emphasis mine),

    My recommendation to the trustee couldn’t be extra easy: Put 10% of the money in short-term authorities bonds and 90% in a really low-cost S&P 500 index fund. (I recommend Vanguard’s.) I consider the belief’s long-term outcomes from this coverage shall be superior to these attained by most buyers — whether or not pension funds, establishments or people — who make use of high-fee managers.

    Buffett supplied comparable recommendation after Lebron James requested him what he ought to do together with his personal investments,

    “By way of the remainder of his profession and past, by way of incomes energy, [he should] simply make month-to-month investments within the low-cost index fund,”The rationale Buffett recommends Vanguard funds over different suppliers is as a result of the funds have the bottom prices respectively for the devices they’re designed to comply with.

    For instance, VOO and VFIAX have a yearly expense ratio of simply 0.05% (VFINX, with its decrease minimal, fees 0.17%). For each $10,000 invested, .05% is a whopping $5 per 12 months in administration charges.

    Right here’s a Buffett quote on low prices and maintaining investing easy,

    Each people and establishments will continuously be urged to be energetic by those that revenue from giving recommendation or effecting transactions. The ensuing frictional prices could be large and, for buyers in mixture, devoid of profit. So ignore the chatter, maintain your prices minimal, and spend money on shares as you’ll in a farm.

    What’s the S&P 500?

    The S&P 500 is probably the most broadly adopted index on the earth. From Wikipedia,

    The Normal & Poor’s 500, typically abbreviated because the S&P 500, or simply “the S&P”, is an American inventory market index based mostly in the marketplace capitalizations of 500 giant corporations having frequent inventory listed on the NYSE or NASDAQ. The S&P 500 index parts and their weightings are decided by S&P Dow Jones Indices.

    If you wish to spend money on the US as an entire, the best technique to do it’s to purchase a fund that replicates the S&P 500.

    The truth is, each Warren Buffett and Jack Bogle (founding father of indexing and Vanguard) consider the S&P 500 is all it’s worthwhile to have a worldwide publicity. It is because the S&P 500 generates simply over 50% of its revenues domestically. The remaining comes from abroad.

    SP 500 company sales worldwide 082715

    $1 Million in 31 Years Utilizing an IRA

    For instance simply how highly effective passive indexing is utilizing Warren Buffett’s easy portfolio, I constructed a primary spreadsheet that replicated somebody placing $5,500 into an Individual Retirement Account (IRA) right here in the US and investing your entire principal into Vanguard’s S&P 500 ETF, ticker image VOO.

    The Vanguard S&P 500 ETF (VOO) has an expense ratio of simply .04% per 12 months, as famous above, which implies the fee to carry the ETF fund can be solely $40 for each $10,000 invested.

    Traditionally talking, the S&P 500 has returned 9.6%, on common, per 12 months. So, make investments $5,500 annually in a tax-deferred IRA with VOO, and after 31 years you’ll have an estimated $1,000,000.

    Bear in mind, your $5,500 funding annually is pre-tax, which ought to make it even simpler to avoid wasting. The truth is, I at the moment worker this actual technique for my spouse’s Roth IRA (post-tax particular person retirement account).

    One last notice right here is that when you might be age 50 or older, you’ll be able to contribute an additional $1,000 per 12 months (generally known as “catch-up” contributions), so $6,500 as a substitute of $5,500.

    Greatest Dealer for Following Warren Buffett

    Which on-line inventory dealer must you use to construct your Warren Buffett portfolio? The reply is straightforward. It doesn’t actually matter which dealer you employ.

    Since you might be investing for the lengthy haul and shall be accumulating a big stake over a few years, dealer commerce commissions will rapidly turn into negligible, even when shopping for shares each month as Buffett recommends.

    The largest benefit of a Warren Buffett portfolio is what we mentioned earlier, the tremendous low prices. Bear in mind, for each $10,000 invested in Vanguard’s S&P 500 ETF VOO or mutual fund VFIAX, .05% is barely $5 per 12 months in administration charges.

    Whichever dealer you select, reinvesting the dividends by a DRIP (dividend reinvestment plan) needs to be a free possibility (that means the net dealer is not going to cost you to mechanically reinvest the dividends and purchase extra shares). Our sister web site StockBrokers.com offers a useful gizmo for evaluating brokers aspect by aspect.

    One last possibility, go direct to the fund supply and use Vanguard.

    I personally maintain VOO in ten totally different on-line dealer accounts at the moment (I do that as a result of I head analysis for our sister web site StockBrokers.com). Level is that this, it doesn’t matter the place you purchase. Simply purchase and maintain till retirement.

    Take into account a Robo-Advisor for Automated Investments

    Maybe you wish to comply with Warren Buffett’s core principals of taking a long run method, maintaining it easy, lowering charges, and embracing passive indexing, however don’t wish to really place the trades your self.

    If that is you, then it would be best to think about using a robo-advisor as a substitute of buying and selling by yourself. For extra on robo-advisors and automatic investing, read this information.

    Conventional Asset Allocation by Age

    Whereas Warren Buffett favors holding a easy 90/10 portfolio of the S&P 500 (shares) and short-term treasuries (bonds), this isn’t what a conventional advisor will advocate.

    To find out a conventional portfolio that’s “correctly diversified”, you first wish to take a look at your age and goal retirement date. For this part I’m referencing the biggest asset supervisor on the earth, Vanguard, which has a staggering $Four trillion underneath administration.

    If you’re younger, it is strongly recommended to take extra threat and make investments extra closely in shares vs bonds to maximise returns. As you age, you then wish to enhance your bond holdings whereas lowering your inventory holdings to decrease threat. In spite of everything, you might be on the brink of retire.

    Right here’s a superb cheat sheet from Vanguard on the totally different allocations and historic returns. (IMPORTANT: The bond returns used under are a mixture of each period whereas Warren Buffett makes use of short-term treasuries. That is equally true with the inventory returns. Thus, the returns estimations are NOT a real 1:1 illustration of Warren Buffett portfolio.)

    Vanguard allocation

    To find out allocation based mostly on age alone, Vanguard recommends beginning with a 90/10 (shares/bonds) combine and sustaining it till you might be 20 – 25 years out of your desired retirement age. From there, you slowly modify your allocation each few years till you attain retirement during which you ideally can be allotted 40/60 (shares/bonds).

    For instance, in case your goal retirement age is 65 and you might be 30 like me, then you definitely would theoretically desire a 90/10 combine. When you flip 40, you can scale back to say 80/20, or wait a number of years to start out transitioning. At age 60, you’d wish to be round 60/40 or 50/50.

    Formulation apart, Warren Buffett made it clear that for his property he has instructed a 90% S&P 500 / 10% short-term gov bonds combine allocation. This might be counter-intuitive to the above formulation and breakdowns of correct allocation, however that’s Warren Buffett for you.

    Ultimately, your plan for retirement must be distinctive to YOU. Your very best allocation combine might not match right into a broad, simplistic mildew.

    There are a slew of things that come into play: your present revenue, present financial savings fee, goal retirement age, and private objectives for retirement to call 4 huge ones.

    I’m not an expert advisor, nor do I’ve any curiosity in changing into one. That stated, hopefully the above can not less than assist to supply a easy information to make use of as a place to begin.

    Goal Date Funds are One other Winner

    If you wish to spend money on a historically diversified portfolio by age, the best answer is to purchase a Goal Date Fund (TDF).

    With a goal date fund (Vanguard calls them goal retirement funds), you merely purchase one low-cost mutual fund and all the things portfolio associated is completed for you mechanically by the years.

    Vanguard has a unbelievable free software to find out what fund it’s worthwhile to purchase based mostly in your present age and desired retirement age.

    Since I’m 30, Vanguard’s software advisable I purchase the Vanguard Goal Retirement 2050 Fund (VFIFX) which fees an annual expense ratio of solely 0.16%.

    In my 401okay portfolio held with our firm (so pre-tax retirement cash, not my private post-tax funding portfolio), that is the one fund that I maintain. I mechanically make investments 5% of my paycheck every month (which our firm matches 100%) and it mechanically buys this fund.

    The underside line is that Goal Date Funds are a unbelievable answer as properly for many who wish to merely set it and neglect it.

    Warren Buffett’s Guess In opposition to Wall Avenue

    Warren believes so strongly within the simplicity of shopping for the S&P 500 that he guess a handful of hedge funds $1,000,000 that they couldn’t outperform a low price index fund over a 10 12 months interval. Winner will get a donation to the charity of their selecting.

    Warren Buffett selected the Vanguard 500 Index Fund Admiral Shares (VFIAX) for his single place. The competitors Protege Companions, a New York Metropolis cash administration agency, chosen 5 unnamed funds of hedge funds.

    The guess was kicked off in 2008 and as of early 2017 Warren Buffett’s guess was crushing the competitors with a 85.4% return vs a 22% return for the hedge funds.

    For the complete story, NPR’s Planet Cash podcast did a nice episode on the guess which additionally covers the advantages of passive, low-cost indexing which I’ve touched on on this publish.

    planet money brilliant vs boring

    Alongside the above podcast episode, I additionally extremely advocate Barry Ritholtz’s Masters in Enterprise interview with Jack Bogle (founding father of Vanguard, indexing).

    Closing Notes

    Warren Buffett likes to purchase corporations which have stood the check of time, have unbelievable managers, huge moats round their core companies, and shall be round for many years to return.

    Constructing a Warren Buffett portfolio is quite a bit simpler than many individuals suppose as a result of the most effective illustration of Buffett’s core beliefs falls underneath the S&P 500.

    Buffett additionally believes in maintaining prices as little as potential by persistently shopping for every month it doesn’t matter what the market setting after which holding for many years. Also called passive indexing, the opposite secret is choosing funds with the bottom expense ratios, which is why Buffett recommends Vanguard.

    All in all, you’ll be able to select any dealer to construct a Warren Buffett portfolio and comply with the recommendation of best investor on earth. Superior.

  • Impact Of Union Budget On Share Market

    Impact Of Union Budget On Share Market

     

    Definition of Budget:

    “A budget is a formal statement of estimated income & expenses based on future plans & objectives. In other words, a budget is a document that management makes to estimate the revenues & expenses for an upcoming period based on their goals for the business.”

    Meaning of Budget:

    “A budget is a financial plan for a defined period, often one year. It may also include planned sales volumes & revenue, resource quantities, costs & expenses, assets, liabilities & cash flows.”

    Advantages of Budgeting

    1. Budgeting provides a systematic & disciplined approach to the solution of problems in the organization.
    2. However it helps in directing capital & other resources into the most profitable channels.
    3. Budgeting provides a valuable means of controlling income & expenditure of a business as it is a “Plan for spending”.
    4. It forces the management to study about the problems relating to the timely implementation. It generates a sense of caution & care among the line manages.
    5. Budget provides a means of controlling income & expenditure of a business. It gives a plan for spending.
    6. Budgeting helps in directing both capital & revenue resources in a profitable way.

    Responsibility can be easily fixed with the help of budgeting.

    1. Proper incentive system of wage payment can be introduced with the help of budgeting.
    2. National economy is improved by providing more employment opportunity, effective utilization of resources & avoiding wastage.
    3. A systematic & disciplined approach is followed to solve the problems in an organization through budgeters’ control.
    4. Budgeting encourage competitiveness among employees & provides incentive to those who perform efficiently.
    5. An efficient & economy in production control is achieved through budgeting.
    6. Budget provide an excellent record of organizational activities.
    7. The major strength of budgeting is that it co-ordinate activities across departments.
    8. Helps in defining strengths & weakness on which the entity can concentrate.

    Disadvantages of Budget

    1. Planning, budgeting or forecasting is not an exact science; it is uses approximations & judgement which may not by per cent accurate. At best a budget is an intimately no one knows precisely what will happen in the future.
    2. Budget can demotivate employees because of lack of participation. If the budgets are arbitrarily imposed top down, employees will not understand the reason for budgeted expenditures, & will not be committed to them.
    3. Budget can create competition for resources & politics.
    4. Budgeting exercise can be at time at very time-consuming exercise. It involves extra manpower to get the estimates as accurate as possible. Especially for a big company with various department, budgeting exercise takes a huge effort. The time consumed may be low in cases where the company uses budgeting software & the employees are well trained. If the company uses zero based budgeting technique, the time, cost & effort involved can be considerably large.
    5. Budgeting is based on a lot of assumptions in estimating the expenses & revenues. These are generally based on trend & the market scenario prevailing at the time of making the budget. Budgets can also be based on the predictions made for the coming year considering the date available at the time of budgeting.
    6. Staff may be demotivated, if the targets set are too difficult or too easy to achieve, they are made responsible for something outside their competence or does not identify themselves with targets.

    IMAPACT OF 2018 BUDGET ON SHARE MARKET

    Union Budget & stock market have a strong relation. To understand the effect of union budget on equity markets it is essential to track the policies that government proposes & its relations to each sector & major stock within that sector. 2018 Union budget is most affected the share market.

    The budget has played an important role in share market & the budget has traditionally been an important part of the financial year, with government announcing exactly what it wants to do for the next year, & how it has succeeded grandly at what it said it wanted to do last year.

    A budget is the government statement of policy for the next financial year. Budget announcement do affect the stock prices of those company who will be impacted favorably.

    Both the major indices in India has scaled record heights, the Sensex has crossed the 36000 mark whereas the nifty 11000 level. Generally, there are negative sentiment & expectations attached to the Budget this investor usually postpones buying decisions before the budgets is tabled.

    The B-Day Or Budget Day is proving to be the D-Day for a euphoric market. Jitters building up in the runup to  the budget have caused the BSE Senex lose 600 odd points from its record high of 36,443 hit.

    That’s what is giving Dalal Street all the scares. Analysts say the continuation of the ongoing bull run in the domestic stocks will depend on FIVE FACTORS in this budget.

    LTCG tax:

    Long-term capital gains tax is one think that comes to haunt the market before the Union Budget every year. But this time is different. The Sensex gained 6 per cent in January alone. Except for 2017, Sensex has never given this much return in the pre-Budget month in last one decade.

    Fear gauge India VIX, though, has spiked all through one month. Market veteran Madhusudhan Kela believes the market so far has not priced in an LTCG tax. Any change in status quo, he believes, could trigger a correction in the market.

    As per Section 10(38) of the I-T Act, gains on equity investment beyond 12 months are exempted from taxes if the securities transaction tax (STT) is paid on the sale transaction. In case of non-equity mutual fund schemes, the duration to qualify for LTCG is 36 months. The long-term capital gains tax (LCGT) in this case is 20 per cent after indexation. There are fears that either the LTCG would be levied on equity or the duration will be raised from one to two or three years.

    Fiscal deficit:

    While there are signs that the government might meet its fiscal deficit target of 3.2 per cent of FY18 due to huge disinvestment receipts and dividends, the FY19 target of 3 per cent looks tough. A fiscal deficit target above 3.2 per cent of GDP in FY19 would be a negative surprise for markets, as it would imply a slower pace of fiscal consolidation, says Nomura India. This could be the result of either higher-than-expected spending or lower-than-expected revenue, if the government goes for cuts in corporate or income-tax rates, along with excise duty cuts on petroleum products.

    Revenue & expenditure:

    It remains to be seen what the FM’s plans are for FY19: Whether the government would go for improving the quality of spending with a rise in the share of capital expenditure and a gradual moderation in revenue expenditure. Will there be doleouts with an eye on 2019 general elections? Will there be any announcement of a universal basic income transfer scheme on a pilot basis that can add to the future fiscal burden? These are the questions the market will be focusing on.

    “In the Gujarat elections, the BJP got very few votes from the hinterland. In that sense, there is a big political need to increase rural spending and in general increase government spending to keep supporting the economy. However, uncertainty around GST revenues and higher oil prices will constrain the government in terms of how much it can spend without deviating from the fiscal consolidation path,” BofA-ML said in a note.

    Bank recapitalisation: Banking stocks do have a significant say on the benchmark equity indices. The government has announced a mega recap plan worth some Rs 2.1 lakh crore. But the market did not look much enthused by the recent Rs 88,000 crore recap bond announcement. One headline risk in FY18 is the accounting treatment of the recap bonds issued to the banks, as previous indications from government officials have been that these bonds will only affect debt and not the deficit, noted Nomura India.

    Divestment programme:

    FY18 will be the first year when the government will be able to hit the divestment target. In his Budget speech on February 1 last year, Jaitley had pegged the divestment target at Rs 72,500 crore, which included Rs 46,500 crore worth of minority stake sales, Rs 15,000 crore worth of strategic sales and Rs 11,000 crore from listing of insurance companies. With total disinvestment proceeding of Rs 54,338 crore so far, the Rs 37,000 crore ONGC-HPCL deal is all set to push the divestment proceeds in FY18 to a record Rs 91,253 crore. Dalal Street veterans believe Finance Minister Arun Jaitley might raise the divestment target for FY19 by 15-20 per cent (over actual target), aggregating close to Rs 90,000 crore.

     STOCKS THAT TANKED UP TO 50% ON 2018 BUDGET PAIN:

    Finance minister Arun Jaitely Union Budget that seeks to rob Peter to pay Paul appears to have killed all the excitement on dalal street, where the benchmark Equity Indices were climbing new record highs every second day till Thursday.

    Select stocks have slumped as much as 50per cent in response to some duty rejig or other sector specific policy decisions announced in the budget.

      PC JEWELLER –

    Shares of PC Jeweller plunged over 50% in morning trade on Friday, as the broader market nosedived.

    JUST DIAL DOWN 17 PER CENT

    JAIN IRRIGATION SYSTEM DOWN 16.57 PER CEN

     

    TRIBHOVANDAS BHIMJI ZAVERI DOWN 16.11 PER CENT

    S P APPARELS 14.50 PER CENT

    DLF DOWN 14.41 PER CENT

    GENUS POWER INFRASTRUCTURE DOWN 10.87 PER CENT

     

  • WARREN BUFFETT – THE KING OF STOCK MARKET

    WARREN BUFFETT – THE KING OF STOCK MARKET

    AGE – 88 YEARS OLD

    BORN – OMAHA, NEBRASKA, U.S.

    EDUCATION – COLUMBIA BUSINESS SCHOOL (1950 – 1951)

    NET WORTH – 8430 CRORE USD

     

    Warrent Buffett is an American business magnate, investors, speaker & he is the chairman CEO & the largest shareholder of Berkshire Hathway. Warren Buffett was born 30 August,1930, in Omaha, Nebraska. Warren Buffett is an investment guru & one of the richest & most respected businessman in the world. Buffett’s grandfather also ran grocery store & Buffett’s father howard, was a local stockbroker & banker who later become Republican congressman.

    Warren Buffett known as “Oracle of Omaha”. When he was 11-year-old, Buffett already bought stock & by 16 he had amassed more than $53000 from various business ventures & investment. From a young age, Buffett was bound for success. Buffett purchased shares of CITISES SERVICES preferred for $38 apiece.

    After graduating, Buffett applied to HARVAD BUSINESS SCHOOL. But he was rejected by HARVAD BUSINESS SCHOOL. In 1951 he received his master’s degree in economics at Columbia university, where he studied under economist Benjamin Graham (the father of value) & furthered his education at the New York Institute of finance.

    He was appointed at a starting salary of 12000 a year at Benjamin Graham’s partnership in 1954. His boss was a difficult man to work with & expected strict adherence to conventional rules of investing which Buffett’s young mind questioned.

    Benjamin Graham retired & closed his partnership in 1956. By this time Buffett had a large amount of personal savings with which he opened Buffett partnership Ltd, an investment partnership in Omaha.

    He become the richest person in the world in 2008 with a total net worth estimated at $62 billion by Forbes, overtaking Bill Gates who had been the no.1 on Forbes list for the past 13 years. The very next year Gates regained the first position & Warren Buffett moved to second place.

    When asked the key to his success, Warren Buffett pointed to a stock of books & said, read 500 pages like this every day. That’s how knowledge works. It’s build’s up, like compound interest.

    On February 16,2011, Warren Buffett was awarded the highest civilian honor, “the presidential medal of freedom,” by former president Barack Obama.

    WARREN BUFFETT TIP’S

    • Never depend on single income. Make investment to create a second source.
    • Saving first, spending last.
    • Don’t buy things you don’t need.
    • Create more earning source.
    • Think long – term & be patient.
    • Do not put all eggs in one basket.
    • If the business does well, the stock eventually follows.
    • Invest yourself.
    • Our favorite holding period forever.
    • It’s far to buy a wonderful company at a fair price than a fair company at a wonderful price.

    WARREN BUFFETT QUOTES

    1. “Without passion, you don’t have energy. Without energy, you have nothing.”
    2. “The stock market is a device for transferring money from the impatient to the patient.”
    3. “Someone is setting in the shade today because someone planted a tree a long time ago.”
    4. “The difference between successful people is that really successful people say no to almost everything.”
    5. “Focus on your customer & lead your people as though their lives depended on your success.”
    6. “If you don’t find a way to make money while you sleep, you will work until you die.”
    7. “If you cannot control your emotions, you cannot control your money.”
    8. “I look for 3 things in hiring people: integrity, intelligence & a high energy level. But if you don’t have the first, the other two will kill you.”
    9. “You are your best ASSET.”
    10. “We have long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie & I continue to believe that short-term market forecast is poison & should be kept locked up in a safe place, away from children & also from grown ups who behave in the market like children.”
    11. “Risk comes from not knowing what you’re doing.”
    12. “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”
    13. “Read 500 pages every day. That’s how knowledge works. It builds up like compound interest.”
    14. “Price is what you pay. Value is what you get.”
    15. “I never invest in anything that I don’t understand.”
    16. “Failure comes from ego, greed, envy, fear, imitation. I have success not because I am smart, but because I am rational.”
    17. “The more you lean the more you earn.”
    18. “The best investment you can make, is an investment in yourself…The more you learn, the more you’ll earn.”
    19. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
    20. “I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”
    21. “Time is on your side when you own shares of superior companies.”
    22. “Don’t save what is left after spending, but spend what is a left after savings.”
    23. “Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.”
    24. “Unless you can watch your stock, holding decline by 50% without becoming panic stricken, you should not be in the stock market.”
    25. “Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that causes the stock to be mis appraised.”
    26. “The stock market is a no called strike game. You don’t have to swing at everything you can wait for your pitch.”
    27. “If you are not thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”
    28. “Its good to learn from your mistakes. It’s better to learn from people’s mistakes.”
    29. “Wall street makes it’s money on ACTIVITY… you make your money on INACTIVITY.”
    30. “People who know the edge of their own competency are safe, and those who don’t, aren’t.”
    31. “First, many in wall street- a community in which quality control is not prized- will sell investors anything they will buy.”
    32. “I don’t try to jump over seven- foot bars; I look around for one-foot bars that I can step over.”
    33. “Never feel guilty for starting again.”
    34. “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
    35. “I mean, I can buy anything I want, basically, but I can’t buy time.”
    36. “An idiot with a plan can beat a genius without a plan.”
    37. “If you are happy every day, I think you are going to live longer.”
    38. “Don’t pass something that attractive today because you will find something way more attractive tomorrow.”
    39. “Stay away from credit cards & invest in yourself.”
    40. “In insurance, as elsewhere, the reaction of weak management to weak operations is often weak accounting.”
    41. “Don’t put all your eggs in one basket.”
    42. “I go out & do what I believe I should be doing. And I’m not influenced by what other people think.”
    43. “If you think being entrepreneur is risky, try working for someone else for 40 years & living off social security.”
    44. “I learned very early in my life that my favorite employer was myself.”
    45. “Never count on making a good sale. Have purchase price be so attractive even a mediocre sale gives good results.”
    46. “There comes a time when you ought to start doing what you want. Take a job that you love.”
    47. “I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
    48. “Remember, money doesn’t create man, its man who creates the money.”
    49. “Predicting rain doesn’t count; building arks does.”
    50. “Success is walking from failure to failure with no loss of enthusiasm.”
    51. “Never test the depth of river with both feet.”
    52. “Successful investing takes time, discipline & patience.”
    53. “It takes twenty years to builds a reputation & five minutes to ruin it.”
    54. “Smart doesn’t always equal rational.”
    55. “What we learn from history is that people don’t learn from history.”
    56. “What the wise do in the beginning, fools do in the end.”
    57. “Charlie & I would follow a buy & hold policy even if we ran a tax-exempt institution.”
    58. “If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But , if each of us hires people who are bigger than we are, we shall become a company of gaints.”
    59. “The best thing that happens to us is when a great company gets into temporary trouble……. We want o buy them when they are on the operating table.”
    60. “The most important thing to do if you find yourself in a hole is to stop digging.”
    61. “You only find out who is swimming naked when the tide goes out.”
    62. “It is not necessary to do extraordinary things to get extraordinary results.”
    63. “Its better to hang out with people better than you.”
    64. “Without passion, you don’t have energy. Without energy, you have nothing.”
    65. “You can’t make a good deal with a bad person.”
    66. “Honesty is a very expensive gift. Don’t expect it from cheap people.”
    67. “Having money makes you rich, having time makes you wealthy.”
    68. “To change your life, you have to change your mindset.”
    69. “Forget managing the situation. Manage your mind.”

     

    GOLDEN RULES OF WARREN BUFFETT:

    RULE NUMBER 1

    Never Lose Money

    RULE NUMBER 2

    Never Forget Rule Number 1…..

  • MOST SUCCESSFUL INVESTORS

    MOST SUCCESSFUL INVESTORS

     

    The most successful investor is an individual who has achieved remarkable success in the world of investing through their exceptional knowledge, skills, and decision-making abilities. They possess a deep understanding of the financial markets, economic trends, and various investment instruments.

    This investor demonstrates a unique ability to identify lucrative investment opportunities and accurately assess their potential risks and rewards. They possess a sharp analytical mind and extensive experience, allowing them to make informed investment decisions that consistently yield impressive returns.

    What sets this investor apart is their long-term perspective and the ability to see beyond short-term market fluctuations. They have a strategic mindset and understand the importance of patience and discipline in achieving consistent growth over time.

    The most successful investor is highly adaptable and stays updated with the latest market developments and emerging trends. They possess excellent research skills and are constantly seeking new knowledge to enhance their investment strategies.

     

    RADHAKISHAN DAMANI

    BORN: BIKANER

    AGE: 61

    NETWORTH: 1,040 CRORE USD

    He entered the market at an age of 32. Radhakishan Damani is a stock market investor, stockbroker, trader, the founder & promoter of Dmart retail store in India.Radhakishan Damani is also known as“Mr. white & white” because of his simple dressing. Radhakishan Damani is a veteran stock market investor & founder of Supermarket chain Dmart. Mr. white & white  is a master in picking multibagger stock. He is famous as a man with Midas touch.

    The Badshah of Dalal Street Rakesh Jhunjhunwal calls him a mentor / guru. Rakesh Jhunjhunwala has credited Damari for guiding him in the stock market.

    His retails chain accounts for 91 stores across India & is the third biggest in the industry. Radhakishan owns 52% stocks in the parent company of Dmart called Avenue Supermarts & Bright star investment- his investment company, holds other 16% stake. Overall – Dmart’s success is focused on three things: Customers, Vendors & Employees.

    RAKESH JHUNJHUNWALA

    BORN: MUMBAI, INDIA

    AGE: 58

    EDUCATION: UNIVERSITY OF MUMBAI, SYDENHAM COLLEGE OF COMMERCE & ECONOMICS

    NETWORTH: 240 CRORE USD

    Rakesh jhunjhunwala entered the Indian market in 1985. Rakesh jhunjhunwala also known as “India’s Warren Buffett” & “The Big Bull” is one of the most renowned & successful Stock Market investors in India.His father was also interested in stocks.

    He is a Chartered Accountant. He manages his own portfolio as a partner in his asset management firm, RARE Enterprises. The name RARE is derived from the initial of his name & his wife’s name.

    He is also the chairman of APTECH LIMITED & HUNGAMA DIGITAL MEDIA ENTERAINMENT PVT LTD. Rakesh jhunjhunwala follows the ideology of warren Buffett & believes in long term investment. He strongly advocates the growth of India & its rising company. Mr. Rakesh Jhunjhunwala is also confident in learning from mistakes. He often says- “Mistakes are your learning friends. The idea is to keep these mistakes small.”   

    https://www.youtube.com/watch?v=QGep7gSWRNI&t=26s

    CHANDRAKANT SAMPT

             “Markets & Mistakes are the best education. The convential education just close the mind.”

    Chandrakant Sampt was known to many as the Warren Buffett of India & was regarded as a veteran stock market investor. The 82-year-old investor lead an active yet simple life that included daily jugging & yoga exercises. Sampt hardly looked like one of the most successful investors in the country. He believed in investing in companies with strong cash flow & predictable business. He made a killing in the 1970’s with the introduction of the Foreign Exchange Regulation Act Or FERA.

    He began accumulating shares of blue chip like Hindustan Unilever (then Hindustan Lever), Procter & Gamble, (Initially Richardson Hindustan), Gillette (then Indian Shaving Products) & Colgate, from the time they went public.

    “His greatest contribution to the Indian market was that he shared his immense knowledge about investing by mentoring many as prising investors”, Ramesh Damani.

    “The one man who has had a lasting impression on him is none other than the greatest management theorist of all time”, Peter F. Drucker.

    His investment philosophy; identify great businesses & let the power of compounding to the rest. Invest in a business you understand the company should have either zero or very little debt, the share should be available at a P/E ratio of 13 to 14 times the current year’s earnings & lastly, it should be available between 3.5% & 4%, “it is that simple!” he says.

    RAMESH DAMANI

    AGE: 61

    EDUCATION: HR COLLEGE, MUMBAI (Bachelor’s degree in commerce) CALIFORNIA STATE UNIVERSITY (Master’s Degree in Business Administration)

    OCCUPATION: FOUNDER OF RAMESH S. DAMANI FINANCE PVT LTD.

    Ramesh Damani, the investment guru & one of the most successful stock market investors in India, started his journey to riches in 1990’s when Sensex was 600 points. He holds a bachelor’s degree in commerce from HR college, Mumbai & master’s degree in business Administration from California state university.

    Investor Ramesh Damani has been known for his investment in both unlisted & listed companies. Damani is popular for his high- quality value picks, that can be retained in the portfolio for long periods of time. He follows the Warren Buffett model of investing, which favors companies with strong management credentials & processes.

    Ramesh Damani works at privately owned Ramesh S. Damani finance PVT Ltd.

    Ramesh Damani’s first famous investment was ‘Infosys’. Coming from a techie background in the US, he knew the Infosys has great future potentials. So, when Infosys become public in 1993, he invested Rs.10 lakhs in it. By 1999, this investment has given him more than 100 times return.

                           “I learned that just become a stock double, it is not a reason to sell it.”

    PORINJU VELIYATH                  

     BORN: 6 JUNE,1962, CHALAKUDY

    AGE: 56

    EDUCATION: BACHELOR OF LAWS

    Porinju Veliyath is one of the most successful stock market investors of India. He has become one of the most respected value stock picker of India. Porinju Veliyath is an Indian investor & fund manager.  He manage his own portfolio & the portfolios of investors in his fund management firm Equity Intelligence been called a Small- Cap Czar by economic times. “I buy lesser known, high quality businesses to derive maximum portfolio value. I didn’t shy away from smaller companies like other ‘knowledgeable people’ do. And I don’t buy a lot of great companies with clean balance sheet, honest management & clear business visibility. If you invest in such companies even bank FDs would beat your portfolio returns”, Porinju Veliyath.

    PORINJU  VELIYATH  INVESTMENT  STYLE

    1. Identify & invest in future muilti baggers.
    2. Make strategy when to exit from stock.
    3. Buy lesser known, high quality businesses to derive maximum portfolio value.
    4. Invest in companies with clean balance sheet, honest management & clear business visibility.

     

    Also Read | Best Stocks For Long Term Investment

  • THE STORY OF SCAM

    THE STORY OF SCAM

    Harshad Mehta scam or 1992 securities scam is one of the biggest scams in the history of Indian stock market.

    Harshad Mehta the Baap of bank frauds before Nirav Modi.

    Harshad Mehta was an Indian stock broker. Harshad Mehta was known as Big Bull of Dalal street. He was born on 29th of July 1954 in a poor family Rajkot District in Gujarat. Harshad Mehta was the son of a peon. Mehta spent his early childhood in Kandivali, Mumbai, whilst his father ran a small business. However, the family had to shift to Raipur in Chhattisgarh for medical reason.

    Mehta completed his schooling in Raipur but never showed much promise. He moved back to Mumbai alone after completing school, completed his B.com from Lajpat Rai college & took up odd jobs from selling hosiery to sorting diamonds for the next eight years.

    While working as sales person in New India Assurance Company Ltd. He developed the interest in share market & hence after quitting his job in early 1980’s. He joined the stock broker B. Ambalal. Later 1981 he worked as sub-broker to stock broker J.L. Shah & Nandalal Seth. After gaining ample of experience, in 1984 he with his brother, started his own firm named as Grow More Research & Asset Management. Later, he become the member of BOMBAY STOCK EXCHANGE as a broker.

    In 1986, he started trading actively. By early 1990, he become a famous stock broker.

    The name Harshad Mehta was in the focus of public attention in the year 1992 with a number of financial crimes charged on him. The securities scam of 1991-92 refers to a diversion of bank funds worth Rs.3500/- crore to a group of stock brokers, led by Harshad Mehta. These funds were then put into the stock market selectively causing it to surge to over 4500 points.

    On April 23, 1992, journalist SUCHETRA DALAL exposed Mehta’s scam. She is columnist in times of India.

    Mehta’s favorite stocks included Associated Cement Company (ACC), Apollo Tyres, Reliance, Hero Honda, tata Iron & steel co (TISCO), BPL, Sterlite, & Videocon, to name a few. The ACC, India’s foremost cement firm, was menta’s favorite. He pumped money into its shares so aggressively that its stocks rose from Rs.200 a share to Rs.9000 a share in three years …. a 4400 percent rise.

     

    Harshad Mehta mainly used these instruments in scam:

    Ready Forward Deal (RF Deal):

    Harshad Mehta used technique of the RF Deal or Ready Forward Deal in scam. Ready Forward deal was the short-term loan instruments for bank. To know what RF deal is first we will see what government securities are.

    Basically, Government Issue’s securities to cover its expenses of various project. They are called as Government Securities. Bond is an example of government securities. In bond, the government raises the fund to cover its expenses, and in return, pay the interest to investors who have invested in these bonds. It was mandatory for all banks to invest in this government securities in those days.

    In 1990’s, if any bank was in short of funds (money) then to generate funds, it used to sell its bond or securities to other bank and in return after some days would pay some interest with capital to regain its bond. I will explain this to you with a simple example.

    If in case we need urgent money then we go to our nearby jeweler. We keep our jewelry as a collateral to him and take the short-term loan from him. After some days, we return the money to jeweler with the decided interest and then he returns our jewelry back to us. Same was the case with banks. In Ready Forward deal, one bank would give the short-term loan to other bank and keep government bonds of that bank as collateral.

    In ready forward deal brokers used to work as mediators between two banks. Brokers work was to find the buyers for banks, willing to sell their securities or bonds and vice-versa find sellers for the banks which are ready to buy the securities. Harshad Mehta was the broker, and used to work as mediator between two banks.

    IMPACT OF SCAM ON MARKET

    1. Sensex fell from 4500 to 2500 losing 1,00,000 crores in market capitalization.
    2. The liberalization policies were put on hold by the government.
    3. Inability of Indian companies to raise capital in worlds markets.
    4. SEBI, the securities market regulator postponed sanctioning of private sector mutual funds.

     

     

  • CURRENCY MARKET

    CURRENCY MARKET

    currency-market

    The currency market includes the Foreign Currency Market & the Euro Currency Market. Various countries’ currencies are traded in Currency Market. The Foreign Currency Market is virtual. There is no one Central physical location that is the Foreign Currency Market. The Foreign Exchange Market (forex, fx or currency market) is a global decentralized or over the counter (OTC) market for the trading of currencies. This market determines the Foreign exchange rate.

    It includes all aspects of buying, selling & exchanging currencies at current or determined prices. In terms of trading volume, it is by for the largest market in the world, followed by the credit market.

    Trading on Foreign Exchange Market establishes rates of exchange for currency exchange rates are constantly fluctuating on the forex market. As demand rises & falls for particular currencies, their exchange rate adjust accordingly. A rate of exchange for currencies is the ratio at which one currency is exchanged for another.

    Future trading happens in currency market. Currency options have been started in USDINR. Currency market trading is conducted on two exchanges viz MCX-SX (multi commodity exchange) & NSE (National Stock Exchange). We an do trading in four important pairs in India USDINR, EURINR, GBPINR & JPYINR. Daily turnover of currency market is more than 10,000/-cr. Market timing for this segment is Monday to Friday from 9am to 5pm.

     

    Symbol Rate Lot Size Margin

    3% (0.03)
    USDINR 65 1000 1950Rs.
    EURINR 75 1000 2250Rs.
    GBPINR 80 1000 2400Rs.
    JPYINR 65 1000 1950Rs.

     

    USDINR is known as pair currency, in pair currency first factor is known as base currency & the second is known as term currency. We pay term currency & buy or sell base currency. We require very less margin in this & if we get 10ps movement also we get Rs.100 profit & if it raises by Rs.1 then the profit is 1000/-. In India USDINR has major volume.

    ADVANTAGES OF CURRENCY MARKET 

    1.  24 HOUR OPEN MARKET:

                                                 The foreign market is worldwide. There is no waiting for the everyday opening bell. Trading starts when the markets open in Australia (Sudney session) on Sunday evening & ends after markets close in NEW YORK on Friday.

    This is fabulous for those who would like to trade on a part- time basis because you can choose your own time for trading: morning, afternoon, night, during breakfast, lunch, dinner or in your sleep. An individual can view the current market trend & get updated anytime.

    2.  TRANSACTION COSTS ARE LOW:

                                           The cost of a transaction is typically built into the price in forex. It’s called the spread. The spread is the difference between the buying & selling price. The retail transaction cost (the bid/ask spread) is typically less than 0.1% under normal market condition. For larger transaction, the spread would be is low as 0.7%. Of course this depends on your leverage.

    3.  PROFIT POTENTIAL FROM BOTH RISING & FALLING MARKET:

    The foreign market has no restrictions on trading direction. That means, if you think a currency pair is going to increase in value, then you can buy it or go long. In the same way if you think it could decrease in values, then you can sell it or go short.

    In either case, if your trade goes right then you make profit.

    4.  VERY HIGH LIQUIDITY:

    Because the size of the foreign market is so large, it is extremely liquid in nature. It means that under the normal market condition you can insanely buy & sell currencies as always there will be someone in the market willing to accept the other side of your trade.

    Liquidity is the ability of an asset to be converted into cash quickly & without any price discount. In forex, this means we can move large amounts of money into & out of foreign currency with minimal price movement.

    5.  NO COMMISSION:

    No clearing fees, no exchange fees, no government fees, no brokerage fees. Most retail broker are compensated for their services through something called the “Bid / Ask Spread”.

    6.  INDIVIDUAL CONTROL:

    One of the main & fundamental advantages of having a career in foreign trading would be that the individual himself has complete control with respect to making a trade.

    The individual who is involved in the foreign trading business always has the final decision in their hand whether they would like to enter in making trade & how much risk the trader is willing to take with respect to earning his money.

    DISADVANTAGES OF CURRENCY MARKET

    1.  HIGH VOLATILITY:

                                    The high volatility characteristic of the forex trading can either be an advantages or disadvantages.

    The changes in the global politics & economy drastically changes the forecast & diagram about the forex market thus it makes risk & invest money.

    It can cause a huge loss to the investors if the market goes down hill & when a loss is incurred a huge amount of money will go as a loss.

    2.  LOW TRANSPARENCY:

    This is one of the biggest disadvantages of foreign exchange market. Due to the decentralized & de- regularized nature of the foreign exchange market, it is dominated by brokers. And you actually have to trade against professionals.

    A trader might not have any control over how his trade order gets fulfilled, but you may not get the best price or may get limited views on trading quotes as furnished be your selected broker.

    3.  NO CENTRALIZED EXCHANGE:

    Unlike stocks or futures the spot forex market does not have any centralized exchange or clearinghouse. Alternatively, each broker acts as its own exchange & the broker effectively becomes the market maker.

    When dealing reputed brokers in well regulated countries these differences will be small but you need to be well aware of this fact especially if your charting data provider is not the same as your broker, as this may lead to inconsistencies between the planned & actual execution of trader.

    4.  RISK FACTOR:

    There is a risk factor involved in forex trading market. There is a high leverage which results in higher risk involved.

    There is uncertainty of the price & the rate of the currency which ultimately give higher profit or a huge loss so one has to be very focused & knowledgeable about the foreign exchange market where future forecasting can be accurate & profitable.

    There are 10 major reason why the currency market is a great place to trade:

    1. You can trade to any style – strategies can be built on five minute charts, hourly charts, daily charts, or even weekly charts.
    2. There is massive amount of information – charts, real – time news top level research – all available for free.
    3. All key information is public & disseminated instantly.
    4. You can collect interest on trades on a daily or even hourly basis.
    5. Lot size can be customized, meaning that you can trade with as little as $500 dollars at nearly the some execution costs as account that trade $500 million.
    6. Customizable leverage allows you to be a conservative or as aggressive as you like (cash on cash or 100:1 margin).
    7. No commission means that every win or loss is clearly accounted for in the P & L.
    8. You can trade 24 hours a day with ample liquidity ($20 million up).
    9. There is no discrimination between going short or long (no upstroke rules).
    10. You can’t lose more capital than you put (automatic margin call).

     

    Also Read | Risk Reward Ratio in Stock Market

     

  • TECHNICAL ANALYSIS

    TECHNICAL ANALYSIS

    Technical analysis is the forecasting of future financial price movement based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute prediction about the future. Instead, technical analysis can help investors anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.

    Long-Term-View

     

    Short-Term-View

    Technical analysis is a study of a particular script by historic Rate, volume & quantity. By studying technical analysis we can predict the price movement in market & a particular share. By studying charts we can easily understand the price movement happened in history & we can understand the trend in market. Share price movement at what price the share will move when will it move and when will it fall can be studies through chart analysis. Therefore, chart is the foundation of this market & it will always be there.

              TREND:

    1. While trading in stock market understanding trend through technical analysis is important.
    2. Trend is a way or a direction which helps in change of rate of shares.
    3. There are 3 important parts of trend
    4. UP trend
    5. DOWN trend
    6. SIDEWAYS trend

    a.  UP TREND:

    • If a particular share is on the verge to go up then it is known as up trend.
    • There is huge volume build up in starting. So everyone starts buying so many times scripts intends to have upper circuit.

    In this trend, script moves higher high means its beats last high price & higher low means it breaks the low of last low.

    b.  DOWN TREND:

    • If the price of the a particular script goes down day by day then its called as down trend.
    • There is huge selling volume in done trend.
    • Lot of traders do short selling in this trend so there are chances of lower circuit.
    • In this trend scripts starts making lower rate of high & lower low means last low rate less low.

    c.   SIDE WAYS TREND:

    • Investors get bored in this trend.
    • The stock way is not clear in this trend.
    • Volume during sideways market is very less.
    • Intraday traders get very less chance to participate there are more possibilities of Stoploss to hit.

    VOLUME:

    • Volume means in a particular time how much buy-sell happened which produced turnover.
    • Volume means number of traded quantity of shares in specified time.
    • In share market more volume means the stock is more active & liquid.
    • Understanding volume is very important in technical analysis.
    • By seeing volume we can easily understand the market trend in advance.
    • To see whether the volume is up or down you can see those details at the downside of the chart which is started as volume bars.
    • Volume gives signal before the rate, this is the reason that volume plays a very important role in technical analysis.
    • In uptrend is the volume starts drying then the understanding become that it is end of uptrend.
    • In downtrend is the volume starts drying then the understanding becomes that it is end of downtrend.

    SUPPORT:

    • Support means, at what rate we can place an idea that the rate will not go down below this rate & there will be an upside from this rate, this particular part is known as support.
    • You can draw a support line by joining support point join.
    • In support line if we get maximum support points the line becomes stronger.
    • At support point huge quantity of shares buying happens & rate starts increasing.
    • But if rate falls below support line then the price starts decreasing & then a new support is formed.
    • That’s why its suggested that if support is breached then we have to short sell & if rate is above support line then we have to place stop loss.

    RESISTANCE:

    • Resistance means its that rate where we feel that price will not move above this point & it will fall further this point is known as resistance.
    • We can join any 2 Resistance Points & draw Resistance line.
    • In resistance line more resistance points means the resistance line becomes stronger.
    • Huge selling comes is the rate of stock falls below the resistance point & price starts decreasing.
    • But is in situation the rate breaks resistance point & goes up, then the rate starts increasing & new resistance point happens.
    • Therefore, if resistance line if breached you have to buy & if you have to keep a stop loss below resistance line.

     

    INDICATOR:

    1.MOVING AVERAGES:

    • Moving average is the value derived from the particular closing rate for that particular time frame.
    • Example if we are discussing on the moving average of 10 days then price is the average of this 10 days.
    • Thus, we derive the average price & join points & prepare average lines.
    • Now let’s draw moving average lines practically.

    a.   SHORT TERM TREND:

    • To understand Short term trend we need to understand 10 to 20 days moving average.
    • Therefore, is you need to take position for 1-2 days then we need to check moving averages of 10-20 days.
    • If price is above moving average of 10 days then it’s a buy & if it is below then it we have to place stop loss.
    • Lets see example on chart.

    b.  MIDDLE TERM TREND:

    • To check middle term trend we study 50 days moving average.
    • So if you need to buy a particular shares for 5-6 months then we use 50 days moving average.
    • If price is above moving average of 50 days then it’s a buy & if it is below then it we have to place stop loss.
    • Similarly if the price is below 50 days moving average then we need to short sell & above the moving average should be our stop loss.

    c.   LONG TERM TREND:

    • To check long term trend we study 100 days moving average.
    • If we need to invest for one year or more than that then we need to study 100 days moving average.
    • If the rate is above 100 days moving average then we can buy & below 100 days moving average then we need to put stop loss order or we can create a short sell position.

    MACD:

    • MACD is an acronym for Moving Average Convergence Divergence.
    • MACD is created by Gerald Apple in the late 1970’s.
    • This tool is used to identify moving averages that are indicating a new trend, whether its bullish or bearish.
    • With an MACD chart, you will usually see three numbers that are used for its setting.
    • The first is the number of periods that is used to calculate the faster moving average.
    • The second is the number of periods that is used in the slower moving average.
    • And the third is the number of bars that is used to calculate the moving average of the difference between the faster & slower moving average.
    • Red line is slow moving average & Blue line is fast moving average.
    • Blue is a MACD line & Red is a SIGNAL line; vertical line is MACD HISTOGRAM.
    • Divergence occurs when the moving averages move away from each other. This is called divergence because the faster moving average is “diverging” or moving away from the slower moving average.
    • Convergence occurs when the moving averages move towards each other. This is called convergence because the faster moving average is “converging” or getting closer to the slower moving average.
    • CALCULATION:
    • MACD = (12day EMA – 26day EMA)
    • SIGNAL = 9 days EMA of MACD line
    • HISTOGRAM = MACD line – SIGNAL line
    • If blue line & red line cross each other above the zero line it’s generate selling call & if blue line or red line cross each other below the zero line that mean’s this indicator show buying call.

     

    RSI:

    • Relative Strength Index, or RAI is a popular indicator developed by a technical analyst named Welles Wilder.
    • RSI is similar to the Stochastic in that it identifies overbought & oversold conditions in the market.
    • It is also scaled from 0 to 100.
    • Typically, reading below 30 indicate oversold market conditions.
    • Readings over 70 indicate overbought conditions.
    • In RSI, line below 50 indicate down trend & line over 50 indicate up trend.
    • If RSI line moves downword after crossing or touching 70 then it indicates profit booking time.

    TYPES OF CHARTS:

    a.  LINE CHART:

    • Line chart is a simple methodology of technical analysis.
    • Depending upon time & price line is drawn on the chart.
    • Line chart will only tell us at what the rate was & we could not see open, close high & low of a particular share.

    b.  BAR CHARTS:

    • Bar chart is very famous in Technical Analysis.
    • We get more detailed information in Bar Chart then line chart.
    • We understand time frame, open, close, high & low in bar charts.
    • Horizontal line on left indicates open & horizontal line on the right indicates close.
    • Upper point of the straight line indicates high & lower point of the straight line indicates low.

     

    c.   CANDLESTICK CHART:

    • Candlestick chart plays an very important role in technical analysis. Maximum countries in the world use candlestick chart for studying technical analysis.
    • The invention of this chart was done in JAPAN therefore it is also known as JAPANESE CANDLESTICK CHARTS.
    • This chart is denoted by various colors.
    • The day when the close rate of a particular script is low then the open rate then it is displayed by red color.
    • The day when the close rate of a particular script is high then the open rate then it is displayed by green color.
    • In candle stick chart above stick shows high & below stick shows us low.

     

    • Now we will take a small test on how candle stick is formed.
    • We will share a data with you & you have to draw a candle & show whether it is bullish or bearish.
    • Lets note the procedure to draw the candle first.

    Step 1 -> Check open rate first & draw a horizontal line.

    Step 2 -> Now see the close rate & if close is above then draw horizontal line above the open line & if close is less then open then draw horizontal line below open line.

    Step 3 -> Get the candle body ready.

    Step 4 -> Is candle bullish (Green) or bearish (Red) write it down.

    Step 5 -> If it has shown high then draw stick of high & if it has shown low then draw stick of low.

     

    • This way we can understand how the candle is down which is useful to study chart.

     

     

     

  • Option Market

    Option Market

    DEFINITON:

    “A stock option is a contract between two parties in which the stock option buyer (Holder) purchase the right (but not the obligation) to buy/sell 100 shares of an understanding stock at a predetermind price from /to the option seller (writer) within a fixed period of time.”

    Nowdays, many investors portfolios include investments such as mutual funds, stocks & bonds. But the variety of securities you have at your disposal does not end there. Another type of security, known as option.

    Option based on equities, more commonly known as ‘stock option’. Stock options are listed on exchange like  the NYSE in the form of a quote. It is important to understand the details of a stock option quote before you make a move like the cost & expiration date.

    Options are types of Derivatives security. They are derivative because the price of an option is instrinsically limited to the price of something else. Options are contracts that grant the right, but not the obligation to buy or sell an underlying asset at a set price on or before a certain date. The right to buy is called CALL OPTION & the right to sell is a PUT OPTION.

    Option traders are self- directed investors, meaning they don’t work directly with a financial advisor to help manage their option trading portfolio. As a Do It Yourself (DIY) investor, you are in full control of your trading decisions & transactions. But that doesn’t mean you are alone.

    There are plenty of communities that bring traders together to discuss things like current market outlook & option trading strategies.

    ADVANTAGES OF OPTION TRADING

    1. LEVERAGE

    The main advantages of trading stock options than simple stock is the leverage involved. Options allow you to employ considerable leverage. Option enable you to control the shares of a specific stock without trying a large amount of capital in your trading account. The amount of capital (premium) that you are paying is a relatively small amount comparing to the cost of buying the same amount of stocks.

    The capability to invest a smaller amount of capital & control the stock give the option trader the flexibility to:

    • Trade higher priced stocks, the big moves, that are normally out of reach to the smaller account trader.
    • Magnify profit when the stock moves in your favor.
    • Make money based on a relatively small movement in the stock.

    This is an advantage to disciplined traders who know how to use leverage.

    2. PROFIT FROM BULL, BEAR & SIDE WAY MARKET

    There are various options strategies that give the options trader the ability to make money from all market directions (up, down or side way market) with limited risk exposure & potentially unlimited profit.

    A few examples are, buying call options when the market is bullish, buying put options when the market is bearish & entering into various credit spread strategies to earn profit when the market is range bound.

    3. HEDGING AGAINST RISK

    Stocks options can be used as an instrument to hedge against various risk exposure of stock holder. For example, If you are a holder of 1000 shares of IBM & suspect that the stock price might drop, instead of selling the shares to stay away from the uncertain future, you can simply buy 10 put options to protect your current position. It can be an inexpensive insurance to protect your stock portfolio from any adverse move in the market.

    Disadvantages of Option

    Trading

    1. Taxes. Except in very rare circumstances, all gains are taxed as short-term capital gains.  This is essentially the same as ordinary income.  The rates are as high as your individual personal income tax rates. Because of this tax situation, we encourage subscribers to carry out option strategies in an IRA or other tax-deferred account, but this is not possible for everyone.  (Maybe you have some capital loss carry-forwards that you can use to offset the short-term capital gains made in your option trading).
    2. Commissions. Compared to stock investing, commission rates for options, particularly for the Weekly options, are horrendously high.  It is not uncommon for commissions for a year to exceed 30% of the amount you have invested.   Be wary of any newsletter that does not include commissions in their results – they are misleading you big time.
    3. Wide Fluctuations in Portfolio Value.  Options are leveraged instruments.  Portfolio values typically experience wide swings in value in both directions.

    The most popular portfolio at Terry’s Tips (they call it the Weekly Mesa) gained over 100% (after commissions) in the last 4 months of 2010.  The underlying stock for the Weekly Mesa is the S&P 500 tracking stock, SPY, one of the most stable of all indexes.  Yet their weekly results included a loss of 31.3% in the last week of November (they have added an insurance tactic to make that kind of loss highly unlikely in the future, by the way).  Three times, their weekly gains were above 20%.

    Many people do not have the stomach for such volatility, just as some people are more concerned with the commissions they pay than they are with the bottom line results (both groups of people probably should not be trading options).

    Option market are modified advance version of future contracts. In this lot size, margin & expiry are same as future. In option contract strike price is the is the price which we need to select while buying & selling. Premium – in option contract premium is the actual rate which we need to pay while buying or selling of option. Different strike price has different premium. Option market is difficult to understand in starting but as we trade practically lot of things get clear.

    THERE ARE TWO MAIN CLASSES OF OPTION MARKET:

     1. CALL OPTION

     DEFINITION:

     “Call options are an agreement that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a specified price within a specific time period. The stock, bond or commodity is called the underlying asset.”

    When we think that original price of a particular stock is going to go up & we are bulling on the particular stock then we buy Call Option.

    Eg: SBIN EQ price = 250 and * is its premium.

    If we buy 250 strike price option at X rate then will be its premium. And as and when the original price of the stock goes up the premium rate also goes up & we come in profit.

    But if we have bought call option & original price of the stock comes down then the premium also comes down & we are in loss. Call option buyers is known as Option Holder & call option seller is known as Option Writer.

    Eg: In rent agreement or sale deed buyer is known as option buyer & seller is known as option seller.

    Call option buyer is Bullish or Positive on the market & call option writer is Bearish or Negative on the market.

    Buyer & seller have to decide strike price. Buyer pays premium to seller & premium is non-refundable. Call option buyer buys premium from seller at the strike price which he has selected & he can ask delivery of shares from the seller. Taking delivery is purely depended on buyer, it is not compulsion. If call option buyer ask delivery to call option seller then it is compulsion to give shares to call option buyer.

    Now let’s look at a example of call option buyer & call option seller.

    SBI Equity cmp (current market price) = 250

    Buy SBI 260 call   Exp 24nov2016 @5 (Buyer A)

    Sell SBI 260 Call   Exp 24Nov2016 @5 (Seller B)

    In above example Buyer A & seller B have a trade of call option, 260 is the strike price & Rs.5 is its premium.

    BUYER A:

    Buyer A feels that before expiry rate of SBI will go above Rs.260 in which he intends to earn profit & he pays a premium of Rs.5. And if till expiry if SBI rate is 3000 then following is the profit to buyer.

    Buyers got a profit of Rs.35 & the lot size of SBI is 3000 so 1,05,000/-

    Total profit = 35 * 3000 = 105000 Rupees

    And at expiry if SBI is below 260 then he will have a loss of Rs.5

    Total loss = 5 * 3000 = 15000

    Total loss of Rs.15000/- will happen.

    SELLER B:

    If seller B thinks that SBI will be below 260 & he should be in profit he will buy the premium paid buys the buyer of Rs.5. So seller B is in profit as follows.

    Therefore call option buyer as limited loss & unlimited profit & option seller has limited profit & unlimited loss.

    MEANS CALL OPTION BUYER OF LOSS LIMITED & PROFIT UNLIMITED THEREFOF OPTION SELLER OF PROFIT LIMITED & LOSS UNLIMITED CAN BE DONE.

    Value of an option (premium)

    Premium = Intrinsic value + time value/ (Intrinsic price)

    For call option intrinsic value = equity price – strike price

    For example 250 this equity price is & we 240 that strike price takes then

    Call option intrinsic value = 250 – 240 = 10

    Put option intrinsic value = strike price – equity price

    Strike Price For Call Option:

    Time value:

    More the expiry more time value is there & as expiry comes to near time value decreases. At expiry time value become 00.

    Premium Depends Upon:

    1. Underlying value (means equity price)
    2. Strike price
    3. Time for expiry
    4. Volatility (possibility)
    • Higher the price, Higher the premium.
    • Higher the strike price, Lower the premium.
    • Greater the time for expiry, Higher the premium.
    • Higher the volatility, Higher the premium.

    TIPS:

    • Premium is already defined; we don’t need to calculate the same. So please don’t sit & calculate the premium.
    • All option contracts are executed automatically on expiry.
    • Option buyer has to pay premium so his maximum loss is his premium. Similarly option sell has to pay 10-20% margin so his loss is his margin paid to broker.
    Call option buyer (Holder) Call option seller (writer)
    Bullish   Bearish
    Pay premium    Receives premium
    Max profit unlimited Max profit is premium received
    Max loss is premium paid Max loss is unlimited
    Margin not required Margin required for sell call option

     

    1. PUT OPTION

    Definition:

    “A put option is an option contract giving the owner the right, but not the obligation to sell a specified amount of an underlying security at a specified price within a specified time frame. This is the opposite of a call option, which gives the holder the right to buy an underlying security at specified price, before the option expires.”

    All things of PUT options are all opposite of call option. when we think that the price of a particular share is going to go down then we buy PUT.

    For Eg SBIN Eq (Equity) price= 250 &* is the premium for it

    As and when the price of share starts declining more & more we start making profit. And as and when the price of the share starts increasing more & more we start making losses.

    Put option buyer gets benefits when market falls & put option seller gets benefits when market goes up.

    For Example – L&T EQ. price 1500 (CMP)

    And consider that price of L&T comes to 1300 at expiry then

    Value

     

    • Put option buyer has has limited risk= premium paid &

    Unlimited profit

    • Potential as price decreases, Put Option Seller has limited profit i.e.
    • Premium received & bears unlimited losses if price decreases, so 10 to 20% margin required to sell put option.
    • Option premium for in the money is more & option premium for out of the money is less.
    Put option buyer (Holder). Put option seller (Writer).
    Bearish. Bullish.
    Pays premium. Received Premium.
    Max profit unlimited. Max profit is premium received.
    Max loss is premium paid. Max loss unlimited.
    Margin not required to buy (only premium). Margin required to short put option (premium not required).

     

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