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Invest on Value Scrips during Bull Market, Blue Chips during Bear Market.
Master Plan of Stocks
 


We receive lot of emails & queries on Overview of Stock Market & Best Stock Ideas.. I would reveal the following facts to them considering the following facts:

  1. They are not niche Analysts
  2. They do not have time to track a company
  3. But they are interested in stocks :)

So let us start with..

Stocks give Best Returns in Long Term

Beating the inflation, Meeting unexpected future expenses, comparing with other investments like Real Estate, I would say the stock holders have been the richest in world.  Warren Buffett, Bill Gates.. Yeah! Bill Gates too  have Microsoft stocks that make him score higher.

If you think of buying a BMW using Easy Money or Freely generated money, then Stocks can do it!

Stocks give Financial Freedom & Wealth

A 10 thousand investment in Wipro & Infosys during 1990s would have fetched 1 Crore for now.  I prefer we have to eye on the Dividends of 1% per year – that will give your investment as monthly income. (10 thousand per month)

You have invested in multiple stocks like this, so your monthly income is multiplied.

The Wipro or Infosys investor have other stocks too in their bag.. Nobody knows which will give best returns.. (plus there were stocks like Pentasoft which closed down – this is calculated risk through Diversification)

Understand Purpose of Stock Market

Most of the people think it is a Gambling Area.. Yes! it is gambling area, because most of the stock market investors (traders) are doing gambling.  They do buy one day & sell on the next day, there are futures & options, margin trading, day trading – all to support these stock market gamblers.

But in reality, stock market was build for a company to acquire money from investors for expanding its business.  The investor will get profit through capital gain & dividend from the growth of company. This is the ultimate aim of stock market.

All the other facilities are provided to get money to the government & brokers through tax & brokerage.. For long term profits (greater than 3 years) there is no capital gain tax.  But for short term (day, week, < 3 year) we have to pay tax if there is considerable amount of profit.

Play Safe, Stay Cool

I am providing the play safe & stay cool strategies.

Please note that only less than 5% people in Stock Market makes money as only 5% do think & act, the rest do follow the croud & make losses.

The stock market consists of short term , medium term & long term investors.  Our strategy is Very Long Term & if you follow another guy of short term profits, you are doing wrong.

I believe you do not have daily hours to spend on stock market, so you can follow these cool strategies after solid thoughts..

There is no real price for a stock

Believe it! There is no fixed price for a stock.  The price will be higher if the economy is good & the company is good & the news is good.. If any of the factor is bad, it will reflect the stock.  So a same performing year will have show different prices for the stock.

Our aim is to buy when the present valuations of stock is cheap considered with the expected growth of the stock in future.

Present Value < Future Growth Value

Invest only 25% in Stock Market

Take your yearly savings, allocate 25% for stocks & the rest 75% for Real Estate & Liquid Savings.. The Liquid Savings should protect your core savings from liquidation during emergencies :) (Protection Band)

You can do the investment in a monthly or quarterly basis by equally spreading in all the selected stocks.  I do it quarterly basis. (set online reminders :) )

I advice you keep an Excel Sheet for all your investments – stock, real estate, liquid savings like FD, Gold etc.  This will give control over the investment percentages.

Find Growth Stocks

The future growth in price of stock is based on the growth in business. Find companies which have Profit Growth & Good financial fundamentals.  Subscribe to a Top Analysts like Katalyst Wealth, HBJ Capital in India.. You can also pool subscribe with friends.. (Currently i do have 3 analyst multibaggers subscribed through pooling)

We are eyeing not for 5 times, 10 times returns, we are eying for 100 times & 1000 times returns, with 1% dividend earnings through the life time.

This is what Sir Warren Buffet follows, he invests for 30 years.. (there are quick money making opportunities like Trading, which is not Investing.. But i have never seen any considerable number of successful people through the strategy w/o putting their daily hours @ work)

Every year invest in 5-10 stocks

Every year, invest in 5-10 stocks.  If you have 2 Lakhs as total stock corpus per year, place 20 thousand in each stock.

Certain stocks may prove better to invest again after few years.  So it is wise to reinvest more on opportunities. Remember, stock price crashing due to temporary problems are opportunities.  Consult well with your Analyst or Peer Groups.

Only Buy, No Sell

This may see weird.. But if you buy & sell frequently you need to spend more energies at work.. We can make profit & loss in every day, every week, every month, every year.. So in the long term i prefer there are only zoomed profits & we are eying the dividends.

You may occasionally sell all stocks during NIFTY PE RATIO greater than 25.  It happens during cycle of 8.4 years.

BUY IT, SHUT IT, FORGET IT! :)

If some of your stocks are Zero, the other stocks will cover the loss in long term, If all of your stocks are Zero, still you have 75% other savings for protection.  If you cannot find confidence still, Sorry – Stock Market is not for you at this stage.. The mindset requires that of a Business man.  Come back later my friend.. :)

One of the mistake people do is periodically check their stocks & if they are in loss, immediately sell all the stocks.  This is wrong as our initial plan was for long term investment, so intermediate selling was not in the strategy.  I prefer purchasing more stocks on each 50% down opportunities – provided fundamentals are intact.  (evaluate bad news with right analysts)

Understand Market Cycle

There is a barometer used by HNI (High Net worth Individuals) who invest 100 crores sum in the market.  How they sleep peacefully?

They use NIFTY PE Ratio.. Whenever NIFTY PE Ratio > 25, the stocks will be peak in price & investors are greedy.  The HNI would start selling their holdings.. They will buy back when the NIFTY PE Ratio is less than 15.  

For example stock market crashed in 2000, 2008 & bounced back  within 2 years.  Indian Market have 2 year bear period, 4 year improving, 2 year bull.

Invest for Long Term

The actual growth of stocks is through company growth which in turn through sales growth & profit growth.  This requires 10 year, 20 year, 30 year for the Power of Compounding to start work.

Out of 10 companies invested, 2 will close by 20 years, 2 can be 1000 times returns, remaining can be moderate returns.. So still we are around 1000 times returns.. & the dividends constitute the monthly income.

If you follow the NIFTY PE RATIO based buying & selling, you can probably make 5000 times returns.. We need notification tools to track the NIFTY PE RATIO.

Each Month learn a bit

Every month, try to learn a new stock market term & its significance.  For eg: EPS, PE Ratio, ROE etc.  By 5 years you will be a master. :)

Best Tools

I use the following web site for analyzing:

I am running the following web site to provide free multibaggers:

(apna site hei bhai :) )

How to start with?

You can start with a low brokerage firm like Geojit which provides online platform for buying & selling. Make sure that the dividends are paid to your online bank account, so you are freed from future dividend cheque submissions to the bank.

www.geojit.com

What are the stocks I am invested?

In 2013, I am investing in following stocks, diversified over (IT, Consumer Goods, Automobile, Bank, Finance)

  1. CERA
  2. VST Tillers
  3. Mazda
  4. Yes Bank
  5. Jammu & Kashmir Bank
  6. Persistent Systems
  7. Accelya Kale Systems
  8. Indiabulls Finance
  9. Mahindra & Mahindra Finance
  10. Dewan Housing Finance

In 2012, I had following stocks, sometime i may reinvest

  1. Bajaj Corp
  2. Bajaj Electricals
  3. Eros Media
  4. Manappuram Finance (Yes, I am invested, I will reinvest when the price is half :) )

There is no risk at all, as we are using only 25% of the corpus.. So even all stocks are lost I will be still smiling, but the real power is in picking the best stocks so that you can feel satisfied as you did the right job!

You can see there are no Blue Chips in my picks as we believe Blue Chips are grown up companies so they can give only 5 to 10 times returns going forward.  They are enjoyed by the people who invested in them when it was a growth stock.  I iterate that, during market crashes when the blue chips are one-fifth of their price, I prefer high capital allocation on  Blue Chips.

Our idea is to stay Cool during stock price crash to one-by-fifth level & stay happy when the stock price is 1000 times, the dividends are our usable money.

We purchase a company as a Plant, company grows as a Tree, we enjoy the  Fruits every year.. :)

80-20 Rule.. Let this 20% effort lead your 80% future success..

Happy Investing.. Please let me know any more information you need.. I am happy to help you.. After all you will become rich, that will be good for poor people in India .. Right? :)

Note:

I am having 5 years of Stock Analysis experience (part-time) & worked with other top analysts of India.  Our group have visibility on the top picks by top analysts, even stock picks by Indian Warren Buffet Rakesh Jhunjhunwala.  The ideas given here are true to the best of my thoughts & still I prefer the investor to take responsibility in understanding the tactics & invest.

UNDERSTAND ALL ASPECTS OF THE JOB