Do you want to create your portfolio like a mix-vegetable curry or portfolio like one vegetable curry?

We all like to have mixed vegetables curry with Roti/rice and also like to have other vegetables curry like Potato. We cannot have always potato because it may increase the chance of Diabetes where mixed vegetable curry is the multi-vitamin source from different vegetables, which is good for our health.

Let’s take an example of this scenario:

Investor1-(Jackson): Mix-Vegetables Curry Porfolio

 Who normally believes in some long-term investment with minimum holdings period of one year. He has also good knowledge of portfolio diversification and allocates funds depending on the stock risk, volatility, technical performance, etc.

In the year 2019, he got an annual bonus 5 Lakh from his company and decided to create a portfolio in the stock-market through his brokerage account.

He had created his portfolio by doing his own risk and mathematical calculation as below:

He frequently checks his portfolio’s health and performance, so in the current year 2020, he has generated his portfolio's holdings report as below and decided to full exit from his portfolio with a net profit of amount 90425/, the net percentage of return is 18.085% in a year.

Investor2-(Babson):  One Vegetable Curry type Portfolio

Who is a risky player and don’t have much knowledge of risk management, portfolio diversification. One of his friends suggested he take a trade position in stock A (Currently trading price 120 ), which is a good stock that can potentially give 100% return within a year as somebody in some forum suggested.

He got 5 Lakh from his fixed deposit maturity last Jan 2019.  As he is a risky player, so he decided to take 2000 buy positions at price 120. After some-month in April, the stock price went down to 80 and again he bought 1000@80.  Similarly, he bought in Aug 1200@70, 1600@60, total quantity of 5800 he bought with total amount of 5 Lakhs.

Portfolio Value in the year 2020 as below.  Net Loss (500000-127600= 372400), -74.48%)

Jackson and Babson both have invested in risky stock Stock A, however, as per Jackson, it was risky stock so only allocated 72000 of the total amount which is 14.41% approx, whereas Babson has no knowledge of risk calculation and tried to average out the price but finally stock price ended with 22 which cause total loss 74% of his initial capital.

So, whenever somebody is going to create the portfolio, do proper risk calculation, ratings, and details analysis of the stock.

Things to know, before enter into Stock Market

To create wealth or earn more income through the stock market, should we directly jump to the market and directly trade?  Since 1792 the stock market is operating and will operate till humans are alive on the earth. So before jumping into the market, please try to have a basic understanding of the stock market, attend training or self-study, reading books, financial news, etc.

Here, I am going to discuss below points:

    

                                 

What is the stock market/Exchange?

It can be defined as a market place where the company’s shares are traded.

Investors /traders normally participate in the market to buy /sell shares and other financial products.

In India, major exchanges are the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and Multi Commodity Exchange (MCX) etc.

Who are the investors?

Investors could be Investment bank, Wealth Management firms, Trading Firms, Hedge Fund, Mutual Fund, Insurance, Govt Pension fund) , retail traders, etc. These firms manage the fund of their clients /rich clients/High net-worth individuals /Government etc.

Major institutional firms in India like SBI Capital Markets, Life Insurance Corporation of India, SBI Life and SBI Mutual Fund, etc.

Retail traders are normally individual trader manages their own trading account.

What are the types of products available in the Stock market to buy/sell?

There are many products available like as below major types:

1.      Cash equity

2.      Derivatives (Index /stock Futures and Options )  

3.      Commodity

What is the primary and secondary market?

 

In the primary market the stock/shares/securities are created through IPO (Initial Public offerings).

In the secondary market these shares are traded by investors/retail traders.

What are initial public offerings?

It can be defined as the public offerings where the company’s some portion of ownership sold to institutional investors /retail investors. IPO offering normally managed by Investment banking IPO division and they get commission depending on the IPO offering size. In this way a company can raise funds for business expansion or other future growth plans.

How one can trade through the stock market?

 

To trade into the stock one needs to create a brokerage account as brokerage firm provides the platform to trade, as they have network connectivity to exchanges like NSE, BSE, or MCX.

 

What is the role of CDSL and NSDL?

 

CDSL stands for Central Depository Securities Limited, whose role is to hold the securities in electronic forms. When somebody buys stocks the details of the buyer, number of quantity, date etc CDSL keeps all these information linked to his PAN and DP ID. CDSL works for the Bombay Stock Exchange (BSE).

NDSL stands for National Depository Securities Limited, whose role is to hold the securities in electronic forms. It works for National Stock Exchange (NSE).

DP ID is unique identification number stands for depository participant ID (CDSL/NSDL) , this ID allocated each customer who opens brokerage account.

What is Demat Account Number?

A demat account number is the combination of DP ID and Customer ID of the Demat account holder.

 

 

 

 

 

 

 

 

Do you want to be a Conservative investor or Audience or Player in the Stock Market?

By: Satyajit Mahalik

Before we co-relate Audience and Player into the stock-market, let us discuss these with an example:


In every sport there are players who play on the ground and the audience who watches the match from the gallery. While matches go on, the audience is emotionally excited and they cheer their favorite team/players when their favorite player scores run/hits six in the Cricket or scores goal in Football/Hockey match, audiences clap as it makes them emotionally happy. At the end of the match the player who scores more run/played match-winning innings, he/she gets the Man of the match. So this is the recognition and reward he/she gets in exchange for their performance.

Out of some audience, they want/wish to become a Cricketer/Football/Hockey player, but they never give any effort or just thinking to be like a player. So, in the long run, they only remain as audience and will spend a very thick heavy amount on ticket buying and no rewards/recognition they can get as compared to a real player who plays on the ground. The player will get an advertisement contract, brand ambassador of some event/Govt program, and huge cash contract from these.

In the stock market if you want to earn money or making profitable trading income one should become an active trader, not as an audience. An active trader always finds the opportunity to enter into the stock buying/selling at the correct price level with details technical analysis and proper risk management.


In contrast, the audience in the stock market only observes the stock market but never take the right decision at the right entry/exit point. If they buy the stock never monitors the price movement, no risk management, no active involvement, no back-up plan, no capital protection plan.  

Another type of audience is who only sees the market/stock movement but never enters the stock due to lack of knowledge or doesn’t have confidence in the market, whether they can earn money from the market.

So, as a result they lose money or never able to earn from the stock market.



Let’s take an example of Conservative Vs Audience Vs Player



Conservative (Investor1): The conservative normally never invests in the stock market due to either doesn’t have the knowledge or maybe due to fear of losing money. Some conservative investor regularly takes update of the stock market news but never want to put money into the market. These type of investors normally parks their money into traditional investment products like Fixed Deposit (FD), Recurring Deposits, Postal deposits, secure bonds, etc.

Let’s have a look into sample investor1, which we have classified as Conservative as he/she has put whole money into less risky product FD. 

Audience (Investor2): As we have already explained this type of investor normally doesn't keep track of stock movement or only observes market. In the below example we have shown the Investor 2 as an audience. Suppose Investor2 wants to park 10 lakh into the stock market, so bought 1000 shares at the price 1000, after some month price started going down, as he has no active involvement in the stock market and no risk management, so at the and he was in loss of -45000.

Trader (Player): As we have already explained normally these types of trader we can term as players, as they normally actively involve in the market, enter the at correct price level with proper risk management. 


Please have a look into the below screenshot for better understanding.

In this example if you can see from below graph player has set the target price and loss booking price, even though at one price he booked loss but finally net profit 87280 which is net 8.728% approx.

  

NOTE: Tenor we have defined here, the trading period of a 1 year if somebody is profitable at any time or target achieved, can exit depending on his portfolio planning

So finally, if somebody wants to ba e successful trader he must be a player.

If anybody interested to learn stock market basics and technical analysis, please contact: 

s2learntrade@gmail.com

Stock Market Technical Basics Support and Resistance

Support & Resistance of a stock  

Finding the entry or exit of a stock/future/index/other financial instruments.

Support Level  

It can be defined as the price level, where buying volume increases as compared to selling volume, however proper risk-management needs to be followed while creating a buying position at the support level, because if it breaks the support level, there may be a chance that price can go down and may cause heavy losses.

So as a result support level will become a resistance level, if the price breaks down support level.

Resistance Level 

It can be defined as the price level, where selling volume increases as compared to buying volume, however proper risk-management needs to be followed while creating a short-selling position at the resistance level, because if it breaks a resistance level, there may be a chance that price can go down and may cause heavy losses.

So as a result resistance level will become a support level, if the price breaks out resistance level.

Pivot, Resistance & Support Formulas

High, Low and Close value can be taken from hourly candle/daily candle/weekly candle, etc.

Thank You