Loading

'Start making profit from today' Dial 09510077089 or Write to info@meghainvestments.com

Knowledge Bank:


Below are firsthand and origional articles from our team you will not find anywhere concerning to most practical topics and issues for traders and investors.


find a lot more on our blog http://www.meghainvestments.blogspot.in from 2008 onwards.



wealth destroying stocks

Alert for Negative List (Wealth Destroying) Stocks-

Majority of investors have had the bitter experience of getting stuck into stocks that go down consistently and considerably from their buy price and seldom recover, or recover above their purchase price when it has been so many years that they have already lost on inflation, and interest rates on their capital as well as the opportunity costs that they would have earned out of other investments.

At MEGHA INVESTMENTS AND RESEARCH, our approach to investing has always given paramount importance to Warren Buffets Philosophy of investing. He said: Rule no.1 is to Never lose money and Rule no.2 is to Never forget rule no.1. Our version of this rule can be: “Return of Capital is important than Return on Capital”.

Times and again we have always Alerted our visitors about the stocks that destroy their wealth. From now we have made this approach and part of our activity as –A Feature in our “Services for Investors”

Thus from now on any one activating any of our “Investor based Services” will get this Negative List of WEALTH DESTROYING STOCKS probably with lower targets as well.

Why Do you at all Need “Alert for Wealth Destroying stocks”?

  • Some of you might say that this thing does not need no ‘why’ explanation. Any way, we are giving some points,
  • By most of the medias and analysts, investors get buy recommendation but they rarely get the sell or even further ‘exit’ or completely screaming avoid alert. So in such scenario, the common investors badly need such alerts that we intend to provide. Because the HNIs, or institutional category gets some of such alert tip but the common investors are sometimes purposefully and many other times un-purposefully kept devoid of such a crucial part of stock market advice.
  • One of the first and basic thing to understand is that ‘stocks do destroy wealth’ and that ‘knowing WHAT NOT TO BUY’ is many times more important than Knowing What To Buy. Because ‘Market will always throw Excellent Investment opportunity in front of you from time to time, but you need to have capital to grab this opportunity. But suppose you are stuck in wrong stocks, then what? Then you will lose these opportunities and INSTEAD as well lose on inflation, interest, opportunity cost and many times with ‘wealth destroying stocks’..your capital as well!
  • This also goes with general public’s attitude of ‘TAKING STOCK MARKET FOR GRANTED’. They glibly think/believe that “It is easy and almost an ‘automatic’ task to earn money in stock markets…and that Long-term investment of any type is always profitable..” Many of these types of people invested in Reliance Communication at Rs.800 and 600 and also may be holding India’s largest private company Rel Ind for last 2 years…and eroding their capital by 80% in the first case (Rel Comm) and standing with zero return in the 2nd case (Rel Ind) and loss of huge opportunity cost during the same period’s smart run up in markets. (The 2 stocks are just examples and not particular cases) The point is that ‘IT IS A MYTH SOLD TO COMMON INVESTORS BY ‘CAPITAL MARKET INDUSTRY’ THAT STOCK MAREKT IS ALWAYS AND ALWAYS BENEFITIAL IN THE LONG-TERM’. It depend on the stock you are invested in. And ALL THE stocks are definitely not the right stocks!!

Some tips for ‘not losing money in investing in stocks’-

YOU WILL FIND BUYING RECOMMENDATION ON HUNDREDS OF SITES…TRUE RECOMMENDATIONS ARE THOSE NOT GIVEN NEW EVERY NOW AND THEN…BUT WHICH ARE GIVEN LESS AND LESS AND REPEATEDLY WITH CONFIDENCE..

  • Wealth is not destroyed in STOCK MARKETS, but wealth is destroyed in STOCKS.
  • It is important to know which stock (read businesses/companies) to buy, but it is equally important to know which stock NOT TO BUY...because in stocks, if you do not EARN money, you LOSE money! There is no third scenario.
  • This NEGATIVE LIST is something you have to build yourself. Because unfortunately no one out in general/popular media will tell you to EXIT/AVOID stocks giving possible downside and stating exaggerated valuations. Because may be at times such media and industry participants are busy ‘selling’ them (in forms of story and the actual stocks as well) to you..!!
  • The general notion in the back of the mind of average investor that-When main indices goes up everything goes up and main indices go down everything goes down, IS A MYTH.
  • Have courage to EXIT/SELL when you have somehow made a mistake by entering into such stocks and you get reliable advice from reliable/timetested advise/sources such as our team. It is better to lose some money than to lose all the money..!!

Useful tips for investors Indian Warren Buffett Mr. Parag Parikh

Useful tips for investors Indian Warren Buffett Mr. Parag Parikh

Parag Parikh is a person who is the real Warren Buffett of India. (Rakesh Junjhunwala is not. Yes, he himself said he is a trader. Warren Buffett does not trade. Not just that Rakesh Junjhunwala is said to be Warren Buffett of India mainly because he has amassed largest wealth by investing in stocks in India than any other individual. In our view, apart from that, he does not qualify to be said to be Warren Buffett of India. Because the Warren Buffet legacy is not only figures but principles that he follows. In our opinion Parag Parikh, whenever he talks, reflects the principles, style and attitude of a real Warren Buffet approach follower. In other words, if you disagree with Mr.Parikh, you are likely disagree with Mr.Buffett.

We request all to repeatedly watch/hear Mr.Parag Parikh and search his videos on youtube.com and hear him and digest him.

  • If you have one set of losers and one set of winner stocks, and you need money then rather than selling the winners you may choose to sell half half of both. In this way you are managing your finances as well as avoiding behavioural anomalies.
  • One should not have more than 20 stocks in a portfolios because it reduces return and it is difficult/impossible to track these many 20-50 stocks.
  • Loss aversion wil be very low if your allocation is across asset class.
  • Equity stocks are best form of assets and best hedge against inflation.
  • Regarding gold- People now think that it is right form of investment only because the prices are rising. Behind this type of thinking your casino mindset is working
  • The innovations of financial markets like derivatives are always against the end user.
  • Write down rational behind each investment.
  • If you bought 1000 share of xyz at 50, and if the stock price comes to 30 and you do not think more can be bought at this level then you should sell your all holding of xyz.
  • Over time profits become boring and losses become terrifying.
  • If the profits/gains are gradual, it gives more happiness.
  • Keep less attention to your investment. Don’t go on looking your investments every day, why the stock went up or down.
  • Receiving stock alerts is only a way of destroying your mental peace.
  • Life is too simple but we make it complicated by technology and gadgets.
  • Check your inv once in a month. Just to check.
  • Mainly brokers make more money than traders.
  • Don’t sell your stock because it has doubled or you are making huge money. Sell it if you think it is overvalued and sell it if the answer to your question that will you buy it at this price is no.
  • Infrastructure companies mainly keep asking money from investors rather than throwing money at investors.
  • Deciding not to decide is also a decision.
  • Each one of us have to know our appetite for loss.
  • Company visits, analyst meets etc.is part of endowment effect. So do not determine investment decision based on that type of experience.
  • If the stock price goes down after you purchase it does mean that you are wrong.

Portfolio Investing: The Key to superior returns in market

Portfolio Investing: The Key to superior returns in market

Approach and attitude for PORTFOLIO INVESTING:

The KEY TO SUPERIOR RETURNS with ADEQUATE DIVERSIFICATION:

Don’t think this is some hi-fi, hni type, academic or finance-jargon!

In our view, portfolio investing is simply a strategy, or attitude or approach towards investments. For example, you want to invest. And by that we don’t only mean investment in equities (stock-markets). We mean, with stocks, investment into debt, real estate, mutual funds, commodities, local/indigenous businesses (we will explain this letter on).

Now this is a portfolio of investment. In finance/investment many people call it asset allocation and then diversification and may be some other names that we’re not yet aware of! Some also call it diversification. Ultimately it’s a portfolio of something, here investments.

Here we want to explain portfolio investing for equities.

But, at the first place why it is so important that we want to talk about ‘portfolio investing’?

It is very important to read the answer for this. Many of you invest in anything (here, stocks) in complete isolation. Meaning thereby you pick a stock and invest in it. Sometime later you pick another stock and buy it. Let’s not talk about how you pick it.

Are you getting it?
Most of you most of the times, invest in one stock at a time. (of course, unless and until you are investing in a mutual fund scheme). Thus you are always feared and prone to one or many of the ahead listed say, ‘overconcentration’, ‘over-diversification’, ‘inferior returns’, and so on.

Thus, less than average people out of you lose money in the medium run, and generate inferior returns or worse capital loss in the long run. Say, you may have invested in Reliance Communication at 600 or 800 Rs. and now what is the price? Rs.200, not even 200! But, suppose, you didn’t had any idea about bubbles, valuations, bull and bear runs, or never believed in market timing; and still have diversified into a certain number of limited stocks with inter sector diversification. And may be with a good valuation for some of them; if you were either lucky or intelligent enough to do so. Then in that case you may have saved yourself from the losses you generated due to ‘investing in one stock in isolation’, as well as getting no benefit of the following bull market.

Please note here, we are not and have never advocated for mutual fund schemes (except for some extremely good schemes and schemes for which substitute in secondary market is not available, or for a very small investor, investing through SIP route for a very longer duration). Everyone have known how and why mutual fund AUMs are coming down despite rosy conditions in the stock market and les schemes have been able to even recover what they lost in last crash.

Thus PORTFOLIO INVESTING is opposite to investing in isolation in any one stock, and rather looking at any stock as a constituent to you whole ‘equity portfolio/special sub portfolio’ or ‘theme’ within the equity portfolio.

For example, in our opinion, a normal investor’s ideal portfolio should consist largecap, midcap, smallcap, as well as penny stocks too. These are generalized classification, as far as we are concerned we use many different classifications and approach. Even among these popular classifications, we sometime define them differently than what usually market participants do.

So, you have understood that each stock should not be bought and looked at in isolation, but as a constituent of a portfolio. This is what we call PORTFOLIO INVESTING attitude and approach. It’s the art and science of right trade-off between concentration and diversification that make this method (its not a method but an approach and style) successful.

In fact, knowingly or unknowingly, successful investors become successful due to the working of this approach.

One thing also to keep in mind is that when we say that a stock is a constituent of a portfolio and is not looked or invested in isolation. It is always certain proportion to the portfolio. This basic logic is what makes it a constituent and an important constituent of a portfolio. There are more quantitative and qualitative logics to it.

About Market Correction and more…

About Market Correction and more…

Well, let’s start by defining. To go further into anything which has attributes of understanding we must define it. What is the meaning of correction?

We take it like this. It says ‘correction’ literally meaning ‘something of a process or act of correcting i.e. making it right which is or was hitherto wrong. But when we apply this definition or meaning to word correction and its use in markets, we do not see integrity.

Because the word is used only for declines in prices and it is never used when prices are rising! (This translates that when markets rise after falling on wrong note, it should be called a correction!)

……This is interesting with respect to how we want to understand the meaning. Mind it. This is not a time pass or ‘intellectual jargon busting’. We believe this whole contemplation will take us through the understanding of markets and its behaviors…….

So when there is any excess of increase in markets, it is ‘incorrect’ and need to decline i.e correct.

But as in everything with the markets, correction is also not perfect or efficient or which can be defined in perfect positive or negative correlations.

There are no absolute and all-time uniform thumb rules market directions and same with this ‘correction’ component of market.

Take the case of the ongoing post-diwali declines in the markets. We have seen banking stock, which rose one way, declining upto 20%, but that’s nothing. If the correction has to end with nifty around 5500, then the contemporary heaters of markets such as banking and auto will continue to shoot up to take markets to new highs of indices and heights of euphoric bull sentiments. While the IT and cement pack from indices will give steadiness if not contributing to rise. While pharma and fmcg likely to contribute where as the other hitherto underperforming counters will at least come to their pre-diwali levels.

Looking for the element and proportion of ‘consolidation’ element in any correction is important. This helps us in figuring out how long the correction will last, what sectors and stocks to trade in, and what would be the magnitude of the correction.

Another thing also to look into any correction is that it is one a ‘one day off’ or a couple of weeks decline.

It should persist through two derivatives expiry with zigzags and bouts of big rises with thin volumes on the upside. We also see days during these on which individual stocks/sectors get hammered or prepare to get hammered when markets are just about steady. The next day likely follow with a 1-3% decline.

Ultimately, try to compare the benchmark indices behavior in terms of declines and range of trading, with several stocks and sectors as a whole as well. Because this is what give us the overview of general condition of market trend.

Making Investment Cost Zero.

Making Investment Cost Zero.

This is interesting. You may think that how it is possible to make investment cost zero. This can be done in reality. When the markets are bottoming out and rising to mark the beginning of the run up, the stock prices rise 20% to more than 120% in few weeks and months time period. This is basically because the stock prices are already ruling at multi months and in many cases multi year lows. The stocks which were in triple digits are now available in double of even single digits! These stocks and even the better ones out of this lot attract a lot of investment and trading attraction.

So the prices rise in a manner as told earlier in this paragraph. Now, when you are entering in markets at an early stage of the price rise cycle, You get the stocks at good price. Suppose you invested Rs.1 lakh in 10,000 Lanco Infratech shares at Rs.10 and it rose to 20 rapidly then you can offload 50% i.e 5,000 shares and thus get back your original investment amount. So now the rest of 5,000 shares that you hold are absolutely cost less as your original investment capital is out of them. Now whatever monetary benefit as to bonus shares, dividends, or price rise you get is absolutely free is can be measures as ‘infinite return’ on investment, as your investment is practically ‘zero’ in it!

Another way your cost of investment can be zero is to hold blue chip investment for a longer duration. For e.g. those who are holding reliance industries or grasim or even hind unilever for that matter, for more than 10 years now are indeed holding it for free. Because the price appreciation, dividends and bonus shares etc. in aggregate have given them more than their investment amount.

So, the conclusion is that the advice to pull out sum of initial investment capital after rise in share price can be a general advice to retail and fearful investors. While the cost of investment long term investment in large cap, blue chips, and value investing stocks automatically becomes zero over the longer term if invested at good valuations.

This concept can be explained in some more ways. Any ways, this concept is one of the very essential practicals that an investor should be aware of.

IPOs-Some Most Important Things to know about

IPOs-Some Most Important Things to know about

WHEN ITS HOT AND FIREY!

IPOs only and only come in hot and bull market. Why? So that they can obtain the highest price.

MERCHANT BANKERS AIN’T YOUR FRIEND

Investors forget that Merchant Bankers are selling agents of the issuers. And many times they are also given extra fee for performance selling over and above fixed fee.

Merchant/Investment banking is a cream business. So many are in race to get mandates for IPOs from issuer companies. They will do everything to please the company.

SELL ON LISTING? If you’re lucky enough.

Most investors have only one funda for investing in IPOs.

To sell on listing!

They all think that they will be able to sell and outsmart everyone else. They all feel so because of psychology. They have seen some issues listing at high premium and their listing premiums quoting in so called ‘gray-market’; and this brings the representative bias. The availability bias makes him confront only good and positive news and information. They ignore the discounted/failed listed IPOs. And in hot market there is all news of economic growth as well.

New sectors are not invented every now and then: The fad and fancy for ‘new’ in markets:

Many IPOs come which are highly pricey and shares of some peer company are already available in secondary market. Still investors buy/subscribe to such IPOs. Because they have tend to believe that (in bull market) ‘IPOs are a sure thing”, which is surely a misconception.

This is a fact that investors have lost more money and taken a hit on the return on their capital. Investing in IPOs.

FRESH BUYING ON LISTING?

Many investors buy stocks on listing day. This is another mistake the investor can make. If one is not allotted shares in IPO than one tries to buy it on listing day and try to become the proud owner. So what if he didn’t get allotment?

Observe yourself and you will every time find that your obsession for buying the new kid on the block or IPO of any stock is only due to one or more bias out of ‘availability bias’, ‘recency effect’, or ‘representative bias’. The Availability bias happens due to hoard of available information/recommendation etc. on the new IPO. You see hoardings advertisements, IPO forms at your brokers’ place, advertisement in blue channels and news papers, chats and recommendation given in all this medias as well. Thus you are provided with constant ‘available’ information/input load about the new IPO. The ‘recency effect’ deceits you by way of others making you believe or you making yourself believe that some recent xyz listed IPO got good gains on listing. And interestingly the ‘recency effect’ works on one way straight at a time. In that it you only look at successful IPOs on lusting and even though there may be fair number of IPOs listed on discount, it will not consider them. Strange but true! The successful IPOs become ‘representative; of all the following ones.

THINK ABOUT THIS:

Investors and money managers, advisors and brokers put a lot of emphasis on PE and other ratios and financials etc. parameters when it come to investing or judging listed (old) stocks. But HOW THEY TEND TO OVERLOOK ALL THESE FOR AN IPO STOCK IS a matter of astonishment! Why do not they employ similar rigour while looking at or advising on IPO stock?

ALL COMPANIES ARE NOT SO GOOD:

For e.g. Power grid Corp gave 50% gains on listing. But this doesn’t mean that all government companies’ IPOs give good returns. Or power companies are good and give good returns.

If/when investors think so then they are playing pray to ‘representative and availability heuristics’. They are plagued with Recency bias.

SOME CAUTIONS:

Investors with a clear goal of making money on listing must bear in mind that it is most of time a luck game with IPOs. Remain ready to face loss and a hit on return on capital in case you hold on to the stock.

Analyst recommendation or so-called ‘gray market premium’ could only enforce your confirmatory bias and representative bias.

Subscribing on borrowed money is another sure way of burning hands in stock-markets.

SOME SUGGESTIONS:

If you like some company then you can wait for its listig. After listing let the stock price stabilize and excesses ease out. Let the emotional euphoria fade and cool down.

If still the stock price is available at high valuation such as it could hit your long-term return then wait for bear market. You will definitely get your preferred price of acquisition.

HISTORICAL DATE:

An analysis of past data of IPOs suggest that few IPOs have been able to give good long-term returns and in some case outperform the markets.

In most IPOs investors have taken a hit on long-term return of their capital. We don’t say that all IPOs are bad. At the same time maintain that investors should avoid most of the IPOs for secondary market.

Experience and Learning

Experiences and learning:

“The second name of experience is to learn”
-Dhirubhai Ambani

Would anyone contradict with this great personality? Every day is experience, every hour is experience, every minute is experience, every event is experience, every response is experience, every action is experience, and every reaction is experience. So does that mean all the life is experience? And by virtue of all the experiences being learning; there is nothing in saying that life is an experience or/and learning. Experience can also be described as the meeting place or convergence of the situation one faces and the mental effects of those situations.

There is a thin differentiation understanding it. But there are few things to it. All experience, but all do not learn. So for those of them experience is not learning. (here we take the discussion forward on premises that (1) human being should learn from experiences.(2) human being should be progressive (3) human being is assumed to improve from after each experience.) On the other hand, it doesn’t mean those who learn stop experiencing. No, but they will have new experiences. Will become successful, less obstacles, things become easier, less problems, they become smart and smarter. And then they get new type of experience. The learning from their experiences makes them shielding of doing more right things while having new experience and less wrong things/mistakes.

This works in markets also. Because you know how to calculate numbers and that you have mastered the philosophy of value investing or you have seen two generations of bull and bear cycles-doesn’t mean you are done. Please Pay attention Here-These are all ‘experiences’= yourself (the physical you) and your emotions/brains (mind) meeting the events. But if you have learned from ‘those experiences’ then you will do more of right things and less wrong things WHILE HAVING NEW EXPERIENCES.

Diversification in Investment

Diversification in investments:

It is literal and clear that diversification has all to do with reducing risk. You may also want to fancy-name it ‘asset-allocation’. Why would one ‘allocate’ to multiple asset classes or ‘diversify’ if one is safely sure about one asset class, and the return on would get, one would never think of any sort of allocating or diversification. Yes it also has to do with the advent of the ‘financial industry’. Recently we see in indian markets the launch of, simultaneously, gold etf and hybrid mf schemes involving equity, debt as well as gold etf investment. Why? They have launched only now? Wasn’t there as need of ‘gold-touch’ earlier? Or in one year only gold has become ‘investible’ or worth giving ‘allocation’? thus most of us do/or should understand, this is about business and they have to sell financial products, any for that matter.

Well, coming to the main topic, lets’ see some expert thoughts on diversification in investing:

Legendary investor Warren Bufferr has said for diversification, “Diversification is protection against ignorance; it makes very little sense if you know what you are doing.”

He also says, “Keep all your eggs…in one basket, but watch the basket closely” So it is clear and evident that the biggest and indisputable legendary investor opines that diversification is not a necessary of investing. And infact signals that it should be avoided with use of intelligent.

Also Robert Kiyosaki, who became widely known I last decade for his thoughts and books series Richdad give his thought on diversification as below,

He says, ‘focus, focus, focus, if you want to be rich’ ‘Investment in diversified mutual funds, in the long run benefits more to the mutual fund company than to the investor’ He says, investing into diversified mutual funds would not get you anywhere, he also gives example of how mf companies earn more than investors in the long run as said.

While his preachings are mostly contextual to USA economy and financial markets, his thoughts also apply a greater extent to whole world scenario.

He repeatedly emphasize that, investing in a mf can be good for the most commont investor and those who want to remain contended below average returns. But for thos who want to ‘play to win’, and become rich out of investing, diversified mfs are not just the right thing to go.

(this article is not against diversified mutual fund schemes or investing into gold etf, but tells facts on diversification issues, and realities that matter, because mfs invest in several stocks and diversify that doesn’t mean they remain immune from market risk. Yes, this diversification makes 100% sure that the returns will remain average or below average, in a range and still dependent to bull market. They operat in market and when markets fall ALL mf portfolio takes a beating. Without exception. So where is the advantage of diversification if you are not protected with market fall!)

We will later on go into detail to tell different types of diversification.

Common and must to know rules for Investors

Common and must to know rules for Investors

  • Grab stocks when good companies post bad subdued or less than expected quarterly numbers. This could be a good opportunity to buy at discounted price.
  • Always keep a list of good companies ready with the price at which you want to buy their stocks and keep checking their prices. This practice gives excellent exercise to individual investors.
  • Always remember that acquisition price will determine your retrun first of all and other variable more so later.
  • Keep your investment broking and demat account different from trading account.
  • Write this on stone that a Bear market is the BEST time to go on hunting for investors.
  • Never work on rumours. That’s traders’ recipe.
  • Never over diversify if you want to make maximum or optimum of stock investing. Mutual funds take similar risks as you would. If you are selecting with ‘value-investing’ and basic principles of investing, then you do not need mutual fund. You can diversify on your own by diversifying amongst sectors, and other classifications.
  • Use mutual funds for their sectoral schemes, gold etf, index schemes (we do not recommend index schemes of high return), commodity, real estate, and international exposure schemes.
  • Do not judge soundness of investment by day to day fluctuations.
  • Do not turn your trading positions into investment positions.
  • Above all most importantly learn and adapt the concepts of Behavioral finance, or psychology of investing/money.
  • Never ever, ever invest on borrowed money, not even in IPOs.
  • Do not frequently change your investment decisions. Do your homework. Take time to decide on things but do not variate unless absolutely necessary.
  • Keep liquid cash for contigent requirements.
  • Believe in the ‘power of compounding’. The earlier you start and the regular you are, the wealthier you’ll become.
  • Enweapon yourself with mental preparedness to stay immune from two enemies namely ‘panic’ and ‘euphoria’.
  • Determine your targets. Get out when you get desired return. Don’t become greedy for more and more. Find new investment.
  • Find a good broker, and not the cheapest broker. To save that 0.10% in brokerage, you may lose out a lot with a wrong broker.
  • Before executing order, ask about the rate with your broker and put order only after confirming price.
  • Never try to time the market. Never ever. Yes investors should be bear-market species. But in the beginning or midst of a bull market as well there are always attractive investment stocks. Always.
  • Never sell on a bad day in panic.
  • Listen to big boys. Forget the analysts. Listen what the PM is saying, what the Central bank governor is saying. Listen to top independent economic institutions and high profile senior industrialists and economic guys. Same applies for international watch.
  • If you are not a seasoned investor or do not want to become one, then SIP investment is also a very good option. Here the investor does not get investment at high prices. It is averaged out and over the long term, the returns are not dissatisfactory.
  • If you have big portfolio and old one too. Then shuffle it for changes into economy and businesses once in a year or three. Port, education and power stocks recently, for example.
  • Investing is not about income. It is about wealth creation.
  • Don’t buy good companies, buy good stocks.
  • Bad company stocks at good valuation are many times better than good company stocks at bad valuations.
  • Never fear correction. This is inseparable part of market. Train yourself and prepare for all situations peculiar to markets.

ATTENTION ! Beware of piratescopycatslook-a-likes using our brand-name

ATTENTION ! Beware of pirates/copycats/look-a-likes using our brand-name

Some unscrupulous persons/website on the internet and via sms are illegally and fraudulently using ‘MEGHA INVESTMENT’ name (which is a registered trademark and the sole property of MEGHA INVESTMENTS AND RESEARCH) to defraud investors and traders and pocket money by mis-leading and cheating them.

We are taking action against such persons/website for fraudulent use of our brand name ‘megha investment’.

Also beware of such people who claim to be associated with us.
Our ONLY phone numbers are 09510077089 and 08000975097 .
Our only email id is info@meghainvestments.com

MEGHA INVESTMENTS AND RESEARCH, is a investment and trading research and advisory firm. We also undertake broking and intermediary activity for select closed group of client.

OUR OFFICIAL WEBSITES ARE- Our parent site is www.meghainvestments.com and other affiliate/sub sites are www.tradeassure.com, www.indianinvestorsclub.com, www.hotcommodities.co.in WE DO NOT HAVE ANY RELATION WITH ANY OTHER WEBSITE WHO CLAIM TO SELL ADVISORY BY OUR NAME other than this sites.

We have been present on the internet since November-2008 through www.meghainvestments.com and smsgupshup.com free groups. The research team has been active in portfolio management and research and analysis since year of 2003.

Article on Contrarial Investment Strategy

WHAT IS THE MEANING OF CONTRARIAN INVESTING?

  • Some characteristics of a Contrarian investment in our view,
  • Stocks/sector not performing or even making lows.
  • Company’s stock out of favour due to transient reasons or for no reason at all
  • Company’s stock out of favour due to short term events or one-off event tampering companies financials and business.
  • It may be a stock from a sector that is performing well or even outperforming the market.
  • The stocks are usually undervalued in one or the other ways.
  • Some companies may have no profitability at all and incurring losses on books.
  • Contrarian investing opportunity also arises due to resumance and end of bull markets and bear market cycles which create discrepancies in valuations.
  • Portfolio reshuffling and rebalancing of big and institutional investors also tend to create contrarian investment opportunity.
  • They are in sum buying stocks that are performing poorly or not so well as they should be (in your view) and selling when they perform .
  • In our view, a true contrarian investing also takes features from true value investing principles.
  • Also that contrarian investing in not just about buying or being bullish like a ‘contrarian investor’ but also selling or being bearish like one.
  • Such other reasons.

“Your investment return will depend on how the stock will perform in future, and NOT how it is performing at present.”
-Deepak Amin

OUR APPROACH has been like ‘not to going against the market’, but ‘going against the market’s ignorance’. We also don’t believe that buying in bad days (market correction or a bear phase) of markets is contrarian investing (as it is much popularized as meaning of contrarian investing) but instead buying in bad days of the sector/stock is.

CONTRARIAN INVESTING Success Stories:

According to our study, in general Contrarian investing has always succeeded if employed while keeping in mind principles of value investing and prudence.

We all know the biggest investor of all time Warren Buffett and many other iconic investors world over have praised contrarian investing and as well proved that this approach works to make big returns out of the markets.

Below is some of the stories taken from site investopedia, Contrarian investors have historically made their best investments during times of market turmoil. In the crash of 1987, the Dow dropped 22% in one day in the U.S. In the 1973-74 bear market, the market lost 45% in about 22 months. The September 11, 2001, attacks also resulted in a market drop. The list goes on and on, but those are times when contrarians found their best investments.

The 1973-74 bear market gave Warren Buffett the opportunity to purchase a stake in the Washington Post Company (NYSE:) - an investment that has subsequently increased by more than 100-times the purchase price - that's before dividends are included. At the time, Buffett said he was buying shares in the company at a deep discount, as evidenced by the fact that the company could have "… sold the (Post's) assets to any one of 10 buyers for not less than $400 million, probably appreciably more." Meanwhile, the Washington Post Company had only an $80 million market cap at the time.

After the September 11 terrorist attacks, the world stopped flying for awhile. Suppose that at this time, you had made an investment in Boeing (NYSE:BA), one of the world's largest builders of commercial aircraft. Boeing's stock didn't bottom until about a year after September 11, but from there, it rose more than four-times in value over the next five years. Clearly, although September 11th soured market sentiment about the airline industry for quite some time, those who did their research and were willing to bet that Boeing would survive were well rewarded.

Also during that time, Marty Whitman, manager of the Third Avenue Value Fund, purchased bonds of K-Mart both before and after it filed for bankruptcy protection in 2002. He only paid about 20 cents on the dollar for the bonds. Even though for awhile it looked like the company would shut its doors for good, Whitman was vindicated when the company emerged from bankruptcy and his bonds were exchanged for stock in the new K-Mart. The shares jumped much higher in the years following the reorganization before being taken over by Sears (Nasdaq:), with a nice profit for Whitman. Thanks to moves like this, the Third Avenue Value Fund has earned a market-beating 14.3% return since Whitman founded the fund in 1990.

Sir John Templeton ran the Templeton Growth Fund from 1954 to 1992, when he sold it. Each $10,000 invested in the fund's Class A shares in 1954 would have grown to $2 million by 1992, with dividends reinvested, or an annualized return of about 14.5%. Templeton pioneered international investing. He was also a serious contrarian investor, buying into countries and companies when, according to his principle, they hit the "point of maximum pessimism." As an example of this strategy, Templeton bought shares of every public European company at the outset of World War II in 1939, including many that were in bankruptcy. He did this with borrowed money to boot. After four years, he sold the shares for a very large profit.

……These are just a few examples only…Contrarian investing Approach has worked more times than it has failed.

PITFALLS/MISTAKES OF CONTRARIAN INVESTING:

So many times due to misunderstanding the heart of the meaning of contrarian investing as mentioned in the meaning section; many investors mistake simply buying underperforming stocks and sectors and think they are contrarian investors.

Another pitfall is that you have to be bold, strong hearted and patient if you want to become a contrarian investor and reap the benefits of it too.

Many people lose their nerves when their portfolio goes down. This is a big draw back of such type of investing mantra. You have to bear looking like a fool for a short period of time to reap huge benefits of being a contrarian investor.

One another reality is about mutual funds. We have been told about few so called contra-schemes from mutual funds. In reality no mutual fund is truly contrarian. They can not be.

3 Essential Strategies of Investors

3 Essential MUST HAVE Strategies for Investors

  • 1. Entering strategy
  • 2. Exiting strategy
  • 3. Re-entering strategy

1. ENTERING STRATEGY

  • It about buying
  • It about making portfolio
  • Right kind of diversification
  • Choosing right sectors. avoidng wrong sectors for e.g. fmcg and pharma and not telecom.
  • Avoiding all-time unfavorable sectors such as pulp and paper, plantations etc.
  • Use of technical analysis if/while investing in a bull market.
  • A review of situation and impact of other markets, for e.g. bond market, commodities market etc.

-why to invest?
Target/goal of investing, gains, speculative gains, dividend.
Deciding whether Economic recovery in sight or more pain for capital markets?
Comparison with other asset classes
Are valuations cheap or there is bubble element.

-Where to invest?
Sectors to pick and sectors to drop
Intra sector and stock selection i.es to chose between an l and t and bhel.

-how to invest?
Allocation of capital amongst stocks, sectors, intrasector and other classification.

2. EXITING STRATEGY

  • When to book profits.
  • Of What use the paper profits are?
  • When markets are fundamentally over priced and technically also.
  • The best way is to look for macro factors for overheating signals.
  • Also look for behavioral indicators such as excessive euphoria such as p/e ratios soaring to 50-100 and even more. And floods of IPOs over subscribing by several times with no justification for such a valuation of its business.
  • How much return should be a threshold for booking profit-50% or less or more? How much for individual stock and how much for the combined portfolio?
  • Oh oh …you may miss 20-30 pc market rise, but if you know the top, please let us know too.!
  • - Your targeted return has arrived or not.
  • Better opportunity in other sectors/stocks/asset class or shifting to debt or bank fd.
  • Valuations entering into bubble zone.
  • Strategy to exit NEAR top (and not AT top, which is not possible for all)
  • Making sure of your bull market PROFITS DOESNT remain ONLY ON PAPERS. (which happens with more than 70 percent of retail investors.)

3. REENTERING STRATEGY

  • When will you reenter into stocks?
  • May be you just wait and watch with cash during the bear market or you may invest into commodities or other asset class during this period.
  • Time for value buying.
  • Buying stocks at real real throw away prices in a completely distressed and panic driven markets. Having courage, confidence, vision and insight to do so.
  • The new economic policies, new themes of investing.
  • Rise of some sectors while fall of few others.
  • Reentering in wrong sector may give bitter experience at the start such as investing in telecom in this new bull market began in 2009.
  • Invest more and more when markets have corrected beyond 40 percent of its previous bull market high.
  • - Market trading at or below fair valuations like average p/e, historic p/e, historic low earnings, etc.
  • Worst and pain coming to be over
  • Valuations becoming attractive
  • Your targeted downside in prices and valuations achieved.
  • Readiness to bear notional loss up to 20 percent and readiness to average at further declines.
  • Strategies of entering NEAR Bottom (and not bottom)
  • Readiness to take contrarian call.
  • Readiness to go against the crowd.
  • Close observation of macro economic cariables, monetary policy hanges, and your targeted companies for investment.
  • Remaining ready with a list of your targeted companies and their prices at which you will buy, Making sure we may be early but not late in the bull party.
  • 3 STRATEGIES APPLIED TO AN INDIVIDUAL’S INVESTMENTS:

    • Portfolio building strategy.
    • Portfolio monitoring strategy.
    • Diversification strategy. Within asset class i.e. equity.
    • Asset allocation strategy. Between asset classes.
    • Portfolio shuffling strategies.

All price-rises inevitably end up in bubble, But all price-rises are not bubble

All price-rises inevitably end up in bubble, But all price-rises are not bubble

We funnily see reporters like Udayan Mukherji when talking with international economist/experts and such other market participants and serious-facedly talking about bull-run eventually turning up into a bubble or ‘possibly’ ending up in bubble. And the interviewee also respecting his answer generally responds into affirmation. And many times using diplomatic languages in even talking about the most obvious thing.

Many times we are fed up with the ‘dramas’ of the business tv channels reporters. But as we have mentioned in our earlier articles, that they poor guys have to ‘fill the airtime’.

After all they are not paid to teach the investors or given salary out of SEBI’s investor protection fund! May be SEBI should think of starting investor protection tv channels! Or may be not!

Let’s come to point.

We want to talk about the frequent use of word ‘bubble’ and their talk on market being or going into bubble zone when prices of stocks are rising. As our title reads ‘every price rise inevitably end up in bubble’. The word inevitably could be a little bit too much but had to be used to let the reader understand the extremeness of the meaning and event/phenomena we are talking about.

The other line says ‘all price rises are not bubble’. Thus, how it goes is that when prices rise it is not every time fake or manipulated or euphoric and exaggeration from the beginning itself. This is what it means by this sentence. However, as our former sentence goes, that these price rises of any security, stock or commodity it might be, ‘usually’ or to say ‘inevitably’ end up in bubble. And this is due to simplistic reasons of behavioral anomalies. The fancies, exaggeration and extremes of expectations which make up of a bull market, which typically always create bubble situation. One important thing for an investor is that a bubble is not necessarily the situation of ‘everything’ on the floor is fancily over-valued and expensive.

There may be ‘non-bubble’ scenarios in individual stock pockets and sectors while the rest of some part of market is into craziness which is driving the over-all craziness in main indices. The point is that some value-investor completely prefer to stay out of markets during bull-runs and thing of only buying in bear phase could be proved to be flawful thinking if this aspect considered.

Whenever prices of something start rising this needless fear of ‘bubble’ is put upon mainly by tv channel reporters. Where infact the observance of history has suggested us that they all mainly were the beginning of bull markets or a re-rating in valuations or some fundamental dynamic change altogether in economies, markets, asset classes, of companies. While on the other hand this run up is stretched and the prices have continued to rising without looking back than these people have to admit and attend to them and entice and induce, directly and indirectly, investors to ‘get in’ the ‘growth’. And most often then not, the peak is near and the ‘bubble’ has already been formed if not at last stage being prickled.

Take example of say, gold or silver prices. During the midst of year 2010, there were more than normal talks about the gold being a bubble. Many people had their arguments but it was not a bubble, is still not. Because on several parameters gold is not looking overvalued. In fact its rise as asset class will work as cushion if when the global equities will come in favour and fears of ‘sovereign-debt-debacle’ and inflation substantially if not completely recedes. At the same time, gold will be in bubble. As mentioned. There will be times and intervals that one would have to obvserve and undertake reviews regarding the prices and situations in other asset classes, global geo political situation, interest rates, inflation and money flow in addition with global economic growth. Thus, one would be able to understand at which point possibly the asset has gone into’ bubble’ phase. Because all asset classes or price-price rises do fall in bubble-zone. But as said that all price-rises are not bubble, to add, not at all times. Imaging people talking about Indian market bubble when in the beginning of the 21st century decade, sensex started rocketing from 3000 points only to 21000 in next less than 8 years. Don’t you think anyone would have said it is bubble? In fact more and more people. The first being the tv reporters (who again have to fill the air-time..)

One another lesson or suggestion comes out of this article is to consider all that is said and opined on tv channels to take them discretionarily and not as a professional/genuine/matured/neutral/good faith advise in/of any sense.

Please mind that there are two phenomenas, and the common, small, or general investor mostly skips to understand. One is bubble and another is bubble prickling. The 1. Bubble-includes the beginning, continuance and existence of price-rises which are not reasonable to generally believed and practiced standard of value investing, and also such other established principles of fundamental long-term investing. Here please consider overall market and leading indices in example, as prices of some individual companies might run through the rough due to sharp growth in business which is absolutely warranted and logical. The another 2. Is Prickling of bubble- yes, the prickling of bubble is the end of that era of bull market. Generally the leading indices normally at the most halves from their ‘peak’ made in 1.bubble phase. The investors loses if they remain outside the markets during1.bubble, and if remain inside during the 2.bubble prickling. According to my assumption, investors enter between the midst and peak of the 1.bubble phase and most remain in while the 2.bubble pricking phenomena.

One might summarize, that all price-rises mostly and do end up in bubble and then burst of that bubble due to reasons obvious to feeding of bull run; at the same time all price-rises are not bubbles, see it from individual stock/asset class perspective which could be not overvalued and expensive and which has just started gaining investor attention and started rising; so as to not lose opportunity of investment due to this now, over-generalized talk and discussion about and on word ‘bubble’, which has been made into/invented to be a good ‘air-time filler’ than in any sense showing concern for investors for manipulative and speculative forces and sources…..

Thus, next time you here a chat on possible bubble (usually once in a week or may be more) on blue, saffron and all colors of biz news channel; you might want to use some or more than some discretion in making any mind on price-rises and those people’s views who are talking about it…it’s simply that you will not want to get amazed neither feared…

To add last,

  • All bubble get burst
  • All price-rises inevitably end up in bubble
  • All price-rises are not bubble

Common and Must to know Rules for Traders

COMMON AND MUST TO KNOW RULES FOR TRADERS

  • Always have a trading plan. Never trade without a trading plan (a trading plan consists of a trading system which is made of few components)
  • Never trade without a StopLoss (Repeat 10 times).
  • Never ever hold on to a losing position. Never average/add to a losing position. (Repeat this 10 times).
  • Let your profits growing. Add to your winning trades.
  • Trade on Rumors and Exit at news. But be care ful while following this strategy.
  • Never discuss your trading position to anyone else.
  • Control your emotions. You cannot control the market but definitely control yourself.
  • Never try to become a perfectionist or Best. Try to become ‘better than others’ and ‘above average’.
  • Follow your trading system. Let the system prove itself right or wrong; before changing it.
  • Never ever over trade (repeat this 10 times).
  • So, what you are intraday trader, Learn basics of stock market. Learn the intermediate and long-term trend etc.
  • If you are starting new or re-starting; begin with paper trading.
  • Don’t think of earning regular salary/income in markets while trading. Because trading is not a job it’s a business.
  • Cut the losses small and let the profits grow.
  • Learn to understand the ‘general condition’ principle’ argued by Edvin Lafarve in book ‘Reminiscence of a Stock Operator’.
  • Learn to both; buy-n-trade and short-n-trade. But try–More buy-n-trade in bull market and sell-n-trade in bear phase.
  • Don’t be greedy. Remain reasonable. Don’t try to make killing once in every week. You can expect it only once in months.
  • Take a break after continual periods of constant success or constant profits.
  • Do not put all your eggs into one basket. Unless you are an experienced trader and afford to lose big sum. Diversify your trading into stocks, asset classes, sectors, themes and technical set ups.

Concerns on Mushrooming stock trading advice blogs

Concerns on Mushrooming stock trading advice blogs

Recently with the spread of knowledge amongst internet enthusiasts about blogging, there has been a huge jump in online BlogSpot blogs which are free, and very to easy update information like a website.

The problem is the anonymous people using this to lure online investors and traders community by making such multiple blogs which literally cost them nothing. They simply start updating tips and selling subscription.

One clear thing about their being unscrupulous is simply the names they keep for their such blogs like niftysureshotcalls or so and so blogspot.com which is easy and high probable to come into results of search engines. 90% of such mushroomed blogsites do not update sophisticated content to even the minimal quality which could suggest their genuinely about their knowledge of markets and capability of being a prudent and reliable and advisor to investors and traders who come to internet to seek proper stock market advise.

In our short survey we found some dealers at broking companies and students (mainly novices, of course) making and writing such blogs for fun and by getting lured with part-time and extra income.

We appeal investors and traders searching for advice on the internet to be aware of becoming a victim of such practices in stock markets. Otherwise all they’ll do is to blame the markets for their bitter experiences and loss of money…

So next time around you find a perfecttipsfortradingstocksxyz.blogspot.com, think twice before clicking on it…or taking tips from any tom,dick and harry on yahoo messenger. You are ultimately responsible for your loss…

How to choose a reliable advisor on the internet:

They must be real!!-

they must be real persons, and registered entities, having a current account if they take subscription monies. Most of them out there in markets you will find are anonymous…

It’s in the name-

In The name of the blog or site you should notice is that it is a name which is a clear cut attempt to get ahead in search engine results, like stockintradaytips dot com or such other similar dot com dot in or blogspot or such other domain name. This tells a lot about the operator’s genuinity. If you open a bakery shop you don’t name it a ‘biscuit bakery shop’ or if you open a phone shop you don’t name it ‘phone phone store’…Are you getting it?

Updates define them…do they at all know a thing about markets…-

Another important criterion to separate good advisors from the unscrupulous one is the quality of content on their sites/blogs. Many of them have leas updated and common type of pivot levels or typical buy sell tips. Many of them also copy news and contents right away from somewhere, as they don’t care about it if in case they want to stop their site altogether and simply starts a new one…

Declined participation of Retail Investors in Indian stock markets

Declined participation of Retail Investors in Indian stock markets

The share of retail investors in the market cap of 2486 actively traded stocks on BSE has declined to a 5-year low. This figure was around 19% in March-2006, which is now 15.86% in March 2011.

Not surprisingly, this share started falling after the Indian Stock market crash of 2008. Which even surprisingly not increased during and after the two year rise of Indian Stocks Markets, when Sensex risen to 21000 levels from 8000 level lows. This is surprising as generally retail investors un-missing fully ride the when it is rising.

Vetting this fact, according to a report the cash segment turn over on BSE and NSE has also declined to more than 2 year low.

On the mutual fund side, the number of folios (investor accounts) has gone down to 3 crore 80 lacs in March 2011, from above 4 crore in March 2009. However, the sorry situation with mutual fund investment scenario has been blamed (rightly) by the industry to SEBI’s rules which cut hard on entry and exit loads, invariably reducing the distributors/agents interest in recommending and selling mf product/schemes. In our view, this is good for small investors. But isn’t it at the risk of retail investors only? In our view, if the Sebi and government seriously want to increase the participation of retail investors and that too through mutual fund route, then it must reinstate the entry and exit load which will in turn give mutual fund companies to offer their agents more incentive to sell mutual fund schemes. Perhaps the govt

can put cap on artificially higher commissions on NFOs and put rules that allow mutual funds to give similar or same commissions on existing schemes. Looking at the Indian Set up, the exponential growth of mutual fund industries (a dominance in fact) is necessary to bring in maximum possible participation of small investors into equities, as well as the best and only possible way of reducing the dominance and influence 'FII hot money' in Indian Stock Markets. We also recommend the exchanges, namely BSE and NSE to do investors awareness programmes on war foot basis rather than just sitting on their investors’ protection funds, if they want to rise the volumes.

Excerpts from book 'Why We Want You To Be Rich"

Excerpts from book 'Why We Want You To Be Rich"

This book is co-authored by Donald Trump and Robert Kiyoaki. They share their experience of success and gives invaluable lessons to the reader. I have put some excerpts here in bullet forms. Please read the book for full understanding and you may deviate meaning of some of the texts below just because it has been opted from a whole chapter or paragraph. There are lot many gems to it and to all the books’ of which excerpts we release here. The excerpts as gems may differ from person to person. We are putting them as we found to be useful to readers’ in general.

Readers’ views are welcome.

BOOK EXCERPTS FROM THE BOOK ‘WHY WE WANT YOU TO BE RICH’”

  • …. But the best part is how to share thought process behind his actions.
  • Most rich people want to keep their secret to themselves.
  • …. so they are asset- rich and cash-poor.”
  • You don’t start with a finished skyscraper- you start with a blue print and a foundation.
  • …. Real life doesn’t give a lot of room for sympathy or excused.
  • We want people to let go of the entitlement mentally and become rich so they can solve the problem…. Their own problems.
  • … start thinking like rich people rather than poor and middle class people.
  • Warren Buffett says, “Diversification is protection against ignorance. It makes very little sense if you know what you are doing.”
  • The best way to have an edge is to live on one…
  • Intelligence is the ability to solve problems.
  • When it comes to money, the biggest financial problems you can solve, the higher your financial intelligence.
  • There are many definitions for intelligence, One of the more practical one I learned from my rich dad, is “Intelligence is the ability to solve the problems.”
  • Where it is important to learn from people like Warren Buffett and Donald, it is also important to find your own formula.
  • If you want to make yourself rich, solve problems.
  • Indentifying problems creates the opportunity for creating a solution.
  • In very simple term a defined benefit plan it will cover you as far as long as you live. A defined contribution plan will cover you only as long as there is money in your account.
  • The generation following baby-boom generation, often called generation-x and generation-y.
  • … Bad times can make you rich.
  • It is a matter of leadership and the ability to solve problems. If my staff thinks I spend money carelessly, then they will spend money carelessly.
  • … I like buying the best, but I don’t like wasting money.
  • Leaders are those people who have replaced fear with discernment which means they can predict the inevitable.
  • …. See problems as challenges…
  • I believe he is saying in other words,
  • ‘..that getting rich is common sense, requiring only simple math.’
  • The Graham’s law states that when bad money enters the system, good money goes into hiding.

Very real problems for USA or any country

  • A growing trade deficit
  • A growing national debt
  • A falling dollar
  • Baby boomers without money
  • Entitlement mentality
  • Higher oil prices
  • Tax breaks for the rich

There are 3 types of investors in the world:

  • People who do not invest at all
  • People who invest not to lose.
  • People who invest to win.

This book is for you want to invest to win.

Donald and I invest to win while others invest not to lose.

  • See money and making money as a game- We have fun. We enjoy the game. Sometimes we lose, but mainly we win, we have fun. “But most people don’t see making money as a game.” “They think of it as life and death, winner and losers “ or survival or struggle for life itself… which is why they are terrified of losing money that’s why they look at investing as risky.” … Making money is fun life is supposed to be fun. … We play hard. We play to win. We have fun that’s what life’s about.
  • “If I don’t build tallest and biggest, I don’t want to build.”
  • If your reality begins with your dreams, your dreams will become your reality.
  • Being stubborn is a big part of being a winner.
  • The other components of winning are simply, a winning attitude. I tell people to see themselves as victorious.
  • Do not let the fear of the unknown hinder your aspirations and your financial well-being.
  • Learn about money and make it work for you. That’s the key to successful investing.. In war, “Sometimes it is best to walk away and rise to fight another day” The same holds in business.
  • The script idea, “We are all in charge of writing our own movie, and that movie is our life. Imagine yourself writing sense – what kind would you want to have...?”
  • One definition of leverage is the ability to do more with less.
  • When Doland and I think working hard, while we both work hard individually, we actually think about other people working hard for us to help make us rich. That’s leverage OPT = Other People’s Time OPM = Other People Money
  • Your savings are a liability to the bank even though those same savings are asset to you. On the other hand, your debt is an asset to the bank, but it is your liability.
  • For our current economic system to keep growing it needs smart people who borrow money and get richer, not people who borrow money and get poorer.
  • Leverage is the key to great wealth.
  • Remember your mind is your greatest lever.
  • …. RichDad hated excuses
  • “We are all born rich. We all have been given the most powerful lever on earth, our minds, so use your mind for leverage to make you rich rather than to make excuses.”
  • Look for opportunity in every climate thats leverage.
  • NEW- And the 10 percent than make 90 % of the money invest more time than money. ... because we invest more of our time than money.
  • … and make it a practice to teach what I learned - because teaching is one of the best ways to learn.
  • Buffett “if you are sitting in a poker game and after 10 minutes, you do not know who the patsy is…then you are the patsy.”
  • Try to get experience of business and investing without risking money.
  • About money
  • …you see, it is not the quest for money that makes me rich, it is the quest for knowledge. It is the desire to learn more, do more, accomplish more and help those who want to learn that drives me and money is just the score, a measure total he how we are doing. Money is the celebration of success, just as the lack of money is the reminder that we need to learn more. Just as a traveler watches for mile markers, I look at money simply as a marker – a marker that measures the journey and distance travelled.
  • The most effective way to learn is by actually doing. The next more effective method is through simulating the real experience.
  • If something is going to affect your life, it is best to know as much as you can about it.
  • -Donald J Trump
  • Observe a week how you spend your time. Write how you spent each of your hour of 168 hours of the week.
  • Then, reframe the allocation of time and activities. Then implement it.
  • OTHER PEOPLE’S RESOURCES: Using strategic partners creates leverage, and is often called OPR.
  • The IB and I side is nothing but leveraging-other people’s money and time.
  • As entrepreneurs and real estate investors, the 6 controls we want are:
    • Income
    • Expense
    • Assets
    • Liability
    • Management
    • Insurance
  • Once you understand what you are going to leverage, your next task is to make sure you have control.
  • I hire qualified people and trust they will do their best, but I make sure to keep in touch with them and keep my door open to them. I don’t micromanage, but know that, ultimately the responsibility is mine.
  • Real estate and businesses, on the other hand I deal for right people. In fact, the more creative you are, the better your chances to becoming rich. You can apply more creativity and innovation when you have more control. Once you have control get creative.
  • … because we don’t have unnecessary energy sappers like overstaffing, overstuffing of unused space. Everyone knows what they are doing and they do it.
  • Creative people do not need to be motivated by anyone else. They motivate themselves.
  • They find inspiration instead of waiting for it.
  • Creativity and control can go hand in hand.
  • The 8 parts that make up a business are:
    • Mission
    • Leadership
    • Team
    • Product
    • Legal
    • Systems
    • Communications
    • Cashflow
  • Many entrepreneurs fail simply because one of more of the eight pieces of the BI Triangle is weak of nonexistent.
  • The ‘product’ is lease important item of the B-I triangle and the mission is the most important.
  • The mission is the most important part of the business.
  • The world is filled with great products that fail. The products fail simply because they do not have the power of BI Triangle behind them.
  • Too many people are people dependent. Mc Donald is system dependent.
  • …these types of businesses focus on people and not on developing great systems. A great team of highly paid people will fail without great systems.
  • Rarely, you will find entrepreneurs who are great CEOs. Donald Trump is one of those people. So are Bill Gates, Michael Dell and Steve Jobs.
  • The 10 percent who make 90 percent of the money do the things that 90 per cent of the other people do not do..!!
  • ..like educating themselves, creating finding and utilizing opportunities, leveraging, using control, using creativity, using OPM, using OPT, using OPR etc.
  • …so many times, innovation results from common sense.
  • Thinking expansively includes seeing what is possible and making it happen.
  • Learn your lessons from as many sources as you can.
  • Try imagining expanding your world to include new adventures, new friends and new places. As you expose to new experiences, you will generate new ideas. You will see new problems that you can find solutions to.
  • Donald Trump and Warren Buffett make a lot of money simply because they know that the end-result of their endeavor is predictable-the opposite of risky.
  • Once you understand PREDICTABILITY, you will see it everywhere.
  • When you drive up to a gas station to fill your car with gas, it is predictability in action.
  • Once you understand predictability, you will see it everywhere. And wherever you see predictability, you will understand why someone or some business is making a lot of money without much risk.
  • When I buy a building, I am confident that I will receive the following four types of income;
    • Rental income
    • Depreciation income (a.k.a phantom cashflow)
    • Amortization (my tenant pays off my loan)
  • Appreciation (the dollar is dropping in value)
  • You want to be foolproof, do the proofing yourself.
  • It saves time to work intelligently, from the beginning.
  • America has one of the worst education system in the world.
  • You have to do what others don’t want to do to have an edge.
  • The harder you work, the luckier you get.
  • In business and investing, I am fanatic about practice and preparation. I practice to reduce risk. I improve my skills to reduce risk. I study to reduce risk. I play to win and the prize goes to the one who plays the game with the least risk and the most confidence.
  • I have looked at tens of thousands of possible investments and purchased only a few of them.
  • I realized that entrepreneurship is not risky. Being unprepared is risky.
  • Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.
  • We are what we repeatedly do. Excellence then is not a act, but a habit.- Aristotle
  • Once your thoughts and attitudes change, your actions change and so do your results.
  • The tougher the negotiation, the more relaxed the environment needs to be. When the environment is relaxed, there is often more flexibility in thinking.
  • When you make mistake, please do not lie about it or pretend you did not make one, as many adults do.
  • A great real life budgeting experience is to undertake the purchases of your house for some months.
  • I recommend all students who want to become rich to study accounting and business law.
  • Take a class in accounting and business law even if you do not have any plan to become an accountant of lawyer.
  • Every entrepreneur knows that Cashflow is king.
  • Many people struggle financially simply because they are not good at sales or marketing.
  • Expense side is most important. if you are going to be rich you need to know how to spend to make yourself rich.
  • Real estate investors and entrepreneurs make money because creativity is allowed in real estate and business.
  • Once you leave school, invest some time converting that education into experience. Converting educational theory to real life is vital.
  • …and the earlier you understand the basic rules, the better chances you have of winning the game.
  • It’s important to do more than is expect if you expect to excel.
  • Raise the bar for yourself. Never settle for doing ‘enough’. Today’s world is competitive and moves so quickly that you will have to raise your stamina level if you expect to remain in the competition or to even get into the competition to begin with.
  • Chance favors the prepared mind.- Louis Pasteur
  • Life is too short not to dream of paradise, whatever it looks like to you.
  • Travel and see the accelerating world of money, known as globalization.
  • …technical investing is essential for teaching investors to invest with insurance. As I have said many times, professional investors invest with insurance. Amateurs do not.
  • The baby-boom generation, that group born between 1946 and 1964, was, in many ways, a very fortunate group.
  • The baby boom generation is in the LAST generation of the industrial age and the FIRST generation of the Information Age.
  • Let love lead your life and not fear.
  • Self made people are less afraid of losing money because they know they can make it back.
  • …the person fails to find an environment that supports him or her becoming rich.
  • A person needs to seek the environment that is best for his or her genius to flourish.
  • “There are many rich people in poor environment”
  • Many people do not grow rich simply because they are in poor environments.
  • Sometimes, the fastest way to change and improve yourself is simply to change your environment.
  • Laziness is the assassin of genius.
  • Do not begin to focus on the negatives of the situation. Begin to focus on the solutions!
  • …you have as much right to be successful as anyone else does.
  • Everyday id filled with defining moments.
  • If you cannot lead yourself, you will not be able to lead others.
  • Investing is not risky, people are risky.
  • The third problem is: Most people cannot follow a formula for long-which is why, for example there are so many different diets being sold, generally to the same people.
  • The key to real estate is great management.
  • You can get rich faster if you do not have to pay taxes!!
  • One of the positive of investing in real estate is that it moves slowly.
  • Long-term success in life is a reflection of your education, life experience and personal character.
  • …there are many ways a person can become very rich-if he or she is focused.
  • Once you’ve had your own business, it’s hard to go back to working for someone else.
  • A leader inspires you to be bigger than your doubts and fears.
  • Financial literacy is the power to see with your mind what your eyes can not see.

Facebook's Valuation and Comments for investors for internet businesses

April-2011,

How much a website is worth? Face Book’s high valuations are ‘exorbitant’-

Recently, there seems to be going around a sort of facebook mania on the internet and now well into investment world as well.

This website founded in year Feb 2004, by 25 yr old Harvard student Mark Zuckerberg, enjoying 500 million users as on July 2010; is making headlines for investors interests and fund raising deals valuing it higher and higher on each deals. But however, this does not seem anyone to be reminding of the dotcom bubble era.

Recently, the rounds of investment in Facebook by Goldman Sachs and DigitalSky Technologies assumingly valued the social networking site at around 50 billion dollars.

In latest update some research firm has estimated that facebook could be worth 234b$ by 2015. It has estimated that the site will earn 11b$ on its 22$b revenues. It adds that this estimation gives the site a present valuation of 85$b. the same firm in its earlier report said the site could be worth 100$b in 2015.

More than a decade ago there was a similar sensationalism. It is widely known that shares of Yahoo Inc., surged and then receded; amongst hundreds of technology/dot com start ups, eroding investors capital who came to earn dividends through secondary market.

Comments-

he bottom-line is mainly everyone will try to exit at some or later point.

The IPO is one main route for that and when the IPO hits as is expected this year or 2012, in the USA, it is advisable to avoid it on the below simple argument

  • 1. Logically most IPOs, especially those in which existing investors offload, come pricier or in other sense do not keep anything on table for IPOs investors. And so would happen with facebook AS WELL!
  • 2. After all faceboook is just a website! Yes, we understand and believe that the future is online and facebook’s user base is staggering 500 million, and it’s some $2 billion in revenue and $500 million in profit (estimated) are assumed figures. But after all it’s just an ‘internet portal’. We have seen ideas come and go. Before ruled myspace and orkuts; but facebook came with better features (and luck as well) and became the staggering success in social networking as it is now. But tomorrow some other people would come up with better ideas, features and who knows (which greater luck!), and the facebook era shall end for some new internet craze or mania run!

The bottom-line is that all the event of investment deals valuing facebook in several billions of dollars is a part and parcel of slowly and gradual exit of investors who came earlier and than after them. The ultimate dump will be the ipo thing. The point is such investments ripes excellent benefits when the retail investors are given opportunity to invest at much earlier stage and not MAKE THEM A ROUTE FIR HIGHLY PROFESSIONAL PRIVATE INVESTORS FOR EXITING (READ DUMPING) AT FAT PROFITS!

Remember, a website is after all a website! It is not selling any product or service.

During the tech-boom era a decade ago there were close to 300 tech IPOs in USA (which amounted to almost half of the total number of IPOs for the year), while in 2010 there were around 20 tech IPOs according to data firms.

The summary is that these ideas are good, but they will face stiff competition. The entry barrier is close to none. Anyone can copy the idea or make modifications and launch a competitive site. Not just someone but many of them!

May be the ‘new era’ of tech bubble/tech investment fancy might last for next couple of or more years with no competition coming/competition held back/suppressed by powerful people in investment world; it can not sustain more than that, the life of such a business at 10 years is too much…This period will see a lot other tech (in fact I should not use word tech, because it is all coding and ideas than hardcore technology) fancied investment deals and IPOs (read ‘secondary market dumping’). Possibly a couple or more years will see the peaking of such phenomenas. We will update more thoughts in this post in comment secton as and when.

Please post your views.

How can you make your stock investment cost zero

MAKE YOUR INVESTMENT COST ZERO: Practical Lesson for Investing

This is interesting. You may think that how it is possible to make investment cost zero. This can be done in reality. When the markets are bottoming out and rising to mark the beginning of the run up, the stock prices rise 20% to more than 120% in few weeks and months time period. This is basically because the stock prices are already ruling at multi months and in many cases multi year lows. The stocks which were in triple digits are now available in double of even single digits! These stocks and even the better ones out of this lot attract a lot of investment and trading attraction.

So the prices rise in a manner as told earlier in this paragraph. Now, when you are entering in markets at an early stage of the price rise cycle, you get the stocks at good price. Suppose you invested Rs.1 lakh in 10,000 Lanco Infratech shares at Rs.10 and it rose to 20 rapidly then you can offload 50% i.e 5,000 shares and thus get back your original investment amount. So now the rest of 5,000 shares that you hold are absolutely cost less as your original investment capital is out of them. Now whatever monetary benefit as to bonus shares, dividends, or price rise you get is absolutely free is can be measures as ‘infinite return’ on investment, as your investment is practically ‘zero’ in it! Another way your cost of investment can be zero is to hold blue chip investment for a longer duration. For e.g. those who are holding reliance industries or grasim or even hind unilever for that matter, for more than 10 years now; are indeed holding it for free. Because the price appreciation, dividends and bonus shares etc. in aggregate have given them more than their investment amount.

How deep and wide Indian Stock Markets are? SHOCKING FIGURES FROM NSE

January 2011,

In a recent interview with CNBC renowned fund manager Samir Arora expressed his disappointment of Indian investors in equity markets by saying “Indian investors are world’s biggest losers”.

He adds that in a year when FII have poured in USD29 bln on the back of fundamental growth and resilience of Indian economy after 2008 global credit crisis; while the domestic investor’s participation have remained below average.

He also added that since Jan 2000, Foreign Investors have put a USD91 bln in Indian markets. While the mutual fund investments has been a meager at only USD 2 bln during this same 11 years span.

He goes on to contend that real public only owns 1% equity in India. Also citing a morgan Stanley report only 3% of average indian’s total assets are in equities.

DAILY VOLUMES:

BSE CASH SEGMENT- between 2000 to 5000 cr. (all mainly cash segment)

NSE CASH PLUS DERIVATIVE SEGMENT- around 1,30,000 cr.

NSE FIGURES PRESENTED IN PARLIAMENT GIVING DATA OF TRADING AND INVESTING ACTIVITY ALSO UNCOVERED THE SHALLOWNESS OF INDIAN MARKETS AND LACK OF PARTICIPATION BY AVERAGE INDIAN:

The data were presented by Mr.Meena, Minister of State for Finance, on 10 Aug, 2010 in Parliament in response to questions asked by two MPs.

The analysis of data is shocking and startling. You will find out in reality how shallo, narrow, concentrated our stock markets are.

While reading this keep in mind we are 2nd fastest growing economy, with close to USD 1 trillion in GDP, with 2nd largest population at 110 cr. plus.

BELOW ARE SOME SHOCKING EXCERPTS FROM IT:
The data corresponds for the three-month period from April 2010 to June 2010.

Total investors traded on NSE cash segment in Aprl-June 10 30.90 lac Only 52% of these were retail, HNIs and corporate investors.
  Inst. investors and Proprietary trades counted for-48% of this.  
  90% of total trading came from 192,200 investors. 80% came from just 41,654 investors. Thus, rest of 1,50,546 investors accounted for the rest of meager 10% volumes.
Only 8,727 investors accounted for 70% of turnover among which 413 were proprietary traders, mainly brokerage houses. 60% of trading came from a mere 1,563 traders and 50% of the trading volumes came from an ridiculously low number of 451 entities of which 156 were proprietary traders…
DERIVATIVES SITUATION-
Only 5.75 lac entities traded.
90% of it volume came from 18,035, meaning 97% of traders accounted for only 10%, and only 3% (18,035) accounted for 90% of the period’s all the derivatives turnover.
Only 2,188 investors accounted for 80% of derivatives turnover.
537 investors account for 70% of trading.
223 investors accounted for 60% of trading.
50% of all NSE Derivative segment TO came from 106 parties including 58 proprietary accounts!!!
INDEX OPTIONS ACCOUNTED FOR WHOPPING 55% OF DAILY F N O VOLUMES.
Daiyly trading in index futures accounted for 11% of total f n o volumes.
INTRADAY TRADING-
In f and o 67% trades were intraday trades.
In cash segment 64% of trades were intraday nature trades.
BROKERAGE COMPANIES AND STOCKS-
25 brokerage companies accounted for 42% of equity cash and 43% of stock derivatives turnover.
In cash segment top 10 stocks accounted for 24%.
And in derivative segment top 10 stock accounted for 38% of total derivatives turnover.

Conclusions and contemplations:

This whole data and figures of trading and investing activity on NSE, country’s top stock exchange which account for 90% of stock market volumes (10% of BSE), is only for a quarter’s period and not whole year; however the figures are so worse and shocking that giving benefit of doubt regarding taking the whole year or even more than a year into account would not suffice to prove that the weird pictured of depth and width of our stock markets is anything better than how we see it after looking at these data.

Massive trading volumes figures published every day hides this naked reality of Indian stock markets that they are dominated by few entities and that it is far far far away from any meaning and sense of average investor inclusion in capital market activities.

NSE has been also criticized for constantly fighting against Right to Information Act applicability on it, which shows its reluctance to transparency and attitude of hiding things which it obviously doesn’t want people to know!

With such a shallow participation with only 106 entities who account for half of the derivatives Turn Over, WHY the markets can’t be said to be a CASINO…than a fair trading platform in any sense and meaning?

Doesn’t this mean that markets movements are not dependent on investors sentiments at general but interests of the few entities who put most of the volumes for e.g. the 2188 investors who accounted for 80% of trading. It is clear that the rest 20% however in lacs do not have any impact and consequently are not at all any part of price discovery in markets.

Activities on bourses weather investing or trading is concentrated among few players, and there is almost nil participation by so-called retail investors or average Indian investors.

The activity on the bourses are more of a nature in speculative than by any means a fundamental investing.

Time and again nse is accused to include try to bring more and more stocks forcefully, into derivatives segment to ramp up volumes and their profits.

Looking at these it becoming even concrete that there does not exist any such thing as ‘price discovery’ in Indian markets and the prices of stocks are influenced by activity and interests of few entities and investors rather than a huge base.

We see many stocks jumping up 10-20% a day and falling sharply on following day (so many times without any news flow). This also supports the data which suggests that few gamblers cause such movements. For them its all about today’s play and more often than not, the retail investor is the one who loses out by hoarding into a wrong stock at wrong prices.

Meaning of Short-term, Mid-term, Long-term and Longer-term Investment

THE CONCEPT OF SHORT TERM, MEDIUM TERM, LONG TERM AND LONGER TERM INVESTMENTS:

Many (most in fact) investors are confused about equity investments. Main reason being the volatility of markets and the investor’s inability to manage his emotional response to it.

Other than psychological/behavioral aspects, the investor is also devoid of basic understanding as simple and as basic as ‘what is asset allocation?’ and “what should be called long-term investing and what not?”

Here in this article we have clearly explained the classification of equity investments on the basis of duration of investment. The classification mainly include the usually known classification of short-term investing, mid-term investing, and one unique but vital and important concept of ‘longer term’ investing which is mainly based on premises of life-long investing and investing philosophy of Warren Buffett.

We classify investment into 4 types when it comes to period or on duration basis.

Short-term investment: (duration 3 months to 1 year)

Short term investment is basically nothing but trading because there is nothing like investing when we talk about it using word ‘short term’. However we call it ‘investment or short term investment’ and we have put it as that type of investor who buys stock for a holding period of minimum 3 months to maximum 1 year. To standardize and clarify the classification types of investment on durational basis we have had to mark the 4 types into months to months time period.

We have put the minimum time frame of holding stocks to qualify it for short term is 3 months and up to 1 year. Above 1 year will become medium term investment. The logic behind this is that a period of 3 months is bigger when compared to intraday trading or futures trading which is mainly based on month to month expiries. also the upper cap of 1 year is placed to freeze it as short term duration investment because above one year holding puts an investors into events involving taxation issues, dividend payouts, voting in annual meeting, declaration of annual results of the firm, and so on which is mainly accepted and expected by an investor who want to hold stock for more than 1 year (which we classify as medium term) Thus, one investing as ‘short-term investor’ according to our classification will limit his or her investment up to around one year as he is not interested to give the stock and in turn the company one year cycle and don’t want factors which can come up over one year time duration of certain nature as annual meeting and so on company side and taxation issues on his personal side; to affect/influence his stock investment which is in fact based on short term factors of analysis and also bringing results in short term which according to us we have put at 3 months to 1 year.

Medium term investment: (duration 1 year to 3 year)

Medium term investment duration is defined by us as any type of investment which is held for more than 1 year but not more than 3 years. As more than 3 years up to 5 years.

We call this type of investment as medium-term duration investment as the characteristics of completion of economic or stock market cycle is absent from this type of investment mentality. Thus, we would not like it to call as long-term investment if one is invested for even 2 or more years but less than 3 years. However most market analyst and investment advisors will tell it as long term investment as most of them believe anything above 1 year is long term investment, which we do not agree as per our theory presented here.

Long term investment: (duration 3 years to 5 year)

The period of 3-5 years is in general what is called to be long-term investment by the investment community. The basic premise behind such belief and argued logic is that an economy sees a cycle turn in about at least 3 years to 5 years. Same can follow about stock market movements also.

We also follow this and put a tag of long-term investment to any investment held at leas for 3 years and up to around 5 years.

It is advisable that an investor undertakes comprehensive portfolio review and shuffle at his/her investment at this turn of duration.

Longer term investment – duration minimum 10 years and beyond

Our this completely new coined word follows the investing duration and point of view adhered by warren Buffett.

For him the ideal holding period of investment is ‘forever’. He likes to buy stocks that he can hold forever. his this belief follows concept and principle of value investing in which investing in stocks is viewed as buying a part of actual business and not the shares that are quoted and traded on stock exchanges. He buys undervalued stocks of very selected sectors and businesses having particular characteristics and similarly avoids some sectors and businesses on counter basis.

Every body knows and hears about investing for ‘long term’ and ‘long –term ‘investing is good and so on. But no analyst or educator has clarified between what should be termed as ‘long-term’ and what shouldn’t. Also none has clarified on what is should be called when a person buys stocks for holding 3 months to one year (which we clarified in short-term investment). You will hear on tv and read on newspapers mostly about 1 year and 3 year and 5 year timelines when it comes to investing.

Getting back to understand the concept of ‘longer term investment’, one thing you understood that it is alike warren Buffett style approach when it comes to the duration of holding. To define it in years we put any investment holding held for 10 years and more as longer-term investing.

The duration of 10 years is beyond and above the usual economic (viewed in interest rate cycle terms mainly) and stock market cycle (bull top outing and bear bottom outing) Thus it surpasses the notion that the investor was looking for cyclical gains or considerations as in long-term investment.

The long enough duration of 10 years also makes it possible that the cost price of the original investment to become nil or zero on account of the return from dividend payouts and stock price appreciation from the stock.

In 10 years the company may consider to delist itself from stock exchanges, the company can come with new products, mergers, amalgamations, takeovers etc. all envisagable and imaginable outcomes and events are possible during such a big duration. So thus the investor has really invested for longer-term’ that is here 10 years on valuations fit to him for such a duration under such considerations.

the investor who is investing for such a longer duration mainly have ‘speculative’ element completely absent in his investment decision, as he is not eying benefits out of stock price or some short term events but completely and solely interested only into the average and fundamental and mature growth of the company as can happen over such a long period a decade and more.

The readiness and ability and confidence to invest and hold for 10 years and more comes from following the tenets of value investing like warren Buffett. Thus, the investor is confident of buying the stock at considerable discount price and ready to average at declines and deem declines as opportunity to buy more of them.

…we will update more comments in this article as and when…

Phases of Stock Market Movements and Human Psychology

Phases of Market Movements and Human Psychology

According to general wisdom, there are these few types of phases in terms of psychology in markets.

This gives the understanding of human behavior/psychology with regard to movements of markets.

Below are the so called phases and their brief explanation,

  • Optimism
  • Excitement
  • Thrill
  • Euphoria
  • Anxiety
  • Denial
  • Fear
  • Desperation
  • Panic
  • Capitulation
  • Despondency
  • Depression
  • Hope
  • Relief
  • Optimism

The markets, generally after a bear phase, wants to rise, big boys have swept stocks at dirt cheap prices and the general investors sentiment is gaining positiveness by recovering economic data. This phase is called optimism phase when the seeds of possible new cycle of market rise is sown.

This gradually turns into excitement with jumps in the market and few early bird IPOs hitting and making investors big in markets. This excites the existing players in markets and seduces the outsiders to think about joining the party without missing. This is called excitement phase.

The excitement usually turns into thrill as the ‘tips’ and rumour market gets hotter day by day. Every one long is generally making money. The atmosphere has turned into thrill from merely excitement. The IPO market is booming with companies of all sorts of businesses coming with issues having insane prices.

The thrill did have some logics in some aspects and pockets, which was only waiting to be overcome by a complete blindness rally and bull run usually taking the form of Euphoria in markets. the only and only thing markets and stocks are driven are news in particular and news in general. No negative news whatsoever is available. If there are any, not broadcasted, or not thought to be necessary to be broadcasted by the blue biz channels. Exorbitant and insane price targets for benchmark indices are being given by so called market maestros who know that market is about to peak and they should consider dumping now!

The market starts feeling jerks of downside due to some macro, generally of international nature phenomena. However the markets recover. But does not sustain and jerks down again. The losses born by those who didn’t knew that stock prices also do go down, spreads feeling of anxiety amongst the small and medium sized participants. The brokers also have started cutting on exposures and making margin calls due to wide swings.

The denial phase follows, which signifies the rejection of market participation to accept that market is more volatile now, and the news flow is not all ‘rosy’, and something fundamentally is being rottening. Many average out their losing positions. More margin calls trigger. The intermediaries become vigilant at this stage and the later stage of FEAR which causes many stocks plunge only due to such type of margin/exposure etc technalities. The unability to cope with denial phase and building up of full capacity hedging positions by big boys causes pressure on market.

The FEAR converts into desperation when investors know markets are going lower, but still holds on to ‘wait’ for recovery. They become desperate. The intelligent boys have already sold off. The markets are probability 20% odd off its highs. Bad news to good news ration is continually getting in favour of the short sellers.

The rising height of feeling of desperation, at one point, results into a panic. This panic stage/feeling can be compared to euphoria stage of selling. Like in euphoria stage stocks are bought more or less without logic, opposite is done in panic stage. Everybody wants to get out as soon as possible. Every single negative news is started being given excessive importance. Some couple of macro-type factors are made the prime-reason for the crashes. This is a stage where the beginning of opportunity for value hunters starts ariisng.

Investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling. The term is a derived from a military term which refers to surrender. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom. At this stage many investors who clinged to hope since the denial stage, becomes determinalt of teir losses, and decided to forget the stock markets. Loss averse investors decides to not to watch the markets, and maintain status quo.

The next stage, Despondence is defined as, depression of spirits from loss of hope, confidence, or courage; dejection. In the former stage the investors have surrendered to market being in the bear phase and that they could not do any thing. The later stage of despondency is an outcome of the former stage.

After all these, depression or recession prevails in the form of slowed economic growth rate and government intervention to boost the economy. Credit contraction also happens many times. This phase sees a whole lot of a turn of economic cycles in many countries. The markets are generally range bound without much volatility.

Then returns the phase from where all started. Hope. The talks of markets bottoming out have been heightened. And steam of concensus regarding markets bottoming out and economic recovery on track is being gathered.

Then comes relief in terms of good real economic data, few surges in markets and return of volume usually by 20-30% rise in volumes prevailing during despondency and depression stage. This sort of relief brings optimism in markets. The difference between hope and optimism is that hope is partial; it is generally not wide spread feeling amongst all the market participant while optimism is conceived, cherished, and popularized by most of the market participants. It also constitutes actual spurts in the market in terms of price rises.

Please note that this is generalization and the market movement does not always follow this pattern of psychology. However this type of caricature gives a good perspective to look at market in behavioural fashion.

Price-less Quotes of Warren Buffett

Price-less Quotes by Warren Buffett

Please note that many quotes are contextually. Many of them are meant for and to America and Americans. Many are said in various interviews at different times. Warren Buffett has never written any books.

  • “When a manager with a reputation for excellence tackles a business with their reputation for poor economics, it is the reputation of business that remains intact.”
  • A public-opinion poll is no substitute for thought.
  • Beware of geeks bearing formulas.
  • Chains of habit are too light to be felt until they are too heavy to be broken.
  • Derivatives are financial weapons of mass destruction.
  • Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation.
  • I always knew I was going to be rich. I don't think I ever doubted it for a minute. I buy expensive suits. They just look cheap on me. I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
  • I just think that - when a country needs more income and we do, we're only taking in 15 percent of GDP, I mean, that - that - when a country needs more income, they should get it from the people that have it.
  • I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
  • I think the most important factor in getting out of the recession actually is just the regenerative capacity of - of American capitalism.
  • If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further. But I think that people at the high end - people like myself - should be paying a lot more in taxes. We have it better than we've ever had it.
  • If past history was all there was to the game, the richest people would be librarians.
  • In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
  • In the business world, the rearview mirror is always clearer than the windshield.
  • It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
  • If a business does well, the stock eventually follows.
  • It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.
  • It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
  • It's never paid to bet against America. We come through things, but its not always a smooth ride.
  • Let blockheads read what blockheads wrote.
  • Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
  • Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
  • Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
  • Only when the tide goes out do you discover who's been swimming naked.
  • Our favorite holding period is forever.
  • Price is what you pay. Value is what you get.
  • Risk comes from not knowing what you're doing.
  • Risk is a part of God's game, alike for men and nations.
  • Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
  • Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
  • Someone's sitting in the shade today because someone planted a tree a long time ago.
  • The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
  • The investor of today does not profit from yesterday's growth.
  • The only time to buy these is on a day with no "y" in it.
  • The rich are always going to say that, you know, just give us more money and we'll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on.
  • There seems to be some perverse human characteristic that likes to make easy things difficult.
  • Time is the friend of the wonderful company, the enemy of the mediocre.
  • Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.
  • Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.
  • We always live in an uncertain world. What is certain is that the United States will go forward over time.
  • We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'
  • We enjoy the process far more than the proceeds.
  • We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
  • We're still in a recession. We're not gonna be out of it for a while, but we will get out.
  • We've used up a lot of bullets. And we talk about stimulus. But the truth is, we're running a federal deficit that's 9 percent of GDP. That is stimulative as all get out. It's more stimulative than any policy we've followed since World War II.
  • When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
  • When you combine ignorance and leverage, you get some pretty interesting results.
  • Why not invest your assets in the companies you really like? As Mae West said, "Too much of a good thing can be wonderful".
  • Wide diversification is only required when investors do not understand what they are doing.
  • You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.
  • You know, people talk about this being an uncertain time. You know, all time is uncertain. I mean, it was uncertain back in - in 2007, we just didn't know it was uncertain. It was - uncertain on September 10th, 2001. It was uncertain on October 18th, 1987, you just didn't know it.
  • You only have to do a very few things right in your life so long as you don't do too many things wrong. 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.
  • I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term ‘thinking outside the box!!
  • Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
  • Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
  • We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.
  • We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.
  • There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do.
  • The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.
  • You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.
  • We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own assets.
  • We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own assets.
  • Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar, we much prefer to purchase $2 of earnings that is not reportable by us under standard accounting principles than to purchase $1 of earnings that is reportable.
  • Never invest in a business you cannot understand.
  • Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.
  • When speaking of managers and executive compensation) The .350 hitter expects, and also deserves, a big payoff for his performance - even if he plays for a cellar-dwelling team. And a .150 hitter should get no reward - even if he plays for a pennant winner.
  • The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.
  • Risk can be greatly reduced by concentrating on only a few holdings.
  • Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.
  • Many stock options in the corporate world have worked in exactly that fashion: they have gained in value simply because management retained earnings, not because it did well with the capital in its hands.
  • Buy companies with strong histories of profitability and with a dominant business franchise.
  • It is optimism that is the enemy of the rational buyer.
  • As far as you are concerned, the stock market does not exist. Ignore it.
  • The ability to say "no" is a tremendous advantage for an investor.
  • Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
  • Lethargy, bordering on sloth should remain the cornerstone of an investment style.
  • An investor should act as though he had a lifetime decision card with just twenty punches on it.
  • Wild swings in share prices have more to do with the "lemming- like" behaviour of institutional investors than with the aggregate returns of the company they own.
  • As a group, lemmings have a rotten image, but no individual lemming has ever received bad press.
  • "Turn-arounds" seldom turn.
  • Do not take yearly results too seriously. Instead, focus on four or five-year averages.
  • Focus on return on equity, not earnings per share.
  • Calculate "owner earnings" to get a true reflection of value.
  • Growth and value investing are joined at the hip.
  • The advice "you never go broke taking a profit" is foolish.
  • It is not necessary to do extraordinary things to get extraordinary results.
  • Remember that the stock market is manic-depressive.

Read Megha Investments' Indian Stock Market Blog

Stock Market Blog, Stock Trading Blog, Indian Stock Market Blog, Stock Investing Blog

www.meghainvestments.Blogspot.in is a blog cum website of MEGHA INVESTMENTS AND RESEARCH team based in Ahmedabad.

You will find,
1. Informative
2. Educative, and
3. Analytical

content in this blog cum site, as well as the details of fee based service offered by us to those interested in becoming a paid member.

Since November-2008, our research team has been producing useful content in form of reports, forecasting, investment and trading related articles, stock tips, trading strategies, indian stock market updates, mcx/ncdex commodities tips and updates, forex and world stock markets updates, multibagger stock recommendations, penny stock recommendation, value investing recommendation, and so on.

Analytical: Our research team has made milestones by regularly forecasting several market events in terms of specific security and for overall market in general. You can find the detail of which on this site and links provided on this site at various places.

Educative: You can find a host of articles which will give you non-traditional education not just in terms of knowledge of markets but sort of relealation of facts of market and investing in bold voice. Please surf the website for this articles. ‘beware investors’ is the most famous label among these articles.

Informative: informative part is mainly in terms of weekly market wrap, and such things. It is mainly public domain available information. But the specialty of reading it on megha investments blog is that you get to read insightful and bold straight from the mouth comments along with the depiction/description of events/information.

Some tips on avoiding wealth destruction in stocks

Some tips for ‘not losing money in investing in stocks’-

  • Wealth is not destroyed in STOCK MARKETS, but wealth is destroyed in STOCKS.
  • It is important to know which stock (read businesses/companies) to buy, but it is equally important to know which stock NOT TO BUY...because in stocks, if you do not EARN money, you LOSE money! There is no third scenario.
  • This NEGATIVE LIST is something you have to build yourself. Because unfortunately no one out in general/popular media will tell you to EXIT/AVOID stocks giving possible downside and stating exaggerated valuations. Because may be at times such media and industry participants are busy ‘selling’ them (in forms of story and the actual stocks as well) to you..!!
  • The general notion in the back of the mind of average investor that-When main indices goes up everything goes up and main indices go down everything goes down, IS A MYTH.
  • Have courage to EXIT/SELL when you have somehow made a mistake by entering into such stocks and you get reliable advice from reliable/timetested advise/sources such as our team. It is better to lose some money than to lose all the money..!!

Strategy based Advisory-How traders and investors profit from right strategies than perfect market tips

Strategy based Advisory

Friends, What really does an investor or a trader want?

A tip, a recommendation, a whisper from street?

Well, all of it is available, many times in plenty!

We see an ocean of anonymous stock advisory sites that shamelessly put PCP (pay per click) advertisements of other similar nature stock advisory sites, which, in normal understanding are their competitors.

Have you ever seen an ad for Kodak Cameras on Sony website or posters in showrooms? No. Never.

Thus, the sole motive of such 95%+ of (mostly anonymous) market advisory companies is to earn, earn and earn money only. The point is that they are not genuine. We even go ahead and say this is a fraud and unfair practice against the interest of investors and traders relying on internet for satisfying their needs of advise for trading and investing.

The main topic that we intended to start with is 'STRATEGY BASED ADVISE'.

Friends, we did a study on our own customer base for our different groups 'sure shot calls' service. And found interesting results;

We send strict quantity for trading to along with the buy recommendation and also sent the holding duration.

We found that out of 100 subscribers, close to 35 either did not adhered to the quantity stipulation, or the holding period stipulation or the entry exit price stipulation.

Let us tell you that the accuracy of our said service is 100% (just imagine so) , in that it rarely amounts in net loss to any single subscriber if he follows the advice strictly as it is given. Even though the renewal ratio has only been hovering around 50-60% since inception of this service. This shows how even accurate tip/advice/recommendation doesn't work for the ultimate goal for investor/trader, that is net profits.

Similar, results are derived from survey of our services for investors.

The point is that we have framed our services in such a manner that the recipient of service is almost clear about everything that could happen between him/her during the course of service, what he/she has to expect, and what they are going to get.

We are doing all this brain-stretching exercise because we think the ultimate goal of our businesses and professions is to benefit the customer. And if they are not, then it is us who have to find out the answer to it.

THE STRENGTH OF OUR ADVICE-

Service Specifications-We have tried to specify our services as much as we can. This enables the investor/trader to select the best possible option out of them of which he is needful or looking for.

Regularity- Most services are imparted without bumps, and when service is going to be interrupted due to any reason, sufficient alert and updates are given regarding the situation.

Use of thumb rules of trading like, making sure to lose less when we lose and earn more when w earn.

We have specific compulsory rules and guidelines, which is in advance conveyed to the trader via email, call and personal phone talk.

Also follow up via sms/email given during the period of the service, to check the traders' situation and make sure he is on track with us.

The moral of the Story is that “Stocks don’t make you rich, or Accurate tips don’t make you rich..because 100% accurate tips are NOT POSSIBLE to generate and give consistently….THUS IT IS THE STRATEGY THAT SEPARATES THE SUCCESSFUL INVESTOR FROM THE UNSUCCESSFUL ONE ANE IT IS THE STRATEGY THAT MAKES PRO TRADERS WIN MOST OF THE TIME IF NOT ALL AND THE NOVICE LOSE OUT AT THE END.

Why Every investor needs Alert on Stocks to Sell-Exit-Aoid

Why Do you at all Need “Alert for Wealth Destroying stocks”?

  • Some of you might say that this thing does not need no ‘why’ explanation. Any way, we are giving some points,
  • By most of the medias and analysts, investors get buy recommendation but they rarely get the sell or even further ‘exit’ or completely screaming avoid alert. So in such scenario, the common investors badly need such alerts that we intend to provide. Because the HNIs, or institutional category gets some of such alert tip but the common investors are sometimes purposefully and many other times un-purposefully kept devoid of such a crucial part of stock market advice.
  • One of the first and basic thing to understand is that ‘stocks do destroy wealth’ and that ‘knowing WHAT NOT TO BUY’ is many times more important than Knowing What To Buy. Because ‘Market will always throw Excellent Investment opportunity in front of you from time to time, but you need to have capital to grab this opportunity. But suppose you are stuck in wrong stocks, then what? Then you will lose these opportunities and INSTEAD as well lose on inflation, interest, opportunity cost and many times with ‘wealth destroying stocks’..your capital as well!
  • This also goes with general public’s attitude of ‘TAKING STOCK MARKET FOR GRANTED’. They glibly think/believe that “It is easy and almost an ‘automatic’ task to earn money in stock markets…and that Long-term investment of any type is always profitable..” Many of these types of people invested in Reliance Communication at Rs.800 and 600 and also may be holding India’s largest private company Rel Ind for last 2 years…and eroding their capital by 80% in the first case (Rel Comm) and standing with zero return in the 2nd case (Rel Ind) and loss of huge opportunity cost during the same period’s smart run up in markets. (The 2 stocks are just examples and not particular cases) The point is that ‘IT IS A MYTH SOLD TO COMMON INVESTORS BY ‘CAPITAL MARKET INDUSTRY’ THAT STOCK MAREKT IS ALWAYS AND ALWAYS BENEFITIAL IN THE LONG-TERM’. It depend on the stock you are invested in. And ALL THE stocks are definitely not the right stocks!!

You can start earning in Stocks/ Commodity investing/trading from today!

 

Are you interested in our:

Service for Investors

Service for Traders Both

If you are an INVESTOR, than which type of investing do you do?

Short term Mid term Long term

Your available present capital for new investment if you are Investor?:

Your existing Approx. invested money?:

If you are a TRADER, than what type of trading do you do?

Your available money for Trading/Margin money:

Less than 50000 More than 50000

(Please complete this security check?)

I agree that you do not give free trial/calls.

Some of the Prominent Institutions in Capital Markets
® Megha Investments & Research, 2003. All Rights Reserved. By surfing this site you agree to disclaimers,
if you do not agree than please do not surf this site.
BSE | NSE | MCX | NCDEX | SEBI | NSCCIL | MCX-SX | NMCE | ACE | ICEX | CDSL | NSDL | AMFI | MOF | RBI | INDIAN STOCK MARKETS | INDIAN STOCK TIPS | SHARE MARKET TIPS | OPERATOR CALLS INDIA | STOCK TIPS INDIA | MCX COMMODITY SURESHOT TIPS | MULTIBAGGER STOCK RECOMMENDATIONS | MULTIBAGGER STOCK TIPS INDIA | STOCK INVESTMENT CALLS | INDIAN MUTUAL FUNDS RECOMMENDATIONS | TOP INDIAN MUTUAL FUNDS | SURESHOT STOCK FUTURE CALLS | SURESHOT MCX COMMODITY TIPS | STOCK RESEARCH REPORT INDIA | STOCK MARKET TIPS INDIA | STOCK MARKET RESEARCH COMPANY INDIA | STOCK ADVISORY INDIA | BEST STOCK ADVICE INDIA