Monday, 18 June 2018

Common mistakes that a beginner trader makes...

As compared to investors, traders hold positions for smaller time periods and buy or sell securities more often. When the frequency of trading is high and positions are held for shorter durations, traders can inadvertently take decisions that can lead to huge losses and wipe out their investment capital. Below, we have listed a few common mistakes that new share traders make:
1. Failure to Contain Mounting Losses
Knowing when to take a small loss and pull out of a bad deal rather than sticking around and letting the losses accumulate is one of the most defining qualities of successful traders. On the other hand, traders who are unable to find much success often, paralyzed by the shock of a bad deal, stick around hoping things would eventually work in their favor. When their trading capital is tied up for a long time in a losing trade, a delay in taking the right action may result in losses piling up and the trading capital getting depleted sooner than expected.
2. Not Implementing Stop-Loss Checks
When it comes to stock broking, a failure to implement stop-loss orders can result in catastrophic losses. Novice traders can use stop-loss measures to contain their losses and prevent trading capital from depleting. There is always the risk of implementing stop orders on long positions at lower-than-specified levels if the security gaps lower. But in most cases, the benefits far outweigh the risks.
3. Not Following a Trading Strategy
An experienced trader will have a well-defined strategy in place before starting to trade. They know their trajectory with exact entrance and exit points, the trade capital to be invested, and the maximum loss that can be sustained. A novice trader may not have such a strategy in place before he or she enters the share market. Or even if they do have one, the chances of them dropping their original plan if things go south are quite high.
4. Redeeming a Losing Position by Averaging Down (or Up)
An investor who has a long term blue-chip investment plan can average down on a long position. On the contrary, it can prove to be very perilous for a trader who dabbles in risky securities. Some of the biggest known trading losses have occurred only because a trader kept adding to a losing position, and eventually the losses got so big that it became impossible to hold on to that position. Some traders tend to go short more frequently as compared to orthodox investors and try leveraging an advancing security to average up; this is an equally risky maneuver that novice traders can fall prey to.
5. Excessive Leverage
That leverage is a double-edged sword is a very well-known cliché in the share market. This is because it can bolster returns from profitable trades and accelerate losses from losing trades. Share brokers who have just started out may be flattered on knowing how much of leverage they possess, but sooner or later, they may discover that it can also wipe out their trading capital in a flash. Take for example Forex trading; if they employ a leverage of 50:1, an adverse move of as low as 2 percent is enough to destroy their trading capital.
In order to make trading a profitable endeavor, beginner traders should avoid these commonly made mistakes.

Thursday, 14 June 2018

Didn’t make it to Russia this year? Watch the next FIFA World Cup in Qatar by investing in SIP

The FIFA World Cup is one of the most-watched sporting events across the globe. This year, this football extravaganza takes place in Russia where 32 teams battle it out to become the world champion. Sadly, India is not participating in this event. But that has not stopped football fans from the country making the trip to Russia for the World Cup. If you were not able to make it, don’t worry. Here is a plan to help you watch the World Cup live in Qatar in 2022.
What are the expenses?
The first step in this plan is to identify how much the trip is going to cost you. There are a lot of variables that come into play when you visit a foreign country. The primary expense is of course the tickets. How many matches do you want to see? Two, perhaps three? In the current World Cup, the cheapest tickets cost around Rs. 7,000 and the most expensive tickets are around Rs. 70,000, as per the FIFA website. If you wish to see three matches from mid-priced seats, it may cost you Rs. 90,000 overall. You also need to think about plane tickets, hotels and food.
Currently, economy flights to Doha cost around Rs. 20,000, according to Qatar Airways website. A round trip means your travel would cost you Rs. 40,000. If you know somebody in Doha, great! You can stay at their place. Otherwise, you need to find a good hotel. Assuming you stay for at least a week, your lodging expenses can be anywhere between Rs. 45,000 – Rs. 50,000. And with food expenses at Rs. 20,000, your total expenditure for the trip comes up to Rs. 2 lakh. These are rough estimates and prices could change in four years’ time. So, let’s incorporate inflation and other miscellaneous and let’s peg the entire trip at Rs. 3 lakh.
You need to start saving
Alright, now that you know the costs, you need to start saving. Creating a fund of Rs. 3 lakh for a football World Cup might seem like a lot of money. But if you plan carefully and invest, it is quite possible. Remember, you have a time span of four years before the next World Cup. So, it is best to start investing right away to realise this dream. But where should you invest?
For this goal, it might be best to invest in mutual funds.

Investing in SIP

The best thing about mutual fund investment is that you can transfer a fixed amount of money each month into your desired fund through a Systematic Investment Plan (SIP). This way, you don’t need to worry about chasing returns or timing the market. All you need to do is transfer the fixed amount into the fund at a regular interval.
In this situation, let’s imagine you invest just Rs. 5,000 into a liquid fund that offers a return of 10% per annum. In four years’ time, you can accumulate a corpus of Rs. 3 lakh! This is the power of Systematic Investment Planning. Of course, you can invest a greater amount per month based on your convenience and requirement.
To sum up, football is a fun sport that offers a lot of enjoyment and delight. But for the players, it is all about discipline and focus. You can apply the same principles with respect to your investments. Through proper financial planning and careful execution, it is possible to make your dream of enjoying the World Cup live in the stadium a reality. Now all you need to do is to start investing.

SIP comes up with another meaning....

The Government on Tuesday added 10 Swachchh Iconic Places (SIP) under phase III of its flagship programme, Swachchh Bharat Mission, which aims to make the country open-defecation and litter free by October 2019.
Raghavendra Swamy Temple (Kurnool, Andhra Pradesh), Hazardwari Palac (Murshidabad, West Bengal), Brahma Sarovar Temple (Kurukshetra, Haryana), Vidur Kuti (Bijnor, Uttar Pradesh), Mana village (Chamoli, Uttarakhand) are among those which have been taken up under Phase III of the flagship project of Swachchh Iconic Places (SIP) of the Swachchh Bharat Mission, an official statement said here.
The others are Pangong Lake (Leh-Ladakh, Jammu & Kashmir), Nagvasuki Temple (Allahabad, Uttar Pradesh), Ima Keithal/market (Imphal, Manipur), Sabarimala Temple (Kerala) and Kanvashram (Uttarakhand) .
These sites have joined the 20 iconic places selected under Phase I and II where special sanitation work is underway.
The iconic places included in Phase I of the project in 2016 include Ajmer Sharif Dargah, CST Mumbai, Golden Temple, Kamakhya Temple, Maikarnika Ghat, Meenakshi Temple, Shri Mata Vaishno Devi, Shree Jagannath Temple, The Taj Mahal and Tirupati Temple. The Phase II launched in November, 2017 included Gangotri, Yamunotri, Mahakaleshwar Temple, Charminar, Convent and Church of St Francis of Assissi, Kalady, Gommateswara, Baidyanath Dham, Gaya Tirth and Somnath temple.
SIP is a collaborative project with three other central Ministries — Housing and Urban Affairs, Culture and Tourism. It also involves local administrations in the concerned States and Public Sector and Private Companies as sponsoring partners.
Envisioned by Prime Minister Narendra Modi, the project  is being coordinated by the Ministry of Drinking Water and Sanitation. A consultation is in process for finalising the PSUs/corporates for extending support to the new sites as CSR partners, the statement said.
Speaking at the launch of the third phase of the project in Mana village in Uttarakhand, Parameswaran Iyer, secretary, Ministry of Drinking Water and Sanitation, said under the scheme, the Government would take up initiatives like improved sewage infrastructure, drainage facilities, installation of sewage treatment plant (STP), improved sanitation facilities and water vending machines (Water ATMs).

Monday, 11 June 2018

Exchange-Traded Fund (ETF)

Exchange-traded funds (ETFs) are securities that closely resemble index funds, but can be bought and sold during the day just like common stocks. These investment vehicles allow investors a convenient way to purchase a broad basket of securities in a single transaction. Essentially, ETF so offer the convenience of a stock along with the diversification of a mutual fund.

Exchange-traded funds are some of the most popular and innovative new securities to hit the market since the introduction of the mutual fund. The first ETF was the Standard and Poor's Deposit Receipt (SPDR, or "Spider"), which was first launched in 1993. Purchasing Spiders gave investors a way to mimic the performance of the S&P 500 without having to purchase an index fund. Furthermore, because they traded like a stock, SPDRs could be bought and sold throughout the day, purchased on margin, or even sold short.
Whenever an investor purchases an ETF, he or she is basically investing in the performance of an underlying bundle of securities -- usually those representing a particular index or sector. Unit Investment Trusts (UITs) are often organized in the same manner. However, the unusual legal structure of an ETF makes the product somewhat unique.
Exchange-traded funds don't sell shares directly to investors. Instead, each ETF's sponsor issues large blocks (often of 50,000 shares or more) that are known as creation units. These units are then bought by an "authorized participant" -- typically a market maker, specialist or institutional investor -- which obtains shares of the underlying securities and places them in a trust. The authorized participant then splits up these creation units into ETF shares -- each of which represents a legal claim to a tiny fraction of the assets in the creation unit -- and then sells them on a secondary market.
Just as closed-end funds don't always trade at a price that precisely reflects the value of the underlying assets in each share of the portfolio, it is also possible for an ETF to trade at a premium or a discount to its actual worth. To liquidate their holdings, most investors simply sell their ETFshares to other investors on the open market. However, it is possible to amass enough ETF shares to redeem them for one creation unit and then redeem the creation unit for the underlying securities. Because of the large number of shares involved, individual investors seldom use this option.
Exchange-traded funds have grown increasingly popular in recent years, and the number of offerings has swelled. Today, these securities compete with mutual funds and offer a number of advantages over their predecessors, including:
Low Cost -- Unlike traditional mutual and index funds, ETFs have no front- or back-end loads. In addition, because they are not actively managed, most ETFs have minimal expense ratios, making them much more affordable than most other diversified investment vehicles. Most mutual funds also have minimum investment requirements, making them impractical for some smaller investors. By contrast, investors can purchase as little as one share of the ETF of their choice.
Liquidity -- Whereas traditional mutual funds are only priced at the end of the day, ETFs can be bought and sold at any time throughout the trading day. Many have average daily trading volumes in the hundreds of thousands (and in some cases millions) of shares per day, making them extremely liquid.

Tax-Advantages -- In a traditional mutual fund, managers are typically forced to sell off portfolio assets in order to meet redemptions. Often, this act triggers capital gains taxes, to which all shareholders are exposed. By contrast, the buying and selling of shares on the open market has no impact on an ETF's tax liability, and those that choose to redeem their ETFs are paid in shares of stock rather than in cash. This minimizes an ETF's tax burden because it does not have to sell shares (and therefore potentially realize taxable capital gains) to obtain cash to return to investors. Furthermore, those who redeem their ETFs are paid with the lowest-cost-basis shares in the fund, which increases the cost basis for the remaining holdings, thereby minimizing the ETF's capital gains exposure.
Although exchange-traded funds offer several advantages over traditional mutual funds, they also have two distinct disadvantages. To begin, the securities that an ETF tracks are largely fixed, so investors that prefer active management will probably find ETFs wholly unsuitable. Furthermore, because they trade as stocks, each ETF purchase will be charged a brokerage commission. For those that make regular periodic investments -- such as a monthly dollar-cost averaging investment plan -- these recurring commissions might quickly become cost-prohibitive.
As with any security, the pros and cons should be weighed carefully, and investors should first do their homework to determine whether exchange-traded funds are the appropriate vehicle to meet their individual goals and objectives.

Sunday, 10 June 2018

Can I buy your one hour


Once day, father was doing some work and his son came and asked, “Daddy, may I ask you a question?” Father said, “Yeah sure, what it is?” So his son asked, “Dad, how much do you make an hour?” Father got bit upset and said, “That’s none of your business. Why do you ask such a thing?” Son said, “I just want to know. Please tell me, how much do you make an hour?” So, father told him that “I make Rs. 500 per hour.”
“Oh”, the little boy replied, with his head down. Looking up, he said, “Dad, may I please borrow Rs. 300?” The father furiously said, “if the only reason you asked about my pay is so that you can borrow some money to buy a silly toy or other nonsense, then march yourself to your room and go to bed. Think why you are being so selfish. I work hard every day and do not like this childish behavior.”

The little boy quietly went to his room and shut the door. The man sat down and started to get even angrier about the little boy’s questions. How dare he ask such questions only to get some money? After about an hour or so, the man had calmed down and started to think, “Maybe there was something he really needed to buy with that Rs. 300 and he really didn’t ask for money very often!” The man went to the door of little boy’s room and opened the door.“ Are you sleeping son?” He asked. “No daddy, I’m awake,” replied the boy. “I’ve been thinking, maybe I was too hard on you earlier”, said the man. “It’s been a long day and I took out my aggravation on you, Here’s the Rs.300 you asked for”.
The little boy sat straight up, smiling “oh thank you, dad!” He yelled. Then, reaching under his pillow he pulled some crippled up notes. The man, seeing that the boy already had money, started to get angry again. The little boy slowly counted out his money, then looked up at his father.
“Why do you want money if you already had some?” the father grumbled. “Because I didn’t have enough, but now I do,” the little boy replied. “Daddy I have Rs. 500 now. Can I buy an hour of your time? Please come home early tomorrow. I would like to have dinner with you”. Father was dumbstruck.
Moral: It’s just a short reminder to all of you working so hard in life! We should not let time slip through our fingers without having spent some time with those who really matter to us, those close to our hearts. If we die tomorrow, the company that we are working for could easily replace us in a matter of days. But the family & friends we leave behind will feel the loss for the rest of their lives. And come to think of it, we pour ourselves more into work than to our family.

Hence, instead of doing all the work ourselves, outsource as much as possible. The advantages of doing so are multi-fold
1) First and foremost you get quality time with people whom your love and who really love you

2) By outsourcing to experts, you get the best results - Mutual Fund for stock investing and Financial Advisory for money management

3) You help the economy by creating employment for others and set up a virtuous cycle of wealth creation for the society and nation


Why One should invest in mutual funds?

Reason 1:
They are investments instruments which are capable of giving high returns . An average mutual fund scheme returns easily beats inflation in longer run and a good scheme can give far superior returns.

Reason 2:
Our Mutual Fund industry is one of the best regulated industry in the world. They are governed by the strict guidelines layed down by SEBI(Securities & Exchange Board of India).

Reason 3:
Investments decision of a Mutual Fund is taken by their AMCs and Fund Managers. They are experts who make investments decisions after doing intensive research and analysis of a company & industry. (Individuals generally don't have time and resources to do research hence best option is to let MF manage your investments)

Reason 4:
This industry is highly liquid. Even more liquid than stock markets. Payments are generally made through cheques or in some cases they are directly credited to your bank accounts , If your bank is allowing RTGS & electronic clearing and mutual fund AMC is providing such facility.

Reason 5:
Investments are diversified into many companies & sectors. Which make our investments safer and consistent growth prospects. Diversifying is usually not done by small investors , for such a actions one requires lots of funds.

Reason 6 :
Tax treatments- Governments encourage investments in capital markets and has given many tax sops. Under i) 80(c) investments done up to one lakh in specific mutual funds schemes which is called ELSS(Equity Linked Saving Schemes.) are exempt from tax. ii) Any units held for more than one year if redeemed is treated under long term capital gain tax which is taxable at 10% . If one plans to redeem before one year then he has to pay tax of only 15% on the profits.

Reason 7:
Mutual Funds are much cheaper compared to direct exposure to capital market since one does not need demat account ,annual charge to maintain account, charges imposed on demat holdings, stamp duty on transaction are not levied .

Now, let's assume that this group of individuals is a novice in investing and so the group turns over the pooled funds to an expert to make their money work for them. This is what a professional Asset Management Company does for mutual funds. The AMC invests the investors' money on their behalf into various assets towards a common investment objective.

Hence, technically speaking, a mutual fund is an investment vehicle which pools investors' money and invests the same for and on behalf of investors, into stocks, bonds, money market instruments and other assets. The money is received by the AMC with a promise that it will be invested in a particular manner by a professional manager (commonly known as fund managers). The fund managers are expected to honor this promise. The SEBI and the Board of Trustees ensure that this actually happens.

Saturday, 9 June 2018

Back up to become unstoppable

Motivation stories come to fore in different forms. Some are real and others fictional. The aim is to induce motivation in a reader.
The story below is fictional but has a O’Henry novel type twist.
A business man had incurred a loss of ₹5 Crores and was sitting on a park bench not knowing what to do. An elderly couple were coming for a morning walk. While the lady decided to have an extra round of walk, the old man came and sat next to the business man. Old man asked WHAT WENT WRONG? Business man told he lost ₹5 Crores. Oldman (he was the wealthiest in the town) immediately pulled out his cheque book and wrote a cheque for ₹10 crores. He said put this in business and DO MEET ME IN THIS SAME PLACE AFTER A YEAR. The business man suddenly felt that he had developed wings and started walking towards his home.In his mind the old man’s words WHAT WENT WRONG was ringing continuously. He kept the cheque in the almirah and locked it. He went about asking WHAT WENT WRONG. Got the answers and started implementing the the right actions. The cheque in the almirah was the fall back option and he didn’t want to use it until there was a dire need. Within one year he had a big turn around and was delighted to go back with ₹10 crores cq to meet the old man in the park. He saw only the lady and asked her about the old man. The lady looked bewildered and asked ‘did he give you give any trouble?’ She continued saying that he would ask WHAT WENT WRONG? Then give people outdated cheques if they say that they have lost money. He has been insane in the last few years. The business man was dumbfounded.
Motivation came from the trigger WHAT WENT WRONG?
Financial Twist – When we have planned for a Financial Goal and started the monthly investment. One can be rest assured that this Financial goal will be achieved .
When one know there is a backup or the financial goal is taken care ,he become more proactive , accurate , Better decision maker and achieve better financial success than the normal person who is not contributing to the financial Goal and who don’t have a financial planner appointed .
So conclusion
1) appoint financial planner
2) Make Goal based financial plan and execute it asap
Start investing with a purpose . Ensure all your employees also have started investing with a goal in mind . When your mind is free your efficiency will shoot up . And when you employees have planned their goals and are saving for the same , as an employee you are more relaxed and your organisation’s performance will be unstoppable.