The Importance of Recognizing RetracementsIt is important to know how to distinguish a retracement from a reversal. There are several key differences between the two that you should take into account when classifying a price movement:
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Wednesday, December 23, 2015
Saturday, December 19, 2015
Retracement Or Reversal: Know The Difference
Courtesy : Investopedia
Most of us have wondered, at some point, whether a decline in the price of a stock we're holding is long term or a mere market hiccup. Some of us have sold our stock in such a situation, only to see it rise to new highs just days later. This is a frustrating and all too common scenario, but it can be avoided if you know how to identify and trade retracements properly.
What Are Retracements?Retracements are temporary price reversals that take place within a larger trend. The key here is that these price reversals are temporary, and do not indicate a change in the larger trend.
Most of us have wondered, at some point, whether a decline in the price of a stock we're holding is long term or a mere market hiccup. Some of us have sold our stock in such a situation, only to see it rise to new highs just days later. This is a frustrating and all too common scenario, but it can be avoided if you know how to identify and trade retracements properly.
What Are Retracements?Retracements are temporary price reversals that take place within a larger trend. The key here is that these price reversals are temporary, and do not indicate a change in the larger trend.
Sunday, December 13, 2015
Agriculture ministry set to control cotton seed prices....
Following news is relevant and important to the share holders of seed companies ,hence re-posting it here .
HYDERABAD: In what could prove a
major setback to the global hybrid seed giant Monsanto, India's agriculture
ministry has decided to control the prices of cotton seed, including the
genetically modified versions and their trait value.
The Ministry of Agriculture, Cooperation and Farmers Welfare on 7 December has firmed up the Cotton Seeds Price (Control) Order 2015, terming it as aimed at ensuring availability of cotton seeds to farmers at "fair, reasonable and affordable prices".
The Ministry of Agriculture, Cooperation and Farmers Welfare on 7 December has firmed up the Cotton Seeds Price (Control) Order 2015, terming it as aimed at ensuring availability of cotton seeds to farmers at "fair, reasonable and affordable prices".
The move of the ministry comes in
response to a series of representations made by the domestic hybrid seed
manufacturers, who sought the government's intervention to rein in the American
seed giant Monsanto on trait value of Bt cotton seed. A Mahyco
Monsanto Biotech (India) spokesperson said the company just received a copy of
the order and was in the process of reviewing. "We will be in a position
to comment only after we understand the order in its entirety," said the
spokesperson. ..
"As a leading player in India's
agriculture sector, Monsanto remains confident that the government will take
into account views of all stakeholders and will continue to encourage
innovation in Indian agriculture." The local seed makers moved the
agriculture ministry after the American hybrid seed giant Mahyco Monsanto
Biotech (MMB) refused to bring down the royalty payments and return the excess
royalties they paid from 2010.
The Indian hybrid seed producers appealed to Monsanto to reduce trait values weeks after certain state government began fixing caps both on royalty amounts the seed makers pay to obtain seed technologies and on selling prices of hybrid cotton seed to farmers.
The Indian hybrid seed producers appealed to Monsanto to reduce trait values weeks after certain state government began fixing caps both on royalty amounts the seed makers pay to obtain seed technologies and on selling prices of hybrid cotton seed to farmers.
This decision may negatively impact the business prospects of previously suggested companies - Kaveri Seed Company and Nath Biogene - from this sector.
HYDERABAD:
In what could prove a major setback to the global hybrid seed giant
Monsanto, India's agriculture ministry has decided to control the
prices of cotton seed, including the genetically modified versions and
their trait value.
The Ministry of Agriculture, Cooperation and Farmers Welfare on 7 December has firmed up the Cotton Seeds Price (Control) Order 2015, terming it as aimed at ensuring availability of cotton seeds to farmers at "fair, reasonable and affordable prices".
The Ministry of Agriculture, Cooperation and Farmers Welfare on 7 December has firmed up the Cotton Seeds Price (Control) Order 2015, terming it as aimed at ensuring availability of cotton seeds to farmers at "fair, reasonable and affordable prices".
HYDERABAD:
In what could prove a major setback to the global hybrid seed giant
Monsanto, India's agriculture ministry has decided to control the
prices of cotton seed, including the genetically modified versions and
their trait value.
The Ministry of Agriculture, Cooperation and Farmers Welfare on 7 December has firmed up the Cotton Seeds Price (Control) Order 2015, terming it as aimed at ensuring availability of cotton seeds to farmers at "fair, reasonable and affordable prices".
The Ministry of Agriculture, Cooperation and Farmers Welfare on 7 December has firmed up the Cotton Seeds Price (Control) Order 2015, terming it as aimed at ensuring availability of cotton seeds to farmers at "fair, reasonable and affordable prices".
Saturday, December 12, 2015
Common Clues Of Financial Statement Manipulation
Courtesy : Investopedia
Law enforcement has crime scene investigators to tell
them the significance of a bloody fingerprint or a half-smoked
cigarette, but investors are often left to their own devices when it
comes to trying to figure out whether an accounting crime has taken
place and where the fingerprint might be. Now more than ever, investors
have to become forensic accountants
themselves if they want to avoid being burned by unscrupulous
accounting in a company's financials. In this article we will look at
some common signs, both obvious and subtle, that a company is struggling
and trying to hide it.
Exaggerating the Facts.
With all the big baths that companies take, it's tempting to believe that Wall Street is the cleanest place on earth. The big bath refers to the swelling of corporate write-downs in the wake of poor quarters. When a company is going to take a loss anyway, they sometimes take the opportunity to write off everything they possibly can. This is often compared to spring cleaning; the company realizes losses from future periods and/or losses that were kept off the books in previous quarters. This makes poor results look even worse and artificially enhances the next earnings report. In this case, there is no actual crime taking place, but it is a deceptive accounting practice. However, the biggest problem with this practice is that once a company has taken a big bath, income manipulation is a step away.
A company taking a big bath isn't difficult to evaluate in comparison with other companies in its sector that haven't used deceptive accounting practices. Generally, the company has a very bad year followed by a "remarkable" rebound in which it begins to report profits again. The danger comes when companies make an excessive write down, such as claiming unsold inventory as a loss when it is probable that it will be sold in the future. In this case, when the inventory moves, the company would add the profits to their operational earnings. This type of income manipulation makes it hard to tell whether the company is actually rebounding or is merely enjoying the benefits of the items they "erroneously wrote off". This type of write off is similar to the difference between spring cleaning and burning down your house for the insurance money, so any company that rebounds quickly from a big bath should be viewed with suspicion.
Smoke and Mirrors.
One of the most prevalent approaches to corporate accounting is to omit the bad and exaggerate the good. There are a number of subjective figures in any financial report that accountants can tweak. For example, a company may choose to exclude costs unrelated to its core operations when figuring its operating cash basis - say an acquisition of another company or purchasing investments - but will still include the revenue from the unrelated ventures when calculating their quarterly earnings. Fortunately, companies have to break down the figures, thus dispersing the smoke and mirrors, but if you don't look beyond a few main figures in a company's financials you won't catch it.
Finding the Accomplice
There can be a number of accomplices to any accounting crime, but two popular suspects are special purpose entities (SPE) and sister companies. SPEs allowed Enron to move massive amounts of debt off its balance sheet and hide the fact that it was teetering at the edge of insolvency. Sister companies have also been used as a way to spin off debt as new business. For example, a pharmaceutical company could create a sister company and hire it to do its research and development (R&D) (pharmaceuticals' biggest expense). Instead of doing the work, the sister company hires the parent company to do their own R&D - thus the parent company's biggest expense is now in the income earned column and no one notices the perpetually debt-ridden sister company. Nobody, that is, except those who read the footnotes.
The footnotes list all financing related affiliates and financial partnerships. If there is no accompanying information disclosing how much the company owes to the affiliates or what contractual obligations there are, you have plenty of good reasons to be suspicious.
Elder Abuse
Sometimes when a company is struggling, it starts dipping into financial reserves that it hopes no one will notice. Target No.1 is usually the pension plan. Companies will optimistically predict the growth of the pension plan investments and cut back on contributions as a result, thereby cutting expenses. When the pensions start coming due, however, the company will have to top off the plans from current revenue - making it clear that putting off expenses doesn't make them go away. A healthy company pension plan has become critical as baby boomers near retirement.
Getting Rid of the BodyCompanies may try to hide an unsuccessful quarter by pushing unsold merchandise into the market, or into the distributors' storage rooms. This is usually called channel stuffing. This may save a company from a big quarterly loss, but the goods will return unsold eventually. Channel stuffing can be detected in two figures: the stated inventory levels and the cash meant to cover bad accounts. If inventory level suddenly drops or the money for bad accounts is drastically increased, channel stuffing may be taking place.
Fleeing Town
Because the Canadian and American markets are so intertwined, companies that trade on both exchanges can choose which country's accounting standards to use. If a company changes from the historical accounting standards for that firm, there had better be a good explanation. The two systems, while generally similar, account for income in different ways that may allow a wounded company to hide its weakness by switching sides. Any change in accounting standards is a huge red flag that should prompt investors to go over the books with a fine-toothed comb.
Guilty Tongues Slip.
Damning statements are often casually mentioned in a company's financials. For example, a "going concern" note in the financials means that you should get out your magnifying glass and pay close attention to the following lines. With the practice of overstating the positive and understating the negative, a company admitting to a "going concern" may actually be confiding that they are two steps from bankruptcy. Unexpectedly switching auditors or issuing a notice that the CEO is resigning to pursue "other interests" (most likely in the Cayman Islands) are also causes for concern.
Conclusion
Although there are many interesting numbers in a company's financials that allow you to make a quick decision about a company's health, you can't get the full story that way. Due diligence means rolling up your sleeves and scouring the sheets until you are sure that those main figures are real. The best place to start looking for bloody fingerprints is in the footnotes. Reading the footnotes will provide you with the clues you'll need to track down the truth.
Exaggerating the Facts.
With all the big baths that companies take, it's tempting to believe that Wall Street is the cleanest place on earth. The big bath refers to the swelling of corporate write-downs in the wake of poor quarters. When a company is going to take a loss anyway, they sometimes take the opportunity to write off everything they possibly can. This is often compared to spring cleaning; the company realizes losses from future periods and/or losses that were kept off the books in previous quarters. This makes poor results look even worse and artificially enhances the next earnings report. In this case, there is no actual crime taking place, but it is a deceptive accounting practice. However, the biggest problem with this practice is that once a company has taken a big bath, income manipulation is a step away.
A company taking a big bath isn't difficult to evaluate in comparison with other companies in its sector that haven't used deceptive accounting practices. Generally, the company has a very bad year followed by a "remarkable" rebound in which it begins to report profits again. The danger comes when companies make an excessive write down, such as claiming unsold inventory as a loss when it is probable that it will be sold in the future. In this case, when the inventory moves, the company would add the profits to their operational earnings. This type of income manipulation makes it hard to tell whether the company is actually rebounding or is merely enjoying the benefits of the items they "erroneously wrote off". This type of write off is similar to the difference between spring cleaning and burning down your house for the insurance money, so any company that rebounds quickly from a big bath should be viewed with suspicion.
Smoke and Mirrors.
One of the most prevalent approaches to corporate accounting is to omit the bad and exaggerate the good. There are a number of subjective figures in any financial report that accountants can tweak. For example, a company may choose to exclude costs unrelated to its core operations when figuring its operating cash basis - say an acquisition of another company or purchasing investments - but will still include the revenue from the unrelated ventures when calculating their quarterly earnings. Fortunately, companies have to break down the figures, thus dispersing the smoke and mirrors, but if you don't look beyond a few main figures in a company's financials you won't catch it.
There can be a number of accomplices to any accounting crime, but two popular suspects are special purpose entities (SPE) and sister companies. SPEs allowed Enron to move massive amounts of debt off its balance sheet and hide the fact that it was teetering at the edge of insolvency. Sister companies have also been used as a way to spin off debt as new business. For example, a pharmaceutical company could create a sister company and hire it to do its research and development (R&D) (pharmaceuticals' biggest expense). Instead of doing the work, the sister company hires the parent company to do their own R&D - thus the parent company's biggest expense is now in the income earned column and no one notices the perpetually debt-ridden sister company. Nobody, that is, except those who read the footnotes.
The footnotes list all financing related affiliates and financial partnerships. If there is no accompanying information disclosing how much the company owes to the affiliates or what contractual obligations there are, you have plenty of good reasons to be suspicious.
Elder Abuse
Sometimes when a company is struggling, it starts dipping into financial reserves that it hopes no one will notice. Target No.1 is usually the pension plan. Companies will optimistically predict the growth of the pension plan investments and cut back on contributions as a result, thereby cutting expenses. When the pensions start coming due, however, the company will have to top off the plans from current revenue - making it clear that putting off expenses doesn't make them go away. A healthy company pension plan has become critical as baby boomers near retirement.
Getting Rid of the BodyCompanies may try to hide an unsuccessful quarter by pushing unsold merchandise into the market, or into the distributors' storage rooms. This is usually called channel stuffing. This may save a company from a big quarterly loss, but the goods will return unsold eventually. Channel stuffing can be detected in two figures: the stated inventory levels and the cash meant to cover bad accounts. If inventory level suddenly drops or the money for bad accounts is drastically increased, channel stuffing may be taking place.
Fleeing Town
Because the Canadian and American markets are so intertwined, companies that trade on both exchanges can choose which country's accounting standards to use. If a company changes from the historical accounting standards for that firm, there had better be a good explanation. The two systems, while generally similar, account for income in different ways that may allow a wounded company to hide its weakness by switching sides. Any change in accounting standards is a huge red flag that should prompt investors to go over the books with a fine-toothed comb.
Guilty Tongues Slip.
Damning statements are often casually mentioned in a company's financials. For example, a "going concern" note in the financials means that you should get out your magnifying glass and pay close attention to the following lines. With the practice of overstating the positive and understating the negative, a company admitting to a "going concern" may actually be confiding that they are two steps from bankruptcy. Unexpectedly switching auditors or issuing a notice that the CEO is resigning to pursue "other interests" (most likely in the Cayman Islands) are also causes for concern.
Conclusion
Although there are many interesting numbers in a company's financials that allow you to make a quick decision about a company's health, you can't get the full story that way. Due diligence means rolling up your sleeves and scouring the sheets until you are sure that those main figures are real. The best place to start looking for bloody fingerprints is in the footnotes. Reading the footnotes will provide you with the clues you'll need to track down the truth.
Saturday, November 28, 2015
The 10 Commandments Of Investing
Courtesy : Investopedia
The biblical Ten Commandments were intended to act as a
driver's manual for the road of life. "Thou shalt not kill." "Thou
shalt not bear false witness." These are life's versions of the
stop-at-the-red-light-and-advance-when-safe rules of the road. In other
words, they are all guidelines to keep people out of trouble. Because
life's highways are full of potholes, blind turns and bad drivers, the
investing world also suffers from scandals, scams and dishonest
companies. Here are 10 commandments for the investing world designed to
help keep investors - and their money - safe.
1. Thou Shalt Set Clear Goals If you don't have a purpose or a set of clear goals to guide your investment strategy, don't invest. This sounds harsh, but there are so many types, styles and flavors of investing that, without a particular destination, you will be lost at sea.
2. Thou Shalt Put Thy Financial House in OrderTo become a successful investor, you have to make sure that your personal finances are in order first. Investing without a purpose is bad, but investing when you have high-interest debt is much worse. If you are drowning in overdue bills and credit card payments that you can't meet, take care of those more serious problems before getting too deep into investing.
3. Thou Shalt Question AuthorityInvesting is more about the art of asking and answering the right questions than it is about deciding when to buy and sell. CEOs, CFOs, CPAs, CFAs and all the other acronyms that we use to classify Wall Street's professional caste can't hide the fact that they are human, and that humans sometimes lie. Analysts get kickbacks, CEOs get stock options and recent accounting scandals, show that impartial accounting is not guaranteed.
To question authority, you will need to educate yourself, especially on the subject of financials. Press releases are flakes of snow that rain down on investors and melt away, but financials stick around. Although financials can be tampered with, there is always a trail left behind.
4. Thou Shalt not Follow SheepHerd mentality leads to destructive rampages down Wall Street. Investing passively by sticking to funds, indexes and other mainstays of the coach potato portfolio is a perfectly acceptable practice. The danger comes when people move from being a passive investor to an active portfolio, but they continue to stick with the behavior of being a passive investor.
There is a lot of available information for such investors - much of which is true - but accepting it with an uncritical eye and neglecting to check it yourself is what leads to herding. This includes getting the latest and greatest stock tip from your Uncle George.
A person can effortlessly become one of the investors that the analysts shepherd into various "must-buy stocks" after they have become overpriced. This is how investors find themselves in the herd when skittish investors flee, causing the stock to plunge farther than it should have (whereupon a more astute investor buys a bargain off of your loss).When people buy cars, they try to find the best value for the lowest price; when people buy stocks, they only see the price and, ironically, gravitate towards rising prices. If you are going to invest, you have to check things for yourself in order to find the true value and get the bargains. This takes more time, and it could even cause you to miss out on early gains, but it will tell you when to stay out or when to sell well before the herd hears the bell.
5. Thou Shalt Be Humble
If you take the first four commandments to heart, there is a good chance that you will perform better than the majority of individual investors and many of the professionals. But sometimes, particularly during a bull market, gains are not dictated by investor actions as much as by having money in the market, so don't allow yourself to become overconfident. Overconfidence often leads to overtrading, taking unnecessary risks and eventual losses when the bull turns bear. Also, remember that you incur commissions every time you trade - this expense can often erase profits or increase losses.
6. Thou Shalt Be Patient
Patience is a virtue for a good reason: It pays for itself. When the market dips, or even when a particular stock dips, there are always investors who panic and sell. Selling should be treated just as seriously as buying. If it is just a bump, ride it out. If there is truly a problem with the stock, take your time as well - you may find a way to use it in a gain-loss transaction that will save you taxes. By the time you hear it, bad news has already settled in - taking your time isn't going to make it much worse.
7. Thou Shalt Show Moderation
Investing too much is not a problem many people have, but it can happen. It is said that the pain of a loss has twice the emotional strength of the pleasure of a gain. For some people, this results in pulling out of the market prematurely, as mentioned above.
For others, losing propels them into successively riskier ventures in an all-or-nothing attempt to win those losses back. Losses are hard to take, but look on the bright side: You can sell a loss to offset a gain in another sector or, if it is in a retirement account, you can use it as a tax write-off. Concentrating your money too much in one area, either by sector, risk level or even keeping it all in the stock market, is a sure way to see more of nothing than all in an all-or-nothing game.
8. Thou Shalt not Ogle Thy Investment
There is nothing like a market correction or a general upswing to change perfectly normal investors into fanatics who have market updates text messaged to their cell phones every five minutes. As with Fidelity, the axiom, "look, don't touch" is insufficient because the more you look, the more you want to mess around with your investments. It is not clear if it is a symptom or a cause, but this rabid over-monitoring almost always leads to unnecessary churning in sufferers' portfolios
9. Thou Shalt not Court or Spurn Risk
You should never put everything you have into futures, but you also shouldn't hold everything in Treasury bills. There is an appropriate level of risk for investors of every age and creed.
10. Thou Shalt not Make Heroes of Mere Men
There is no perfect investor. Warren Buffett, George Soros and Peter Lynch have all slipped up from time to time. That doesn't stop them from being great investors who are worth studying and learning from. That said, you should never mimic an investing strategy that you do not fully understand.
There is too much guru-ism going on among investors - so much so that credentials are often lost beneath book titles in which the word "rich" is prominently featured. As with the early caution against trusting authority, you have to question everything. Even if a strategy works for a certain period of time, once it becomes widespread, it skews the system. For example, the publication of Lynch's tenbagger strategy has led to too many people searching for those stocks, leading prices to become inflated to adjust for the non-market driven demand. Skeptics survive on Wall Street much longer than believers.
The Bottom Line
Praying or getting behind the wheel expecting everyone else to follow the same rules you do are both acts of faith. Investing, in contrast, requires practice. To be a good investor, you have to make doubt a part of your creed and make double-checking a ritual. These guidelines should help you on your way. Happy driving.
1. Thou Shalt Set Clear Goals If you don't have a purpose or a set of clear goals to guide your investment strategy, don't invest. This sounds harsh, but there are so many types, styles and flavors of investing that, without a particular destination, you will be lost at sea.
2. Thou Shalt Put Thy Financial House in OrderTo become a successful investor, you have to make sure that your personal finances are in order first. Investing without a purpose is bad, but investing when you have high-interest debt is much worse. If you are drowning in overdue bills and credit card payments that you can't meet, take care of those more serious problems before getting too deep into investing.
3. Thou Shalt Question AuthorityInvesting is more about the art of asking and answering the right questions than it is about deciding when to buy and sell. CEOs, CFOs, CPAs, CFAs and all the other acronyms that we use to classify Wall Street's professional caste can't hide the fact that they are human, and that humans sometimes lie. Analysts get kickbacks, CEOs get stock options and recent accounting scandals, show that impartial accounting is not guaranteed.
To question authority, you will need to educate yourself, especially on the subject of financials. Press releases are flakes of snow that rain down on investors and melt away, but financials stick around. Although financials can be tampered with, there is always a trail left behind.
4. Thou Shalt not Follow SheepHerd mentality leads to destructive rampages down Wall Street. Investing passively by sticking to funds, indexes and other mainstays of the coach potato portfolio is a perfectly acceptable practice. The danger comes when people move from being a passive investor to an active portfolio, but they continue to stick with the behavior of being a passive investor.
There is a lot of available information for such investors - much of which is true - but accepting it with an uncritical eye and neglecting to check it yourself is what leads to herding. This includes getting the latest and greatest stock tip from your Uncle George.
A person can effortlessly become one of the investors that the analysts shepherd into various "must-buy stocks" after they have become overpriced. This is how investors find themselves in the herd when skittish investors flee, causing the stock to plunge farther than it should have (whereupon a more astute investor buys a bargain off of your loss).When people buy cars, they try to find the best value for the lowest price; when people buy stocks, they only see the price and, ironically, gravitate towards rising prices. If you are going to invest, you have to check things for yourself in order to find the true value and get the bargains. This takes more time, and it could even cause you to miss out on early gains, but it will tell you when to stay out or when to sell well before the herd hears the bell.
If you take the first four commandments to heart, there is a good chance that you will perform better than the majority of individual investors and many of the professionals. But sometimes, particularly during a bull market, gains are not dictated by investor actions as much as by having money in the market, so don't allow yourself to become overconfident. Overconfidence often leads to overtrading, taking unnecessary risks and eventual losses when the bull turns bear. Also, remember that you incur commissions every time you trade - this expense can often erase profits or increase losses.
6. Thou Shalt Be Patient
Patience is a virtue for a good reason: It pays for itself. When the market dips, or even when a particular stock dips, there are always investors who panic and sell. Selling should be treated just as seriously as buying. If it is just a bump, ride it out. If there is truly a problem with the stock, take your time as well - you may find a way to use it in a gain-loss transaction that will save you taxes. By the time you hear it, bad news has already settled in - taking your time isn't going to make it much worse.
7. Thou Shalt Show Moderation
Investing too much is not a problem many people have, but it can happen. It is said that the pain of a loss has twice the emotional strength of the pleasure of a gain. For some people, this results in pulling out of the market prematurely, as mentioned above.
For others, losing propels them into successively riskier ventures in an all-or-nothing attempt to win those losses back. Losses are hard to take, but look on the bright side: You can sell a loss to offset a gain in another sector or, if it is in a retirement account, you can use it as a tax write-off. Concentrating your money too much in one area, either by sector, risk level or even keeping it all in the stock market, is a sure way to see more of nothing than all in an all-or-nothing game.
8. Thou Shalt not Ogle Thy Investment
There is nothing like a market correction or a general upswing to change perfectly normal investors into fanatics who have market updates text messaged to their cell phones every five minutes. As with Fidelity, the axiom, "look, don't touch" is insufficient because the more you look, the more you want to mess around with your investments. It is not clear if it is a symptom or a cause, but this rabid over-monitoring almost always leads to unnecessary churning in sufferers' portfolios
9. Thou Shalt not Court or Spurn Risk
You should never put everything you have into futures, but you also shouldn't hold everything in Treasury bills. There is an appropriate level of risk for investors of every age and creed.
10. Thou Shalt not Make Heroes of Mere Men
There is no perfect investor. Warren Buffett, George Soros and Peter Lynch have all slipped up from time to time. That doesn't stop them from being great investors who are worth studying and learning from. That said, you should never mimic an investing strategy that you do not fully understand.
There is too much guru-ism going on among investors - so much so that credentials are often lost beneath book titles in which the word "rich" is prominently featured. As with the early caution against trusting authority, you have to question everything. Even if a strategy works for a certain period of time, once it becomes widespread, it skews the system. For example, the publication of Lynch's tenbagger strategy has led to too many people searching for those stocks, leading prices to become inflated to adjust for the non-market driven demand. Skeptics survive on Wall Street much longer than believers.
The Bottom Line
Praying or getting behind the wheel expecting everyone else to follow the same rules you do are both acts of faith. Investing, in contrast, requires practice. To be a good investor, you have to make doubt a part of your creed and make double-checking a ritual. These guidelines should help you on your way. Happy driving.
Saturday, November 21, 2015
Three reasons patience is essential for stock market investing
Courtesy : esignal.com
In stock market investment, patience is necessary. If you don’t demonstrate patience, you will either miss out on opportunities to buy securities at the right price, or you will sell prematurely and lose money in the market. Whether you are new to stock market investing or have been doing it for years, taking your time and making smart, well-thought out decisions will help you achieve greater success. Accordingly, here are three things you should focus on to cultivate patience when investing:
1. Knowing when to buy
Determining when is the best time to purchase new securities should involve lots of research and careful consideration. You will have likely studied past performance, fundamentals and identified the ideal entry point. If, however, as you wait for the price to come down, it suddenly starts edging upwards, you should not panic and place an order in haste. By doing this, you not only give up potential profit, but you also nullify all the research and planning you have done up till that point. The point is that once you set a purchase price, you should stick to it. The whole reason you do research is to avoid guess work and impulse decisions. Emotional stock market investing will eventually lead to disappointing returns. Investopedia explained that investors who violate their discipline can end up in ruin. As such, that’s why sticking with a predetermined investment strategy will help mitigate the losses that result from emotional investing, lack of patience and failing to look ahead. Exhibiting patience is not always as easy it sounds, but the best investors and traders are able to trust their own discipline. By using sound methodologies and allowing your research to serve your strategy, you avoid buying prematurely. Remind yourself that patience is the most important investment discipline.
2. Knowing when to sell
Zentrader pointed out that private equity is consistently one of the highest performing asset classes because investors buy and sell when prices are optimal. They purchase companies and securities at a bargain and then hold them for a full business cycle. When the investment has appreciated enough, the investors sell them. Selling when conditions have improved substantially is how to make a huge gain. What retail investors should learn from this example is that, having bought a security at the right price, the next thing to do is wait. If you have done your research, then you have determined the best time or conditions to sell. You should hold steadfast in that decision. According to Investopedia, there are times when you can stick to your strategy diligently and the price of the security does not move. This is when patience will serve you the most. You can go back and re-examine your strategy and look for something you may have missed, but don’t sell impulsively. If the outlook for the security has changed, then you can set a new price at which to sell. Alternatively, you may find that your analysis is on track and that the security will eventually get to where you want it to be. In that case, continue to hold your position. Many institutional investors lose money in the market because they don’t know how to be patient. They will make sudden decisions that limit their ability to make a real profit. Knowing when to sell is essential.
3. Knowing yourself
The most important thing when cultivating patience is knowing yourself. If you are aware of your tendency to be impulsive and can react emotionally to volatility in your investment portfolio, then you can implement certain safeguards to ensure that your temperament doesn’t get the best of you. Zentrader mentioned that most studies done on the behavior and results of individual investors reveal that they routinely underperform the stock market over time. The main reason for this is that retail investors are too focused on the short term and don’t put enough time into forming strategies and waiting for them to materialize. It is also important to highlight that most of us aren’t experienced day traders. Making money with short term positions isn’t easy. The only people who really make money from frenzied buying and selling activity are brokers. However, long term strategies allow investors to capitalize on the simple fact that markets appreciate over time. Institutional investors who spend their days studying and predicting market fluctuations may be able to play the arbitrage game, but for the retail investor who wants to invest in the market as a hobby or as part of a retirement plan, the best way to make money is be patient.
Ultimately, like in any field, study or discipline, hard work pays off. Many investors operate under the assumption that making money through stock market investing is easy, but the truth is that it requires research, analysis and patience. Zentrader also pointed out that while it seems obvious, the best way to invest is to buy low, hold on to securities for a long time and sell high. This is what investment gurus like Warren Buffet advise individual investors to do.
In stock market investment, patience is necessary. If you don’t demonstrate patience, you will either miss out on opportunities to buy securities at the right price, or you will sell prematurely and lose money in the market. Whether you are new to stock market investing or have been doing it for years, taking your time and making smart, well-thought out decisions will help you achieve greater success. Accordingly, here are three things you should focus on to cultivate patience when investing:
1. Knowing when to buy
Determining when is the best time to purchase new securities should involve lots of research and careful consideration. You will have likely studied past performance, fundamentals and identified the ideal entry point. If, however, as you wait for the price to come down, it suddenly starts edging upwards, you should not panic and place an order in haste. By doing this, you not only give up potential profit, but you also nullify all the research and planning you have done up till that point. The point is that once you set a purchase price, you should stick to it. The whole reason you do research is to avoid guess work and impulse decisions. Emotional stock market investing will eventually lead to disappointing returns. Investopedia explained that investors who violate their discipline can end up in ruin. As such, that’s why sticking with a predetermined investment strategy will help mitigate the losses that result from emotional investing, lack of patience and failing to look ahead. Exhibiting patience is not always as easy it sounds, but the best investors and traders are able to trust their own discipline. By using sound methodologies and allowing your research to serve your strategy, you avoid buying prematurely. Remind yourself that patience is the most important investment discipline.
2. Knowing when to sell
Zentrader pointed out that private equity is consistently one of the highest performing asset classes because investors buy and sell when prices are optimal. They purchase companies and securities at a bargain and then hold them for a full business cycle. When the investment has appreciated enough, the investors sell them. Selling when conditions have improved substantially is how to make a huge gain. What retail investors should learn from this example is that, having bought a security at the right price, the next thing to do is wait. If you have done your research, then you have determined the best time or conditions to sell. You should hold steadfast in that decision. According to Investopedia, there are times when you can stick to your strategy diligently and the price of the security does not move. This is when patience will serve you the most. You can go back and re-examine your strategy and look for something you may have missed, but don’t sell impulsively. If the outlook for the security has changed, then you can set a new price at which to sell. Alternatively, you may find that your analysis is on track and that the security will eventually get to where you want it to be. In that case, continue to hold your position. Many institutional investors lose money in the market because they don’t know how to be patient. They will make sudden decisions that limit their ability to make a real profit. Knowing when to sell is essential.
3. Knowing yourself
The most important thing when cultivating patience is knowing yourself. If you are aware of your tendency to be impulsive and can react emotionally to volatility in your investment portfolio, then you can implement certain safeguards to ensure that your temperament doesn’t get the best of you. Zentrader mentioned that most studies done on the behavior and results of individual investors reveal that they routinely underperform the stock market over time. The main reason for this is that retail investors are too focused on the short term and don’t put enough time into forming strategies and waiting for them to materialize. It is also important to highlight that most of us aren’t experienced day traders. Making money with short term positions isn’t easy. The only people who really make money from frenzied buying and selling activity are brokers. However, long term strategies allow investors to capitalize on the simple fact that markets appreciate over time. Institutional investors who spend their days studying and predicting market fluctuations may be able to play the arbitrage game, but for the retail investor who wants to invest in the market as a hobby or as part of a retirement plan, the best way to make money is be patient.
Ultimately, like in any field, study or discipline, hard work pays off. Many investors operate under the assumption that making money through stock market investing is easy, but the truth is that it requires research, analysis and patience. Zentrader also pointed out that while it seems obvious, the best way to invest is to buy low, hold on to securities for a long time and sell high. This is what investment gurus like Warren Buffet advise individual investors to do.
Saturday, November 14, 2015
NCL INDUTRIES - RESULT UPDATE
NCL INDUSTRIES Declared its second quarter and half year result as follows .
Link to latest interview with MD of NCL HERE
Wednesday, November 11, 2015
DIWALI WISHES ..
Like any other profession , to succeed in investing , lot of hard work and patience is necessary. Controlling emotions is very important and we must ready to accept our faults and willing to correct it. “ I am a new investor , please suggest some stocks to me" is the common message I am getting from at least 25 % of mails receiving in my mail box. I have only one suggestion to such friends, before jumping into the market first of all we must realize what kind of investor we are, based on our temperament,expectation, risk taking capacity..etc .One stock suitable for a person may or may not suitable for another .Another point is , ‘ a good company’( based on balance sheet and related equations) always never means as a ‘Good Investment’ and the entry price is very important in investing and rate of return from it.On the other side, a bad company ( with a poor balance sheet so far ) may turn as a wonderful investment if our entry is at right point and things develop as per our calculation and expectation. Of course the risk and reward in both these cases will be always different.So , defining our own aim and selecting the way suitable for us is most important for our investing journey. Generally we can classify stocks into three categories ( This is my personal view and never expect the copy book meaning for the terms used ) – Value Stocks , Growth Stocks and Dark Horses.
Value Stocks
Generally a stock termed as a value stock if it trade at a lower price compared to its known fundamentals. One common mistake lot of new investors making while selecting value stock is their inability to assess the reason for lower valuation and taking investment decisions based only on certain pre-defined valuation methods like P/E ratio..etc.Personally I don’t think a lower P/E never guarantee good return,instead to a certain extent, it may give a cushion against sharp fall.At certain point of time ,outdated businesses may seems attractive if we follow lower P/E alone as a benchmark for stock selection. Such business may attractive till date but ends in big loss in the years to come due to changing trend, technology ..etc.
So , while selecting value stocks we should also consider future prospects, promoter quality,dividend distribution policy ..etc along with cheap valuation . One can expect steady return and good dividend from such stock with less risk but don't expect multiple times returns from such stocks in short period .
Growth Stocks
As per definition , 'Growth Stock' is the stock of a company whose earnings are expected to grow at an above-average rate relative to the market.These type stocks may always look expensive based on conventional valuation parameters but remain as expensive till their growth trajectory ends which may last for many years .While value stocks are selected mainly based on the current performance,growth stocks are practically selecting based on the anticipated business growth in future and hence the later is riskier than the former.
Dark Horses :
Please don’t search for the meaning for such stocks , you may not find it anywhere :)
These type stocks are only for daredevils but may change our fortune on either side . Generally lesser known with poor fundamentals at present but potential to grow multi fold over a period of time due to some unique features like niche technology,patented products, possibility to emerge as a winner due to changing trend of people in favor of company’s product ..etc. Risk is very high in such stocks and any error in calculation and assessment may wipe out entire investment in such stocks . They are not suitable for newbies and better to avoid in the initial stage of investment journey, at least till we gain something from stock market itself.
So, before investing in any stock it is always better to study whether that particular stock is suitable for you considering your style of investing , even if everyone around you claim it as a wonderful one.
Once again ,Diwali wishes to all my readers .
Saturday, October 31, 2015
RESULT UPDATE
Two companies we are following published their September quarter
result Yesterday - SKM Egg Products Exports and V2 Retail. Result of SKM is
in line with expectation as follows .Traditionally company's business is better in second half compared with first half.
Result Link HERE
The second one is V2 Retail which reported lower than expected result .As a notes to result company mentioned about favorable decision from CIT Kolkata in a tax dispute for Rs.116 Cr out of Rs.167 Cr ( Company mentioned , IT department may opt for appeal in this matter ) .
Link To Result HERE
Result Link HERE
The second one is V2 Retail which reported lower than expected result .As a notes to result company mentioned about favorable decision from CIT Kolkata in a tax dispute for Rs.116 Cr out of Rs.167 Cr ( Company mentioned , IT department may opt for appeal in this matter ) .
Link To Result HERE
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