Article

5 Easy Steps to Navigate Earnings Season better than the pros

Nutan Gupta

27 Mar 2018

Earnings season for an investor can be both, a joyous time or a stressful time. But the whole season falls on one point, Preparation. If you are prepared enough, there is no way that you have to feel stressed at this time.

If you look at the traditional ways of preparing for an earnings season, it would require you to give time and research thoroughly about every company and investment. But as most investors are not professional and have a separate job to go to, they don’t have much time to spend on research and get prepared. The good thing is that you don’t have to spend time anymore too. You just have to follow the below points, and you can navigate through earnings seasons better than the professionals.

1. Write down earning dates:Open a text file on your computer and tag it as ‘Earnings.' Go to NSE OR BSE’s website or Yahoo finance and search your tickers (the short name of the companies you have invested your money in) one by one. On the text file on your computer, write down the ticker name, the date and if the money is due in AM (before market close) or PM (after market close). You can further categorize the text file by date of earnings, top to bottom so that you can track your earnings easily.

2. Write down earnings date of leading stocks of your investment group:Make your text file more meaningful by adding the earning dates of key leading stocks of the group or sector you have an investment in. As the change in the prices of these stocks can influence the prices of the whole group or index, you can easily track what is going to happen or why your stocks increased or decreased in prices if you have the earnings date of leading stocks. You can go to Yahoo Finance or NSE or BSE’s website to find the leading stocks of different sectors.

3. Treat every position in the same manner before the release of the earnings:You must stick to a predetermined guideline to avoid emotions and sentiments. For example, you can make a rule like “I will sell 30% of my positions five days before the declaration of the earnings report.” By creating a rule like this, you will be unaffected if one of your holdings does extremely good or if it tanks as you have already cut your losses at least to some extent.

You can also make rules like above for the peer stocks which will report even before your own stocks. “If the primary stock of the portfolio goes down by 5%, I will sell 70% of the stocks of that investment.” It will allow you to avoid risk at the time when you know that the odds of the market are against you.

4. Treat every position in the same manner after the release of the earnings report:It is true that mostly everyone reacts based on their emotions when the earnings report is announced. But to trade like a pro, you should keep your emotions far away from your decisions, even after the earnings report have been declared.

You should prepare for this scenario the same way as you did in point number three, by making specific rules and sticking to them. The rules after earnings report can be: “If my stock rises by 5% in the opening, I will fully re-buy my positions. OR “If my stocks tank 5% in the opening, I will sell my stocks entirely in the market.”

5. Analyze your results and right your mistakes:It is vital that you analyze every trade you have made and learn from your mistakes so that you don’t commit the same error again in the future. The good or the bad of every trade should be noted down so that the good could be executed in the next trade and the bad could be avoided. Only by reviewing your previous trade, the rules you make for trading can become ideal and you can gain from your knowledge in the form of increased profits.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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5 Easy Steps to Navigate Earnings Season better than the pros

Nutan Gupta

27 Mar 2018

Earnings season for an investor can be both, a joyous time or a stressful time. But the whole season falls on one point, Preparation. If you are prepared enough, there is no way that you have to feel stressed at this time.

If you look at the traditional ways of preparing for an earnings season, it would require you to give time and research thoroughly about every company and investment. But as most investors are not professional and have a separate job to go to, they don’t have much time to spend on research and get prepared. The good thing is that you don’t have to spend time anymore too. You just have to follow the below points, and you can navigate through earnings seasons better than the professionals.

1. Write down earning dates:Open a text file on your computer and tag it as ‘Earnings.' Go to NSE OR BSE’s website or Yahoo finance and search your tickers (the short name of the companies you have invested your money in) one by one. On the text file on your computer, write down the ticker name, the date and if the money is due in AM (before market close) or PM (after market close). You can further categorize the text file by date of earnings, top to bottom so that you can track your earnings easily.

2. Write down earnings date of leading stocks of your investment group:Make your text file more meaningful by adding the earning dates of key leading stocks of the group or sector you have an investment in. As the change in the prices of these stocks can influence the prices of the whole group or index, you can easily track what is going to happen or why your stocks increased or decreased in prices if you have the earnings date of leading stocks. You can go to Yahoo Finance or NSE or BSE’s website to find the leading stocks of different sectors.

3. Treat every position in the same manner before the release of the earnings:You must stick to a predetermined guideline to avoid emotions and sentiments. For example, you can make a rule like “I will sell 30% of my positions five days before the declaration of the earnings report.” By creating a rule like this, you will be unaffected if one of your holdings does extremely good or if it tanks as you have already cut your losses at least to some extent.

You can also make rules like above for the peer stocks which will report even before your own stocks. “If the primary stock of the portfolio goes down by 5%, I will sell 70% of the stocks of that investment.” It will allow you to avoid risk at the time when you know that the odds of the market are against you.

4. Treat every position in the same manner after the release of the earnings report:It is true that mostly everyone reacts based on their emotions when the earnings report is announced. But to trade like a pro, you should keep your emotions far away from your decisions, even after the earnings report have been declared.

You should prepare for this scenario the same way as you did in point number three, by making specific rules and sticking to them. The rules after earnings report can be: “If my stock rises by 5% in the opening, I will fully re-buy my positions. OR “If my stocks tank 5% in the opening, I will sell my stocks entirely in the market.”

5. Analyze your results and right your mistakes:It is vital that you analyze every trade you have made and learn from your mistakes so that you don’t commit the same error again in the future. The good or the bad of every trade should be noted down so that the good could be executed in the next trade and the bad could be avoided. Only by reviewing your previous trade, the rules you make for trading can become ideal and you can gain from your knowledge in the form of increased profits.