10 skills to be a successful stock trader
Everyone wants to make an extra earning in today’s time of soaring prices. To sustain with a good living standard and to have a secured future it is important that you create extra sources of income. People tend to find stock trading a better source of creating wealth and financial security.
While every individual who trades in the stocks might not be as successful, following are the 10 skills which you could adapt to be a successful stock trader:
- Have a trading plan: Working with a set plan is important when you are going to work as a stock trader. These plans could be both long term and short term. It helps you to keep motivated and paves a way for your activities than being random and falling prey to losses.
- Have diligent research: Maintain charts, do diligent market research and analysis. Identify the strongest sections and stocks of the market and utilize it to your optimum benefit. Research enables you to take better decisions and avoid loss-making mistakes as a trader.
- Avoid Overtrading: Sometimes you might just overtrade and cause hefty loss. Overtrading is a common mistake committed by traders. A successful trader gets distinguished by not overtrading. A disciplined approach is required while trading.
- Go for the bigger picture: Don’t just get wooed away with the temporary things. A successful trader is a visionary who looks at the bigger picture. This makes him different from others. To be a successful trader, try to connect the dots and look at the bigger picture to pitch in more earnings and financial security.
- Don’t get panicked by the losses: People often panic when they suffer a loss. Thus, it is said stock market is not for the faint-hearted. One must be prepared for all kinds of circumstances and try to keep calm especially when a loss strikes. Often in a panic, you tend to take wrong decisions worsening the situation. A successful trader maintains cool and keeps calm even in the most unfavorable situation to bring things back under control.
- Balance Risk Quotient: Always keeping the risks on a higher side is also not a favorable thing to do. One has to strike the right balance to get optimum benefits out of it. A successful trader knows it very well when to take higher risks and when not to take much risk. Thus, a proper balance of risk quotient is very important to get optimum gains out of stock market trading.
- Know the difference between Trading and Investing: Trading and Investing, though both of them are activities of the stock market to earn profits, there is a difference between their nature and one must not confuse them. While trading is a short-term activity which works on building positions on the stocks, Investing is a long-term process where you tend to invest in a business for long-term benefits.
- Keep Learning: A successful trader has a learning flair which makes him/her get through the tough spots. Learning is an important part of growth. When you learn from not only your mistakes but from others too and the surroundings you tend to prepare yourself for the tough times. This brings in resilience which is important for being a successful trader.
- Have Realistic Expectations: Never keep unrealistic expectations from the stock market. Though people do earn fortunes from the stock market nothing comes overnight and one has to keep perseverance to achieve success. There’s no magic in the stock market and to be a successful trader one needs to have realistic expectations from the market.
- Don’t let emotions overshadow judgment: When the emotions overshadow judgment it often results in wrong decision making causing hefty loss. To be a successful trader one has to go by analysis, research, and judgment rather than being driven by emotions such as greed, anxiety and fear.
The stock market remains a good source of earning if you master the art of trading. To be a successful trader you could work on the 10 skills mentioned above and earn good yields from the stock market. Happy Trading!!!
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Why does Stock Market Price Rise and Fall?
Stock markets are known for being a risky investment. It is this very unpredictable nature that makes stock markets an investment option that offers high returns as well. The fluctuation in the performance of the stock markets can be a cause of trouble or elation for many.
It has been said that equity trading is not for the weak hearted nor is it like a gamble. It is for people who are well aware of the workings of shares and know when it is the right time to invest. Though the stock market price fluctuations majorly depend on the demand-supply factor, other factors also play a vital role in influencing the prices. In order to help you get a better understanding of the price fluctuations in the stock market, here is a list of 5 factors that regularly affect the stock prices:
Any change in the company attributes makes its prices volatile. Increased sales revenue, fall in the cost of operations, product launch, repayment of debts, etc. increase future cash flows of the company. A grand launch of a new product line or good performance in overseas markets will see the stock of a company rise. The demand for shares of these companies grows. Hence, positive factors lead to a rise in stock prices.
Negative factors constitute product failures- change in top management, high employee turnover, fall in sales revenue, etc. adversely impacts the company’s productivity and future earnings. Investors abandon shares of the loss-making company. It results in fall in the stock of the company.
Monetary policy of RBI
RBI reviews its monetary policy every couple of months. Any increase/decrease in Repo and Reverse Repo Rates changes the stock prices. When the RBI raises the key policy rates, it reduces the liquidity in banks. This, in turn, makes the banks increase the lending rates. Investors see this as a stoppage in the bank’s progress. They start offloading the shares of a company which reduces its stock prices.
The reverse of this happens when RBI follows a dovish monetary policy. Banks tend to decrease the lending rates. This leads to credit expansion. Investors perceive this as a positive sign and stock prices automatically start rising.
The exchange rates of Indian Rupee keep fluctuating with respect to other currencies. When the rupee grows with respect to other currencies it sets a multi-dimensional chain reaction. It causes Indian goods to become expensive in foreign markets. Companies drastically affected are the ones involved in overseas operations.
Companies dependent on exports experience a fall in demand for their goods abroad. This leads to decline in revenue from exports and a subsequent fall in stock prices. Importing companies shell out lesser on imported goods which reduce their production cost. This reduction in cost will reflect in their company profits making their share prices shoot up.
Political events especially Prime Ministerial elections have a big influence on the stock market. The release of the financial budget every year gives different sectors of the stock market a boost while it sees the stock of other sectors drop. These changes happen based on new government policies being proposed or implemented.
A headstrong government with a clear financial roadmap for the country will see a growing stock market. In addition to this, politically unstable situations like wars and riots will see a drop in stocks as people are less likely to take risks.
The severity of natural disasters has grown in the last few years. Droughts, earthquakes, floods and so on cause displacement of a large population and leave destruction in its wake. Another facet of a natural calamity is the slowing of economic growth of the country due to damage done to its financial resources like factories, machinery, and manpower.
Apart from these, there are few other factors as well that affect the prices of the stock market in India. These include the prices of gold in the country or even the expectation of the good or a bad monsoon season.
ICICI Lombard General Insurance Company Ltd - Information Note
This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Hearing Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so.
This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.
Issue Opens: September 15, 2017
Issue Closes: September 19, 2017
Face Value: Rs 10
Price Band: Rs 651- Rs 661
Issue Size: ~Rs 5,701 cr (8.62 cr shares)
Bid Lot: 22 Equity shares
Post Issue Market Cap: ~Rs 30,006 cr (at upper band)
Issue Type: 100% Book Building
ICICI Lombard General Insurance Company Ltd was founded as a joint venture between ICICI Bank Ltd, and Fairfax Financial Holdings Ltd (a Canadian based holding company). The company was the largest private-sector non-life insurer in India based on gross direct premium income (GDPI) in FY17. ICICI Lombard offers well-diversified range of products, including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels to its customers. It has 8.4% market share on GDPI basis among all non-life insurers in India and 18% among private sector non-life insurers in India. In FY17, the company issued 17.7 million policies and its gross direct premium income was Rs 10,725 cr.
Objective of the Offer
The purpose of the offer is to sale of up to ~8.62 cr equity shares by the selling shareholders. The listing of the equity shares will enhance the ICICI Lombard brand name and provide liquidity to the existing shareholders. The company will not receive any proceeds from the offer.
ICICI Lombard has diversified range of insurance products with motor, health and personal accident, crop/weather, fire, marine, and engineering insurance contributing 42.3%, 18.9%, 20.1%, 6.9%, 3.2% and 2.1%, respectively, of their GDPI in FY17. It also has diversified channel mix enables them to reach customers in 618 out of 716 districts across India and provides them with a competitive edge over its competitors.
The company has a strong capital position with a solvency ratio of 2.1x as at March 31, 2017 compared to the IRDAI prescribed control level of 1.5x and an Indian non-life private-sector average of 1.95x. Their combined ratio has been generally stable, improving from 104.9% to 104.1% over FY15-17. During the same time period, their loss ratio improved from 81.4% to 80.6%.
The company was the largest private-sector non-life insurer in India, by GDPI in FY17 and continues to grow faster than the industry. Their GDPI has grown at a CAGR of 26.7% over FY15-17 against 22.8% CAGR for the Indian non-life insurance industry over the similar period. This has helped the company to improve its market share in GDPI term, which has increased from 7.9% to 8.4% over FY15-17.
India continues to be under-penetrated with a non-life insurance penetration of 0.8% of the gross domestic product, compared with a global average of 2.8% of the gross domestic product as of 31st Dec 2016. Thus, non-life insurance sector in India holds significant growth potential going forward.
The company derives significant proportion of its GDPI from motor vehicle insurance products led by demand from motor vehicles in India. Any adverse changes in consumer demand for motor vehicles may affect its GDPI from vehicle insurance products.
At the end of Q1FY18, ~83% of their total investment assets were invested in fixed income assets. Any significant change in interest rates could materially affect their investment returns.
The company’s diverse product line, consistent market leadership and superior operating and financial performance give them a competitive advantage. We believe that the non-life insurance sector in India holds significant growth potential because of its under-penetration and low insurance density.
*For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only.
Trading tips from a Taxi driver
Being an avid traveler, I try to go to as many places I can and meet interesting people; some of these people end up inspiring me in numerous ways. Last month, I was traveling to Mumbai to visit my sister.
I boarded a taxi from Mumbai Central to go to my hotel. I had no clue that this hour-long taxi ride was going to upturn my financial life and change my way of reaching my financial goals.
Ten minutes into the ride, I noticed a photograph glued to the dashboard. It was a photo of the taxi driver, his wife, and his two daughters. Out of curiosity, I asked him what his daughters were doing in life, to which he gave me a surprising answer: "This one is Radha, and she is pursuing her Bachelor's degree from IIT Bombay, and this is Sandhya who is doing Ph.D. from Yale University in Connecticut." Out of all the possible answers, this was one that I was not expecting from a taxi driver.
I congratulated him on his daughters' hard work and achievement. Curiously, I asked him: "All this must be costing you a fortune; do you earn enough from the taxi to fund your daughters' education and cover your daily expenses?"
To my surprise, he replied: "No, not from the taxi; I mostly earn my money by trading in the share market. Driving a taxi is something I started with because I don't like to sit all day in the house doing nothing. So, I decided to do the one thing that I'm good at; apart from investing, of course." This reply was followed by a big laugh as I sat there, even more astonished than before.
Since I have always been fascinated by the share market and the infinite opportunities that it provides to build wealth, I decided to ask him how he manages his investment and the strategies that he uses to trade in the share market. Given below is a small summary of what I learned:
On knowing that he hasn't had a loss in investing in 2 years, I asked him, how he picks the perfect stock. To this, he replied: "I research the investment inside and out before deciding to invest. I check the background of the company by looking at their previous earnings, their balance sheet, their income statement, and their potential to pay a regular dividend. If all of this seems right and I see that the company has a potential to grow in the future, I go ahead with my decision to invest in the company." I asked him where he got the time for all this.
"What are nights and early mornings for?" he replied with a smile.
When he stated that he hadn't had a loss in over two years, I doubtfully commented: "But this seems like an impossible thing in the share market, even big-time investors incur regular losses." To this, I got an intelligent reply: "It's not that I have not suffered a loss in my investments, I just cut them by earning more profits through my other investments. You see, I am all in for diversification of my portfolio. I try to invest in different company's stocks rather than putting all of my money in just one place. It spreads my overall risk across multiple investments, and even if my one investment turns bad, profits from my other investments make my overall portfolio profitable."
"Well, that's just pure genius," I replied.
On asking him what trait a person should have to be successful in the share market, he smiled and replied: "Discipline and patience are crucial. I have seen people selling their stocks as soon the prices go a little higher, losing out on earning so much more money as the price usually increases in the future. You have to be disciplined and patient when trading in the share market. If you sell early, you lose on making more money, and if you retain your stocks for too long even when the market is down, you incur massive losses. By regularly monitoring your investment, you will know the right time to buy or sell your stocks."
When I reached my hotel, I still had so many questions that I wanted to ask him. I realized that I didn't even know his name.
"In midst of all this, I forgot to ask your name.”
"No worries, I am Dinkar Rajoria and here is my card. Feel free to call anytime you want a taxi."
"What about for investment advice?”
"Call me anytime for that."
5 Investment Strategies to make money this Diwali
Diwali is the time for a lot of sweets, gifts, crackers and light. It is a time-honoured tradition to invoke the Goddess of Wealth during this time. The Festival of Light is an auspicious occasion to hasten our prayers with wise fiscal planning.
Investment options have become less lucrative with falling interest rates. Let us focus on some all-round investment options.
Public Provident Fund (PPF) - PPF is among the safest long-term investments in the land. Since it is government backed, this investment is completely watertight. Any bank or post office can facilitate the opening of a PPF account. Furthermore, for any annual investment amounting to Rs.1,50,000, the entire interest earned is tax-free.
This is particularly beneficial for long-term investment as it has tenure of 15 years, though withdrawals are allowed before this period.
Systematic Investment Plan (SIP): With the SIP proving a runaway hit in the mutual fund market, it is reasonable that you jump on the bandwagon. SIP means that you keep on investing bite-sized amounts into the mutual fund of your choice periodically. The greatest is that it encourages financial discipline. More than profits, its discipline which would keep your finances in good stead. Also, unlike the lump sum method of investment, it allows us to tide over market downs and get reasonable profits from bullish periods. Studies have shown that SIP’s tend to perform better over time and evens out any losses incurred.
Gold: Buying gold during Diwali is a time-hallowed tradition. Buying gold has long been considered as the best way to welcome Goddess Laxmi. Tradition now gets a boost of modernity as several gold-based investment schemes have been proffered. Both GOLD ETF’s (Exchange Traded Fund) and E-Gold have changed the face of the industry.
GOLD ETF’s or Gold Exchange Traded Funds have become very popular. These are mutual fund schemes which only invest in gold. These units are then held in electronic form by the investors. The value of one unit of ETF has been set as equivalent to one gram of gold. These can be bought and sold like ordinary stocks on the market.
E-GOLD was recently launched by the National Spot Exchange Ltd (NSEL). The main difference it has with Gold ETF’s is that the investor becomes the owner of the gold and not any Asset Management Company (AMC). In this way, we avoid the maintenance charges and other fees levied by the AMC’s.
Equities: The market for equities is always lucrative during festive occasions. Buying stocks and shares have been a traditional investment during Diwali and this fiscal year should be no different. Investors and traders often purchase stocks on Diwali for themselves and also for their families. The BSE (Bombay Stock Exchange) Sensex gained almost 4,000 points or 13 percent since last Diwali. The expectation is strong that 2017 could lead to an even greater spurt of growth. There was some brisk trading in mid and small cap stocks with valuations rising up to 800 percent in some cases. Most sectors, with the noticeable exception of the export-oriented sector, have recorded substantial gains for the fiscal year.
It seems like the perfect time to tweak the strategy and focus on the winning stocks for the year ahead.
Sukanya Samriddhi Account: Under the aegis of the “BetiBachaoBetiPadhao” movement, the government has initiated the Sukanya Samriddhi Account scheme. This scheme explicitly means to encourage girl-child education. You can easily open an account under this scheme in post offices and banks. With a minimum investment of Rs 1000 a year to Rs 1,50,000, the investment is completely tax exempt. The investment period needs to begin before the girl in question is 10 years old and continues till she is 21. It offers a very practical way to ensure the financial security of the little goddesses of our household.
10 Golden Rules of Investing
One of the world's richest men and the greatest investor of our times, Warren Buffet has many remarkable stories surrounding him. In 2006, Warren Buffet donated 85% of his then 44 billion US dollars wealth to charity. None of us would have the spine to do that. However, Warren Buffet did that and re-attained his position among the richest men in the world.
We all have dreams and aspirations; for some, it may be having a place to call theirs while for some it may be driving their luxury car to work every morning. However, these dreams come crashing down when you realize that you don't have the funds to fulfill them and with your limited income, you probably won't even have the required amount after 20 years. Luckily, these days there is a solution to everything. Investing your money in different instruments is a sure shot way of not just increasing your income but also increasing it exponentially. However, smart investing is important for your money to grow exponentially.
Here are a few points to aid you in investing smartly:
1) Be clear about financial goals
Before investing, always be clear about what you want from your investment and how much return you expect from it.
2) Know your net worth
It is always important to calculate the net assets and liabilities a person has before beginning with the investment process. It will be easier for you invest your money wisely if you are knowledgeable about current investments.
3) Proper research
Proper research is crucial; avoid investing in anything unless you have adequate knowledge about the subject.
4) Never try and time the market
In simpler words, never try to guess which way the stock market will go. Invest today and widen your investment horizon.
5) Always invest in businesses you understand
If you are new to investing, it is always safe to start off by investing in the sectors with which you are familiar. This will help you make sound investment decisions.
6) Diversify your portfolio
Spread your risk across different asset classes. Invest in different types of financial instruments so that even if you suffer a loss in one, it will be compensated by gains in another.
7) Review your portfolio
Always track the performance of your portfolio at regular intervals to check the performance of your investments. Also, an analysis may be required may be required on special occasions like marriage, etc.
8) Factor in inflation when calculating returns
Very few investors comprehend the influence of inflation on their investments. Factor in inflation to know the real value of your income and investments
9) Be prepared for contingencies
Always ensure that a few investments are in the liquid state; these can be withdrawn at short notice to meet any emergencies. Don't lock in all your funds for a long time.
10) Emotions should not dictate investment decisions
Never get carried away by emotions while making investment decisions. Be realistic and rational when making such decisions related to investment. Always be realistic about your expectations. Don't build castles in the sky; don't base your financial goals on unrealistic expectations.