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7 things to not do while trading

7 things to not do while trading
12/01/2017
Untitled Document

It is easy for everyone to enter a trade but sustaining it is tough. A lot of discipline and planning is required to stay in the race with viable earnings. It is important to trade slowly, patiently and logically, avoid losses thereby safeguarding your investments.

These are the seven things trader should not do while trading;

1.    Risk huge amount of capital

Everyone has the expectations to earn high amount of money & for that reason, he or she believes in putting huge capital into a single trade. It is not always true that high investment will lead to greater gains. So it is always advisable to not put more 1% of the total capital into a single trade. Don’t put all your eggs in one basket.

2.    Trading immediately after the news breaks out

The market may or may not react rationally to a particular news or event. So wait till the dust settles and see how stable trend emerges. One should analyze the event/happening and predict the market conditions after careful calculations. Failing to do so will lead to significant losses without anyone to blame.

3.    Unrealistic expectations

The market is very dynamic and volatile. It might behave in anirrational manner at times. So it is necessary to have proper strategies to deal with it. Stock trading, should be considered as a business and not as a gamble. Having unrealistic expectations out of even the most performing trade can also prove fatal. Losses should be hedged wherever possible instead of riding on it.

4.    Proper positioning

Many things happen around the world which will have an impact on the sharemarket. We can only assume what impact it will have, but we cannot predict what will occur in the future. So it is imperative to position yourself accordingly with sound trading strategies.

5.    Stay focused on strategies rather than potential outcomes

Do not focus much on the obstacles and maintain a trading discipline. Try to focus on single strategy instead of trying different strategies. Always test your strategy beforehand before applying it in live trade. If you find it useful then only use it for livestock trading.

6.    Entering the market at the time of closure

The incidents around the globe have a significant impact on the market. Entering the time of closure further increases the risk of trading. Because certain things are beyond our hands and failure to take this into account will lead to significant losses.

7.    Method of averaging down

People do not have the intentions of averaging down when they enter the markets. However, when their expectation rises, then without realizing the outcomes, they start the concept of averaging down. Then they began to hold their positions for a more extended amount of time. They then dive deep into losses riding on them instead of booking them when possible. So avoid this practice, instead have careful prior calculations for hedging the maximum of losses.

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5 reasons to start trading immediately

5 reasons to start trading immediately
12/01/2017

When someone advises you to start trading, it doesn't necessarily mean that you have to give up your current job and become a full-time stockbroker. It means to invest your hard earned money in your free time through best trading platforms to receive the best returns. While surfing the internet, you might have come across numerous new ways to invest in the stock market.

Here are some expedient reasons to invest in the share market:

 

A legit source of second income

Investing in stocks is a perfect way to earn extra money. You can keep working on your current professions and trade online at your convenience. This second income can help you fulfill your materialistic whims and desires.

You are your decision maker with the online trading account. Also, online trading companies provide you with discounted brokers to take care of your investments.

Education is no barrier

Many professions require a formal degree. In the share market, you don't need to have any specific training; just an acumen to hit the online share trading. You can quickly rope onto some stock market tips on how to buy shares online, the best stocks to buy, and stock market basics. The trading websites teach you how to trade stocks online.

Multiplicity of options

There isn't one market-one trade which limits you. You can explore from the pool of stock market. With forex trading, options, futures trading, derivatives, equity shares, bitcoins, etc.; the possibilities are endless. You don't have to go for something that you don't like.

No need to leave your bedroom

You can sit in your pajamas and trade online, sipping on a beverage of your choice. You can trade online at your convenience. All you need is a steady internet connection and a laptop (or a computer). You can even work while traveling; all you need is your smartphone and the best trading apps.

Make it your own business

Once you've amassed a substantial amount of wealth through online trading and you are confident about your skills in the share market, you can become an online trading expert. In this way, you can make a profitable business in the share market.

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Different Emotions You Can Feel During Investing In The Stock Market

Different Emotions You Can Feel During Investing In The Stock Market
by Nutan Gupta 12/01/2017

The share market relies on people with rational minds to enter into a trade to make profits and avoid losses, but most investors are not rational robots who always take a sound and efficient investment decision. Instead, the decisions that the investors make are mostly affected by their sentiments and emotions which forces them to incur massive losses while trading.

Trading psychology defines a specified range of emotions that an investor can go through while taking an investment decision. While it is the truth that we can never fully avoid our emotions while trading, knowing what can affect our decisions emotionally can go a long way to avoid losses and to become a rational and successful investor.

1. You get optimistic: This is the primary emotion an investor feels before even entering the share market. The will to make money and the optimism that the investor will not incur a loss encourages the investor to enter the market and buy stocks.

2. You get Excited: As your ideas and decisions start to prove profitable, you begin to get excited and start considering what your life would be if you make big in the share market. This allows you to get motivated to invest further in the market.

3. You get Thrilled: As your investments begin to prove successful you feel thrilled as you never imagined that you would make such good profits while trading. It is an emotion that will make you feel proud of yourself, and you will feel that your every decision from now on will be undoubtedly profitable.

4. You get Euphoric: This is the highest point of financial risk which an investor can achieve. As you have made quick and easy profits, you begin to feel like a financial wizard and start to ignore risk in your investment decisions. You expect that every trade you make from now will be profitable no matter what.

5. You get Anxious: This is the first time the market goes against you. Having made good profits until now, you feel agitated as you realize that you can also incur a loss. This emotion is that primary reason for an investor to identify himself as a long time investor and wait until the market goes up again in the future.

6. You go into Denial: Even after waiting for a long time, when the market has still not rebounded you begin to go in the denial phase that you have made poor choices and that it is the time to sell your stocks and incur a loss. At this time, you still think that the market will go your way and you will make profits on your investments.

7. You get afraid: You begin to worry as the market has still not risen and you know that there is no way that you are going to make profits on your investments now. This is the emotion that de-motivates most of the investors, and they think they should quit the market.

8. You get into desperation: You cannot believe that this is happening to you and you start to become desperate to seek any idea from anyone that would make you go profitable again so that you don't lose your money in the market.

9. You get Panicked: Having exhausted every idea, you are at a loss of what to do next. This is the emotion that forces the investor to question his/her's knowledge about the market and if he/she should have researched before investing.

10. You start to Capitulate: You understand at this point that you have made a bad investment decision and your portfolio will not increase again. This emotion enables the investor to consider selling the all the stocks to avoid further losses.

11. You become Despondent: Having incurred massive losses on your investments, you have decided to exit the market. You believe that you will never again buy stocks of any company. This emotion becomes the main reason for an investor to miss out on great financial opportunities as the investor is unwilling to trade irrespective of how good the opportunity is.

12. You get into Depression: When you realize that you passed on an opportunity that could have made you great profits, you feel depressed and ask yourself: How can I be so foolish? This emotion gives you the required motivation that the market is still profitable for the ones who are careful enough.

13. You become Hopeful: As the market returns to its former glory, you revert to the market in the hope of making profits once again. This is the emotion that makes the investor more careful and eventually leads to profits.

14. You get Relieved: Having made a profit once again, you feel relieved that you can still make profits in the market if you are careful enough. This emotion re-establishes the faith of an investor in trading and lead the investor to buy stocks once again. 

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Why You should Have A Demat Account?

Why You should Have A Demat Account?
by Nutan Gupta 12/01/2017

As Indians, we can proudly say that banks have successfully penetrated 99% of households in all of India. Banks are making sure that they provide essential services in each corner of the country. So, most of us now know how bank functions and what services they provide. Let’s go further and try to understand what a demat account is.

Simply put, a demat account is like a bank account. A bank account holds money of the account holder and a demat account holds securities. These securities can be in the form of shares of a company, bonds, exchange-traded funds or mutual funds. Demat account enables the holder to store shares in an electronic form. Investors hold shares and securities in a dematerialized (demat) account instead of physical certificates.

If you want to invest in stocks, it is necessary for you to have a demat account. It is opened with Depository Participants (DP). Depository Participants are those organizations that enable contact between investors and depositories. There are two depositories registered with SEBI – NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). Demat account is the account that you hold with a Depository Participant.

Depository Participant is a broker who spells out the requirements, terms, fees, etc. to maintain a demat account with them. An investor would comply with all the requirements and open an account with the DP.

Here are the steps enumerated to open a demat account:

  • Approach a Depository Participant
  • Fill the required forms and submit the documents
  • On successful completion of this process, account number is generated
  • Access the demat account

Check: Procedure to Open a Demat account and necessary document required to open a Deamt account

It is mandatory now to link your Aadhar UID with the demat account. Also, it is compulsory to fulfill the KYC norms too. Primary documents are required to get this done. Once this process is over, you will be able to buy and sell shares online. Just like a bank account, you can have multiple demat accounts with various depository participants.

Demat account thus enables an investor to trade online. Buying and selling happen through online stock trading platforms; these platforms are provided by DP to the investors. Through these trading platforms, an investor can place an order to either buy or sell in the stock market. Once the order is placed, the money is debited, and the demat account is credited with the shares of the company.

What are you waiting for? Invest in the share bazaar, open demat account today!

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Best Performing Tax Saving Mutual Fund for 2016-17 - DSP BlackRock

Best Performing Tax Saving Mutual Fund for 2016-17 - DSP BlackRock
by Nutan Gupta 23/01/2017

With the financial year end coming closer, a lot of people are seeking financial advice from tax planners and chartered accountants in order to save as much tax as they can. Equity linked savings scheme (ELSS) is considered to be the best tax-saving mutual fund and it has given exceptional returns over the years. While there are a lot of tax-saving mutual funds available in the market, only a few have managed to attract the attention of investors by giving higher returns. One such fund is DSP BlackRock Tax Saver Fund.

Launched in the year 2007, DSP BlackRock Tax Saver Mutual Fund has given returns of 13.83% since its inception. The primary objective of this scheme is to generate medium to long-term capital appreciation from a diversified portfolio that is substantially constituted of equity and equity related securities of corporates, and to enable investors avail of a deduction from total income.

DSP BlackRock Tax Saving Mutual Fund has outperformed its benchmark Nifty 500 and its category returns over a 7-year period.

Trailing Returns (%)
1-year 3-year 5-year 7-year
Fund 18.35 22.68 21.44 13.38
Nifty 500 11.82 14.41 13.63 7.20
Category 12.16 19.59 17.32 10.90

*Source: Ace equity

The fund is managed by Rohit Singhania and the total assets under management of the fund stand at Rs. 1,494 crore as on 31st December, 2016. Majority of the fund’s corpus i.e. around 75% is invested in large-cap stocks. As far as the sector allocation is concerned, the fund has a higher exposure to the banking sector. The fund comprises a total of 68 stocks in its portfolio. There is no exit load that one has to bear if he chooses to redeem his investments.

Conclusion

While DSP BlackRock Tax saving Mutual Fund has been performing consistently over the last few years, it is advisable for investors to consult their financial advisors before making any investment decision. It is very important that the objective of fund should align with individual risk profiles.

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Invest in Mutual Funds only after knowing the Basics

Invest in Mutual Funds only after knowing the Basics
by Nutan Gupta 23/01/2017

Mutual funds have become a popular investment over the last few years. Mutual funds give an investor a lot of exposure to different sectors and industries without letting him pick an individual stock. Mutual fund is an appropriate investment option for a common man as it offers a diversified and professionally managed portfolio of securities at a relatively lower cost. However, it is very important to know the basics before investing in a mutual fund, which will help you make better investment decisions.

What are the different types of mutual funds?

Mutual fund schemes vary based on their structure and investment objective. - By Structure

Open-Ended Mutual Funds

An open-ended fund is the one which is open for subscription throughout the year. An investor can buy and sell the units anytime as per the net asset value (NAV) at that time. Also, these funds do not have a fixed maturity period.

Closed-Ended Mutual Funds

A close-ended fund is the one which is not open for subscription throughout the year. An investor can invest in such funds only during the new fund offer (NFO). Thereafter, they can buy and sell the units after the fund is listed on the Bombay Stock Exchange (BSE).

- By Investment Objective

Growth Mutual Funds

Growth funds are for investors who want to invest for a longer period of time. These funds aim to provide capital appreciation over medium to long term. Majority of the corpus of such schemes is invested in equity.

Income Mutual Funds

As the name suggests, the aim of income funds is to provide a regular income to its investors. These schemes usually invest in fixed income securities like bonds and government securities. As these funds invest in fixed income securities, risk is lower than that in a growth fund.

Balanced Mutual Funds

A Balanced funds aim to provide both growth and regular income to its investors. These funds invest a part of their earning in both equity and fixed income securities. These funds are ideal for investors who are looking for a combination of regular income and growth.

What are the different plans that mutual funds offer?

Mutual funds offer two investment options - growth option and dividend option.

Growth Option in Mutual Fund

Under the growth option, all profits made by the fund are invested back into the scheme. An investor does not receive any intermediate payments in the form of bonus and dividends. An investor gets returns only on selling the units, which is determined by the net asset value (NAV) of the scheme. Under growth option, the NAV of the fund increases over a period of time which helps in capital appreciation, thereby giving you more returns.

Dividend Option in Mutual Fund

Under the dividend option, an investor receives regular income at periodic intervals in the form of a dividend. In this option, whenever the NAV of the fund reaches a certain level, the fund distributes the profit to its investors as dividend. Hence, the NAV of the fund does not change drastically at the time of selling the units. Also, the power of compounding is less in the dividend option.