The markets are trading flat. Apparently, global cues aren’t conducive enough to trigger the SENSEX and NIFTY. So what does one do?

I’ll tell you what I’m doing.

Firstly, I’m carrying Reliance Industries (RIL) stocks like the proverbial albatross around my neck. I’ve already sold some shares at a loss and bought them again when the price went down. Shockingly, now the price is even lower. Selling at this stage will add to my losses. Indications are that RIL will remain low priced for some more time to come. Ideally, this is the right time to buy more of RIL, but then, I don’t have enough capital.

I’m comfortable with stocks of ITC, BIOCON which are giving me handsome profits as of now. Even though some analysts have given a ‘sell’ call for ITC, I’m going to hold on. I know that company too well for it to cause me jitters. They were once my major competitors when I worked in the packaging industry for British company, Metal Box.

I have also invested in IFCI (200 shares) and the stock is performing well. Actually, I’m waiting for the price to go a bit lower so that I can pick up another 100 or 200 and bring down my average price.

What’s so special about IFCI you might ask?

Well, for starters it was once known as Industrial Finance Corporation of India and its name got changed to IFCI in 1999. The company provides loans and advances to corporate borrowers at low rates, catering to the long-term finance needs of the industrial sector. The interesting part is that the company is in excellent financial health. It has posted profits for the fourth consecutive year despite the challenging economic environment.

What is even more significant is that with the RBI’s recent notification to give banking licenses to private sector players, IFCI is one amongst the front-runners on the list.

That’s why I’m keen on adding more shares to my portfolio. The shares are trading in the Rs. 61-62 range and that’s not too bad, is it? Question one would ask is how much of an upside can one expect if and when the RBI’s announcement comes? I’m optimistic that the price will come close or cross 100 rupees in another 6 months.

Another mid-cap is Spicejet, arguably the only airline that’s been quite profitable consistently. My wife has 200 shares bought at around 57 rupees. It’s been on an upward trend off-late and is currently around 74 rupees. There are a few big ticket announcements around the corner that’s triggering upward movement of its shares.

With ownership changing hands - Kalanidhi Maran having almost bought over the company - the buzz is that Spicejet plans to move their corporate headquarters to Chennai. Besides, the airline has completed the mandatory 5 years in the business and is eligible to offer international routes. Chennai-Colombo-Chennai is being talked off. A new CEO will take charge in September and perhaps, that’s when all these strategic moves will come about.

So, I expect the share to zoom to 100 rupees or maybe even more.

Having said all that, there’s still volatility in the market and big time corrections could be in the offing. News from other economies such as the US, UK, Europe etc aren’t what one wants to hear. However, there’s still some money to be made and if you are a sensible investor, you wouldn’t want to miss the opportunity.

It’s your call! 

Good old days were when parents searched the globe for a suitable marriage alliance for their siblings. What did he or she look like? Was he/she well-educated? Did he have a good job, earning well or was he a bum? What sort of skills did she have - sing, dance or was she a lazy-lout? What was the parents’ background? Were they well-off, rich, tons of property or perhaps, had a stake in the ownership of the Kohinoor diamond? What was the family size like – another Laloo Prasad-type family with 12 kids and scores and scores of relatives that you wouldn’t want to call all at the same time for lunch or dinner? Any criminal record, political leanings, no mentals in the family and so on and so forth?

Because they said marriages were made in Heaven and because these were arranged, parents would often look at horoscopes, dig deep into each other’s family backgrounds like Sherlock Holmes and Dr. Watson. Simply put they were indulging in the process of doing a Fundamental Analysis to ensure there weren’t any risk factors.

Experts believe that anyone who wants to invest in any company’s share ought to know what he/she is getting into. After all, when we buy a share we are actually buying a portion of that company. So, if you don’t know what the hell that company is doing, why are you investing into it?

In stock market lingo, Fundamental Analysis is the process of evaluating the company, its business, the market, its products, the competition, the potential, its managements and whole lot of such stuff, that I won’t list out and drown you in it. Suffice to say, it’s similar to the ‘boy-meets-girl’ evaluation you or your parents would do before you tie the knot – usually around the neck, which could mean anything.

Three weeks ago I attended a 2-day National Stock Exchange (NSE) program on Fundamental Analysis conducted in association with Manipal Education. I must say it wasn’t as good as the Bombay Stock Exchange (BSE) programs, though I must admit I got to understand a bit more than what I knew before.

Generally speaking, long-term investors are the ones who need to do a Fundamental Analysis of a company stock they wish to purchase. The basic things they look at are – is the company making profits; is it in good financial health, and that would mean any debt or interest burden it may have; is there a demand for the product they manufacture; is it weighed down by shortage of raw materials or is it taking a beating because of global recessionary trends?

By and large, most small-time retail investors don’t really resort to an elaborate Fundamental Analysis of a company. I mean, I wouldn’t use up too much ink working all sorts of calculations of say a company like ITC, where I presently have over 150 shares; or say, BIOCON, where again I have over 150 shares and sitting on good profits. Small quantities but what really matters is that the profits are good.

Most often people buy shares based on what someone told them or some analyst on TV said, “Go for it” and after buying the stock they find its share price is beginning to fall.  Happened to me a couple of times, but one learns. Sometimes financial newspapers do the fundamental analysis for you of various companies. If it makes sense, buy the stock but just check a few things before hand. This is what I do nowadays.

• Look at its EPS – Earning per Share (Company’s after tax profit ÷ No. of Shares)

• Calculate the P/E – Price to Earnings Ratio (Market Price of the Share ÷ EPS)

Calculating Profitability Ratios will give you an idea as to how profitable the company is. In fact, these ratios are an important aspect of financial statements in understanding the financial health of the company.

It wouldn’t be a bad idea to take a look at the company’s balance sheets (most are available on company websites). The basic information is available and you don’t have to be a financial wiz to understand it, though it helps. If, after all expenses such as Interest, Depreciation, Amortization, the company is making profits, feel comfortable about buying that stock.

Ultimately, it’s your call. But remember; never ever regret you did this or that. Investing in stock markets is not for cry-boobies.

Having said all that, nothing comes risk-free; even marriage.
 

Disclaimer: The views and opinions expressed on this blog are those of the writer and are for information purposes only and do not constitute any investment advice. Readers should check with certified experts before taking any investment decision and not on the basis of what is written in this blog.

Warren Buffet is the Chairman and CEO of his firm, Berkshire Hathway and arguably, the most successful investor in the world. Currently, he’s ranked the third richest with an estimated net worth of $47 billion.

He doesn’t believe in dynastic wealth and has said it in public that his children will not inherit a significant portion of his wealth. Instead, he proposes to give them just enough so that could do anything, but not so much that they’ll like doing nothing.

“Mr. Buffet! That’s fine with me. I’m your long, lost, distant relative.”

One of his famous quotes is, “The first rule is not to lose. The second rule is not to forget the first rule.” His other quote which I really like is, “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”

People have various risk appetites. Some are risk-averse - the type to hide behind mama’s apron seeing their own shadow. Some are the risk-neutral - the ‘Yes’, ‘No’, ‘I’ll think about it’ types who can never take a stand and tend to always lean on others. Lastly, you have the risk seekers – like me, for example – who’d take the risk just for the sheer experience. I know people who never make mistakes; but that’s because they don’t do anything.

Now, that doesn’t mean that if you tell me to jump into a well, I will. Nah! That’s stupidity and I’m not stupid.

I suppose self-confidence is what matters. Things may get tough initially, but then, that’s the learning phase. Avid traveler that I am, risk has never deterred me from exploring.

So, when I got into trading at the stock market, I knew I’d encounter varying degrees of ups and downs. The whole idea was to learn from mistakes and at the same time, not make too many, too soon. Fear of failure must never be a reason not to try something.

Like someone said, “Don’t refuse to go on an occasional wild goose chase - that’s what wild geese are for.”

Disclaimer: The views and opinions expressed on this blog are those of the writer and are for information purposes only and do not constitute any investment advice. Readers should check with certified experts before taking any investment decision and not on the basis of what is written in this blog.

Once you have a Demat account and some cash in the bank, buying or selling stocks isn’t any big deal, right? Well, that’s easier said than done. I burnt my fingers not understanding how stock markets worked. That’s the reason why I went to “school”.

My first stock was UCO Bank at Rs. 88/- per share. I bought just 10. Then I bought 30 of Reliance Natural Resources Limited (RNRL), 30 of Reliance Power, 30 of Reliance Industries and 20 of ITC.

I said to myself, “Ah! I’ve got it made. Now all I need to do is sit back and watch the prices go up day by day and my first million piles up.”

Soon enough, the applecart turned upside down. Except for Reliance Industries and ITC, I was sitting on stocks that were heading the other way. So did my dream of my first million.

Then, one fine morning the market opened with RNRL shares dropping to an unbelievable low of Rs. 44/- from the previous day’s close of Rs. 63/-. I was aghast. The company had decided to merge RNRL with its sister (or was it parent) company with Reliance Power. They also announced they’d give shareholders one share of RPower for every 4 shares of RNRL. So, I off-loaded these stocks. I also sold UCO Bank at a loss but ended up with a marginal overall profit from RPower.

What did I do wrong?

Simple! I just didn’t bother to check company fundamentals; didn’t know that one has to calculate ever so many ratios; didn’t examine the economic conditions and bought these shares hoping to make a quick buck.

For instance, I bought RNRL because it was from the Reliance stable. What I didn’t know – or didn’t bother to find out – was that RNRL was somewhat of a trading company and once the government announced the gas utilization policy that went in favour of Reliance Industries, RNRL was a goner. The merger with another Anil Ambani owned firm, Reliance Power, and the swap ratio would begin RNRL’s downslide.

Crafty chaps, these Ambani brothers. They have this habit of announcing results on Fridays after markets are closed for the weekend. If the results are good, you have a good start on Monday. If they are bad, be sure that your stocks will tank first thing Monday morning, as it happened to me.

At the Bombay Stock Exchange, the two sessions on ‘Fundamental Analysis’ taken by Ramji during the course were extremely interesting and useful. It gave me a better insight into how buying/selling stocks have to be analyzed and even though the topics were just touched upon, the broader picture came through quite clear.

The curriculum of the course was so well-structured and the faculty was absolutely fantastic. I mean, these chaps are hands-on professionals. They eat, drink, dream stocks and many of them appear on NDTV Profit, CNBC etc offering Fundamental and Technical Analysis in answer to stock queries. And by the way, they also make millions when they are not on TV.

What better environment than the Bombay Stock Exchange to attend a 4-day course. I returned to Bangalore feeling like a biscuit fresh out of the oven.
 

Disclaimer: The views and opinions expressed on this blog are those of the writer and are for information purposes only and do not constitute any investment advice. Readers should check with certified experts before taking any investment decision and not on the basis of what is written in this blog.

The Bombay Stock Exchange is virtually a fortress. Security is pretty intense; more so after the 26/11 terror strike in Mumbai. Anyone entering the building is subjected to physical frisking and X-ray machine baggage scrutiny. Apart from the usual machine gun toting security personnel the presence of two sniffer dogs is an indication as to how tough it is to get in.

They say, “The first impression is the best impression.” And so it was with the first session titled “Secondary Markets” taken by Mr. Bhagirat Merchant, a past President of the BSE and with 40 years experience in the stock markets.

This was an extremely interesting session and one of the keys lessons I learnt here was about compounding interest. Mr. Merchant cited an example. He said if one were to invest 70,000 rupees each year in PPF for 15 years and the you don’t touch that money for another 15 years and you’ll end up have one crore rupees plus.

Boy! That’s the kind of money I should have retired with.

He also gave an example of his having bought 100 Wipro shares for 100 rupees each, when the company listed on BSE somewhere in 1980 or so. Subsequently, he kept adding Wipro shares. Those shares are today worth a huge amount and with Wipro stock currently trading at about 433 rupees, he’s sitting a on a big pile of profit.

Heard of Rule of 72? It’s a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest.  Let’s say, you want to know how long it will take your money to double. The formula is 72 divided by the interest rate = no. of years. For example, 72 divided by an interest rate of 8% = 9 years, the time it will take for your money to double. 

 Run it backwards.

If you want to know what interest rate would be required to double your money in 6 years, the formula is 72 divided by 6years = 12%.  (Works fine up to 20% interest rates; at higher rates errors can occur).  Now I know why I never made it to the rich and famous list.

Disclaimer: The views and opinions expressed on this blog are those of the writer and are for information purposes only and do not constitute any investment advice. Readers should check with certified experts before taking any investment decision and not on the basis of what is written in this blog.
 

Disclaimer: The views and opinions expressed on this blog are those of the writer and are for information purposes only and do not constitute any investment advice. Readers should check with certified experts before taking any investment decision and not on the basis of what is written in this blog.

         

Till about 3 months ago, I hadn’t a clue to what the stock markets were all about. I’d often heard the words ‘market crash’, ‘market is up’ but to be honest, I was clueless as to what that implied. Sure, I was familiar with names of the stock exchanges ‘Nifty’ and ‘Sensex’, but didn’t know the difference. I’d never heard of NASDAQ till Infosys got listed on the American Stock Exchange.

All of a sudden something happened.

I got this bee in my bonnet that I must learn and understand how stock markets work. An sms to CNBC TV was the trigger. One thing led to another, culminating with my landing up in Bombay for a 4-day Certificate course at the Bombay Stock Exchange popularly known as the ‘Sensex’.

Each day I spend 5-6 hours glued to the TV - NDTV Profit, ET Now, CNBC, Bloomberg - watching stock price movement, the indices swing like a pendulum and if not for the 4-day course, I’d be bamboozled by stock market jargon like Day Moving Average, Trend lines, EBITDA and what have you.

So, here I am with my antenna up, looking for opportunities, buying and selling stocks, making a buck here and there and even losing some. How else would one get experience?

In the evenings, I spend an hour or two making notes from the half a dozen books I’ve purchased, browsing the Internet, refreshing on what I learnt those 4 days, learning how to analyze balance sheets, calculating Price-to-Earning Ratios (P/E), Earnings per Share (EPS), figuring out various charts used to make a Technical Analysis of stock price movements (a 4-day Certified course is on the cards sometime this September in Mumbai) and what not.

Boy! There’s so much to learn.

I haven’t got there as yet, but I’m already walking down the path, treading cautiously and not putting too much money. I don’t have much anyway. The words “Market Crash” may sound terrifying; but a smart and wise investor would know how to bail himself out fast before all is lost.

Legendary investor, Warren Buffet once said, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

That’s precisely what I propose to do; change vessels and let others in the leaky boat do the patchwork.

Disclaimer: The views and opinions expressed on this blog are those of the writer and are for information purposes only and do not constitute any investment advice. Readers should check with certified experts before taking any investment decision and not on the basis of what is written in this blog.