I am relatively new into stock markets, what are the best lessons I can pick from those who have already lost money in this market?
Guys I must admit, this is one question which I could say really made my day today. This question looks more like a bullet shot at Point Blanc, with pure innocence :). Even before we dig at individual investor’s profile as to what went wrong, there are few things we can bluntly tell.
Knowing but Not Doing: Yes, you can find many in our global stock market setup who knows many things but implements few. We can easily tell, at least 70-80% of our people knew “what are stop losses & when to apply it” but just didn’t implement it. I am not just talking about individuals, but I am including companies too… coz it is run by same set of like minded people. Anybody who has lost anything more than 20% of their capital, it’s due to this reason. Stop loss is the very first chapter which people should know & it’s absolutely not difficult to implement.
For Ex: If you buy a share for 100 rs, & you know that you can afford to loose only 10 rs on your capital & not more than that… then 90 rs becomes your stop loss. You should sell your share at any cost, when it reaches 90 bugs. I feel, this lesson is too simple which is one reason people failed to re-think about this. :) hmm.. end of day it’s more like … a costly tuition fees for a simple lesson, isn’t it .. :)
How do I judge which stock to buy in the market? Could you please share few tips that would help us in such stock selection..
Stock selection principles always differs while two people analyze. I could certianly share few general practices, while betting on a stock selection.
- The stock price of any company would always have two components in it two move either ways.. its Stock News & Index News. Stock news includes all news & noise the company makes in the market all about itself. Index news is the news & noise that the entire indices create about many different companies in the market. So this way, make sure you analyze why a particular stock moves up.
- Volumes with which a stocks getting traded, is definitely a must & should which you should consider. Coz Less volumes means the stock is less liquid. For Ex: If you can 100 shares of ABC company for 29.50rs, very next moment you should be able to sell the 100 shares of ABC company @ 30rs. If you find no buyer for 30 rs, then the stock is less liquid & indicates its less attractive in the market.
- Study a stock which you want to buy for atleast 10 trading sessions/days … Check out the 52 weeks highs/lows for that stock & where it is currently standing & fix your target accordingly.
- Checking out on the average price of that stock on that particular day while you buy, is certainly a good idea. As that helps you while setting a target if you wish you sell the same day.
- Long term traders could also check …. The Price to earnings ratio[P/E ratio], Earnings per share [EPS] & Dividend yeild figures in the charts before making a decision to buy. [you can find this technicall info in all commercial websites these days]
How to play life,with caution during Inflation times?
These suggestions given below are purely personal & its very much subjective based on an individual’s life style pattern. Probly you could just keep these things in mind, while you decide to play with things around you.
1> Make sure you keep a tab on your Credit Card spending. This is the primary segment which is generating huge revenue for the banks. So banks will raise interest rates first in this department.
2> People who wish to quit jobs & then look out for a new job, may consider to postpone their decision by atleast 6 months, as Job cuts issue will factor inn very soon.
3> People who are having interest in taking loans for housing/personal, may post pone it by atleast 9 – 12 months. And a “Big NO” for people who wish to go for floating rate of interest, considering the economic arbitrage at this stage.
4> People whose investments are into mutual funds, & if they are about to expire any time in August…. It would be a good idea to pull back your funds at current rates, rather than renewing it for more than one year. For MF’s expiring after 6 months from now, you could probably take a decision accordingly.
5> Avoiding luxuries at the moment for the next 6 months, would certainly help you during times of Necessity.
6> Real Estate prices are staggered at the moment, with very less movement. Even people who may wish to sell, can hold on for some time.
Why do we always lay stress only on US dollar & not other currencies across the world? How are other currencies performing currently?
Yes, people all around the world track US Dollar the most, than any other currencies. One simple reason is US dollar has been accepted as the global currency medium for all trade related activities across the world. Even a simplest of variation in Dollar, it directly affects the margin figure within which a product is bought/sold in world markets. If any company wishes to be mapped or given status as a multi national, it should be ready to declare its assets, turn over & revenue as per the GAAP … i.e. Globally Accepted Accounting Principles and the medium of currency should be denoted in US Dollars. This is one reason, why people lay much stress to US dollar ($).
Now coming to your second question, about how are other currencies across the world are performing currently… I would say “how strong or week a currency is, largely depends on how strong that countries economic situation is”. The strength of an individual countries currency is measured, by taking US dollar as the base. Just like how you see in India, if rupee is being currently valued at 48.80 rs … it’s against 1 US dollar as the base. For more details, please check out the attachment which gives you a clear picture of world currency standings. It’s from one of the best sources & most relied upon across the world.
How secure are foreign banks in India?
To be frank, I would tell foreign banks operating in India, are considerably secure when compared to their counter parts outside of India. One simple reason would be that foreign banks operative in India, will have to function under guide lines of RBI. Given the stringent CRR, SLR & PLR measures prescribed by RBI, the money left within an individual foreign banks to invest or re-invest would be very less. So that reduces chances of risking too much money in investments.
Okie, now if you have a question as to - why are so many foreign banks coming to India ? Answer to this lies with each one of us. How many of us or our families still have a thinking that … Keeping money in Savings Depostis, Fixed Deposts or Current a/c Depostis are the best mode of Investments & does a living out of this in India, instead of being exposed to equities or other modes of investments ? I would say, 8 people out of 10 still have this policy of savings. In contrast, the West world this habit of investment has few takers & most people are exposed to other modes of investment especially equities. Each of these practices has its own pros & cons, that could be thought of.
What is OPEC & how does it help in regulating crude oil prices in the market?
OPEC stands for Organization of the Petroleum Exporting Countries, is a committee formed by 12 countries to bring about standardization in reforms related to crude oil across the world. The 12 countries that come under this purview are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. The Head Quarters of OPEC is located in Vienna.
Okie, now how does OPEC help in regulating crude prices in the market?
Let me tell you guys, there is a myth about this amongst most new analysts in India, which needs fine tuning. Most believe it’s only OPEC which controls oil prices, but the answer is “NO”. The market share of OPEC is only 35.6% all across the world as on March 2008 data. OPEC can exercise control only on 12 countries which are listed above & has no control over oil reserves found in Gulf of Mexico, North Sea & Russia. Mind you, Russia produces the highest capacity till date which stands at close to 9.5 million barrels per day, then later closely followed by Saudi Arabia & others. Most of the countries listed in OPEC have been burning out most of their energy reserves very severely from close to 5-6 decades & thus oil reserves there are either in the process of going extinct or have declined production quantity in this region. Now you can understand why Bush mama, choose for a war against Iraq. :)