Investor Choices

When a company starts a business has to face two kinds of risk one is systematic and another is unsystematic risk.  1. Systematic risk -   It is non diversifiable risk. It exists  because of macroeconomic factors like- Political, Legal, Economical, Social, Legal Rules and Laws. Because it exists into the system so it is a non diversifiable risk.   2. Unsystematic risk -   It is diversifiable risk. It exists  because of microeconomic factors like- Weak internal control, Weak management, Bad Strategies, Bad product line.    Example of unsystematic risk - Business Risk or Financial Risk. When we talk about beta it is a systematic risk which is non diversifiable. Which measures the volatility of the stock with respect to the market. High beta stocks: These stocks outperforms the market when market rises provided financials should allow and falls heavily when the market does fall. Low beta Stocks: These stocks neither outperform nor drastically fall but continue to grow as per their financi

How to build your investment portfolio? What is the role of diversification in portfolio risk management.. . Very Nice saying ! "Don't put all your eggs in one basket".  The First thought when we look for an investment that comes to our mind. How to build our portfolio? An ideal portfolio should be a kind of portfolio which does not affect too much with the market volatility.  And which can only be possible with the help of a good diversified portfolio. The very first question which we will ask to ourselves before an investment is, What is our risk appetite? 1) Risk Lover- Equity Focused ( High Return) 2) Risk Moderate - Equity and Debt Focused  (Moderate Return) 3) Risk Averse - Debt Focused (Low return) The Debt market is not so popular and widely used. So for now we skip and jump to the equity market i.e one of the largest markets in the world. Now let us understand how we can build a strong portfolio with the help of only the " equity investmen t" for all ki

 Want to invest in the Stock Market but am confused about which INDUSTRY  should I invest in??? This is for you ! Industries basically work as per the Economy's (Expansion/Contraction) There are 4 types of industries. 1. Growth Industry :   New Start-up Stage in Industry Life Cycle Solid Earning Figures Risky Stock High Return.   2. Cyclical Industry: Growth is dependent on Expansion and Contraction Of economy. Include those that produce durable goods or heavy equipment. People spend more when they have good income. E.g.. Airline   3. Defensive Industry: Food Processing Industry. Provides necessities for consumers withstand recession and depression. E.g.. FMCG   4. Cyclic Growth Industry: Both characteristics of Cyclical and Growth Industries. Change in technology and intro of new models help them resume growth. E.g.. Automobile .   Everyone wants to beat the benchmark. It can be Nifty 50, Nifty Mid Cap or any other INDEX.   So attached video will help you to understand INDUSTRY fo

Company Analysis! Qualitative Analysis Why do retail investors always fail to pick the quality stock?  Why does it become so necessary to look at the management as a whole before any kind of an investment? "New Car - Bad Driver - Definitely there will be an accident. Old Car - Good Driver - Definitely you will reach the destination." Fundamental Analysis of any company starts with 'quality analysis' followed by 'quantity analysis' Quality analysis of any company is more subjective however quantity analysis is more objective and numeric. Everyone says see the management but nobody talks about how to see the management. We will  analyse the management as a whole not in a very concentrated way. Which means we will divide the management into many small parts and then will use the method of 'sum of the part' . So let us discuss how to watch management. There are so many parameters which an investor can look before an investment. But there are few key parame

Extended Du-Pont Analysis (The concept of ROE)   Two companies having following ROE which will you buy? Other things are constant.   Definitely an investor will prefer company A as other things are constant. But this will be an irrational behaviour firstly we will go to the root of ROE from where the value has been derived .    Normal DU-Pont Analysis   Extended Du-Pont Analysis   Now Let us understand each parameter one by one. a. Tax Effect : It shows how much the tax a company is paying. If these figures are heavily mismatching then there can be a huge possibility that they are making manipulation in taxes to show profits more. Should not be fluctuated more.   b. Financial Leverage Effect. It shows what the effect of leverage is having upon the profitability of the company.Increasing is better as company is paying less debt In the figure above if we see Company B already has a high leverage effect i.e 0.40 (1-0.60) and 0.55 (1-0.45) is the year 2019 and

Market Looks Like Volatile ? Manage your risk with proper strategies. Want to trade in the volatile market with proper risk management? When we talk about risk management then suddenly it clicks with options strategies. And out of so many strategies available for options trading we will discuss here two popular strategies for options trading i.e Straddle and strangle let us understand how these strategies work in a practical way.  Assumed, CMP of  Index 2,700 for both the cases. 1) Straddle : To form the straddle strategy we need to buy a call and buy a put with the strike price near to CMP. Here trader expects that there is some big news or an event but not sure which side the market will move hence he prefers this strategy. Eg: Annual Budget, Financial policy reforms, Government election results, Government policy reforms etc.  Formation: Strike Price 2,600 Buy Call @137.6 Buy Put @ 46.85 With the same strike price which is nearby CMP. See how your pay off will look like. In this c

Butterfly spread ! Market Looks Like Sideways ? Want to trade but with proper risk management. Before an application of butterfly spread you must have a market view as non-volatile. Yes my friend it only works in non-volatile markets.   How to apply practically in the market.?? Which Strike price is required to select ? Let's understand, Many times we see different-different opinions in news channels and on social media that the market will be bullish from there or the market will be bearish from there but if you have understood the market behaviour you will be able to draw your own opinion. And if your opinion is sideways than you are the perfect one who can get benefit from this strategy. For Example: Company A CMP: 2700 Formation: Buy - Cash Outflow Sell - Cash Inflow Major condition : Choose strike price only on the basis of uniformity i.e difference between each strike price should be equal in this case i have taken the difference of 300. You can take 100, 200, or 300 as as pe

One wrong investment can evaporate all your savings, and one right investment can grow you like anything !  Very nice saying " The stock market is filled with individuals who know the price of everything, but the  value of nothing. ~ Philip Arthur Fisher When we talk about wealth creation it becomes necessary for us to understand what are the investment styles people have used in the past to create wealth.   And the answer is- There are broadly two most popular investment styles 'Value Investment' and 'Growth Investment'   1) Value Investment style:   Warren Buffet the master of Investment is majorly focused on value investing strategies. These strategies are for a long term basis and investment is done only those stocks which have just started performing good but price is not moving up or falling down.These stocks will be available at low Price to earning  and their 'intrinsic value' will be higher than 'market price'. Companies may start