Investor Choices

Why do retail investors always suffer with losses? Are "Institutional Investors" the only one who has the right to make money?  These types of so many questions I was asking to myself and when you ask questions there is an answer. I was reading a very nice book where a concept of 80/20 pareto principle was nicely explained. I would like to summarize the whole book concept and betting that it will definitely help you provide an edge in investing. Firstly, I would like to brief you about Pareto principles. What does it say?  This is the principle of "Vital Few" which says 80% consequences come from 20% causes. It applies everywhere. Firstly, it is observed in 'ITALY' where 80% of land was occupied by 20% of the population. Another observation is that 20% is the conclusion of the whole book, 20% of your clothes you wear 80% of the time. Remember it is not a thumb rule but is just an observation and this simple observation works  wonders in the 'Stock Market...

Economic Analysis Economic Analysis is the primary term or factor which is used before any kind of investment. It stands first in top-down approach i.e EIC (Economy | Industry | Company ) So it should not be ignored as it plays a vital role to impact the stocks and their performance. There are few indicators which tell us about the economic condition, what is going into the economy and how they impact the business. These indicators can be found easily on google on different websites. One and popular website for these information is Trading Economics. Caution: The accompanying chart merely serves as a handy guide  and should not be construed as an accurate predictor in all cases. Many times the  anticipation of good or bad news is built into the market and when the news comes  out, the reverse move happens. Investor Choices

Difference between face value, book value and market value. Let us understand these all terms with an example of a story so that you never face any problem regarding these terms in future. There are three friends A, B and C. They start a new business with the capital of 10 lakhs. In which A contributes the capital of  5 lakhs, B contributes the capital of 3 Lakhs and C contributes the capital of 2 lakhs.  They think that they might have faced problems of capital transfer and distribution in the near future if they were required to add another person in the business. So they divided their capital into 1 lakh shares of 10 rs each. So this 10 rs is called face value which is their initial investment.  Now they continue the business and next year they earn the profit of 10% in their capital. They want to grow their business so they don't withdraw completely but 50% of their profits. Hence next year their capital becomes 10 lakhs plus 50 thousands profits.They c...

Basics of Top-Down Approach (EIC Analysis) Basics of EIC Analysis which will be helpful for a common man to understand. How to design a portfolio. An optimum portfolio is that which grows faster than the economy when the economy expands and falls less as compared to the economy when the economy contracts. 1) Economics Analysis: Basically economic work in the cycle. Which has two phase expansion and contraction we can simply identify the phase by observing our surroundings. Let's say, if we hear GDP is growing, more employment opportunities are being created, Infrastructure improving, MNCs are investing etc.  these are the examples of expansion economy and contraction is vice versa. 2) Industry Analysis: After analysing the economy we need to pick those industries which perform as per the economy cycle. Industries are classified as per their nature how they  perform as per the phase of economic cycle. 3) Company analysis: It is much easier to identify a...