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This website is purely ACADEMIC in nature and NOT a stock market recommendation service or a tip provider. No live data or feeds are provided and all information is historic only. Information is provided for ease of understanding for the purpose of learning. Accuracy of definitions etc is not mantained. I am not a SEBI or IRDA registered.
Basic Terms on Investing
When we are into stock market investing, the most common term that we hear is share.
Now what is a share?
Technically speaking, a share is a document issued by a company.
This document specifies the rights and the extent to which the rights in the company can be exercised.
Shares can be bought from a stock exchange or from the company directly though a process called Initial Public Offer.
Do not worry about all these terms. We shall discuss them all going forward.
Investing vs Trading
Now, let us understand what Investing is, and what Trading is.
When you tell your friend that you are in stock markets,
he will immediately ask you:
Are you a stock *trader*?
Let us see what they mean.
- Investing* means
=> buying shares (or securities)
=> with an intention to hold for few days, months or years.
=> with an anticipation that the share price goes up in future
=> invest in Gold
=> with an intention to hold it for several years
=> and anticipate that gold adds some value to us
=> invest in Reliance shares
=> with an intention to hold it for few years, say 5 years
=> and anticipate that the share price doubles because of Reliance Jio business
So, the focus of investing is on the security, the time period of holding, and the expected return from it over a period of time.
Now lets see what *Trading is
- Trading* means:
=> buying and selling (or vice versa) of stocks
=> usually for one day
So, by the end of the day, your net position will be zero.
This means, when u bought in the morning, you sell them by market closing time.
And if you sold a share in the morning, you will buy the share by market closing time.
- Positional* is a little different.
Because, we have both
Positional traders and Positional investors.
Both *Investing* and *Trading* follows different methods and approaches
.. and both have their own advantages and disadvantages.
Before you put money into the stock markets, decide on your role clearly.
Are you an investor? or a trader?
If you are in stock markets, or want to be into stock markets, generally,
it is better to stick to one of the two role.
Because the psychology, views and approaches are different.
Understood about the roles?
We will stop the class here.
I will do a quick recap:
In this class, we discussed about
1. What is Saving and what is Investing?
2. Focus on *Savings* is safety of money over growth.
3. Focus of *Investing* is to give extra returns by taking extra risk.
4. There are two types of people in stock markets: Investors and Traders
5. *Investing* means buying shares (or securities) with an intention to hold for few days, months or years and with an anticipation that the share price goes up in future
6. *Trading* means buying and selling (or vice versa) of stocks usually for one day (or for short duration)
Investors have a mind set of getting returns fast so to achieve this what to do is that correct attitude for an investor
@Manikandan: You are right. Security market participants need the right attitude and traits to be successful in stock markets. Else, they are more likely to fail than succeed.
I want my investment to turn to 50lakhs in 2022 How much should I should invest in 2016 .what compounding percentage I would get.which are the sectors I should invest. As of today I invest only in Mutual funds on zip basis. 30k every month since many years say between 7 to 11 years
@Anna: Mutual funds will have fund managers who are specialists in the field. It is always better to invest a substantial portion of your investments into mutual funds than over equities because of the various advantages MFs offer. If you are interested in joining my Mutual Funds group, contact Prama and she will add you in. We discuss a lot of such topics there.
Dear Vijay Sir..iam interested in delivary based trade..from nifty...selection of shares from different sectors..needed.
@drmsanile, Amit: This is exactly what we will be learning in the group. "Delivery based traded"? You mean, you want to trade intraday and ultimately take delivery? We will explosure such option as well!
How psychology influence to decide trader or investor
Psychology impacts tremendiously on the behavior and decision making of trader and investor.
For instance, the waiting time frame and patience for traders will be less compared to investors.
lets limit classes on weekdays and ppl can note down the queries and bring it up on saturday
@Sunny: Indeed a good idea. Lets allot Saturdays and Sundays for revision and for taking more examples related to them
Should Investors also have stop loss?
@Balaji: Yes, at one point or the other investors should stop loss. Usually when a share turns from bad to worse.
In yestedays class, we discussed about some simple terms:
I hope u are clear about the terms and the differences between the terms.
- Investing* is relatively safer than *Trading*
=> because there is *no time pressure* for you to close your position by market closing time
=> investments will grow as the company *grows over time*
=> and we will be optimistic that *good stocks* over a period of time.
- Investing* will be risky when:
=> you do not invest in *good stocks*
=> or when you buy good stocks but at *high prices*
So, when you are investing in the stock markets, you have to look for these two criteria.
You should not invest just being attracted by brands that you see or news that you hear.
We have heard of Reliance Jio
and Reliance Jio is part of the company called *Reliance Industries*
- Reliance Industries* shares are traded on stock exchanges.
But, can we buy shares of Reliance Industries ?
Because they will have good business in the future?
Becuase we already know Reliance Industries is a good company?
We should not invest just by our perceptions of the company.
We need to use certain analysis methods to determine whether:
Reliance is a good quality share or not?
Reliance share price at current market price is a good price to buy?
Our *fundamental analysis* lessons teaches you just that.
We use *fundamental analysis* to learn
- how to invest*
- in which stock to invest*
- when to invest* and
- when to exit and book profits*
Now, lets talk a bit about *Trading* as well.
On the other hand, trading can bring in quick gains and faster results.
However, Trading is risky because
.. if you do not close your positions by end of day, you might have to accept loss
.. and some times loss means loss of your capital itself!
So, understand that both Investing and Trading are risky.
Trading is more riskier than Investing.
There is no guaranteed profits all the time in stock markets.
You will need a lot of time and patience to study and analyze a lot before you being putting money into the markets.
Even after anlysing, you need to spend a lot of time to *transact and track* in them.
If you do not have time and patience do not transact in stock markets directly.
You can try alternative equities investments like Mutual funds.
Direct equity investing might suit you if you do not have time and patience.
If you still want to try stock markets, you can continue here..
Otherwise, this is your exit point.
To earn money in the stock markets, you need to:
manage risks carefully and
How to manage risk?
We use various fundamental analysis methods that will discuss in these classes.
In the next few sessions, we will be focussing on *investing only*.
Because trading (intraday trading or positional trading) are high risks, we will avoid them for now.
If you are expecting sessions on trading, giving tips or about advanced concepts like F&O, Commodities or Currencies, we are planning them later.
We are turtles and will make slow and smooth moves.
We shall not hurry either in learning nor in investing.
So, these learning sessions will not be for you, if you are expecting quick and fast results.
We shall focus on how and where to *invest* in equities *for the long term*.
In the beginning, we will be discussing about *buying shares on a delivery basis only*.
Now, what is meant by *Delivery* ?
- Delivery* (buying of shares) means
=> buying of shares
=> by paying cash
=> and holding them in demat.
Now, what is meant by *Demat* ?
- Demat Account* is the account where the shares that bought are held.
Demat account is similar to a bank passbook
except that it makes note of transactions related to shares.
So, we buy shares and pay cash.
These bought shares will be noted in the demat account.
Now the question: How long should i keep buying shares?
As i said earlier:
We are *longterm investors* here.
- Longterm investing* means, investing for about 1 year, 3 years, 5 years or even more years.
I know of friends who just bought some good quality shares and have held
for over 5 years ..
some for even 10 years ..
and some are holding ever since they joined in their job
When you are in stock markets, you need a lot of *patience*.
Stock prices will go up and go down. That is the nature of market.
You should not get worried too much when your stock investments go down a bit.
Taking quick, hasty and hurry decisions is most likely to result in losses.
After u make an investment, u should not start worrying about it .. even if it goes up or down.
Why? Because u shd be for the long term.
If you have invested for the long term
.. and if your investment is a good quality share,
.. it is more likely to grow than to fall (in the long term).
Stock prices move up and down drastically every day.
After all, if they dont go up or down, we might be into trading / investing.
How are prices of shares keep chaning every second and how they fix value of shares?
Price of the share goes up
=> when a buyer comes forward and buys.
Of course, there is a seller ready to sell at the same time.
In the share market,
since many people will be buying and selling shares at the same time,
the price fluctuates several times during the day
Sometimes, the price fluctuates several times within a minute itself!
There will be lakhs of people who deal in shares every day in the stock market.
So the market is always there with several opportunities.
Yes vijay..buying nd selling happens in same day s called trading..am i right?
At any given point of time, there will be thousands who come to stock market to invest or trade.
For a fresher like us, intraday trading is risky.
Why? If u cant sell your shares for a profit at the end of the day, u might have to accept a loss
So, the safe method at this point of time is to go for long term investing.
In long term investing,
the premise is that
if your stocks are of quality => they will do better and bring profits in the long term.
So, we are not investing in each and every thing in the market.
We should invest in *quality* stocks.
Also, "Long term investing" means we buy shares and hold them for a *minimum of 1 year* before even considering to sell.
So, your investment horizon should be on those lines.
In other words, do not invest money that you need for less than a year or so.
Because, stock markets are risky investments.
There is no guaranteed assurance of returns.
This means that money that you invested now may or may not be withdrawn.
Stock market is just short of gambling !
Any thing can happen any time.
You may win or lose.
And you wont get to know that unless the results come.
If there is "Long term" investing,
there should be "short term investing" also.
- Short Term Investing* = Buying shares but selling them *in less than 1 year*
By short term, it can be
=> for 1 day,
=> for a week,
=> for a month
=> or few months
but definitely less than a year.
Understood the terms *Longterm* and *Shorterm* ?
These are important terms not just for holding of the shares etc but for tax related matters as well which we shall discuss in later classes
We shall stop the class here today.
No new topics from here for today.
Ask any questions that you have related to topics we discussed so far.
Whether we have to keep track of the shares we purchased for longterm investment or just forget it for sometime.
This depends on the time you can spend.
In general, it is better to track your holding stocks and the news related them on a daily basis.
For long term investors, you need not track the stocks every minute.
Please suggest some fundamental good company
We will learn how to identify fundamental good stocks here gradually.
I am not giving any stocks list or buy / sell calls here in the group.
Vijay sir how to know the entry time for particular stock
Entry and exit times are both important for us.
I will teach the methods of doing that gradually in the upcoming sessions.
Tip: Always keep some cash ready for investing when the markets correct. Do not worry if you do not understand the tip. We will discuss later.
What determines price move?? Is it supply and demand.. And Who operates price.. Persons manual or automated software in exchange
Price moments are mostly done by people. Yes. the supply and demand impacts.
But offlate, automated software trading is happening too. This is called Algorithm trading.
Is free floating shares are the one goes from one buyer to another? What is tat
When company is formed, certain number of shares are alloted to share holders.
Those quantity of shares that are available in the public, for free trading in stock markets is called free float shares.
These are the shares that are free to be bought or sold.
for investment purpose selection of good liquidity stocks from different sectors needed.
Yes. We will build a portfolio of 5 shares, each from a different sector.
We call it the core-portfolio, this is for long term
We also build another portfolio with 3 to 5 stocks for short term. We call it non-core.
Will tell this in upcoming classes.
It is a very important fundamental factor in our stock picking. Simply said, when the promoter of company needs huge quantity of money, he pledges the shares as collateral (security) with a lender (such as a bank).
We believe going to that extent of loans isnt a good trait. Hence, we will avoid investing in such companies.
Does recession affect long term investment ? for explaining Pledge share
Recession is a period when companies find it difficult to get loans or raise their capital. It is this time that promoters go for pledging the most. And if the capital is used properly, it will be good for the promoter and the company. If the promoter fails to repay, it leads to company shares going into the hands of competitors .. and there by a possible hostile takeover by a competitor.
Thanks Vijay sir but request you to come up fast on that because market seems to be recovering now.
@Tiwari: The market is always full of opportunities at all times. And do not hurry or time the market. Slow and steady still makes you win the race.
Good Evening All!
Welcome to todays session.
Let us do a quick recap of what we discussed yesterday.
1. There are three popular stock exchanges in India - NSE, BSE and MCX
2. We discussed about how stock exchanges work (stock broker, exchange etc)
3. Later we discussed about market opening (including about pre-opening session) and closing timings
4. And about four types of prices for a stock - Opening price, closing price, day high and day low.
5. We also discussed about gap up and gap down
I hope the topics are clear.
Let us continue the topic
How gap up or down opening happens ?
Between 9:08 to 9:15, the exchange does order matching.
and then depending on the best matches on both buy and sell sides, the opening price of the stock is determined.
This matching is called "price discovery".
Now let us get to some cash management aspect of investing.
If you want to invest in equities for the long term,
use only that money that u do not absolutely need to use right now.
Do not borrow or take a loan or close a FD to invest in equities.
Do not exit from another investment instrument to invest into equities.
Understand that there is a possibility of losing some or all of your money if you make a wrong investment.
In intraday, the result comes at the end of the day. Either u gain or loose
But in investing, u have time on ur side.
So profit or losses get postponed till u realize them. i.e only when u sell the shares
So as long as you hold the shares, the profit / loss is only notional.
Investing is an ongoing process.
U shd be in the market in upside market and downside market.
Do you know that ...
Near to 80% lose money in stock markets.
Most people *exit* or stop when *markets fall*
and *enter* when *markets are up*.
Actually, doing the opposite is what they have to do.
We should buy when shares are cheap or low in terms of valuations
and sell when they are at highs.
Invest only if you are fearless or if you are ready to face risks.
If you fear about risks, you should avoid equity markets.
For those who do not want to take risk, there are several other options - like Bank FD, Bonds, Debentures etc. which are basically low risk asset classes.
Basically, u shd understand that there is a risk involved.
So, investing is estimating risks and making careful investments.
Lets move to the next topic:
- Preparing an investment plan*
The first important question you should answer for yourself is:
How much money can u invest in the equity markets per month?
The amount can be small or big. But it needs to be certain.
Also, you should try to committ for the same amount for month after month.
Always come to the market with a proper plan.
Do not come to market and then start preparing ur plan.
Do all your home work overnight and well before opening ur stock market trading software.
Because once market opens, there will be lots of destractions.
There will be lots of stocks to track, lots of news and data that keep coming in etc.
To invest for the long term: *Fix some monthly budgeted money*.
How ever big or small the money is, fix the *budget*. And once fixed, stick to it.
It is important to fix a monthly budget amount. There is no need to put in more money or less money than the budgeted money.
It can be 1k, 5k, 10k, 20k or whatever per month.
Try to invest the same amount every month.
In a month, we will generally have *25 trading sessions*.
If my monthly budget is 10k,
my daily budget is Rs. 10k / 25 sessions = Rs 400 per day
For some Rs. 400 is a big amount.
For some it might be small amount.
Do not compare or compete your budget with others.
Always stick to this budget.
Use this daily budget amount of Rs. 400 to buy every day on all trading days of the month.
Do not buy more or do not buy less than the daily budget amount.
Stick to your budget amount for all days of the month.
Do not get tempted and buy more or buy less.
Do not skip a day thinking market is up today. So tomorrow it will be down.
Do not use your self intelligence or follow others words.
We are not trading. We are into investing. And that too .. for long term investing.
Remember than amidst the market buzz, your neighbour is as good and as confused as you are (in most cases)
You need to keep investing in the markets on all days - good and bad !
We are working on an disciplined investing method that does not time the market.
Yes! We are not attempting to time the market.
This means, we will invest in the market even when it is up or when it is down.
Understood about daily budgeting?
We shall continue later.
In particular, we shall discuss about *methods of investing*
Quick recap of what we did today:
1. Understood what are Investing and Trading
2. Stock market timings
3. What is long term investing
4. Preparing a daily budget for investing
Those who feel sleep, pls hit bed. We all have offices tomorrow! No new concepts for now. Only clarification of doubts
1 doubt on closing time, market closes at 3:30 pm but still we can see price movements in the stock and finally closing price changes
Price changes do not generally happen after market closing. Stock exchanges will do some settlement of orders (such as auctioning of shares etc). Rarely happens. And we shouldnt be bothered about them.
There is one possibility though!
There is a post-closing session from 3:40 PM to 4:00 PM where exchange sets the last traded price and allows either buying or selling or shares.
But do not try to time this. It is safe to assume, markets will close at 3:30 PM
Vijay Ji, can you plz elaborate a little more how pre open settlement is done how the opening price is determined?
During the pre-open window of 9:00 AM to 9:07 AM, every one puts their orders.
After 9:07 AM, stock exchange looks for matches.
It will search for the price where there are most qty of buys and most qty of sells.
That price is usually will be the opening price at 9:15
1 doubt on gap up /gap down opening sir Will it only depends on price matching...or any impact of Nifty opening ?
Gap Up / Down is compared with previous day closing with the next day opening price at 9:15
Gap Up / Down has nothing to do with price matching because until 9:15, the final price might not get determined and we cannot confirm if it is a gap up or down.
Sir if someone budget monthly is 10000 RS and he want to invest in RS 500 per share stock how could he sip ??
We shall discuss about that budgeting process using *Investment methods* in our next session.
Vijayji have seen slight differences in the last traded price and closing price. Why is it happening
Because of the post-closing session.
After 3:30 PM, the exchange will check the last few trades.
It will try to find out if the last trade was made to artificially go high
Usually, the exchange gives the correct closing price at 3:40
Lets' not dig more into how it is done. Will confuse others.
It is safe to assume the 3:30 PM price is final.
In intraday ...in case if we didn't sell the shares ...it will automatically exit from our account and present value of share ll returned..right?
well. it will automatically exit in the same and ur profit / loss will be adjusted to ur ledger
If u have bought some shares in cash market u will have to take delivery if u don't square off
I wanted to know about open interest build up. ..and how it affects share price
Open Interest is a little advanced concept. may be we will deal with it later at the end or on some other day. I am planning an F&O Segment session some other weekend.
Yes. Square off means automatic closure of ur intraday orders by the broker
happens at 3:20 with most brokers
If buyers are more than sellers thn is it sure price will go up?
In a way yes. But because there will be disclosures, there is no sure way of confirming.
Hi All !
Welcome to our 3rd Day on learing Equity Fundamental Analysis.
We will do a quick recap about what we have discussed yesterday.
1. Investing and Trading are risky and there is a possibility of loss of capital.
2. Trading is more riskier than Investing
.. because of pressure to close positions by the end of the day.
3. Investing requires lot of patience,
.. for analysing and identifying the right company,
.. for investing and to book profits.
4. Our focus will be *investing* in equities *for the long term*
5. We discussed terms like Demat, Delivery etc.
6. *Long Term Investing* = Buying shares and holding them *for more than 1 year*
7. *Short Term Investing* = Buying shares but selling them *in less than 1 year*
Now lets start our topics of the day.
- Stock Exchanges*
We already know that, in India, we have two or three stock exchanges.
We already know the full forms of NSE and BSE
MCX = Multi Commodity Exchange
It is a stock exchange where we trade in commodities (such as gold, silver and agri commodities like sugar, pulses etc)
Our focus will be mostly on NSE and BSE because that is where we can transact with company shares.
When we want to buy or sell stocks, we have to send the appropriate buy or sell *order* to the stock exchange.
The order is sent from our PC / Laptop to the *stock broker*.
The stock broker then forwards our order to the *Stock Exchange*
The Stock Exchange
=> collects all such orders and
=> does matching of buy and sells for a given price and
=> then send back confirmation to you.
At the end of the day, your stock broker will send you three important files:
=> Contract Note
=> Day Bill
Sir what is ledger?
Ledger is the account maintained by the stock broker telling how much cash goes in and out of your trading account.
These are your proof for the transactions.
If you already have a stock trading account and buy / sell shares,
remember save these files on your PC / Laptop for offline use.
I will tell you the importance of these files in later classes.
Now, lets move on to the next topic.
Cash Market or CNC
Cash market or Cash Sement or CNC means the same.
When we transact in this segment, we need to have cash in our ledger account of our broker to buy shares so as to trade or to take delivery.
Margin or Margin money is the temporary money that the stock broker gives (based on the collaterals we hold with them - such as the existing shares in our demat) so that we can do Intraday trading.
Most brokers usually allow this so that you can trade with more money than your really have in your ledger.
The quantum of margin that is allowed will differ from one company to another and from group to another group (Usually A and B group shares are given higher margins; No margins are generally given for XC and XD group companies).
The margin amount also differs from one stock broker to another.
- Initial Public Offer (IPO)
- Offer For Sale (OFS)
- Market Timings: Pre-market, Post-market, After Market Order
- Grey Market and Grey Market Premium
- Price Quotes