Trading and investing are completely different in nature.
In trading, we don't care about the prices whether it's fair or not.
We buy high and sell even higher.
But in investing, we should only buy a stock near its intrinsic value. No matter if everyone is making money except us. But, price which is justified by fundamentals are sustainable and proved sustainable historically.
"Intrinsic value is upgraded or declined based on fundamental changes. I amend my intrinsic value every year based on the growth of the company."
So here I am with a stock named HCL Tech. According to my method of calculating intrinsic value, it's not worth more than ₹700 a share.
It has broken its daily trendline on charts. And I am expecting it to come at least near my intrinsic value. Well, this will not happen overnight, it may take several months, to several years.
But, what if the stock didn't come down to my intrinsic value?
I won't buy it for investing. Never.
Short term trades can be taken, which can even last for several months, but for investing? Nope.
Disclaimer: The views expressed in this article is of my own, you're solely responsible for any decision taken in the markets. The analysis I've shared is just for informational and educational purposes only.
In trading, we don't care about the prices whether it's fair or not.
We buy high and sell even higher.
But in investing, we should only buy a stock near its intrinsic value. No matter if everyone is making money except us. But, price which is justified by fundamentals are sustainable and proved sustainable historically.
"Intrinsic value is upgraded or declined based on fundamental changes. I amend my intrinsic value every year based on the growth of the company."
So here I am with a stock named HCL Tech. According to my method of calculating intrinsic value, it's not worth more than ₹700 a share.
It has broken its daily trendline on charts. And I am expecting it to come at least near my intrinsic value. Well, this will not happen overnight, it may take several months, to several years.
But, what if the stock didn't come down to my intrinsic value?
I won't buy it for investing. Never.
Short term trades can be taken, which can even last for several months, but for investing? Nope.
Disclaimer: The views expressed in this article is of my own, you're solely responsible for any decision taken in the markets. The analysis I've shared is just for informational and educational purposes only.
Comment:
Always buy in lots. Allocate you capital dedicated for a particular stock in at least 3 parts. If it fall more, you buy another lot. And don't put all your eggs in one basket.
Comment:
Sorry, I made a mistake in calculating Intrinsic Value. According to Sir Ben Graham's method, its IV is around Rs 1141. It's better to start accumulating shares NOW. HCL Tech looks good as compare to TCS, INFY and Wipro according to this formula.
Always buy in lots. Buy next lot as you like but slow & steady.
Disc: This is not an investment call, please do your own analysis.
Always buy in lots. Buy next lot as you like but slow & steady.
Disc: This is not an investment call, please do your own analysis.
Trade closed: target reached:
This price seems good to sell. I would pull my capital (sell some shares), and leave the remaining shares as it is.
Comment:
I have written this article in my early days of learning. My perspectives and opinions have changed a lot. You must have noticed, I have "copy-pasted" multiple sentences that I've heard from various sources. Some of them doesn't work anymore. For e.g. intrinsic value is a very very "subjective" topic. It differs from person to person. Sometimes it includes a lot of "expectations" of future earnings from analysts as well as individuals. Survival of fittest holds absolutely true in the markets as well. So you have to "have your own edge" to succeed in the markets. You shouldn't blindly follow me or some random joe or friends/family or news TV analysts. "Have your own edge and keep polishing it!"
Comment:
I expect anyone who is reading my writings to know that there is nothing "certain" in the markets. Neither the %gain on stock nor "out-performance" or "under-performance". There is a risk and opportunity cost involved in both, buying and selling. Selling at any price can often result in "opportunity loss" when the stock moves higher and higher. Human psychology is a culprit here. For e.g. I post any stock which seems undervalued or overvalued to me on tradingview. When anyone makes money on that, they wont appreciate me "a single word". But when they lose or it results in opportunity loss, they are bound to blame me. I don't criticize any person, because I know their psychology has defeated them. At last, there is nothing like "easy money" in the markets. The survival of the fittest holds absolutely true here.