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Process Of Value Investing EXPLAINED with chart 🎯 Understanding the process of value investing is easy. But it is not as easy to implement The process starts with screening stocks based on its history. -----Stock History: Value investing is about picking blue chip stocks at discounted price. They represent established companies which has a long history trail. Example: stock analysis worksheet does not accept stocks which has less than 10 years financial data. Warren Buffett will probably look at, at least last 15 years data of a company to estimate its intrinsic value. ----Business Fundamentals: Stock’s 10 years financial data should be checked to estimate the financial health of a company. Idea is to shortlist those stocks which are fundamentally strong. Value investors will invariably invest in only those companies which are fundamental power houses. ---Price Valuation: This is the ultimate screener. No matter how established is the company, no matter how strong are its business, it is not enough. Value investors will not rest till it calculates the intrinsic value. To be more sure of the calculation, they will also apply a suitable margin of safety. Once this is done, comparing current price with intrinsic value value will highlight if the stocks is undervalued or overvalued. Undervalued stocks becomes a good buy. Example ..Consider the case of Tata Steel & Tata Motors. These are the flagship companies of the Tata Group. Probably they will not cease to do business in next 100 years. But it is facing hard times since last 5-6 years. ..The company is doing everything to maintain the shareholders value. Today (in 2020), Tata Steel has takeover Bhushan Steel. Tata Motors has launched new premium cars. This is a hint of their competence. ..A common man must always be in look-out of such business to buy stocks. When we see the past 10 years performance of these companies, it is hard to estimate their intrinsic value. It is because, in the last 10 years, the company has not performed as well. They have been making low sales and lower profits. ..But looking ahead in future, the prospects looks more promising. CONCLUSION :- If you want to invest in stock market, you must learn to practice value investing. The investor must at least know how to value stocks of companies. This way he/she will at least not invest blindly. There are two main ways of valuing stocks. One is done using financial ratios, and other is through intrinsic value calculation. For people who do not want to go into the hassle of intrinsic value calculation can follow the financial ratio approach. But it is not as reliable. 🙏FOLLOW for more ! 👍LIKE if think is useful ! ✍COMMENT Below your view !
NSE:NIFTYEducation
by ReviveTraders
41
Cheat Sheet : Investment products at a Glance 🎯1) Cryptocurrencies: Highest Risk, Highest Return :- There are 3 main types of Cryptocurrencies in the market now which are the most actively traded – Bitcoin, Ethereum, and Litecoin. Think of this as a new version of a stock, where the underlying thesis is the idea of decentralized ownership and value. For any other currencies in the market, for eg. USD , it is debt-based and backed by the respective monetary authorities. This also means that they are free to increase or decrease the supply to implement their policies on the market. For cryptocurrencies, they are limited in supply, hence the free market is completely at play here (demand and supply). 2) Stocks: High Risk, Highest Return:- A stock (also called a share) is a part of ownership in a company. It represents a claim on the company’s assets and earnings and what that entitles you to do is to attend the Annual General Meetings (AGMs) and dividends payout if declared by the company. So essentially by buying into this company, you are betting that the management team and company fundamentals are able to get you more returns. Total Returns = Capital Appreciation (price increases) + Dividend Payout (cash payouts) 3) Exchange Traded Funds (ETF): High Risk, High Return Think of ETFs as an investment fund which is traded on a stock market. Essentially when you buy a stock of an ETF, you are buying into a basket of weighted shares. – diversification. Being actively traded also brings many benefits, namely, efficiency as well as liquidity compared to funds where often you would need to go through a long process to buy and sell the holdings. You can get a rather efficient price for your holdings at almost any time. 4) Unit Trust (Mutual Funds): High Risk, High Return An instrument whereby you pay fund managers a fee of between 0.5% to 2% yearly to manage a pool of money (fund). Essentially their main goal is to outperform the benchmark return Where it is justified if they can outperform the market, they should indeed earn that fee because they know how to navigate and invest in the market better than you. 5) Bonds: Moderate Risk, Moderate Return A bond is a type of debt instrument where an investor loans money to an entity. The entity can either be a corporate or more commonly government body. The purposes vary but it is mainly to raise funds for a defined period of time at a defined variable or fixed interest rate. if you loan the amount for a longer period of time, the % interest increases towards the maturity date. As a bondholder, you reserve the right to the future payout at the maturity date. Something interesting about bonds is that they come in various types such as a Bond ETF (where it is a diversified basket of various bonds traded on the market) or a Bond Fund (where it is an actively managed basket of bonds with a purpose to beat the bond index) 6) Endowment: Low Risk, Low Return An endowment policy is actually dressed up as a life insurance contract designed to pay a lump sum after a specific term (on its ‘maturity’) or on death. Usually, the structure is one which involves regular payments into this endowment fund held by your insurance company which then decides to invest and bring in some returns. Therefore it is a mix of some protection and forced savings plan (with a little better interest than a regular savings account normally) 7) Savings: No Risk, Negative Return This is the most straightforward of all the different options. Actually, this is not an investment option but it is planted in the illustration above to show you how much you could be losing if you put your money in a normal savings account and not touch it. I think it is clear that the main goal is to have enough rainy day/opportunity funds of about 6 months of monthly expenses in this account. Next, by optimizing for an account which gives you the highest interest rates (although usually ranging from 1.5-2.0%). We actually did a useful comparison of which accounts make the most sense for you. Guys check out the related ideas as well, it will work for you ! 🙏FOLLOW for more ! 👍LIKE if think is useful ! ✍COMMENT Below your view !
NSE:RELIANCEEducation
by ReviveTraders
22
Trading Psychology - The Cycle of Market EmotionsThe majority of traders spend most of their time looking for good trades. Once they enter a trade, they lose control and either suffer stress from losses or are jubilant with pleasure. They ride along with these emotions and forget about the essential element of becoming a successful trader – keeping emotions under control. Winning traders know the importance of psychology in trading, whilst amateurs are not aware of it or ignore it. Develop your mental framework, your psychology by reading books, attending psychology webinars, remember, trading is 70% psychology and 30% skill. If you develop your mental framework appropriate for trading, you have won half of the battle.
NSE:NIFTYEducation
by PranamGhagare
58