Post Updated , Read it again if you read it before .
This is a follow up post on Akruti City saga .
While I write this post on Friday Evening 20th Mar 09 , Prices of Akruti City has crashed by 28% with better than average volumes on NSE , and may even fall more . This is happened because SEBI banned it from F&O from next month . In my previous post I mentioned that retail investors must stay away from these kind of companies .
The scrip has gained more than 250% from Jan 09 , and has doubled in just 5 sessions . this kind of behaviour is unjustified and hence it had become a dangerous scrip to trade in .
There was a Evening Star Pattern seen today , which is a bearish Signal . This tell that its something to be cautious of .Though its a signal to sell , but dont just go and sell , wait for the first sign of confirmation again . Overall markets upmove can again take it high again .
So wait for next downmove to consider selling incase you have made your mind to do so . The better thing would be to stay away .
In my earlier post I had mentioned about this , Read it here
Though the reasons are not directly related to company inside news or anything . the point is simple , Whenever it comes down , it will be a heavy move and it has happened . Any one who had invested 1 lac a day before has now worth of Rs 75k. It may go further down or again go up . that’s is not the point .
The Point is Was it a Good investment ? Think 🙂
Read detailed new about Akruti City’s Drop in Prices here
If you are watching Markets , you must have seen the movements of Akruti City . This company is a Mumbai based Company . The shares of this company is on the roll from last 10 days . In just 1 week it has zoomed from 994 on march 9th to 2145 on Mar 18th , that’s roughly a week .
Note : Please vote on the question asked on the upper – left hand side of this blog .
Also see the update on Jaiprakash Associates after todays markets action on my analysys blog , click here
So, Now the company market capitalization (13421 Cr) is second highest in Real estate sector , just next to DLF (29229 Cr) . Its suddenly 3 times more valuable than Unitech !!
see list of real estate companies with market capitalization
My God !! , whats going on !!
90% of the equity is with promotors , and a very small fraction is with retail public , you can understand that everything going on is just the “kartut” (hindi word) of minority public .
Agreed that anyone who has entered the stocks some days back or 2 days back or 1 day back has made exceptional profits , But is it a right decision to invest in this as of now for short term gain or to ride the trend . A big NO!!
For sure some insider trading is going on with company , that’s the reason why stocks has gone mad . Retail Investors must not get very excited with these kind of things , These kind of sharp moves are not sustainable , to move in a healthy way , the stock must form a base (spend some time in a range ) and then start its up move slowly and with some corrections in between .
These kind of mad up moves without any pauses and slowdown are nothing but a bomb ready to explode .
If like someone who just entered the trade 1 week back and made 100% gains , other person can also loose 60-75% in just 1 week from now onwards . If you put money in this , Its not investing now , its Gambling !!
Suggestion : please stay away , Dont forget the mantra of “Not loosing money” rather than “Trying to get fast money” in stock markets . If you are bothered about lost opportunity , I can bet there more opportunities in market every day than all the combined opportunity in the world in all other aspects of life . Wait for just 1 day and you will get thousands of opportunities again .
see detailed news on :
Note : Please vote on the question asked on the upper – left hand side of this blog .
This is one of the questions which everybody wants answer to . You can do it , but it will require some effort, learning and dedication. Also you will have to develop some kind of discipline and change your attitude a bit.
We shall first see who all are into Direct Equity Investing. They are Mutual funds , FII’s , Big experienced Investors with high experience and qualification . These people are 24/7 doing this job of researching the companies for long term investing . And even these people do mistakes and even they can predict markets directions always .
So now you can be one of the two kind of people.
1. Someone who has no interest in the markets and have no desire to learn things on his/her own.
They want to earn better returns than debt, but at the same time without bothering much. Then you better invest in mutual funds (SIP would be a good idea).
That way you can get returns over long term and don’t have to put much effort (apart from choosing good mutual funds in the start and monitoring them once in a while in a year, which is not a big deal).
2. Someone who is ready to take more risk and can also devote some time to do his own study of stocks (not a big one, but basic atleast).
He has better than average interest in these things and also enjoys the stuff. If you are one of those than you can put some money directly in shares of companies after your own research and understanding, it can be any way you are comfortable with. You should learn some basics of Fundamental Analysis and then apply it.
For example:Â I can say, that After RPL – Reliance Merger, Reliance will be among the biggest refineries of the world (it was anyways, but now in better position), It has lots of exploration projects going on and company’s is in safe and great management (as per the current information).
On the top of it Company has great valuations, and is available at many years low price and now overall markets are near its bottom. Just by looking at these facts, you can understand that it would make sense to BUY Reliance for long term, better accumulate it over the next 6 months, to catch the volatility too.
Can we go wrong and it may not give us good returns?
Definitely yes, Markets are the place where you should expect the unexpected. But at this moment that’s the best we can do and should do.
Can you do better than Fund managers of mutual funds?
Some people may answer yes , and may be they are true, But personally I would say at this moment I can’t do better than them. Reasons are as follows:
They are doing it from last 10 yrs, I might be doing it from last 6 months or 1 yrs (personally i dont do any ).
They are highly expert and qualified people. I learned accounts till my 12th only and it really sucks for me.
They have access to internal information and resources to do better research. I don’t have it.
So, I may be able to pick a company once in a while which gives 100% in 6 months against there 20%. but over long term, chances of there sustaining in the business is very high. So think long term. Don’t over estimate yourself.
You should understand that i am not trying to tell you cant do it. I am just trying to make sure that you understand your position in this game and your abilities to do things.
I personally like to do things on which i am good at and transfer the responsibility of other things to experts in that field. If I want the joy of it anyways, I will take a small portion of my portfolio and will play with direct equity. That is allowed 🙂
Watch the video given below to learn everything about Direct Equity:
Why Mutual funds Makes sense for Retail public?
Mutual funds are the products which are formed on the philosophy that many inexperienced and uninterested people who have money but no knowledge will pool all the money together and hire a person who has experience, understand the markets well, and can take better decision.
This person also has all the time dedicated to investing, so that thousands of investors don’t have to monitor the investments and the returns which will be generated will be distributed to investors after paying this fund manager for services.
So it makes sense you any one like you , who may be a Software engineer, Doctor, businessman or another person, who has no time for all this investing thing. Its you who have to decide who you are?
Don’t fell in the trap of high returns, With high returns comes the disaster too.
“Good return with some risk is much better than Exceptional returns with catastrophic losses”.
I hope this article will prove helpful to your. Leave your views about this article in the comment section. You can also ask me if you have any query.
Let’s see a good Equity Diversified mutual fund today, DSP Black Rock Top 100, is an old fund, Its name was DSP ML Top 100 earlier, but now its renamed. It comes from one of the best Mutual funds houses DSP Black Rock.
The fund has very good record and consistently outperformed its Benchmark. To get more information see here
Returns
If you see last 1 years returns its only -35%, which is much better than others who have given close to -50% return.
1 yrs : -35%
3 years : 1.2%
5 years returns : 15%
Since Inception : 29%
It has consistently outperformed its category average by good difference. Which is one the evaluating criteria.
Portfolio
Its portfolio is well diversified with high concentration on Large cap companies (50%), which is good.
Derivatives usage : There is one point to note in the portfolio is that the fund also uses tries to take advantage of Futures (derivatives). This is a smart action, considering Fund manager understand the risks. Else it can be disaster.
Rating
Its rated as 5 star fund and is places in Low risk High Return Grade by value research online. Though we should not put lot of focus on ratings, its one of the things to look at.
Conclusion : Overall the fund looks good. We have not done any detailed analysis but see it in a way which should be done at the minimum level by an average investor. The main thing is not the product, its the usage and utilization . You can take a normal fund and make most out of it using SIP and portfolio re balancing.
Please do your own findings and see if the fund fits your risk-appetite and criteria. People who want to invest money for atleast 3-5 yrs and without putting lot of efforts on monitoring the market , can invest there money using SIP in this Fund.
Keep the money invested for at least 3-4 yrs, and keep monitoring the fund performance minimum once every 6 months.
If you want to check one of my favorite scenes from movie “Socha na Tha”, see this
This post is for people who are interested in Stock markets trading, SudarshanSukhani has posted an excellent presentation on Swing Trading here, please go through it and use it incase you want to do it.
Who should use this presentation for Trading ?
This presentation is only for people, who are already experienced with Trading, no matter they make Profit or Loss. You must have some level of knowledge and experience before.
Especially for people who are trading and are yet to succeed in Trading (Whether its Stocks , Futures or Options , it may be currency or Commodities also). I also come in this “overall loss making” category of traders till now. I am yet to break even and start making some profits in Trading.
Who should not start using this presentation just after seeing this presentation ?
Anyone who is not at all related to trading and just want to start Trading. If you have not done it before, Just look at it and stay away as of now. You are yet to gain more knowledge and then enter this world, You yet need to understand what is Money Management, Trading Psychology, Technical Analysis etc etc.
If you don’t listen to me and start using the techniques given in this presentation, there is extremely high possibility that you loose blow up your account at some point of time, Just see this presentation, get the feel and save it for future reference.
Precious metals market is on a roll these days !! GOLD and SILVER are everyone’s Darling.
GOLD
Gold has given good returns from this year start and finally broke its trading range. Its expected to give good returns in future too.
SILVER
Silver has outperformed Gold in 2008 and is expected to do so in future too. But I am hesitant with an idea of buying Silver from some local jeweler. It should be bought from some recognized Bank only as per my view.
I don’t think that its a good idea to buy gold or silver in physical, People who want to do it to invest for marriage and all is OK, but still its only for Investment and to gain from the price appreciation in these metals, the best idea would be to go for ETF’s. They are easy, secure, more cost-efficient and tax efficient.
Some Notes
Silver ETF’s are still to come, currently we only have GOLD ETF’s, so given a choice of investments in precious metals, I would prefer GOLD ETF to Physical Silver even though Silver is expected to outperform GOLD in coming future.
Guys, When it comes to ETF’s, Benchmark mutual funds are the leaders, that company mainly focuses on ETF’s and manage them in a better way. So there ETF’s are recommended. (that does not mean, others are not good or can outperform them).
Many people have this concern about taking policies from Private Insurance companies. Let us try to understand about the factors which takes care of financial stability and ability to repay back customers there money.
In reality the only things differentiates one insurance company from other is the service the provide, there settlement track record.
It indicates how solvent a company is, or how prepared it is to meet unforeseen exigencies. It is the extra capital that an insurance company is required to hold to meet all the claims which arise.
In other words, Solvency margin refers to the excess amount of asset the insurance company has to maintain over its liabilities. Basically, it is the amount the insurer has to stash away in order to pay the claims during emergency.
IRDA requires the insurance companies to maintain a particular level of solvency margin for their smooth functioning.
Why is Solvency Margin there?
Companies have Assets and Liabilities. In some adverse situation, Assets are used to payoff all the Liabilities. Suppose there is company which has assets of 100, and liabilities of 100. In ideal case it would be able to payback the liabilities. But what if some adverse situation occurs and liability increases unexpectedly.
In that case company will be declared Insolvent (Bankrupt). This will be a bad situation which every customer does not want to experience.
Thats the reason, Solvency margin comes into picture, The excess margin maintained by the company provides that extra cover which may be required in case some thing totally unexpected happens.
Current Solvency Margin is at 150% for Life Insurance Companies. It means for every Rs 100 insured the Insurer should have 150 with them.
Does it mean customers are totally safe?
You must have understood Solvency margin till now, but what if some bad event of High Magnitude happens and then Liabilities of company (the claims they have to settle) crosses there total assets + extra margin, in that case they will not be able to pay back, but the chances of this happening is very very small, and generally Solvency margin takes care of it.
Some bad unexpected event like Earthquake or some terrorist attack which kills say 1000’s of people can dramatically increase Insurer’s Liability, but in most of the cases its always taken care by choosing adequate Solvency margin. But there are always that small percentage chances of the Failure which you have to live with and we cant do anything.
So what does it mean for us common Investors while choosing Insurance Products?
Solvency Margin has to be maintained by all the Insurance Companies in India whether its Private or Public sector. All the companies are at same level, Some of them are old, some are new, some are big and some are small, but its same for all and everything is under IRDA norms and scrutiny.
So decisions based on How safe or unsafe a company is not relevant now . Risk is with every company and that is equal for all.
So for people who are going to take Term Insurance, the best thing is to go with the cheapest price and good record of claim settlement. There are many new players in this market who are so new that we don’t have any long track record . like for Religare Aegon (which is my favorite).
So for term Insurance, just break your cover into 2 parts and take insurance from 2 companies to diversify the risk further.
Read tips while taking Term Insurance
Summary
This is what many people never knew and they take there decisions based on just trust and how long company has been in existence. Huh, people trusted Satyam and Lehman Brothers also, so what !!
From many years there has been a lot of mis-selling happening in some products and investors are getting trapped in it. In this article I’m going to tell you about mis-selling of financial products so that you avoid getting into this trap.
What is Mis-selling ?
Mis-selling means selling a product by giving a wrong picture of a product , it may include .
Giving Wrong Information
Giving Unrealistic Information (some times based on previous performance)
Not giving full information about the product.
Selling the product with proper information, even if it does not fit customers requirement.
Why is mis-selling happens?
Mis-selling happens because of following reasons
Low Awareness : Financial awareness is very low in our country and that’s the reason we do not understand products and how they can fit our requirement, Agents put a picture of a product in such a way that it looks the best product for us.
Competitive environment and Sales Targets : There is lot of pressure on agents and manager to show performance and sell products to meet there targets because of which mis-selling happens.
Last minute “Tax Rush” : People in India do not plan there Investments in Advance and hence at last moment they buy product just to save tax and which does not fit there requirement, and sellers take advantage of this.
Examples of Mis-sellings
ULIPS :
ULIPS are the classic example for mis-selling in this country, ULIPS are often projected as high growth, less risky products with “Insurance” in build. Ofter agents promise that ULIPS are risk free and it wont drop more than x% and return at least 10-15-20% in long run, which is nothing but marketing gimmick.
I have seen at least 100 people who have bought ULIPS and they don’t need it after 3rd year. They do not know why they bought it other than tax saving and when talked about how much Insurance cover they have, no one had more than 5 lacs.
One of my friend has ULIP for 50 yrs !!! not sure what he will do !! One of my friend has insurance of 1.25 lacs !! Insurance of 1.25 lacs !! Really, what does that mean … His/her life cover is just 1.25 lacs, he earns 5 lacs yearly !!
Even mutual funds are mis-sold, that happens when a agent recommends you a mutual fund which does not fit your requirement. Often agents recommend mutual funds which are too risky for customers without understanding there risk-appetite.
Read how to choose mutual fund ?
Insurance
One of the worst thing which has happened in India is that Agents never tell customers about Term-insurance, which is ultimate requirement for Indians, This happens because of penny like commission agents get on Term policies, that’s the reason they often lure customers with products like ULIPS and Endowment or Money back policies, which do not insure people to the extent they need it.
Agents don’t explain the importance of Insurance and only make them feel that they loose money in Term Insurance and we get lured by it, because we love “not loosing money” more than “little chances of dying and our families suffering”, this happens because people do not have enough foresight to look into future and question themselves about what will happen if they die without giving enough cover to there families.
Watch this video to know a horrific story of an insurance mis-selling:
So like this Mis-selling happens in many products.
What can we do and should do?
“Prevention is better than cure”, this saying also applies in Investing, I know of people who took wrong products and then have to live with it for 10-20- years like Endowment plans. (Read why Endowment plans are not good)
So the only thing we can do is to educate our self to the level where no one can take advantage of our ignorance. Once you come to a level, where you understand importance of things in investing and managing you money, then no one can mis-sell you the products.
One of the recent product which i will categorise in Misold category is “Jeevan astha”, The reason I will say it was mis-sold is because it tried to put its picture in a very fuzzy way and tried to put things which were confusing to general public.
Conclusion
Don’t Take any product just because it look good or is recommended by someone (not even me). Do your research and do some study, it does not take more than 1 hr to search the net and read about it, or ask some knowledgeable person whom you trust about the product.
1 or 2 hrs to study can save you pain of years, So don’t be lazy, when it comes to money no one is yours, its only you who can save you from mis-selling.
I see many people who want to try there hands in trading .
Trading means buying and selling something with a short tenure in mind. Short tenure can be day, week or months. You can trade Stocks, Derivatives like Futures or Options or you can try out Commodities or currencies too.
The sad part is that many people just enter this trading business without much preparation and knowledge and burn there hands like anything. they continue loosing money every day, week, month and cant figure out why they are loosing.
Understand some things :
Trading is a profession, and its highly rewarding in every ways. BUT !! Trading is one of the hardest thing one can ever attempt, trading is simple but not easy. It takes years for one to master it and become successful as a trader.
If you are trying to learn trading and want to do this in your life. I can suggest somethings:
Start Learning about markets and do it for at least 1 year (not 1 month)
Read good books and make sure you have read it really well.
Once you have done this. Then you should paper trade for some time, may be 2 months. After you have paper traded and can see that you can trade well on paper, then start with small money (you must be ready to loose this money) … Do some real trading with this money and see how you perform.
Trading is a highly rewarding and satisfying profession. You can earn good money and you are your own boss. Trading can be fun and challenging. But Trading is the most challenging and highly risky profession one can attempt as I already said.
Technical analysis helps in taking much better decisions for buying and selling. Its a must for short term traders, however it also helps people who have longer time horizon, With Technical Analysis you can make better entries, exits and manage your decisions well.
Some reading Material for people who want to learn technical Analysis is here
