Tips & Ideas for Getting a Higher Return from Share Trading

As you all know investing is the best way to grow your money. All of us are now more interested in making more and more money with our investments. However, the truth is many people around the world don’t know where to invest their hard-earned money. Please read my blog to know how you can grow your money by getting a higher return because I am going to share with you how you can do this. There are many investment options available today. You can expect an average return from them.

• Savings Account – 3.5% to 7.1% per year
• Fixed Deposit Account – 7.10 % to 9.50% per year
• Mutual Funds – 10% to 20% per year
• Stock Market – 15% to 28% per year 

These are based on Indian scenario. However, you can also investment your money in real estate, insurance policies, bonds and commodities.

Out of the many investment options, the stock market is the best option for getting a higher return.

Things you need to remember for getting higher return form stock market:-

• Risk & Reward Ration: 

The risk & reward ratio refers to how much you want to lose and how much you want to profit. If you want to be a successful trader then you need to consider the ratio. Most probably if you maintain 1:1.5 risk and reward ratio then you will be successful. For an example, if you have bought a stock at Rs. 10,000 then your profit target must be 15% and your trigger price (stop loss) 10%. That means you should sell your stock when the stock price increased to Rs.11500 or decreased to Rs. 9000 from Rs.10000. Now, If you have bought 5 companies shares at Rs.10000 each, that means your total investment amount is Rs.50,000 and out of your 5 shares 3 of them have reached the target and 2 of them not, and you had to sell these 2 at stop loss. Your profit will be Rs. 2500. That means if you earned 5% return in short term.

• High Returns with Low Risk is the Key: 

Warren Buffett says, “Never invest in a business you cannot understand.” Do a research yourself or ask your financial advisor before buying stocks. There are many blue chips stocks those can give you higher return with minimum stock. I always suggest my family members, friends and relatives to invest in blue chips stocks where risk ration is very low. So, target blue chip companies. Never ever invest in stocks if you don’t have any knowledge about them.

• Invest in what you know: 

Do not put your money into any unknown stocks. You don’t need to find hidden stocks and invest as per your broker or friends advice. Research for growing companies around you. Study if they are blue chip companies or not, study fundamentals of those companies if they are financially strong or not. This is the most effective way to invest and earn money from investing in those companies.

• Pay low brokerage: 

Most of the stock broker’s brokerage is very high. When you do intraday trading or delivery based trading they take most of the profit from you as a brokerage. You need to find the discount brokers who take the lowest brokerage from their clients. Your earning profit will be maxed if you are able to cut down your brokerage percentage by finding lowest brokerage taking Stock Broker.

• Always avoid panic: 

Panic is an emotion that forces us to take a wrong decision. In a panic, we always sell our stocks when time suggests for buying and buy the stocks when perhaps these should be sold.

• Learn when to swim with the tide:

It is shown that market pays the investors when they go against the prevailing trend. In a normal situation, the average investors do not necessarily swim against the tide. In the other words, do not buy the stocks if the stock price is falling, wait until the buying pressure is coming back on the stock.

• If you are a new investor then be prepared for some small losses. To become successful in the stock market you must tolerate some small losses. 

• Persistence is most important when you are learning to invest in the stock market.

• Always try to avoid types of investments that are volatile, such as futures, options, currency and foreign stocks. 

• For identifying winning stocks you need to learn fundamental and technical analysis. 

• Remember History always repeats itself in the stock market.

Patience and thorough analysis are most important in the stock market. Once you have picked right stocks for investment then go for it, otherwise, you may miss the flight. Just think about the people who are still kicking themselves for missing the impressive rise in companies, such as Reliance and Infosys etc. Stock trading isn’t about predicting what is going to happen it’s about proper plan and knowledge.

How to Buy Mutual Funds – Full Guide

There are so many interested people who want to invest in mutual funds but do not know how to start. In this blog, I am going to guide you step by step. There are many questions can be raised before start investing. How to open a Mutual fund account? How to pick right mutual funds in the medium term and long term? What documents do you need to submit? What do you choose lump sum investment option or SIP?

How to open a Mutual fund account?

Frankly speaking, there is no such concept of a mutual fund account assuming if you are thinking of a bank account, Demat account or trading account. You can directly purchase mutual funds units without such accounts dedicated to MFs. When you purchase units the fund house will allow you folio numbers similar to an account number.

You can also open an account with a broker who provides online service, for an example, you can open an online account with Sharekhan. From here you can buy and sell your mutual funds yourself. You also can ask them for an advice related to the funds which will suit you. 

How to pick right mutual funds for short term and long term?

Mutual funds are always the good investment option if you wish your money to be growing over a period of time. Wide ranges of mutual funds are available to invest today. Whether you are thinking about capital gain or seeking regular income mutual funds are best options for you. Calculate your financial goal and investment period first and then decide accordingly which mutual funds are going to serve you most. There are many types of funds are available for investment namely:

•    Money market funds

•    Fixed income funds

•    Equity funds

•    Balanced funds

•    Index funds

•    Speciality funds

•    Fund-of-funds

If you are young and want to invest in mutual funds for long-term, then invest primarily in equity growth funds rather than debt funds. But if you are a retired person, then debt funds would be a perfect choice for sustainable income. If you are thinking about investing for a short period time then ultra-short -term debt funds would be the best option for you.

Short Term & Long Term Period:

According to the tax rules if your investment holding period is for 1 year or less then it is considered as a short-term investment. And if you hold your investment for more than 1 year then it is known as long-term investment. For equity funds, capital gains generated from short-term investment are treated as short-term capital gain and taxed accordingly. Whereas, capital gains generated from long-term investment are treated as long-term capital gain and taxed accordingly. For debt funds, the holding period is treated differently. If your debt investments are sold for 3 years then it is treated as short-term capital gain and when it is sold after 3 years then it is treated as a long-term investment and taxed accordingly. Long-term investment is always best but you can also take the opportunity of the short-term investments too.

Documents you need to submit for investing in mutual funds

Buying a mutual fund today is not a daunting task. It is super easy. You could even do it online within a few minutes.

• Application Form: This is the most basic requirement. If you wish to start investing in mutual funds. You may need to fill more than one application form. One for opening a mutual fund account and another one for a SIP plan if you opt this option too. If you wish for an electronic transfer from your bank account, an ECS form will also need to be filled.

• KYC Compliance: KYC (Know your’s client) norms have been made compulsory for everybody who wishes to invest in a Mutual fund. You need to submit your KYC acknowledgement along with your Mutual Fund investment form. KYC compliance proves that you already have a pan that’s why you no longer need to submit your PAN details. Go to the website www.cvlindia.com and then click on “Inquiry on KYC”. A pop-up window will appear on your screen and ask you fill your PAN number. Fill it up and then submit it for verification. Once your KYC is approved you will be notified on the screen. You need to take a printout of it as a proof.

Proof of Identity: (Any of the following documents are required)

-    PAN card

-    Aadhaar Card

-    Passport

-    Voter’s ID

-    Driving licence

-    And Identity card with applicants photo issued by the approved organization

Proof of Address: (Any of the following documents are required)

-    Aadhaar card

-    Driving licence

-    Passport

-    Voter’s ID card

-    Ration card

-    Registered lease/sale agreement of residence

-    Flat maintenance bill

-    Insurance copy

-    Utility bills such as electricity bill, landline telephone bill, or gas bill, less than 3 months old

-    Bank account statement/passbook, less than 3 months old

-    Any other documents issued by the approved organization. 

• Cheques required for lump sum amount or SIP as per your choice. Cheques are not required if you want to do investments online.
• GST rate of 18% applicable for all financial services.

What do you choose lump sum investment option or SIP?

You want to invest Rs.10,000 in Mutual funds. You can invest Rs.10,000 in mutual funds in one shot (lump sum). Or you may want to invest Rs.1000 on a monthly basis (SIP). 

1st Month – NAV 13

2nd Month – NAV 14

3rd Month – NAV 12

4th Month – NAV 15

5th Month – NAV 17

6th Month – NAV 20

7th Month – NAV 18

8th Month – NAV 19

9th Month – NAV 21

10th Month – NAV 20

Suppose you have invested lump sum Rs.10,000 on 1st month and sold in the 10th month. Your total mutual fund's units are (10000/13 = 769 units) and your profit on 10th month is you sell is (769*20 – 769*13= Rs.5383 approx.).

For SIP your total units will be (10000/(13+14+12+15+17+20+18+19+21+20/10) = 592 units), So the profit here is (assume you selling on 10th month at NAV 20 (592*20 – 592*16.9= Rs.1480 approx.).

It is up to you to choose what you will prefer sometimes lump sum investments win and sometime SIP.

You can follow my blogs Basic Knowledge of Mutual Funds for the Beginners & Benefits of Investing in Mutual Funds to know more about mutual fund investment. 

Mutual Fund Investment Tips

There are so many schemes out there for investments. You can choose from including mutual funds, fixed deposits, recurring deposits, insurances, stocks, and bonds, etc. Among these schemes, mutual fund investments have appeared as one of the most attractive schemes in recent times. You can expect higher return compared to the other investment schemes except for stocks. The most interesting part is that investors don’t need to invest their time to monitor their investment. Professional Mutual funds are a convenient investment vehicle for individuals with no previous knowledge about investing for a small fee. 

Mutual Funds have increased generous reputation in a previous couple of years, maintained by their reliable performance at least partially due to the liquidity-driven rally in equity markets not just in India but also globally. In this way, whether you are a novice or an experienced investor, you can start investing in mutual funds and watch your wealth grow in long run. You can expect at least 15% on an average return in medium to long term.

Let look at the advantages of mutual funds - Mutual Fund Investment Tips:

Diversify investment amount:

Diversify specifies reducing risk in investment. Let’s say you work from your home for your office and you only have a single internet supplier at your home. And you are working on an urgent task and internet connection gets disconnected due to some reason. You won’t be able to complete your task within the scheduled time. But if you have two connections then you can always use your alternative connection to complete your tasks. Every mutual fund spreads the money across a large number of investments. In any well-managed fund, this extent is balanced not just across different companies but also across different sectors, thus providing optimal safety. The pleasant thing about mutual funds is that they allow everyone to hold a diversified portfolio. The reason why investors invest in a diversified portfolio is that it raises the expected returns while reducing the risk.  

Professionally managed by the fund managers:

Mutual funds appoint investment experts known as fund managers who are reinforced by a team of research analysts with a number of years of experience. They find the best stocks in the market and track their performance on a regular basis to guarantee that they deliver high returns to the investors. All you need to do here just pick the right mutual funds for investment. And then fund managers will do the rest. This isn’t to say that you shouldn’t review your investments in mutual funds. You positively should, but not too frequently. If you’ve chosen your mutual fund sensibly, reviewing it once a year is usually enough.

Liquidity & Lock-in period: 

The mutual funds are the hot favourite for the investors because of the liquidity. Investors have the benefit of getting their money back almost suddenly in case of mutual funds, based on the NAV (Net Asset Value) at that time. The only thing you need to watch out for is exit load, which may apply to particular funds. There are two types of mutual funds, one is open-ended and another one is close-ended. Lock in period is not available on open-ended funds. Open-ended funds can be traded like stocks. You can sell open-ended mutual funds based on the Net Asset Value at that time when you need money. I personally won’t recommend you to sell your mutual funds until you have reached your goal or underperforms. 

On the other hand, the unit capital of closed-ended funds is fixed and they sell a particular number of units. You cannot buy a closed-ended fund after its NFO period is over unlike open-ended fund. Therefore, new investors cannot enter nor exit before the specified period. 

You Can Invest Small:

You can start investing in mutual with a very small amount. For example, you can invest as low as Rs.100. Some funds like Reliance Small Cap Fund allow you to invest starting with just Rs.100. There are so many good performing funds are also available for investing starting with Rs.500 as well. And most other funds will let you start investing with just Rs 1000.

You can also choose between two different investments styles – lump sum and SIP investments. For a lump sum investment, you pool your capital and invest in the form of a huge single investment at a favourable moment. On the other hand, a SIP is a smaller investment made at regular intervals, usually on a monthly basis, over a period of time in a mutual fund of your choice. The SIP is perfect for investors looking for a controlled methodology to making mutual fund investments.

Tax Efficiency:

When you are buying selling stocks yourself then you have to pay taxes on the profit you make. But this doesn’t happen when that buying and selling is being done on your behalf by a mutual fund. Fund managers could keep buying and selling stocks as needed on your behalf. That’s why you only have to pay taxes when you are redeeming your mutual fund units.

All mutual funds companies come under the preview of SEBI and they need to make required disclosures. All the stocks your mutual fund held are known to you. Fund managers qualification and track record are known to the investors. The net asset value (NAV) of the fund is updated every day. Mutual fund investments are also very safe when you redeem your units; money goes straight into your bank account.

Beginners Guide to the Stock Market

The stock market can look a rather intimidating experience to a beginner. But the truth is, with depressing returns on offer from banks, bond, insurance, fixed deposits and from other sources, investing in shares provides an opportunity to achieve much higher returns.  

Let’s talk about stock market basics:

Stock Market is also known as Share Market or Equity market. It refers to the marketplace where shares or stocks of a limited company are bought and sold in an exchange. Both buyers and sellers encounter to buy and sell shares of the company which are listed under them. NSE (National Stock Exchange) and BSE (Bombay Stock Exchange Limited) are two main equity exchanges in India, where there is a benchmark Index for both exchanges. Nifty is the index of NSE and Sensex is the index of BSE. Nifty is a composition of 50 stocks traded in NSE and Sensex which is a composition of 30 stocks traded in BSE.

Primary & Secondary Market:

The stock market is divided into two markets one primary market and another one is a secondary market. The primary market is where the companies list their newly issued share to the public. These newly listed stocks can be purchased directly from the company through the primary market. This issuing process is called IPO (Initial Public Offer). On the other hand, the secondary market is much bigger than the primary market. Here the shares bought from the primary market may be traded further in the secondary market. All companies shares can be purchased or sold on the secondary market.

The following accounts are needed for trading in stock market.

• Bank Account

• Demat Account

• Trading Account

These 3 accounts are separate accounts. You need a linked bank account with your broker because when you buy stocks or shares you need to transfer money for trading also you can withdraw your money into your account when you sell your stocks. Demat account is like a bank account where your shares are kept in electronic form. A Trading account is an account which is opened with an exchange registered broker for buying and selling of stocks.

Delivery and Settlement:

When an investor buys shares and does not sell them on the same day. He/She holds the stocks for more than 1 day then he/she receives the shares in his/her Demat account. This is called delivery. If you purchase a share on Tuesday then you will be getting your shares on Thursday. This process is completed in T + 2 days, T refers trading day. These processes of the buyer getting his shares in his Demat account and the seller receiving his money is called settlement.

Few things you should always remember as a beginner:

• Do not invest money you cannot afford to lose. Make sure you are investing slowly. Don’t rush of stocks which are jumping. When you have realized gains from one or two stocks, you can go for reinvesting that gain which is now your capital. 

• Do not invest all your money just into 1 to 2 stocks. Always try to diversify your investment on investing at least onto 5 to 7 shares. That will definitely help you to survive in the stock market. It is very obvious that out of those 5 to 7 stocks 1 or 2 stocks may not perform well. 

• Do not invest in stocks if you don’t have any time to research. Always do research the stocks that you are going to buy. Never ever buy a stock without a proper research. Stock trading should be considered as a part-time job. Like any job, your skills will suffer if they are not regularly practised. If you do not have time to exercise, consider investing in mutual funds instead. Never invest in a company share. Invest in a business instead. And invest in a business that you understand. That means, before investing in a company, you should know what business the company is in.

• Don’t buy stocks high: Beginners should be very careful when they are buying stocks. Don’t buy stocks when the stock market is in high. Always buy stocks when the market is in panic and sell your stocks when the market is up. Stocks may be trending upwards at a great pace, in that case, wait for the stock for the correction. Don’t jump to buy the stocks, always wait for the market to come down.

• One more thing you must remember before buying stocks. Your stocks may come down, for an example, you have purchased a stock X at Rs.500 as you think it’s the best price and time to purchase. But in reality, it may come down further may be from 500 to 300. Don't despair or pull your money out at that time. Because Stock trading is a long-term investment and it requires patience.

• Plan your investment precisely:  you need to make sure what you want to achieve, how long you are planning to invest for and how much risk you can take before buying stocks.

So get a pan card, select your broker, get a trading and Demat account in your name and start researching and trading and keep following my blogs…..