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View Poll Results: Stocks as a percentage of my net assets are -
0 - 25% -- I'm like the most conservative Indians. I love FDs. 219 32.02%
26 - 50% -- I have a few stocks. 302 44.15%
51 - 75% -- I'm an active trader. 113 16.52%
76 - 100% -- Hey, I'm an i-banker!!! 50 7.31%
Voters: 684. You may not vote on this poll

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Old 15th November 2013, 16:17   #2236
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Default Re: Do you play the stock market

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As I said in my earlier post, this is an Exchange Traded Fund. So you need to buy it like a stock and not like a MF - i.e. you need to buy it through your stock broking account.
Since an index fund is an ETF,

What if suppose you want to sell your fund on the stock exchange and there are no buyers?

With proper mutual funds, you can always redeem it, but Index funds - that guarantee is not there - atleast theoretically. Am i right?
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Old 15th November 2013, 16:56   #2237
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Default Re: Do you play the stock market

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Since an index fund is an ETF
Not all Index Funds are ETFs.
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What if suppose you want to sell your fund on the stock exchange and there are no buyers?
What happens if you try to sell a stock and there are no buyers? As far as an ETF index fund goes it becomes very unlikely because it would introduce an arbitration opportunity.
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Old 15th November 2013, 17:17   #2238
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Default Re: Do you play the stock market

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It is easier to understand PE ratio this way -

P/E Of 24 means it will take 24 years to "get back" the money you invested in the company IF the company's profits remain stuck at current levels. So in that way, lower the PE, the better.

Although, this concept is theoretical (because a particular company's profits keeps changing over years, and never remains constant), it is still good advice to buy stocks with a PE lower than 25.
@Smartcat. Excellent answer !!!
I was looking for this kind of explanation.

I will PM you with some more terms, Would be happy if you could provide me with the appropriate explanation. Thanks.
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Old 15th November 2013, 18:16   #2239
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Thumbs up Re: Do you play the stock market

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Originally Posted by gemi_kk View Post
I will PM you with some more terms, Would be happy if you could provide me with the appropriate explanation. Thanks.
Please ask it on this thread, so that the information can benefit other members!
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Old 15th November 2013, 18:21   #2240
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Default Re: Do you play the stock market

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Please ask it on this thread, so that the information can benefit other members!
From the PM I sent to gemi_kk on his questions -

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Originally Posted by gemi_kk

1) VaR, security Var, Extreme Loss rate.
Irrelevant to stock pickers like us. It is used mostly by hedge fund managers & mutual fund managers to calculate "portfolio risk".

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2) If we should not consider PE > 25, then many companies in our CNX 500 could be directly excluded. Still people trade heavily. So, will there be any other reasons, which are considered prior buying?

It's only a guideline, not an absolute rule. Some companies like HDFC bank, ITC, Nestle has always traded at PE above 25, but still have given great returns in the past. Personally, I pick only stocks that are trading at a PE<30. Why? Because, that's what I'm comfortable with!

As I mentioned in my post, you also need to look at RoE, Debt to equity ratio, Sales & profit growth, dividend yield etc - and then pick a stock.

You can use the Edelweiss Stock Screener to filter out stocks using PE ratio (and other parameters) -
https://www.edelweiss.in/Tools/screener.aspx

Quote:

3) If a company earns, say 100 Cr as profit. And say, its PE is 40 times.
Now, if the company doesnt pay any dividend and if it reinvests that profit in its business, the probability of making more profits in next quarter is high. So, are there any ratio's which show/express these factors?
Return on Equity!

I personally buy companies that have RoE > 18%. In your example - Let's say a company earns Rs. 100 Cr profit and has RoE of 20%. This means, it has a high probability of earning Rs. 120 Cr profit next year.

Note that you need to look at RoE for not just last year, but a few years before that too. That is, RoE of 18% plus must be "sustainable" and not a one-off thing.
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Old 15th November 2013, 18:41   #2241
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Default Re: Do you play the stock market

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Return on Equity!

I personally buy companies that have RoE > 18%. In your example - Let's say a company earns Rs. 100 Cr profit and has RoE of 20%. This means, it has a high probability of earning Rs. 120 Cr profit next year.

Note that you need to look at RoE for not just last year, but a few years before that too. That is, RoE of 18% plus must be "sustainable" and not a one-off thing.
Mate, i think i am a bit confused. Return on Equity is the amount of return that one earns by investing in a perticular stock. The returns are calculated in terms of dividend & Bonus received.
say, i invested 100/- and bought a share. I received a dividend of 5%. Now, the Rate of investment is 5% in my case as i earned 5/- by investing 100. Am i wrong?

I think, your eg: will be called as return on investment from the company's perspective. Not sure. Because companies dont show any thing as return on investments. atleast in balance sheets.

Say, if the company invested Q2 profit on new machinery, say like a car company. The machinery value will always be shown less in balance sheets. reason being Depreciation. 100 becomes 90 then 80 then 60, ...

If the company makes new cars and sells them, the company may make some more money say 105Cr, Q4 say 120 Cr, ...
considering the previous example. Now, the business + value + earnings base of the company has grown. Now, which factor represents this value. Is it net worth? or something else.

Also, where the 100 cr investment is shown? New machinery? or Debt? or something else.
Reason being, if they show in Debt, the Book value must come down. But it doesnt. Neither the PE. then where did they partk this amount ?

Last edited by gemi_kk : 15th November 2013 at 18:46. Reason: Adding another question.
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Old 15th November 2013, 19:01   #2242
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Default Re: Do you play the stock market

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Mate, i think i am a bit confused. Return on Equity is the amount of return that one earns by investing in a perticular stock.
Not really. RoE is a financial parameter of a company/stock.

Quote:
The returns are calculated in terms of dividend & Bonus received.
say, i invested 100/- and bought a share. I received a dividend of 5%. Now, the Rate of investment is 5% in my case as i earned 5/- by investing 100. Am i wrong?
It means the dividend yield of the stock is 5%. But you also earn from your investments when price of the share goes up. If the stock price has gone up 10% in the last one year, your total returns would be [dividends + capital gains] = [5 + 10] = 15%

This has nothing to do with RoE of a company.


Quote:
Say, if the company invested Q2 profit on new machinery, say like a car company. The machinery value will always be shown less in balance sheets. reason being Depreciation. 100 becomes 90 then 80 then 60, ... If the company makes new cars and sells them, the company may make some more money say 105Cr, Q4 say 120 Cr, ... considering the previous example. Now, the business + value + earnings base of the company has grown. Now, which factor represents this value.
You need to look at RoCE or Return on Capital Employed for this.

Quote:
Also, where the 100 cr investment is shown?
Under "Capital Employed" in the balance sheet.

But gemi_kk - this stuff is too theoretical and has very little real life application in investing. You don't need to go deep into the balance sheet of a company to be successful in stock market investing. All Accountants know how to read balance sheets of companies - but does that make them good stock market investors? Never.

If you want a car analogy - you don't need to learn how an engine works, how gearbox transmits power to front wheels or clutch works in order to become a good driver.
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Old 15th November 2013, 22:15   #2243
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Default Re: Do you play the stock market

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@carboy. Need your inputs.
i am currently reading that book. completed till page 280~
And i do not find anything interesting in that book. He uses tooo long Examples and too less valuable quotes/information. I think, the whole book could be written in < 200 pages if, 50% of examples could be avoided.

Will the book become more interesting from here or will be like the first half?

As Buffett has mentioned in the book, read Chapter 8 and 20. That is crux of the book. I did not find much value in rest of the book.

And do not miss the commentary by Jason Zweig.

Last edited by PatienceWins : 15th November 2013 at 22:17.
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Old 15th November 2013, 22:51   #2244
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Default Re: Do you play the stock market

According to me, the following aspects are very important, other than the obvious aspect of finding the right stock.

1. The price - Everything has a value. As Howard Marks mentions in his book The Most Important Thing - "No asset class or investment has the birthright of a high return. It’s only attractive if it’s priced right." I would recommend you to read Chapter 8 and 20 - Margin of Safety (most important) of The Intelligent Investor.

2. Temperament - This is the most important aspect. If you do not have the right temperament, stock market is not the place for you. As Warren Buffett says, you do not need a high IQ for success in investment but you need the right temperament. You need to shut your mind from all the noises around (stop watching CNBC ), have conviction on your analysis and wait for the market to realize the value of your investment. You need to be greedy when others are fearful and fearful when others are greedy; this needs a lot of patience. Basically buy right (right stock at the right price) and sit tight.

After reading a lot on behaviour biases, I have come to realize that the biggest risk for investment success is the investor himself. And stock market is an expensive place to learn about yourself.

Last edited by PatienceWins : 15th November 2013 at 22:52.
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Old 20th November 2013, 22:09   #2245
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Default Re: Do you play the stock market

Hi,

Find V Mart retail very interesting at CMP - excellent numbers compared to peers, robust business model and strong balance sheet. Growth visibility is high as far as I can see. Trading at around 13 times FY15 EPS.

Good going for Symphony, MPS and Canfin. The portfolio recommended in July in this thread would have given a 20% absolute return as per today's price.

I had bought PI Industries at Rs 150 and Shilpa Medicare at Rs 208 in the last 30 days. Both look solid long term bets. Good time to trim Symphony, Canfin and Kaveri and introduce V Mart and Shilpa Medicare....PI has already ran up quite a bit.

Happy investing

VW
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Old 5th December 2013, 11:24   #2246
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Default Re: Do you play the stock market

Something to think about.

Was googling and found this interesting to share.
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Old 19th December 2013, 13:21   #2247
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Default Re: Do you play the stock market

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Something to think about.

Was googling and found this interesting to share.
What is this graph about?
I am just about to invest 50K in the market (for the first time).
Are you indicating some index will fall after 14 January?

Edit: Came across this site: http://rjstocks.in/
It seems so simple. I just have to buy the three stocks listed there and sit back. Am I missing something?

Last edited by S_U_N : 19th December 2013 at 13:32.
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Old 19th December 2013, 14:52   #2248
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Default Re: Do you play the stock market

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Originally Posted by S_U_N View Post
What is this graph about?
I am just about to invest 50K in the market (for the first time).
Are you indicating some index will fall after 14 January?

Edit: Came across this site: http://rjstocks.in/
It seems so simple. I just have to buy the three stocks listed there and sit back. Am I missing something?
I think the graph is trying to show that stock markets follow a pattern, and what happened decades ago may happen again. (Jan 14 is the predicted doomsday).

Quite frankly, such mapping and fitting appears to be hokum.
Stock market movement is quite like fractals. You will always find pattern repeating if you WANT to see it ... (because you can always consolidate or conversely zoom in and produce similar graph)
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Old 19th December 2013, 14:57   #2249
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@S_U_N; Do not take anything at face value. Use your own grey cells. Remember if I buy and you sell, I am expecting the price to go up, you down. Both cannot be right!
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Old 19th December 2013, 15:17   #2250
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I think the graph is trying to show that stock markets follow a pattern, and what happened decades ago may happen again. (Jan 14 is the predicted doomsday).
OK. I get that now. Thanks.

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@S_U_N; Do not take anything at face value. Use your own grey cells.
Thanks. I just made my first transaction with 20 shares of Tata Steel.
What I have realized is that most recommendations everywhere are for short term or for even shorter term.

What is the tax implication in those cases? Less than 1 year, CGT at 10%?

@VindyWheels: You are finding good dark horses, which I am looking for. I don't mind taking the risk.
Only problem is, by the time I read it, they are already in a good upward cycle. Next time, please post a little earlier, so that I can invest while the price is still manageable.
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