[Naetik30]

As with anything else, in the equity market (stocks or MFs) you need to have some stable anchor investments that account for the majority of your portfolio. The minor portion can be for trading. Note the terms investments vs trading here. Else your money will turn to profits for others.

For a small trader (even if your portfolio is a few crores you are still small), it is impossible to make profits on the long run. Remember, the more boring you can make your investments the better for you. 'Boring' is the key word here.

[Zippy_wheels]

I think people get unduly influenced by stories floating around about how someone bought apple shares in 80's and become multi billionaires or how Rakesh jhunjhunwala bought Titan shares in 2002 and earned 1000's of crores.

The other thing is the lure of penny stocks and how if you buy a stock that is trading at 1 re, even if it increases to 2- your money doubles. There is a reason why the share is languishing at re 1.

I have dabbled in equity a little, but I still bought companies with sound financials, and in the last two years a few of them gave me handsome profits - Indian bank, BEL, NMDC are some of those. There are some that did have not given me much profit but I am relieved that they are not at a loss either. I have kept most of them for long term, and only keep an eye on the news to try to identify risks and pull out (hopefully before suffering much losses).

Its difficult to get good recommendations these days, since almost everyone out there, has an agenda.
People recommened stocks on youtube, quora etc so people buy them and that increases the price and these people can recoup their losses. From what I came to know, companies sponsor a lot these reviews/recommendations.

The big players use a big web of network to get insider information and that is how they are a step ahead. Blindly following them is useless.

[thirugata]

I guess the original question was " What should be the learning process".
I see most responses pointing out how and why it will not work. What was their learning process which was involved before entering the market and realising it does not work has not been mentioned.

Some are advocating everyone should buy only in a certain way or certain type of companies, may be because it worked for them. Even in such advises what was the learning process that helped them to make those decisions to buy is missing.

Some advises are about how one will lose in market. In fact learning to loose is necessary in market, key is understanding early that one is loosing and keeping that loss small. Most would have indulged in some sort of sport at some time in life. A sports person's mindset comes closer to a market participant's mindset when it comes to dealing with losses.

There are few suggestions here about how everyone is falling for online recommendations. If one is depending on someone else's recommendation to buy/sell stocks you are already at a disadvantage. It is like standing on the edge of the cliff waiting for someone to push. One can blame the person who pushed, but real reason for falling is the person was on the edge of the cliff.

There are 2 kinds of propaganda happening in social media, one set giving recommendations and another set explaining why recommendations wont work. Both have their agendas. For someone who is looking to a be a serious market participant it is necessary to stay away from both set and learn how to decide what & when to buy or sell.

I wish to see more people explaining their learning process than just commenting if stock market can be a career option or not.

[darkfantasy]

Just one simple question to stock market trading experts here - Has any teamBHPian managed to get at least NIFTY50 index beating returns through trading consistently for at least a decade? As per my understanding, short-term stock market trends are way too volatile to predict and all the supposed patterns are nothing but our brains trying to make sense of random movements and not actual patterns. What works for 1 or 2 years might not work for the next year and almost all of my colleagues who traded ended up with loss let alone earning better than passive investment returns. It's way better for an average person to invest in index funds through SIP mode and try to upskill in their current profession to earn more.

[SmartCat]

Originally Posted by darkfantasy

It's way better for an average person to invest in index funds through SIP mode and try to upskill in their current profession to earn more.

If somebody loves their job/business/profession, nothing else comes close.

However, it is not a good idea to invest only in NIFTY index funds. Nifty has offered zero returns for long periods of time in the past - with one such stretch extending for 10 years.





During the exact same time frame, actively managed funds would have given better returns. Most of the time, when NIFTY is stuck in a zone, mid and smallcaps are likely to see a good run up.

So its best of have a diversified portfolio of funds. You can check the "Actively managed fund Vs Index funds" debate at
https://www.team-bhp.com/forum/shift...ml#post4758027 (The Mutual Funds Thread)

[PatienceWins]

I have been investing in the stock market for the last 20 years. I believe there are many ways to make money in stock market and a person has to choose the way that suits their personality. I am not comfortable buying stocks at expensive valuation, irrespective of how bullish the gurus are or the future growth prospects of the business. When I look back, these are different phases in my investing journey.

Initial phase:
I got some lump sum money in 2004 and booked an apartment in Bangalore. After the initial down payment, the balance amount was just lying in my account. As per the contract with builder, the monthly installments have be paid over the next 3 years. I saw that the market has been going up and got into it without any learning (Greed, FOMO with others making money, even Newton could not escape it). Listened to experts in TV channels and invested in stocks like Satyam, NTPC, Bharat Forge etc based on gut feeling. I made money as I had to sell most of the holdings by 2007 to pay my monthly investments. But 2008 recession was a big wake up call for me. It occurred to me that I was just lucky to be in and out of the market at the right time based on my need for money. If majority of my monthly installments had to be made in 2008 recession time, I would have lost a lot of money. I was just lucky!

Learning phase:
Started learning investing by reading whatever I could find about Buffett, Munger, Lynch, Howard Marks, Graham, Joel Greenbalt etc. With the next bull run, the stocks did not come to the valuation I wanted to buy, but I was not comfortable pulling the trigger. Maybe I should have invested in them in a SIP manner over the long term, but I realized my personality would not allow me to invest and be at peace. So I stopped looking at the market and started thinking I have got it all wrong. I was tempted many times with small short term corrections.

Post Covid phase:
With Covid, stocks came to levels I was comfortable with and I invested all the money after leaving out the short term expenses and emergency fund. I invested primarily in Auto and FMCG. I liquidated most of the holdings by middle of last year as they became expensive again and I expected another downturn with the changing macro economic situation in the US. It seems I got out a little early but no regrets as overall I made more than 3x returns (helped by Tata motors giving 5x return, Balkrishna Industries giving 4x return, Maruti giving 2x return etc).

Now I am waiting for the next major downturn to invest. In hindsight, I think I would have made better returns if I did SIP in good stocks I wanted to buy from the beginning of the bull run post 2008 recession (Asian Paints, Page, Pidilite, Eicher etc), but I would not be saying this if the bull market did not last so long. Who knows with the sea change in the macro economic conditions of free money and low interest rate in US (https://www.oaktreecapital.com/insights/memo/sea-change), the near term future wont be as good as the past. Only thing I know is I am comfortable buying cheap (maybe that suits my personality ) with enough margin of safety as I do not know what the future holds.

There are people who sleep peacefully day trading, buying good/ bad companies at any valuation etc. As psychology is a major factor in investing success, find the style that suits you and invest. There are many ways to make money, choose what you like.

[thirugata]

Originally Posted by darkfantasy

Just one simple question to stock market trading experts here - Has any teamBHPian managed to get at least NIFTY50 index beating returns through trading consistently for at least a decade?

I find this argument bizarre to say the least.

To start with I dont think anyone will be comfortable to share how much one is earing, maybe a trader or investor, salaried employee or a businessman.

Second part is do we ask salaried person how many years his salary hike exceeded inflation or FD or whatever the benchmark one wants to choose?

Lot of business goes through lean patch, if you look at history of even Reliance their earnings might have been less than Index return many times. Now imagine Ambani saying, "I am not beating the index, let me close down the business, invest in Index fund and find a job."

I think the real strive for a full time market participant should be, Am I earning enough to manage the life style? And when one gets bigger opportunity make it big. Again a sportman's mentality helps, a batter does not beat his own average every time; on his day gets man of the match.

[PatienceWins]

What do you guys think about dividend based investing? I started getting interested in it after my experience in NALCO.

During Covid, NALCO went to Rs.30 per share and I invested a small amount as it was at near all time lows. I did not sell it even when it went to Rs.120 per share because of the dividends I have been receiving. Even with the current price of Rs. 97, it gives a dividend yield of 4.6%. I am thinking about investing a small part of portfolio in such stocks for regular dividend returns (obviously during the next clearance sale ), works out far better than FD in the long term if invested at the right price. Appreciation in stock price is a bonus.

[SmartCat]

Originally Posted by PatienceWins

What do you guys think about dividend based investing? I started getting interested in it after my experience in NALCO.

Click on this link to read posts on dividend yield investing.

Also, bookmark this link for my dividend yield stock screeners
https://www.screener.in/user/28210/
You can change the minimum dividend yield filters and save it as your own screener

During Covid, NALCO went to Rs.30 per share and I invested a small amount as it was at near all time lows. I did not sell it even when it went to Rs.120 per share because of the dividends I have been receiving. Even with the current price of Rs. 97, it gives a dividend yield of 4.6%. I am thinking about investing a small part of portfolio in such stocks for regular dividend returns (obviously during the next clearance sale ), works out far better than FD in the long term if invested at the right price. Appreciation in stock price is a bonus.

You have to follow the age old adage of 'buy low, sell high' if you want good returns from commodity dividend yield stocks. You can either look at current dividend yield to make buy/sell decisions or better still, use P/BV ratio



Median PBV ratio of NALCO is 1.1. So buy when PV ratio is below 0.7 to 0.8 and sell when PBV ratio is 1.3 to 1.4.

OR

Buy when current dividend yield is equal to FD interest rate (6% to 7% pa) and sell when current dividend yield reaches savings interest rate (3.5% to 4% pa). After all, current dividend yield will be inversely proportional to price rise. That is, current yield will rise if stocks fall and current yield will fall if stocks rise.

This helps timing the markets, without using technical analysis. If you are wrong about the timing, it is still fine because you are getting FD-like returns from stocks (as dividends). But do remember that commodity stocks are not for buy and hold investors. If you want good returns, your holding duration has to be tactical.

[DigitalOne]

Originally Posted by SmartCat

Also, bookmark this link for my dividend yield stock screeners

A friend mentioned that
Powergrid Infrastructure Investment Trust Ltd price has fallen significantly and now offers a dividend yield of >10%. Any idea why this has fallen so much recently and is there an opportunity here?

[S1200]

Yes! I do trading everyday in FnO.

Being 16% of the voters are in this type, I am sharing my trading journey here.

It has been 3 years now since I started it and right now, I fall in the category of 90% (losers) in overall 3 years. First 2 years were in loss and current YTD is in profit.

I am not dependent on the income from profits in trading to bear my expenses neither I am being much disturbed when facing losses and fortunately, my quantities were bare minimum in the initial days and now are slightly increased purely based on grown capital.

I used to look at stocks since many years but converted into a full time trader when I started to get plenty of free time even after doing all the duties at my workplace. So my income is still running despite of losses here. Now I feel that this independence is extremely important to keep myself stress-free about money.

Investors feel trading is risky; Traders feel derivatives are risky; FnO traders feel cryptocurrencies are risky.
Investors think share prices will get buyers even at higher prices if fundamentals grow; traders think, by selling they will get theta benefit and contracts will become 0.

Whatever somebody does, he should be dedicated and learn it fully and do that professionally.

FnO instruments are designed to pull money from unprofessional to professional. So please learn and practise fully. Learning stock markets is not rocket science.

FnO instuments are here to hedge underlying cash instruments. Its easiest and most effective way to reduce loss, in case of market moving opposite. Even if we don't do FnO trading, learning it for hedging cash instruments in falling market will be definitely helpful.

I will focus some points about trading.

1. Stock market involves real money and real money will definitely exit with profit or loss. Further, as FnO contracts have obligations i.e. expiry, some different moves happen in FnO instruments.
Let’s take an example. If I have sold a contract of weekly expiry at 100 on day 1, and on day 3, it has come to 10, but there are still 2 days to expire the contract. So the seller will prefer to book profit of Rs. 90 and be away from the risk of 2 days for just Rs. 10. At this time (it may even happen on day 4 or day 5), one can expect a resistance or reversal in the underlying stock/index, and the strength of that reversal will depend on number of contracts exited.
If this case is with big players, which generally plays at round levels for better liquidity for big quantities (levels in the multiple of 500 & 1000), we need to keep an eye on whether big fishes are full on stomach or not to take pause in rally.
So, in this case, premium was sold at 100 and at the time of exiting, the order will be buy type. So huge buying orders will execute at flash and then the premium will shoot from 10 to 15/20/30 within minutes. At this time, the buyers will get opportunity to multiply their capital. But the timing to execute buy order is one of the most skilled job in this world as it will have a window of only 5-15 minutes.

So, option buyers should learn to wait for their time, whereas sellers need to hold position till expiry and for this; however he will need to do hedge to minimize positional risk.


2. Trading is 20% about knowledge & 80% about psychology.
Profits and losses are of 4 types: small loss, small profit, big loss, big profit.
One has to do everything to avoid big losses. This is the real culprit that will decide your net PnL. At the same time, identify big opportunities and make sure to take big profits
Cut losses quickly and keep running profits.

A trader does not get that much feared when his trade goes into loss and holds that loss making trade for much more time. More he holds, bigger the loss piles up. Because, it human psychology to not exit at 150 which was bought at 100. One expects to come down to 130 but eventually, what is going up, probability becomes higher to go to 300.

A trader gets feared when his trade goes into good profit and cut profit much before.
When the instrument, which was bought at 100 and is now at 140, he thinks its 40% return and gets more than happy and book. But the price further goes to 300 and misses the rally.

This is the human psychology. It will develop only with real money trading. So, sufficient experience is the only solution to develop human psychology.

3. Risk:Reward
A trade should have potential of 1:6 R:R and at least take home 1:2.5/3/4 before booking profits so that, even with the accuracy of 40% account will not be in loss.

Option premium spikes and crashes within flash. So traders needs to be very fast to enter into the trade otherwise changed entry price will drastically hamper Risk:Reward. For this, one need to keep an eye on each and every movement of the market, specially the hours of high volumes. For this, data will come into action. Data about the participant action will give you confidence to take the trade and increase the probability of winning and holding the trade for more time. But, markets are not easy to make money and big players will make you confuse with data, if not able to read exactly.


4. Money Management further comes into play here.

Markets too has cycles of trending-volatile-sideways-trending.
A trader must take big profits on trending days, small profits on volatile days and non-directional trade on sideways days.

Size of the trade should be according to the trend of the market and must follow big profits on trending days, like selling more quantities and/or deep in the money contract on trending day to capture big points of premium (sell at 800 buy at 400/300/200); lesser quantities and/or fixed profits target on volatile days (selling slightly in the money contract like at 400 and buying at R: 1:3/4) and further less quantities and/or non-directional strategies on sideways days.

Trader should identify the opportunity and keep the size of the position to make big profits and avoid big loss. It will definitely absorb many small losses easily without getting into red PnL.

Protect your capital like daughter.

[SmartCat]

Originally Posted by DigitalOne

A friend mentioned that
Powergrid Infrastructure Investment Trust Ltd price has fallen significantly and now offers a dividend yield of >10%. Any idea why this has fallen so much recently and is there an opportunity here?

Last year, they closed with a largish loss of Rs. 400 cr after which the stock has been trending downwards. However, this is a non-cash loss (called impairment of assets, which probably means one of their power transmission asset has reached end of life).

[sukhbirST]

Originally Posted by SmartCat

Nifty has offered zero returns for long periods of time......

Valid point and would like to add that, if people knew that top 7 stocks out of 50 in Nifty and top 6 stocks in BSE constitute 50% weightage, they would not invest.
Take Nifty, unless the top 7 grow, the other 43 cannot do anything to your returns.

[OffRoadFun]

Originally Posted by SmartCat

If somebody loves their job/business/profession, nothing else comes close.

However, it is not a good idea to invest only in NIFTY index funds. Nifty has offered zero returns for long periods of time in the past - with one such stretch extending for 10 years.

[[/url]

This does not look to be correct. I have this data on NIFTY and as expected, the risk adjusted returns over a decently long period asymptotically approach long term value.

Heck, even from 2000-2010 return is a "whopping" 13% CAGR.

Source: https://kunaldesai.blog/nifty-returns/



For 15 years, it gets even better, as expected.



As the investment horizon expands, the risk is virtually zero and returns from stocks beats all asset classes (viable for middle class and I am not talking about plots of land or some chit funds as investment options).



The best time to invest (lumpsum or SIP) was 10 years back and the second best is today!

Looking back, what would have I done differently when it comes to investing? Start an SIP the day I got my first paycheck in an index fund. Simple and yet powerful. And that would be an advice today also, no matter what the valuation/PE of stock market is. Read the book by Jeremy Siegel titled Stocks for the Long Run (free PDF available online). Fire and Forget and then reap the benefits and yes, it will beat even real estate also unless your grandpa bought agriculture land in Gurgaon or Bellandur 50 years back!

[SmartCat]

Originally Posted by OffRoadFun

This does not look to be correct. I have this data on NIFTY and as expected, the risk adjusted returns over a decently long period asymptotically approach long term value.

Your data points are probably correct, but so is mine.

As you can see, I've just cherry-picked starting and ending time (Eg: 1992 to 2003 & 2008 to 2014) where NIFTY returns were zero. Just to make point that it is better to have a diversified portfolio of mutual funds or ETFs. You can check the multi-page discussion on this topic in the mutual fund thread (hyperlinked in the previous post).

Meanwhile, your data points show rolling 10/15/20 year returns. These are excellent numbers to show why investing in equities is not as risky as one imagines, if held for a long time. Also shows why one should invest in equities vs (real estate or FD or Gold)