MARKET EXAM

Every day and in every trade, the market gives us an examination. The results are unforgiving. Get the examination question correct and the market gives you money. Get the examination question incorrect and the market takes money from you. Every trading decision to buy, or sell, or just observe is a test of all the skills and knowledge and experience you have accumulated. Unlike on-the-job training, the market gives you no latitude for error, for past successes, or experience. Every test is for real, and every test pass or fail carries the same consequences. It is a demanding task. Over ten weeks we give you a less demanding test – at least in terms of consequences. These questions are designed to help you to evaluate your knowledge about trading and help to identify areas where you may needs to do some more homework.

Crude, monsoon hold key to mkts rally now

I feels that the markets have seen some momentum despite the weakness in the US. There is a large build up in stock futures, which is positive for sentiment.I thinks that the monsoon remains a worry but crude is the biggest risk. One can see further rally if crude falls and monsoon improves.

Have Politicians Forgotten The Theory Of Karma?
Politically things are not that good in India. I have always believed that whatever good has happened in our country has been because of people like you and me and never because of politicians. During the time of independence we had great people giving up their lives for the freedom of our nation, but after that we had politicians who were not afraid to take away lives for their own benefit. Not letting the economy and the common man prosper is the worst form of mass murder according to me.To be honest I feel that politicians all over the world are the same irrespective of which political party they belong too. However they unfortunately have forgotten the theory of Karma. They have forgotten that as we sow, so shall we reap.For example today our country has extremely high inflation and this is affecting all of us. But does it affect the ministers who are living in castles and have everything paid for with our taxes? Inflation can be reduced significantly if we increased efficiency and supply. We could cut down our consumption of fossil fuels by having a world class mass transit systems in major cities running on nuclear power. Imagine how much nicer it would be if we had a mass transit system like major cities in China. We would all reduce the use of cars and make sure we used the public transport.Instead of doing what is needed, our politicians are busy hurling chairs at each other in the parliament and constantly arguing on petty issues. I find it disgusting when politicians come on TV and take credit for whatever economic growth we have. The sectors which have had growth have had it because of entrepreneurs who in spite of politicians were able to succeed. It has been because of intelligent and hard working people who have made sure their organisations and business grows. All that politicians would have done is eaten money and filled their own Swiss bank accounts.Wrong policies and decisions by the government bodies affect all of us. They affect our investments and our lives. For instance if the nuclear deal doesn’t go through, it would certainly affect our investment grading abroad. A nation whose Prime Minister can’t decide on his own is never an encouraging sign for investors. It might lead to capital rushing out of the country in the short term.I agree that the need for politicians has reduced compared to what it was say twenty years ago and that is been one good thing. But still we have parties like the Left trying to take our country back to the Stone Age. Not that other political parties are great. Personally I am of the view that inflation in India is not just around 11%, but much higher. Figures can be manipulated, and they always are. Just look at the prices of things we use in our daily lives, they have gone up by more than 40% in a matter of a few months.Inflation, political problems, energy crisis, credit crunch, higher interest rates, sub-prime problem are all going to affect the markets. Investors are usually extremely jumpy and do not take rational decisions. Simply on hearing all this there is a flight of capital which has been bringing the markets down. Markets can go down further- I don’t know if they will or they won’t. Most retail investors who do not believe in value and do not bother too much about fundamentals are constantly grumbling and cursing everything now. Many of them have gone bankrupt due to taking leverage in the form of trading in futures. I understand their problem, however I wish that all of them learn from their mistakes and try to use this time as an opportunity to learn more. I too have made such mistakes in the past, but luckily I have learnt from them.For value investors the markets going down is a great opportunity to buy, however the sad part is that most retail investors do not think this way and now even if they do, they might not have sufficient funds to benefit from this. Many will panic and sell and again after a few years will curse their luck for selling so low. My advice to them would be that use this opportunity has a time to start afresh. Every day is a new day and every day gives us the chance to start a new life. Once Edison had his whole lab burnt. Lots of his work and research was there in the lab, but he still was very happy. People were surprised and wondered why is he smiling even though his lab is burnt. He told them that all his mistakes have been burnt and he has the opportunity to start afresh. If you have made mistakes, do not worry and use this time to learn.Less than around 4% of India’s savings goes into the stock markets. As more and more people are educated about investing, this figure is bound to rise. As this figures rises, unethical operators and dirty money belonging to politicians will be less likely to control the stock markets. As more and more people have a stake in our country’s growth politicians will be more responsible to make sure that their decisions are beneficial to investors and the capital markets. This correction has been one of the best things that could have happened for any value investor. It is giving us a chance to buy assets into an economy which still has a long way to go.I am a strong believer in the theory of Karma. If we work hard today, learn more and invest in knowledge we will be rewarded. I was at the BSE building the other day and a good friend there who has been a part of the markets as well as the BSE for several decades very beautifully told me something from the Gita, which he has used in the markets. He told me that the Gita tells us to do our duty and not worry about the fruits and rewards. If we do our duty we will get the fruits either sooner or later. The same applies to the markets. We need to do our work and not worry about the returns in the short term. If a business is good, it shall be discovered by the masses sooner or later. These ideas are not very popular, but these are the very ideas which have stood the test of time. This simple idea runs into every area of our life. Let us all sow seeds of good in every area of our life. Do you agree with this way of thinking?
Keep smiling and feel free to share whatever you read here with friends, family and loved ones!

Seven Ways To Survive a Stock Market Correction!

Here are seven simple ways to survive a stock market correction as an investor:
1. Stop Listening To Analysts
Most analysts in the media instead of providing you with a solution will just confuse you. Somebody will say everything is doomed while others will say things are great in the long term. Forget listening to analysts- most of them would not be of any help. The reason people listen to analysts is because they are looking for peace and hope. Trust me you will get none of that by listening to somebody else. Peace and hope are all within you
.2. Stop Staring At Your Portfolio Every Thirty Minutes
Another mistake people make is that they get up every morning and wait for the markets to open. Once markets open they start staring at their stock prices. A fall makes you feel worse and small rise makes you feel a little better. This would not help either. Instead keep track of the fundamentals of your company every time the results are out. If your company is profitable and growing - be happy. If it is not, find out if you need to exit. The stock price will catch up in the near future if business is growing. Do you stare at your money kept in a bank FD everyday? Most probably not. Use the same principle when you invest in stocks or mutual funds.
3. Be Patient
Many of you might not have a lot of cash to buy cheap now; however please be patient with whatever you have bought. Even the youngest billionaire on Earth today is 23 years old. It took him 23 years to be a billionaire and he did not do it in few days or weeks. The youngest billionaire probably in history is 23-year-old Mark Zuckerberg - the founder of the social networking site-Facebook.
4. Speak To Actual Investors
With ExperienceInstead of interacting with analysts or your broker, speak with people who are actual investors and who have been in the market for longer periods of time than you. They will tell you how they have survived various stock market corrections and what has made them richer. Read and learn more about people who have actually created wealth and sustained it over a long period of time.5. Stop Following Crazy TipsPlease for heavens sake stop following â hot tips which promise to make you a millionaire in a matter of months. Maybe the hot tip is only meant for billionaires who would end up as millionaires in case they do follow the tip. If it seems to good to be true, it is probably just a scam, which hopes to take money away from retail investors and put them in the hands of greedy manipulators. Similarly stop following rumours about how fundamentally strong companies are going to be shut down and go bankrupt in the next few months. Use your own head and trust yourself. 6. Understand Market Cycles
Every asset class has a cycle. Stock markets, mutual funds, real estate all move in cycles. Please realize that nothing can keep going up forever in a single direction. There will be phases when prices will come down and again move up. If you go back into history you will see several instances when stock prices came down, however over a period of time quality companies always reward investors. Understand market cycles, and dont become a slave to them.
7. Follow The GuruToday the richest man on earth, Warren Buffett, is an investor who has created wealth because he has stayed away from what everybody else is doing and has simply invested in quality companies for the long term. He invested in Gillette, for the simple reason that he believed that men wont stop shaving. It makes sense to follow, as I call him, â The Guru and think long term and remember people who create wealth do things that others dont.I âm sure if you follow the simple techniques above you will be a much happier and a calmer investor. Investing is about controlling your emotions and being disciplined about what you do.
Happy Wealth Creation!
jestin xavier

3.Pay the right price

It is essential to buy at the ‘right price’, that is, the price that you are comfortable paying. Do not buy because others are doing so. This will help you to hold the stock for a longer duration. Conversely, when you have to decide when to sell, if you feel that the market is overheated and prices have reached unrealistic levels, exit; Don’t stick on hoping for a little more. It helps to limit your own greed.

How to receive income from shares?

The income received from shares is called a dividend. We invest in shares to make money – either through a share’s capital growth, i.e. the amount by which the share price increases in value over time, or through the dividends it pays to its shareholders. Dividends are payments made by companies to shareholders from their profits. Not all companies pay dividends. Dividends are usually paid twice a year and are in effect the yield from your investment. Some growth companies plough most of their profits back into generating more business rather than paying out dividends to investors.

What is a demat account?

Investors who wish to trade in the market need to have a dematerialized, or demat, account. In India, the government has mandated two entities –National Securities Depository, or NSDL, and Central Depository Services (India), or CDSL – to be the custodian of dematerialized securities.

Who is a broker?

A stockbroker is person who is licensed to trade in shares. Brokers also have direct access to the sharemarket and can act as your agent in share transactions. For this service they charge a fee. They can also offer additional services like advice on shares, debentures, government bonds and listed property trusts and non-listed investment options (cash management trusts, property and equity trusts.

2 What is a stock exchange?

A stock exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. The Bombay Stock Exchange Limited, or BSE has a nation-wide reach with a presence in 417 cities and towns of India. Its index, or market indicator is known as the Sensex. It gives a general idea regarding the movement of the stocks; whether they have gone up or have gone down. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up.

What are shares?

A share is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends and to a portion of the value of the company in case of liquidation. Equity is a share in the ownership of a company. It represents a claim on the company’s assets and earnings. As you acquire more stock, your ownership stake in the company increases. The terms share, equity and stock mean the same thing and can be used interchangeably.

Kaun Banega Crorepati(Power of compounding)

If you are a investor,you must know about magic of compounding
In case you earn Rs20,000 per month, do you know how many years it will take for you to become a Crorepati? Not 10 or 20, but 50 years!" exclaims Amitabh Bachchan, the anchor for "Kaun Banega Crorepati".Mr Bachchan, did you know that if you invest just Rs9,250 once and earn 15% per annum on this investment then, in 50 years you will be a 'Crorepati' too! And in case you invest Rs20,000 every month for 50 years under similar terms, you will be worth more than (hold your breath) Rs173cr! That is Crorepati 173 times over!!!
Welcome to the 'Power of Compounding'
One of the basic premises of investing is that your money multiplies manifold over time. And this multiplication of money is normally referred to as the "Power of Compounding".So, how does money compound?When you invest money, it earns interest (or returns, if you may). If you keep the interest invested, then it does not sit idle while only the original investment sweats it out. The interest earns interest too! And then the interest on interest earns interest again!That is the beauty of compounding. That is what made great men like Albert Einstein and Benjamin Franklin extol the virtues of 'compounding'.
What does the 'Power of Compounding' mean to an investor?
Ms Thrifty, Mr Realist and Ms Follower went to the same school and the same class.On her 10th birthday, Ms Thrifty's father gave her Rs100. She wisely invested the money that earned her an interest of 15% every year. Mr Realist won Rs200 as prize money when he was 16 years old. His friend, Ms Thrifty, advised him to invest his prize similarly. When Ms Follower earned her first salary at the age of 21, she salted away Rs400 in the same investment.After reaching the age of 60, all three decide to withdraw their investments. Who do you think realised the most from his/her investment?You think it's Ms Follower, right? After all, she invested four times the money that Ms Thrifty had invested. So what if she invested the money 10 years later. She did earn interest for 40 years anyway after that.But think again. Ms Thrifty makes the most out of her investment! In fact, her Rs100 is worth Rs1,08,366. On the other hand, Ms Follower's Rs400 is worth Rs93,169!
It simply means that the LONGER you stay invested the MORE you make.
Now you know why Ms Thrifty made more money than Mr Realist and Ms Follower.Let us try another small exercise.Let us assume Ms Thrifty, Mr Realist and Ms Follower invest Rs100 for 10 years. However, all three of them earn interest at different rates. Ms Thrifty earns 20% while Mr Realist earns 15% and Ms Follower manages a 10% interest rate.Can you work out what each one of them will have ten years hence?Ms Thrifty will have Rs619 while Mr Realist, Rs405. Ms Follower will have the least - Rs259 in ten years. Did you notice something though? While the interest rates differ by just 5%, in 10 years the worth of the original capital, Rs100 was vastly different!
That is another way of understanding the 'Power of Compounding' or the power to grow exponentially.
Now that we have understood the magic of compounding, it is time to take a look at an interesting rule associated with 'compounding' - the Rule of 72.The 'Rule of 72' is an easy way to find out in how many years your money will double at a given interest rate. Lost?Suppose the interest rate is 15%, then your money will double in 72/15= 4.8 years. In case, the interest rate is 20%, then the money will double in 3.6 years.Interesting rule indeed!
Moral of the story: The longer you stay invested the more you make!

while investing stay focused on future goals.

While driving a car, one needs to see in front. If a driver only looks in the rear-view mirror, then he is bound to have an accident. This is true of investing too. Do not invest by just looking at the past performance of an asset class. It is often observed that an individual, who is reluctant to invest at 3250, shows extreme eagerness to invest when index touches 14000 and falls to the 11000 level.
At 11000, he recalls the last level of 14000 and finds the current level attractive. He forgets that at 3250 he did not see value in investing. While investing, stay focused on future goals.
These investors panic if markets fall by 15-20%. This is because their investment strategy was not based on their financial goals but it was based on “...what others are doing.” Secondly, they were reacting on past information.
The past can be a guiding post but can never be a driver of future growth.
Stock markets have cycles. Everything that goes up has to come down. Even the current rally will come to an end sometime. If you have stayed focused on your financial goals, you need not panic or go overboard with greed.