Stock Portfolio

Stock Portfolio Returns – A Discussion of Their True Determinants

Before going deep into the discussion we should first understand what a stock portfolio actually means in its true sense. In a brief way we can term it as a collection. It is a compilation of various financial assets comprising of some investment tools. These investment tools may be gold, real estate certificates, stocks, asset-backed securities, bank deposits, bonds, foreign exchanges etc. held by an individual or a group of individuals. So, we will discuss about Stock Portfolio Returns – A Discussion of Their True Determinants A stock portfolio is constructed just to minimize the related risk factor and to maximize an investor’s return as well. As the returns of assets that constitute a portfolio never move in the equal trend, the risk factor of the portfolio is always lower than the risk linked to a single asset. That is the reason why asset allocation is the prime factor behind portfolio returns in the Indian stock market. It is neither the assortment of individual stock nor any particular global market.

Formula of success
No one, even a proficient financial guru can tell the exact success formula on how to get satisfactory returns on investment. But with there wide knowledge in financial field. They know where to invest money and in what proportion so as to minimize the risk and maximize the profit. They divide the funds in such a way that no one field get maximum fund and is equally allotted in various fields.

Now the question arises is there any specific theory to follow? We have many investors around us who do not follow or believe any theory or formula. They simply follow their own intuitions where little time is invested. Surprisingly they are often seen to get even more profits in their cash. Well, there must be some factors that actually work straight or in some other way. There must be some determinants to look for that attribute to a good extent in the range of portfolio performance.

Portfolio Performance Determinants:
Well, no one can assure anybody that there are some specific determinants that are proven and time tested that actually work for the benefit of the investor. But there are some areas to focus that actually show positive results when applied with proper knowledge. Stock picking, timing, asset class allocation, choosing correct regional markets are a few of those areas of concern or we can say ‘determinants’ that make some sense in portfolio performance. Out of these factors, asset class allocation draws the maximum attention globally. Choosing a perfect asset allocation is prime important. At the same time what makes a substantial difference in the output performance is identifying a correct regional market.

In the end, what we can learn from this? In a single sentence it can be clearly said that investing at the right time, in the right companies, and in the right countries does create the significant sense.

Lessons to learn from the above discussion
There are thousands of stock market consultants roaming here and there to guide an investor. Obviously they are not going to do any social service by providing their valuable knowledge but to get their livelihood. In such a critical scenario whom can one blindly trust? Just get one person who is an excellent and clever stock picker, knows very well about global market scenarios, can understand regional market trends, and has got enough of technical indicators to precisely predict the market timing. So, you have understand the topic of Stock Portfolio Returns – A Discussion of Their True Determinants. Just think of a person or firm which can be the best one to guide you for your tremendous benefits?

Investment Strategies

A good planning and strategy is always important to accomplish any kind of work perfectly. This is true in the case of stock investments too. You should follow somebasic investment strategies in order to manage your funds accordingly. So let us have a look at the different investment strategies in the stock market.

Factors Of Investment Strategies

Basically there are four main factors on which your investment strategies depend. They are:

  1. Objective: It is the amount of funds which you are investing that will determine your goal.
  2. Time Period: In order to achieve your financial goal, you should frame a particular time period
  3. Return: It means how much return you are expecting within a certain timeframe.
  4. Subtle Risks: It means how much risk you can take in order to achieve your objective or target.

Investing in an Indian stock market is an excellent way to gain profit from the growing economy. Here you won’t get affected by the inflation rate. If you keep in mind the above four points in your mind, you can be sure of your profits as far as your investment and returns are concerned. There are stock traders who have got experienced in the stock market and they invest after knowing everything about the volatile nature of the market and earning huge profits from their investment they make.

If you are a novice investor and you do not have much idea about the market then you need not panic. You can get much information on the Internet about how and when to invest in stocks, how to start an online investment, about the different trading options related to stock trading and so on. All these information are available on the Internet where you can also get share tips of the market. The biggest advantage of investing online is that everything becomes accessible online, right from buying to selling of stocks to the stockbrokers. There are online brokers who guide you about the market scenario, they also advice you and keeps you updated with the market trends and also the basic investment strategies.

 

 http://www.moneymantrastock.com

 

Stock Market Prediction Tips

Stock Market Prediction Tips  – Stock Market Forecast – Strong Stocks Today

Stock market is a place where investors plays their huge amount with a hope of good return, One can also say that it is a kind of gambling because the profit which the investor is going to earn cannot be guarantee to some extent it can be somehow predicted according to the company performance and so on in the Indian stock market. Stock market is known to believe that it is the institution in which the investors can earn maximum profit among the other financial institution but risk is very high. So we would focus on the stock market prediction tips > Stock Market Forecast – Strong Stocks Today.

Shape of the market
Since the time when stock market began to be practice in the market, till today there were some tragedies which occurred. Stock market was known to be practice in the latter part of the 11th century and from that time there were few things happening even there was a time when majority of the investors committed suicide because of the great decline of the economy beyond expectation. Beyond imagination within a short span of time the market began to revive and began its normal function in the market. Since you need to be successful in the stock market it is best if you can go for a deep study onBSE, NSE…etc.

Since stock market is a place where different company’s involve, each an every company performance predict the stock market points, as thousands of company were listed under this market each have their own different portfolio and ideas, this is why stock market is difficult to predict. In this case they get more attention of the investors and their performance is also quite notice compare to other company. For instance Tata company announced that they will be launching a new product which be recorded as a cheapest car in the world, from the day they flashed the news everyone were curious to see the new things and the trading also focus on them some investors were switch over their investment to Tata company because it is one kind of a development as in case of globally also. Do you think that this will also affect the sensex? We will see the moment when they sell out their manufactured car.

The government also have a deep impact on the sensex, its objectives, aims and portfolio matters a lot as in case of the parliamentary election last year since that was not a small issue we can also says that it is a matter of having a nuclear power or not, since than the economy was not that good but just after the election was over the sensex was increase .And when the government launched the nuclear bomb to show the protest some foreign countries stop trade with India that also affect our economy. While flashing the news of all the government bonds investors can come to the conclusion where to or where not to switch over their investment also but when all the share market is affected it is good to know that there will always be a chance for the development or the recovery an that if history.  As of now we all know the tragedy face by the Satyam computers, there were lots of money missing from the company this not only alone affects the company, so expertise believe they are one part which makes our economic worse, so the company performance can also be known through their balance sheet this will indicate whether the company is moving forward or backward, and taking a deep conscious about their performance in the market will be very useful for timing the market.  So, you are now much cleared about stock market prediction tips > Stock Market Forecast – Strong Stocks Today.

 

Pillars of Technical Analysis

This blog focuses on the 3 pillars of Technical Analysis and lays the foundation for the so called Study of charts.

 I.Price discounts everything
The statement “price discount everything” forms the cornerstone of of technical analysis. The chartists believe that the prices of the market reflect all the possible causes such as fundamental, political, psychological etc. Therefore the study of prices and volume is all that is required.
The shift in demand and supply causes the price to change. If demand exceeds supply, prices will rise and vice versa. These actions are the basis of all fundamental and economic forecasting. Saying it in another way, if the prices rise fundamental must be bullish and if the prices fall fundamental must be bearish.
As a rule, the chartists do not concern themselves with knowing the reason why markets rise or fall. Everything that affects market reflects in the prices; therefore only the prices need to be studied.

 II. Prices move in a trend  
It is important to understand and accept the concept that the markets move in a trend until there is trend-line-suppot-charta significant sign of reversal. The whole purpose of charting the prices of a market is to identify the trend in the early stages of its formation. One can also say it is similar to Newton’s first law of motion “a trend in motion is more likely to continue than to reverse”.

 

 

 

 

III. History repeats itself
Most of the technical analysts believe that the study of market action has a lot to do with the study chart-pattern-repeats of human psychology. Chart patterns for example, have been identified and characterized over the past hundred years to reflect certain pictures. These pictures appear on the price charts and reveal bullish or bearish psychology of the market. Since these patterns have worked well in the past it is assumed to work well in the future as well. In other words we can say that the future is just the repetition of the past.

(Source: Technical analysis for the financial markets by John.j.Murphy)

Dow theory’s six basic tenets

  • Charles Dow (left) & Edward Jones (right) established Dow Jones & Company in 1882.
charles-dow-edward-jones-both

 

  • They created the two indices i.e., the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) to provide a good indication of the health of the economy.
  • Dow explored the relationship between the two indices and published his theories in editorials in the Wall Street Journal, which pioneered Technical Analysis.
  • Even in today’s highly technologically developed market, Dow Theory holds its basic tenets.
  • On Dow’s death in 1902, William Hamilton continued his work of writing editorials until 1929.
  • Robert Rhea then collected the work of both of these men and used it as a basis to publish The Dow Theory in 1932.

Dow theories six basic tenets:

I. The average discounts everything: 
The market reflects all available information which can affect it positively or negatively. What it cannot anticipate is happening of the natural calamities, even that are discounted as soon as it happens. It is similar to that of the first pillar of the technical analysis; the prices of the stocks absorb all the news as soon as the information is released. Prices show the sum total of all the hopes, fears and expectations of all participants. Interest rate movements, earnings expectations, revenue projections, presidential elections, product initiatives and all else are already priced into the market.

II. The Market has three trends:
According to Dow theory, the market has only three trends
a. Primary trend: In Dow theory, primary trend is also considered as major trend in the market. It has a long term impact and may remain in effect for more than 1 year. It may also influence the secondary and minor trend. Dow looks at it as tides in the sea as it affects the overall impact dramatically.
b. Secondary trend: Dow call a correction in the primary trend as secondary trend. It usually last for three weeks to three months. It generally retraces 33% to 66% of the primary trend. In a bullish market secondary trend will be a downward movement and in a bearish market it will be a rally. Dow calls it as waves in the sea.
c. Minor trend: The “short swing” or minor movement varies with opinions from hours to a month or more.

The three trends may be simultaneous. For instance, a daily minor trend in a bearish secondary trend in a bullish primary trend.

dow-thoery-three-trend

III. The Market trends have three phases:
Dow theory believes that major market trends consist of only three phases:
Accumulation phase: It is a period when investors are actively buying (selling) stock against the general opinion of the market. At this phase trader keeps buying and selling the stock but the prices do not change as the demand is far less the supply in the market.
Absorption phase: In the second phase investor starts accumulating stock. All the technical indicator starts working as there is a huge participation in the market. This phase continues until rampant speculation occurs.
Distribution phase: After a huge hype in the prices because of the skewed supply of the stock the prices begins to retrace as the astute investors begin to distribute their holdings to the market. As a result of it the prices start falling along with the volume.

Dow-three-phases-edited

IV. Average must confirm each other:
In Dow’s time, the two averages were the Industrials and the Rails. The logic behind the theory is simple: Industrial companies manufactured the goods and the rails shipped them. When one average recorded a new secondary or intermediate high, the other average was required to do the same in order for the signal to be considered valid.
If the two averages acted in harmony, with both reaching new highs or lows around the same time period, then the prices of each was said to be confirming.
When one of these averages climbs to an intermediate high, then the other is expected to follow suit within a reasonable amount of time. If not, then the averages show “divergence” and the market is liable to reverse course.
In other words if one average went to a new high, while the other was left behind, then there was bearish divergence. If the opposite occurred, with one average reaching a new low while the other held above a previous bottom, then the divergence was bullish.

V. Volume must confirm the trend:
Dow recognized the volume as a secondary but important factor in confirming price signals. In other words volume should increase in the direction of the major trend. In a major uptrend volume should increase with the rally in price and should diminish during correction. Also in a major downtrend volume should expand with the fall in prices and should contract during upward ripples.

VI. A trend is assumed to be in effect until it gives a definite signal of reversal:
Dow was a firm believer that market remains in a trend. It may deviate for a while because of noise but it will return as soon as its effect is over. It is like Newton’s law of motion “an object in motion tends to continue in motion, until some external force causes it to change direction”.

There are many trend reversal signals like support/resistances, price patterns, trend lines, moving averages. Some indicators can also provide warnings of loss of momentum.

(Source: Technical analysis for the financial markets by John.j.Murphy)

Never average losing trades

Never average losing trades

How many times have your position gone against you?

You planned and executed your trade correctly, yet soon after you bought price goes for a toss. You have three ways ahead

  • Hold on with your position and wait for the prices to regain
  • Cut your position in loss
  • Average or buy some more as it is cheaper than before

One can also hold on to his position but its advisable to cut position in time before a significant amount of capital is vanished.

But in most of the cases people tend to opt for the last option. They average out their position to reduce the buying cost in hope that prices will soon take a U turn. This approach can work at times, but is very risky.

image02Let us take an example:
Buy one lot of Nifty @ Rs 58
95
and average with same qty twice
@ Rs 5800
@ Rs 5750
so the average price = Rs 5815
Suppose we square up @ Rs 5500

Loss without averaging = (5500-5895) x 50= Rs -19750

Loss with averaging= (5500-5815) x 150= Rs-47250

Moreover how rational it is to repeat a mistake once already committed? Then why we do the same with our investments?

Let your profits compound, not losses!
Be Smart, Trade Smart !

Smart Trade Rule 1

“Do ask yourself; are you a Speculator or an Investor”

Have you ever found yourself in a dilemma whether to hold a loss making trade in a hope to exit in profit or to square it up taking a small loss?

If yes, then it is time to take Smart Trade rule # 1 seriously !!

This is one of the elementary problems every trader encounters in his initial trading career. It is because one finds it difficult to distinguish between a Speculation and an Investment.

Features of Speculation :

  • Short term trade
  • Involves smaller part of entire capital
  • Adherence to predefined stop loss, targets, trade size and time period

Features of Investment :

  • Trade with longer time horizon
  • Significant part of capital involved
  • Noise is ignored
  • Fundamental valuations are given priority

People tend to switch over from being a speculator to an investor and vice versa over small market movements.

confused
Ultimately a speculator ends up holding a loss making trade like an investor in a hope for the prices to regain, until a significant part of their capital is lost. Also, an investor books small losses after an unfavourable move, missing a big chunk a profit if they would have held it for a long period of time.

This inability  to define the type of trading will result in large losses and continued future bad trading habits.

Don’t let this happen to you. Most of the market wizards determine the trading style that suits them the best and remain committed to it.

If you have not decided yet, think again before placing your next order !!

Learn Magical Chart Patterns

This module is suitable for traders who want to take intraday or swing trades in options, by doing their own analysis.

Following aspects would be covered in the training:

  • Basics of Options revised
  • Myths in Option trading
  • How to price Options (Converting a view in to an option’s trade)
  • Strategies work better
  • Smart Option trader guidelines

Note – A derivative trader trades in the derivatives segment. Derivatives are contracts between two or more parties, whose price is dependent upon or derived from one or more underlying assets. Its value is determined by fluctuations in the underlying asset. In India, the most common underlying assets include stocks and market indices. Most derivatives are characterized by high leverage. They are generally used as an instrument to hedge risk, but can also be used for speculative purposes.

An option contract is nothing but a RIGHT to buy or sell an underlying asset at a pre-decided date and time.

 

Check Next Webinar – Click Here

How to trade options for profit

How to trade Options for profit

This module is suitable for traders who want to take intraday or swing trades in options, by doing their own analysis.

Following aspects would be covered in the training:

  • Basics of Options revised
  • Myths in Option trading
  • How to price Options (Converting a view in to an option’s trade)
  • Strategies work better
  • Smart Option trader guidelines

Note – A derivative trader trades in the derivatives segment. Derivatives are contracts between two or more parties, whose price is dependent upon or derived from one or more underlying assets. Its value is determined by fluctuations in the underlying asset. In India, the most common underlying assets include stocks and market indices. Most derivatives are characterized by high leverage. They are generally used as an instrument to hedge risk, but can also be used for speculative purposes.

An option contract is nothing but a RIGHT to buy or sell an underlying asset at a pre-decided date and time.

 

Check Next Webinar Details – Click Here

 

What is Online Trading?

Buying and selling is actually if a customer along with a retailer agree to exchange some sort of economic item (shares, futures, possibilities, stock markets, products, etc). in an decided value. Normally, some sort of broker is actually aiming to gain some sort of gain selling or buying the actual economic item using a short-term schedule. Off-line dealing happens if a broker places his / her industry by way of his / her broker. The actual broker in most cases phone his / her broker and ask the actual broker the best place positions on the part of the actual broker.

On the web dealing is actually when the broker places his / her positions on his own through the world wide web. The actual broker will supply some sort of software program that the broker incorporate the use of to use his / her positions online. The application might be down loaded using a personal computer or even, with a number of broker agents, about cell phones, drugs, and so forth. On the web dealing is normally easier subsequently off-line dealing as the positions occur real-time and many more speedily. On the web dealing is normally cheaper compared to off-line dealing as the broker is just not active in the industry; thus, the actual broker’s costs drop and therefore, the actual trader’s costs drop also.

On the web dealing is the reason a lot more than 30% with the dealing done with The indian subcontinent, and this portion is actually improving each year. Most leading broker agents with The indian subcontinent present online dealing software program on their customers. On the web dealing is usually easy to discover, rapidly, successful, and it is an even more cost-effective option for just a broker vs off-line dealing.