NEW EQUITY Investing

Q&A: Questions & Answers Investing Basics Q&A
#2

Dear Sir,

There are various ways to initiate your Do it Yourself Investment journey (specifically Equity investment).

Foremost being self aware that equity investment in itself carries Risk as compared to other safe investment options being available (Post office, Bank Fixed deposits etc), but over a longer time horizon (5Y and above) the rewards are good – Generally the returns expected are (Country GDP+Inflation+Alpha).

Starting point could be – read a lot, make notes and evaluate what kind of investor you are.

Reason being: in case you blindly follow and get impressed by various twitter threads on a particular company – the creator of the post might be correct from his/her point of view but he/she is not aware of my situation (elaborated below).

To make the point clear – when you teach a particular subject to Class 6 students the content and references are different as to when you teach the same subject to Class 10.

As an investor one needs to note down his income, expenditure and savings, accordingly a portion of savings can go for equity investment – for first 5 years it can be done via DIRECT Systematic Investment Planning (SIP) through Mutual Fund House/Index ETF investment, to keep the cost low.

Keep it simple.

Over a period of say 3 to 5 years you gain knowledge and the regular SIP creates a reasonable corpus. Thereafter you can take a call to open Trading (Dmat) account and go for direct equity investment.

During this journey many key words which have lots of significance need to be experienced, personally. Like Conviction vs borrowed conviction, Portfolio Allocation, Sectoral Diversification, Cyclicals etc etc. Frequent buy and sell in initial days can cause cost in terms of brokerage charges and Profit/Loss computation for Income Tax purposes.

Some of the Actions to be avoid – F&O, taking loan to invest, investing in Penny stocks, investing purely based on story – Youtube/Twitter based recommendation etc. Some expert might be successful in this domain but we may not be aware of the background story about their earlier failures.

Have a positive mindset, it being money market instrument, money is required to earn money.

Have patience, take care of excessive fear and greed. Just like every drug in a chemist shop is meant to cure some ailment but a person cannot popup pills on random basis, a visit to a qualified Doctor and due diagnosis plus the prescription is needed. Similarly, this path is Simple But not Easy.

I am my own friend and foe, based on my temperament. Emotional Behaviour matters a lot.

These are some random thoughts to get you initiated, please do your own study and all the best.

Edit1: Typographical errors corrected/removed

14 Likes
#3

Thank you so much for such an elaborate explanation…

2 Likes
#5

And so my post in native language got flagged, despite my request to not flag it. The native language which if admin/moderator understands would not have done so. And I couldn’t find any rules, explicitly mentioning that one should not post in native language, regardless of the situation. I did a search for language and tongue in the pages, but could not find any rules regarding these, so I am asking this.

https://forum.valuepickr.com/guidelines

I very well know why we use English here, but I thought this particular situation warrants a different language. If regional languages are not permitted, please mention so.

And what I had mentioned my post is pretty elementary, but it would help an absolute newbie in the future, if he stumbles upon this thread.

I know the high standards of this forum, but to be able to do my bit in helping a beginner in a particular way, should be considered here.

1 Like
#6

I feel the same way…
Regional language can be accepted…
Any way I have read the thread as soon as you have posted…
Thank you for the Contribution… for my investing journey.
I have started reading different threads on basics of investing…of your time line…
Chaithanya Garu.

#7

Could you please share some of the reading material as well. Books, websites, etc.

My point being, being a new investor it gets overwhelming given the number of resources available. What could be a selected list of items that we could start from?

#8

Reading @hitesh2710 Sir’s old & new replies can take care of lots of FAQ, additionally, one can also learn to be helpful, still remain humble, accept slips and many other things.

Of course there are many other Gems at VP.

Your Q’s is already answered here.

1 Like
#9

Hi @ChaitanyaC

The problem with allowing regional languages is that suddenly you will find the whole forum full of posts in different languages that a lot of people will not be able to read. So, let’s stick to a language that can be understood by all members here.

11 Likes
#10

Regional languages are not understood by all. Also it would be difficult for moderators to keep tab on the content. So even if it is not there in the rules, regional language posts will not be permitted.

7 Likes
#11

@basumallick @manish962

True, there is no disagreement here. I reason why I opted for the regional language was because the OP was a complete novice, a new entrant, so I thought of explaining the intricacies of the market in simple terms in the native tongue, I felt the need for it, which I thought may help someone in the future too.

I would not willingly disturb the nature of the forum.

1 Like
#12

I did not understand the correlation between being a new investor with language proficiency. In this particular case when the member has asked the question in English. It seems a bit presumptuous to assume that the person may not understand english as well as another language.

2 Likes
#13

I started my investing journey by reading two books

  1. One up on wall street
  2. Psychology of Money

@gatlabhaskar for at least 1-2 years you have to learn how the things works . If you want to start investing i would say try your hands on some good large cap and once you are comfortable adjust accordingly in different caps.
Investing is not so difficult ,invest in things you see around have good sales growth, growth profit growth, high Roe, Roce, lower debt to equity , good growth prospects (V V impt), No corporate governance issue , Tailwinds in sector it operates and most importantly you understand that business well.
Some really simple business that you can study are Varun Beverages, Asian Paints , Pidilite ,Astral
in small cap(Risky): RHI magnesita, Niit, Moldtek packaging, Tarsons

All Stocks discussed are only for Educational purpose , This is not a Buy/Sell recommendation

1 Like
#14

Sir Thank you for the Advice…
I have started reading ONE UP ON WALL STREET and RICH DAD, POOR DAD… from past ten days…
As u suggested I will read PSYCHOLOGY OF MONEY after I finish these two books…
I have also started investing in ICICI PRUDENTIAL Nifty INDEX FUND… First SIP done… Long way to go…!!

5 Likes
#15

You know how wide and deep markets are, I don’t have literally anything to tell you as far as the markets are concerned. And I have learnt and experienced a few things, which I thought I should say in our native language, despite the OP has posted in English. Because there exists the certainty of loss of my emphasis, my caution, if I use English, because the OP was an absolute novice, having been introduced to the market only a few days ago. So I thought to explain the broader working and basic things in our native tongue, rather than English, as the occasion called for it. Every single word will be understood, what needs to be conveyed will reach without a doubt.

A lot of things get lost in translation, even when the thoughts are one’s own. That is the limitation of language, unless both parties belong to the same league, if that is not true, there wouldn’t be an expression like ‘You know what I mean?’.

You may not have noticed this, but it does happen regularly in VP, as we have members all over India from different walks of life, the essence will be understood but not necessarily the emphasis. As, having a basic understanding of a language is one thing, and understanding the tone and depth of what is being said, when the same words are used is another, as the reader may have to read between the lines, know the meaning of certain words, understand their weight, interpret it correctly in the context etc. And each case could be different, if said briefly they may not grasp, if said elaborately they may get lost.

Why ‘One up on Wall Street’ is popular and is still read, one reason is that it is written in such a way that anybody can understand, why Dr. Hitesh’s thread is the most visited, like Monalisa, because he explains everything in simple language, despite being in the markets for many years.

It is said that Ramayan can be narrated in just 3 words in Telugu, kaTTe koTTe techche, Rama builds the bridge, defeats Ravana, brings Sita.

Just like markets, languages have nuances and intricacies. Unlike science, language is not absolute, including the native tongue. Big words or small, rich vocabulary or limited, native language or foreign, the transmission should happen, if that is the objective. So I felt the need at that point of time, chose native as I knew my objective will be achieved. I have never posted in my native language before, despite replying to members from my state(s), that was the first time. I should have given a DM to the OP (which I did later).

Apologies if any or all of this sounds like unwarranted rudimentary gyaan :neutral_face:

2 Likes
#16

Sir
As mentioned Dr. HITESH Sir threads are easily understandable … Please do give any books to understand the basics of financials… to assess the financial results of any company /Business… Thank you once again for your help…

#17

First of all, be clear as to why you want to invest in equity. Is this because you have a goal, say like your child’s education, for example, you need 50 lacs after 10 years, so you start investing in equity funds or stocks, keeping that amount and that time period in mind, and will not deviate from it. You can also invest without any goal, if that is the case, you can take chances, take risks. Equity is not fixed deposit, returns are not guaranteed, returns will be irregular unlike salary, one year we get 12%, next year we may get -15%. If for any reason, you need money and want to sell your equity, depending upon that time, you may be profits or losses, and you have to sell for losses too, so we need time on our side.

So first know what kind of an investor you are, why are you in the market, what do you want to achieve, if you can take capital loss etc. Then you can start devising a plan as to how to go forward. For example, you started investing in Nifty index fund. Why did you choose Nifty? Without understanding what you are investing in, don’t do SIP. And index investing is different from stock investing. You can invest in both but the way you should look at them is different.

Market will not go anywhere, the information and knowledge are abundant, so don’t jump, don’t go fast, have clarity, a basic plan, then go forward. This is a very long journey, with many surprises, some sweet, some bitter.

#18

Sir
I have two grown up kids, one is in job earning well, other one is an IITan doing B.Tech fourth year…
I have no goal…
But I became curious about Markets… I came to understand by readings that index is the best way to invest for long term without worrying about capital loss… I. e. for about 10 years or so… Also I am investing money which I don’t need for 5 years or so… Hope this makes my thoughts clear…

1 Like
#19

So there is no immediate financial need, then you should have patience, even with index. Look at the past returns of index, know how long it has taken for the index to reach to its previous high after it fell. The time may or may not be the same in the future, but it gives a rough idea.

For example, Nifty is at 15400 today, you are doing SIP, Nifty can go up, go down, remain at the same level for the next 1 year. If Nifty falls to 14000, will you stop SIP thinking it will fall more, or you stop because you are in loss. If it takes 2 years for Nifty to go from 14000 to 154000, are you okay with it?
So even with index investing, we should have a plan. If you consider this investment as part of your inheritance you want to give to your children, then it is different.

Stocks are different, as each stock is a different company, there is a lot to learn.

Each person’s financial and psychological states are different, financial part is easy, one should know what kind of person he is, if he wants to invest for a long time.

We start with a plan, learn, invest, gain experience, refine plan, go forward.

1 Like
#21
3 Likes
#22

I think to begin with, for direct stock investing, while you read one up on wall street, just pick up few stocks of your choice whose thread exist in this forum and read them completely…the more the better…it will give you perspective of how seasoned investors in this forum look at companies & analyze them during various phases.of the company and also market cycles…

Read Hiteshji’s thread also from start to understand many aspects…also go through some other portfolio threads to know how different individuals look at stocks and have evolved…

Congratulations for having successful grown up kids…

Best wishes

2 Likes
#23

The forum has helped me a lot in learning basics… Thank you everyone who has helped me out…
It has been six months of reading and only learning about Market… It looks like Still there is lot to learn about…
Can any one suggest a book or Material (Website) to understand the finances of Bank with terminologies… Thank you…