Stock market : My 100 pillars of failure (always updated )

An e-book of experience under construction. Copyright reserved©® 2009 Palas Kumar Ray.

My 100 pillars of failure in the stock market

Introduction:-Money, market and the man Everyone who comes to stock market, comes to make money, comes to build wealth, to make fortune. My reason becoming there in the stock market was not any exception. I have been associated with the Stock market for about 7 years now and despite a very big bull run in the Indian stock market for more than 5 years I have not made money there. During this very long period I have truly made a lot of experiments with my investment decisions and have acquired knowledge about what should be done and what should not be done in the Stock market. I have a lot of failures in stock market and now I know very well how to lose money there. By now I have gained my 100 pillars of failures and now I wait for nothing less than success in the stock market. I have much to tell about my experiences which I would like to share with you. Money is very important. We need a lot of them to spend and lot more we need to keep them as reserve for meeting our future expenses. Money is that apple which we want to eat and have it intact at a time. And we dream of having ample money to fulfill our desires. Desires are unlimited and we need unlimited money. We need money to fulfill our dreams, whatsoever. Stock Market shows us the opportunities opportunities of acquiring acquiring unlimited unlimited wealth and we reach there with a lot of dreams and expectations. Initially we look at the market with fear and respect. We try to acclimatize ourselves with the environment of the market and try to learn market language. Soon we become so obsessed with market activities that all other works appear less important. We become much involved both monetarily and emot emotio iona nally lly.. Frie Friend nds s who who do not not deal deal with with stoc stocks ks appe appear ar less less friendly. Slowly we become so much passionate about stock market that we star startt negl neglec ecti ting ng our our healt health. h. We now now cons consum ume e more more elec electr tric icit ity y and telepho telephone ne bills bills and pay handsom handsome e bills bills for our intern internet et connec connectio tions. ns. Eventually we forget to keep account of these losses while calculating our possible profits. Man as such is a very important component of stock market. The thrill and excitement of dealing with stock is almost unparallel. For me, I could compare this with my passion for the girl I madly loved in my teen. . .


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Introduction:-Money, market and the man

I entered into the market at my 40 years of age when I was already father of two children and I had a lot of social responsibilities to take care of. Had I not been there in the market I’m sure I could take better care for my responsibilities. Market consumes a lot of time in studies exploring opportunities. I almost devoted myself to learn more about market. For years together together I remained remained pasted pasted with my computer computer forgetting forgetting the world arou around nd me. me. Some Someti time me I thou though ghtt a life lifeti time me is not not time time enou enough gh to understand various components of stock market. Reading up to here you may feel that I am repenting for my earlier decision of getting involved with the market but I’m not. The message I inte intend nd to send send you here here is we need need be very very judi judici cio ous abou aboutt our our expect expectati ations ons and limitat limitations ions.. We need need be aware aware that that market market has the potential potential to give us very lucrative lucrative returns and also it has equal potential potential to take our last coin from us dragging us into the deep financial miseries as well. I want to send you the message that first of all we need invest time to learn more about different activities going on in and around stock market while I reiterate that the depth of market is almost unfathomable and we should not be under false notion that I’ve learned too much of it to take immediate control. This is no surprise that almost every new comer in the market falls into the false notion of having learned it all within very short period of time. With due honor to one’s individual merit and intelligence I reiterate that market is not an entity to learn within very short spell because true return from the market do not come from day trading kind of activities. Rather a rich harvest of wealth is reaped only after expiry of reasonably very long gestation period. Stay invested for a long term kind of advice is not uncommon in financial websites. I do only endorse the concept of investing with a long term perspective after experiencing the taste of investing otherwise. In true sense, putting some money in a stock for a short while and selling it off after 30-40% profit once or twice is quite common happening in the market but this is something like a game even not worth saying investing. .


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Introduction:-Money, market and the man Even if you wish to call it as the game of money making (and not investing) I’ll reiterate that investing is the best Game market has to offer you. There are certain things which one can not truly learn without experiencing. We are all in search of the best way to acquire more gains from the stoc stock k mark market et being being subj subjec ecte ted d to minim minimum um poss possib ible le damag damage e to our our financial abilities. As such when we will encourage ourselves saying more risk more Gain kind of sentence we must be aware of our capacity to bear “More risk more Loss” kind of possible outcome.

Mone Mone for for the the mone mone We reach stock market because we need money. We reach stock market because we have money. But we often fail to understand that all money is not made for the market. We have our money for livelihood, children's education, health care care and and many many othe otherr impo import rtan antt purp purpos oses es whic which h shou should ld neve neverr be considered useable in the stock market even for a shortest period. We are only only the the cust custod odian ian of such such money money to spend spend for for the the spec specifi ific c caus causes es without any delay for the end users. Such money is no way meant for the stock market. We need be very conscious about this difference when we indulge in stock market activities. Once we enter into the market the first impression we get there is profit is direct directly ly propor proportio tional nal to the total total amount amount we invest. invest. Eventu Eventually ally we ignore the dark side of this concept that loss is also proportion to the money invested. More money we bring into the market more susceptible we become to the possible losses. Often we think of perking huge sum into the stock market for a very short period period during Bull Run to earn quick profit. But I assume, assume, like me most of the people who found it as the right policy has found them very badly caught. Then only the real worry begins. Experience of the Stock market tastes bitter. To become a happy and prudent investor we need identify the money which we may place in the stock market for a longer period. . .


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Money for the money When we go for purchasing land, house or jewelries we maintain certain kind of attitude that the money we are investing on such items are not likely to be available for some other purposes soon .In stock market too we need adopt such attitudes. But while we enter into the stock market we suddenly happen to forget many basics which so far we ourselves might have followed. The stock market lures us to bring more money into the market to get them quickly multiplied. When market trends upward and grows at a very rapid rate not surprising that we feel great about ourselves. We find ourselves among the best trader of the world. We do even regret for not becoming here a few years earlier. We apparently find no reason keeping our available funds away from the market. When dreams of getting rich seemingly come successful we become the last person to keep our money away from the market. We go here and ther there e seek seekin ing g more more mone money y to pour pour in the the stoc stock k mark market et.. We star startt behaving like a person we are actually not. We turn greedy and continue to remain greedy until fear engulfs us soon following quick changes in the market trend and overall market scenario. By then some of us might have run up to the banks to get personal loans or drawn money from the provident Fund to invest in the stock market. By then we learn our first lesson in the stock market that all money is not made for the market. In this context I feel it would be wise to say something about credit facilities offered by the brokers for day trading of stocks. Brokers give facility to the client for buying stocks worth 4-5 times of money available in a client’s account i.e. in day trading a client is allowed to buy/sell stocks worth 400-500% of his actual capital. But condition is applied that the trade need be squared off within a stipulated hour regardless of profit or loss incurred by the client. Market has valid reason of extending such facility to the expert institutional traders for bringing liquidity in the stock market. But a fresher and less educated person falls prey of this lucrative facility offered by the broker houses. I personally mark this as a red zone which an investor should always avoid. Such offers appear to be the golden opportunity to play in the market with low capital. .


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Money for the money But a chance of losing 100% capital in a day is a reality here. Because once you make a 4-5% loss on 500% of your actual capital it amounts to20-25% actual loss of your true capital. The broker has no liability on your losses and always happy with the liberal brokerage you pay for day trading. This is also not investing. I hardly believe there may be any small investor who made money in day trading. Hence in the stock market own money is always the best money to deal with. We must get rid of the misconception that more capital will make us rich sooner. Instead accumulating money from every possible sources into the stock market which give birth to long lasting worries and pain we should always restrict ourselves in investing that extra money in the stock market which we do not need very soon. This will help us stay cool even if market shows great fall. In fact, we must adopt strategy of putting money into the market on regular basis. Even if we invest 4-5% of our monthly income into the stock market in a long run we may be able to have very rich harvest. This is again again noth nothing ing new new I’m I’m sayi saying ng abou aboutt which which has has not not been been spok spoken en earlier. Before I wrote this I read this in many websites but I had my mission mission on of learning learning everythi everything ng by experi experienc ence. e. I did every odd thing thing and found them testing bitter. Now I’m adopting this style of investing by my own choice. This is as such no advice but example which I lay before you.

I’m not wiser than the market Yes, I’m not. I'm not wiser than the stock market. Truly to say I had never been wiser and never shall I be. Because market will always continue to manifest the cumulative affect of many forces beyond my control Marke Markett has has no comm commit itme ment nt to meet meet my pers person onal al expe expect ctat atio ions. ns. Yet Yet market is very promising. I can not tame market but I can surely learn about its possible behavior and design my strategy to draw maximum benefit out of its errati erratic c moveme movements. nts. But I have have also also seen seen that that learning learning about market alone does not work properly. It so happened that more I learned more I fell short of knowledge. .


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I’m not wiser than the market The fault is not with the market but with us. It so happens because we are in hurry to earn money very soon. We feel whatever we have learned is final. Because we take investment decisions on the basis of incomplete knowledge. Because we are not free from external biasness. There are many ways to learn about stock market behavior and almost everyday new ways are being found out of making accurate predictions. Resources are never inadequate for a learner. But when we enter into the marke markett we play play under under typic typical al psyc psycho holo logic gical al pres pressu sure re.. When When mark market et trends upward very rigorously we seldom find reasons to waste time in studies. Rather, jumping into the fray and putting money on any stock that looks relatively cheaper becomes our objective and we often act under the influence of mass market behavior. Again we do not rely on our studies when market is bottomed out. We feel shaky to invest on stock market because no one is buying. Stocks are sold even at 20% of it’s yearly peak price and comes down to yearly lows but we find no reason to buy them because we fear them coming down further. This is common market behavior and I do not find ourselves rising above the the comm common on mark market et sent sentim iment ent.. We inve invest st time time and and money money to make make profits but we can not. We do not want to make losses but we book losses. We become bullish when everyone is bullish and become bearish when everyone is bearish. Then how do I become wiser than other? In the stock market we individual investors take most of our investment decisions under the influence of overall market sentiments and often we take them very lately. We waste time under fear before buying and we waste time under greed before selling. We waste our time and we waste our money. In fact we suffer from a lot of investment indecisions. Tim Timing ing work works s as very very impo import rtan antt facto factorr influe influenc ncing ing our our inves investm tment ent decisions. decisions. We need be smart in adjusting adjusting our timing of entering entering into and exiting from a stock. We need develop our own style of making and implementing decisions and we need take such decisions confidently on our own studies as far as possible free from external hues and cries of market. Not necessary that all our decision will be very perfect at the beginning but once we develop our style we will find us somewhere in a better position able to make better decisions. . .


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Too much of mathematics do not work Simple is the best Once we enter into the market we try to measure it’s depth in many ways. We think of every possible alternative ways. We make a lot of exercises on using our capital in every possible manner. We make a lot of calculations how our money can be multiplied. Obviously, idea of staying invested on a particular stock for a very long term appears very idiotic. Even if we try to remain invested we run out of patience when every stock jumps to a higher altitude except one I have invested upon. When every other stock except one I bought, shows 30-40% growth within a very shot period every permutation and combination tells us that repeated buying and selling is much profitable. Mathematics Mathematics told me that only 100 wise decisions decisions could make me a millionaire. We do our own research on investing 100% of our capital on a particular fast moving stock to get rich quickly. But unfortunately such thinking are too many in number at a time and we fail to remain sincere sincere to any of such calculations. We change our investment philosophy faster than than the the chan change ge of mark market et tren trend. d. We ofte often n cont contra radi dict ct our our earl earlie ierr decisions and keep them changing. soon we observe that almost our every reading was correct and they yielded nice result but as we could not trust them for a reasonable period we could not harvest any good result. In several occasions I found none but alone myself to be blamed for not relying upon my own observations. In several occasions I had to repent my decision of venturing different stocks even within a week. With great regret I had to observe that the laziest investor reaped golden harvest who even could not remember the name of stocks he had bought. Market I have seen yielding better result to less sensitive people. The market is full of probabilities but changing decisions frequently yields nothing. Even if every probability comes true in a trending market a flickering investor returns empty handed. Too much of mathematics is as such very harmful for an investor. We need to stick to simple investment philosophy of remaining faithful to our reasons of buying a stock and we need wait patient fully till the target price is reached. Simple is the best in the stock market. .


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My 100 pillars of failure in the stock market .

But I’m puzzled

Ther Th eree are are too too man man th thin in s to to tak takee car caree of! of!

Capital

Options Bear

Balance sheet

Security

Bonus

Bud et

PE Ratio

Security

Large cap Fundamental Index

Brokera e Book value Tech Techni nica call Anal Anal sis sis Profit SIP Medium Lon term

Da tradin

TAX Settlement

Mar in

Sector

Mutual fund

Blue Short term

I fear to unca Ginn ! An e-book of experience under construction. Copyright reserved©® 2009 Palas Kumar Ray.

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But I’m puzzled Yes we become puzzled when we enter into the financial jungle for the first time in our life. There are so many parameters to understand that we feel getting mad. We feel go back soon. But how can we go back? Then what will happen to our dream of getting rich? We fight with our own self and lastly and obviously we decide to stay. We try to invest time in understanding the language of market. Soon we find that things are not as complicated as they initially looked. Suddenly we also discover that we are speaking in that language. Joy of having learned the financial language fills our heart. Joyously we go for opening our first trading account. I remember those days how hard I had to try to collect an account opening form! Buying the first ever stock gives us such a satisfaction! The experience of selling a stock still remains due and we soon make it by selling it once 15-20% profit is reached. Booking profit gives us confidence to go for further investing. But during this process almost always our concentration on learning is grossly interrupted. I don’t think many of us do continue to learn any longer. The ghost of making profit takes our control and we get involved in frequent buying selling kind of activities. We feel if profit is being earn earned ed why why shou should ld I spar spare e much much time time in lear learni ning ng? ? We feel feel we are are educated enough to deal with the market. This metamorphosis takes place very fast and we get busy calculating how best we can utilize our small capital for spinning money. Now we listen to the market experts and try to get more tips on promising stocks. Many a things we do not understand but these are not much hurdles in buying and selling stocks. By then we also get the taste of missing huge profits on our sold out stocks. But we console our burning heart saying such mistakes are very common for a new comer like me and I need not be unhappy. We thank ourselves for not keeping our capital not invested. Interestingly I have observed that the psychological behavior of every new investor remain almost same. Now we try to learn about creatures like options and futures in the stock market. Many of us find our heaven in the day trading. Now I'm not puzzled but a learned investor. Now I teach other very well how to invest. . . .


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But I’m puzzled

But we continue to remain wise as long as the rally continues when good weather prevails everywhere. Companies bring out new IPO. Many comp compani anies es issue issues s Bonus Bonus share shares. s. Many Many share shares s are are split split.. Comp Compani anies es decla declare re hands handsom ome e divi divide dends nds.. Mutu Mutual al Fund Funds s too too pay pay out out attr attract active ive dividends. Good news pours into our ears from every nook and corner. More and more people get interested about stock market and fresh stock trading accounts are opened in millions. Broker houses open new offices to reac reach h ever every y pote potent ntia iall cust custom omer er.. Stoc Stock k mark market et attr attrac acts ts almo almost st everyone. But unfortunately this is only one side of the coin. The other side is too gloomy to imagine. When market crashes the picture becomes entirely opposite almost in no time. Rarely do we find someone looking calm and cool. Shattered dreams become talk of the town. People get worried about future. They try to save their remaining money by booking huge losses. Prices of almost every stock come down to unbelievable lows Every calculation now seems meaningless. People now become ready to invest anywhere but in the stock market. This phase of stock market is also so real that many people commits suicide out of great depression. Wherever there were great expectations there is great depressions. These two phases respectively are described as Bullish and Bearish phases in the stock market. Both are the realities of stock market and as such it continues to remain to be great PUZZLE. But such extremity of stock market is not unknown to the veterans. If we go back to our studies we will find that this is the basic character of the stock market. Nothing is surprising about it. These two phases come in the stock market in a cyclic order. Wise veteran investors are well aware of these sequences of such price movements and know the reasons behind. We now need go back to our studies and update our knowledge about stock market to deal it with much maturity and wisdom.

.

We nee need d be wise we need need learn more more


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Let’s go back to school We ne need ed o back back to scho school ol a ain ain and and a ain ain We need become real people to deal with the real happenings. We need become realistic in our outlook about life. We need get ready to accept both the realities while approaching the uncertain trails of the stock market. Truly to say the stock market has immensely helped me to know about the kind of man I’m. The market acted as a mirror for me. While taking hasty investment investment decisions I have repeatedly repeatedly felt that I myself needed more corrections than the stock market. I missed thousands of opportunities for not becoming sincere to the lessons I learned. Almost my every prediction which was mostly based on technical analysis of historical stock prices came true but I failed to draw the benefit only because of myself. Because I did not trust on my own studies and I did not wait for reasonable time before my crop was ready to harvest. I have made only mistakes and now they give me immense strength and confidence not to desert stock market out of fear.

Where’s the school? If you have already come across the stock market and have got some investing experiences you have already been in the best school. AS you now already have some practical exposure into the stock market affairs whatever now you may learn from elsewhere will reach to you much clarity. But we also need be a student of a trustworthy school where valuable education education on money and investment investment is readily available. available. In this internet era there are more schools than students. I have visited many of them some time or other. But the tutorials of website investopedia.com I have always found to be the the best best amon among g all all for for a begi beginn nner er as well well as for for an expe experi rien ence ced d investor. I become happy to refer this source to the enthusiastic learner. Howeve However, r, there there are many other other importa important nt resour resourcef ceful ul websit websites es which which impart valuable investment tutorials. We need choose our school and learn new lessons everyday as we continue continue our journey journey into the world of investment. .


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Let’s go back to school

What should I learn in a School? In fact we should ask ourselves what we should not learn. This is such an endl endles ess s curr curric icul ulum um!! Our Our life life will will but but the the less lesson ons s will will not not end. end. Howe Howeve ver, r, all all lesso lessons ns may may not not be requi require red d to be lear learned ned with with equal equal importance. We should have overall idea of different activities going in the stock market but we need not master all activities. As long as we prefer to remain restricted in buying and selling stocks (equi (equity ty shares shares)) i.e. i.e. what what in gene genera rall what what we under underst stand and the stock stock market to be all about we may avoid learning much about “Future: and “Option” trading in the beginning. Not because they are less important but because because they they are just just differe different nt kind kind of investm investment ent opport opportunit unities ies which one can master after having proper exposure to stock (equity/ share) trading purely on delivery basis. But we may acquire detail knowledge about investing in Mutual Funds where our money is invested mostly in the stock market by well managed institutions on our behalves. If we plan our investment as a mix of direct stock investment and through mutual fund we may very easily compare our performanc performance e in the stock market comparin comparing g our return return from from the mutual fund over a period of time. Obviously we enter into the stock market with a dream making hefty profits and building wealth. Hence, we need be aware of our tax liabilities on our short term and long term gains from the stock market which we will require to pay to the Government in time. We need learn our best about such implications while deciding our inves investm tment ent plans plans.. And And first first and fore foremo most st we need need lear learn n about about the the company of which we intend to buy equity share. We need know about the sector in which this company belongs to. We need keep ourselves aware about the compositions of different indices of the stock exchanges where we intend to trade. We need identify the emerging sectors and companie companies s which which are expect expected ed to perfor perform m better better busines business s in coming coming yea years rs.. We need need unde unders rsta tand nd how how to lear learn n more more abou aboutt a part partic icul ular ar company by studying it’s key fundamental ratios and it’s performance again against st prev previo ious us year years. s. We need need learn learn the the tech techniq nique ues s of “Tec “Techni hnical cal analysis” of stock and indices to asses their future price movements. .


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Let’s go back to school

How can I do all the these se thin thin s? True. Assignments are too large for someone to learn in a few weeks or months. We may not even find them very tasty. And you may argue that everyone who makes money in the stock market are not necessarily very learned person. There has got to be some alternative ways to invest in the stock market. You are right. If one person you find learning from the books you’ll find thousand others in proportion who do not at all make any study themselves. They also make money in the stock market and that’s why they are there. In contrast you may see me who have studied a lot but has made no money even in a bull run. I reiterate. In fact, no one will assure assure you that even if you learn a lot you’ll surely make money. Alternative ways are always there. Some people invest only on the advice of the brokers. The broker houses keep information about every rumor and news that may affect the price of stocks. They They have have very very orga organi nized zed busi busine ness ss netw networ ork k of exch exchang anging ing information in a lightening speed to deliver them to their clients. They keep sending “BUY-SELL-HOLD” kind of suggestions to their clients clients continu continuous ously. ly. Also they they organiz organize e invest investmen mentt worksho workshops ps where where clients are imparted investment know-how. There are Television Television channels where financial experts experts are analyzing every every moment momentary ary move move of nationa nationall and intern internatio ational nal happeni happenings ngs that that can affect stock market. There are financial websites bringing you bulk information about stock in particular and industry in general. They do also provide you buy-sell tips with proper interpretations. You also get a lot of information from your investment friends. One may like to make use of any or many of these channels to take an investment decision. I am never in position to tell you which is ideal. But you may consider all of them are different schools where you learn from. All of them have made this world very colorful and vibrant. At the end only two things remain very important which will decide either you gain or lose money in the stock market. 1) At what price you have bought the stock. 2) At what price you have sold it out. .


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I’m often confused! Nothing surprising that we often become confused. Processing such tons of data is no human job. Besides, we have our other priorities to take care of. We have our many other important assignments. We can not always be sitting before T.V and computer to receive the market updates! And neither are we genius to grasp information in minutes to take our decisions. Winning or losing money in this investing game seems like a matter of chance. What is said to be very promising today is not being said tomorrow or being said just opposite. New investment opportunities are everyday highlighted but no one is seemingly caring for what they might have said or forecasted yesterday on which we might have trusted upon. Everything is being uttered prefixing ifs and buts. None is straightway saying how I shall be most benefited. We do not get answers why the stock prices zoom into the highest altitude after we sell them out. We do not get the answer why prices of some stocks are rising up to 1000% without giving us any clues .No one is there to answer why the prices fall soon after we buy the stock. We also fail to understand why market become so much volatile a time that we feel ourselves put into a roller-costar ride. Why companies with apparently good fundamental do not perform well but unknown companies with weak financial records show extraordinary rise in price remains becoming a great puzzle. Sometime it appears that market do not follow any logical path. Market seems always succeeds to prove everyone wrong. Everything seems very uncertain in the stock market and hardly there is someone to describe what will happen tomorrow confidently. The way out from this labyrinth seems unknown to everyone. Then what will be the right philosophy of investing? Whom should we follow? On what should we put our confidence upon? How to make money by investing in the stock market? How other people do that? Is there really any end of this discussion? Is it at all possible?


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We should find out our ways. If the stock market is a very large entity we have our strength to explore it. Even if things are very confusing in the beginning when we will learn various components of stock market we will not feel surprised as before. We will find that the Stock market is just different than our conventional mark market et.. If we take take it for for gran grante ted d in the the begi beginn nnin ing g that that the the pric price e movements are likely to be very erratic in the stock market we need not feel uncomfortable. Rather this erratic movement of price a time shall give us real pleasure. There are mainly two approaches of studying stock market, Fundamental analysis and technical analysis of stock. I feel every one should follow a mixed approach to understand stock market. In every stock market its listed stock are grouped in different classes like Group-A, Group-B etc. They are also categorized into different classes as large cap, Medium cap and small cap stocks and there are penny stocks which are generally the cheapest stock in the stock market. But such classifications are never permanent. A “small cap” stock when appreciate much much in price price become becomes s a “med “medium ium cap” cap” stoc stock k and and vice vice vers versa. a. Such Such things we should thoroughly learn in our preliminary lessons. The term indices are the plural of index. We should know how indices are important in stock market. They are very important indicators. Of every stock market there are the national indices which comprises of the best companies representing almost every prominent sector. Rise and fall of index of a stock market gives us the overall idea how its component companies are doing. They tell us much about the market direction. There are benchmark indices of all major sectors in every stock market. If we carefully study there composition and weightage in the index soon we get our preliminary idea about which are the important companies of our count country ry.. Leas Leastt we must must know know abou aboutt the the funda fundame ment ntal als s of a company is its EPS and PE ratio which tells us how much this particular comp compan any y is earn earnin ing g and and how how chea cheap p or cost costly ly this this shar share e is sold sold at present. present. We should also make relative price study of companies within a sector. We should also try to know the “dividend” history of a stock which we may intend to buy. Dividend is that part of earning which a company distributes among the share holders. When the earning per share is more a company may give 100-200% dividend on its phase value which may be equivalent to 2-4% of its present price. .


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We should find out our ways. Suppose a share whose phase value is Rs.10 which is now being traded for Rs.500 giving dividend Rs.20 per share, this will amount to 4% yield of dividend on current price and 200% yield on phase value. If you have bought this stock for Rs.200 per share you are yielding 10% dividend on your money invested in this stock. Think of such person who might have boug bought ht this this stoc stock k at its its phas phase e value value of Rs.1 Rs.10. 0. Such Such pers person on is now now yielding 200% dividend on his investment. Suppose one invested Rs. 1000 in the same stock @ Rs.10 per stock. He got 100 shares. At present price they are worth Rs.50000 (Rs.500X100). If the company gives dividend of Rs.20 per share he gets Rs.2000 as dividend (Rs.20X 100) which is double of his investment. It also makes the sense that if you could pick up the right stock at right price and if you could remain invested for long time patient fully every year you may earn dividend more than what you might have initially invested in such shares . As in our country dividends may be Tax free in many other countries. Once a stock is nicely appreciated you are almost left with no reason to give it up. If it happens so, you eat your apple and have it too. When you invest with a long term perspective you are benefited some other ways too. Company at its good time issues bonus shares to its investors. Bonus shares increases number of shares in your portfolio. Let us take the previous example and imagine that this company has issue issued d 1:1 Bonus Bonus when when it is trad traded ed for for Rs 500 500 per per share share.. Now Now the the investor in example shall get 100 shares for his 100 shares in portfolio. After receiving bonus shares he will have 200 shares @ Rs. 250 each because once 1:1 bonus is issued the present price of stock will come down to Rs. 250 per share from Rs 500 per share. Now whenever fresh dividends will be announced the same investor shall get dividends for his holding 200 shares. When in future 1:1 bonus is issued this investor will get 200 shares for his present holding of 200 shares in portfolio. This way in a very long run a portfolio appreciate much in number and value which becomes a better portfolio in every respect. But this is also true that only a very few investor may stick to such policy of investment. While deciding our investment style and objectives one most important thing thing we have got to consi consider der is our prese present nt age. This This is always always an added advantage for us if we can start investing at our early age. . .


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We should find out our ways. I read somewhere that Warren Buffet; the legend, bought his first share when he was only 11 years old. Hardly can we assume someone coming into the stock market at this tender age. In fact we even fail to adopt such such philo philoso sophy phy for for our our child childre ren n too. too. We gene genera rally lly reac reach h to a stoc stock k market when we are aged enough and when we need quick money. We feel by investing a lot of money we can compensate the time we left behind. We think why to invest in small amounts every month when we have a lot of money ready with us? We also feel that as we could not start investing at our early age we must not waste time in bringing more capital into the stock market. We start investing without any delay at whatever position we find the market. This is not proper. Doing as such we make gross mistake with regard to money management which we soon regret. One may wonder why we need money management while investing in the stock market and what may I exactly mean to say by the term money management. Look, we have certain amount of money which is always equal to 100% for any of us. My 100% money is not necessarily equal to your 100% but 100% is the end limit for both of us. We can never exceed this limit while investing. Now in the very beginning if any of us utilize our 100% money buying stocks we become helpless when the price of stock drastically comes down. We now have no money to buy the same stock/stocks at lower level. The stock prices even come down further low but we find us very badly caught at higher level and except waiting for the price to go up in true sense we remain option less. This is very compulsive waiting and waiting for few months or even years we surely run out of our patience and interest in stock market. Side by side we lose our self-confidence too. But if we adopt recurring investment philosophy we can buy a stock at various price levels wherever we may find them appropriate across a longer time line. Adhering to a recurring investment philosophy we can chase stock market for a longer time without being much panicked about market falls. Such investment philosophy helps us to diversify market risk. Even if we later decide to stay away from buying for few months until the market is bottomed out to an expected level we find reasonably good cash to invest which comes to us regularly as per our previously kept provisions.


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My 100 pillars of failure in the stock market . A good planning with regard to money is as much important as picking up a good stock to invest. Price of no stock, good or bad is static. We all do expect to buy a stock at very low and sell it at very high price within a time frame. But perhaps, no one exactly knows the location of these two points. When the price of a stock comes down no one in true sense can assure you that it will not go down further and vice versa. This is a reality of the stock market and we have to adjust our monetary plans with such reality. We should bear a flexible outlook about both the possibilities in the stock market and we should be mentally ready to accept both the chances. If we plan to bring money in to the stock market on regular basis in very small small amount amount (whi (which ch will will no way way hamp hamper er our our othe otherr impo import rtan antt requirement within short time] we get the market at different levels and our portfolio so created becomes an average balanced portfolio. Adopting such investment philosophy we also happen to minimize our greed-fear factors. But bear it in mind we should continue to develop necessary skill to understand market trend through various available resour resources ces like technical technical analysis analysis of overal overalll market market trend and that that of indi indivi vidu dual al stoc stock k on whic which h we may may inte intend nd to inve invest st or rein reinve vest st.. If averaging averaging of price is profitable, profitable, averaging may also be very harmful at certain occasions. Bett Better er we unde unders rsta tand nd the the mark market et tren trend, d, more more like likely ly we are are to be benefited. If we desire to remain in the stock market for a very long run we should try to make us updated. Even though we may speak of good return is likely in very long run, nothing is truly assured. Investing is also not alone a time game. We should be free from the notion that every stock will perform very well and appreciate in a long run. The reality may be the just opposite. Hence we should avoid purchasing stocks having very poor EPS and PE-RATIO. We may begin our fundame fundamenta ntall studie studies s by compar comparing ing PE-Rat PE-Ratios ios of differe different nt stocks stocks within a sector and make a right choice. There is a general trend among fresh investors that we look for cheaper stock within a sector and avoid the costlier one. This is again a very common mistake we commit which we realize after pretty long time. Instead as a beginner we beginner we must try to restrict our choices among the reputed companies having slow but steady growth showing a sound uptrend. We may try to learn which are the leading stocks within a sector and put our trust on them. Price of such stock is generally less volatile and yield good dividend in the long run. However Price of a stock is the yield of many factors factors of which one most important factor is its performance in the industry it belongs to. But despite of better result a stock may be sold for cheaper rate only due to


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My 100 pillars of failure in the stock market over overall all mark market et influ influen ence ce for for a time time bein being. g. On the the cont contra rary ry,, desp despit ite e showing no remarkable business a stock may be sold at much higher price beyond imagination during crazy Bull Run. While in the market we investor need be acquainted with such unpredictable price movements.

This document’s regularly updated http://www.scribd.com/doc/16225720/Stock-market-My-100-pillars-of-failure-always-updated-

Now this e-Book is available in the blog http://stockmarketexperiences.wordpress.com/


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Stock market : My 100 pillars of failure (always updated )

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