Today's Tutorial[5-7-08]

Why does the stock market go up and down? Theses fluctuations occur partly because companies make money, or lose money, but it is much more involved than that. A stock is only worth what someone will pay for it. Usually, if a company makes a lot of money, its value rises, because people are willing to pay more for a company's stock if the company is doing well. There are many other factors that affect the value of stocks. One example is interest rates, or the amount of money you have to pay a bank to loan money, or how much it has to pay you to keep your money in their bank. If interest rates are high, stock prices generally go down, because if people can make a decent amount of money, by keeping their money in banks, or buying bonds, they feel like they should not take the risk in the stock market.

Many other factors have an effect on the stock market- for example, the state of the economy. If there is more money floating around, there is more flowing into companies making their prices rise. Yet another factor is time of year, and publicity. Many stocks are seasonal, meaning they do well during certain parts of the year, and worse during others. An example is an ice company, the ones that package ice that you buy at the supermarket. During the summer, with picnics, and sweltering heat, their product sells well, and thus their stock price goes up; But during the winter, when people are not as interested in a picnic with 20 below temperatures, their price goes down. Publicity has an effect on stock prices. If an article comes out saying that company ABC, has just invented this new type of ice that will revolutionize the industry, odds are their price will increase. Conversely, if an article comes out saying that company ABC's president is a crook, and stole the pension funds, it is a good bet that the price will go down.

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REPLY TO UR QUERIES

@ DINS

As u r new to the markets and there are such dreaded times at the markets the best way for u to start investment is via SIP.All the analysis and technicalities go wrong even for an expert person so u r bound to go wrong.Better u invest in the Mutual Funds via a SIP.And if u dont want to take any risks at all(0%) then u can start a RD in a bank becz the interest rates are high enough.

Inspite of this if u want to invest in the share market then i wud advice u to wait for a while max 15-20 days,the markets ll reach their lowest levels and u can invest wid least risk.

@Ashish

My advice to investors who hav lost large sum of money is quite clear.As far as the Nifty is concerned the max upside in the very short term is abt 4450 provided their is no political crisis on 7th.So in case of essar oil i feel it can reach abt 198 (+ or - 5)if all is well.so i wud advice u to exit ur positions at these levels so that u can reenter wen the markets reach lower levels(wch is bound to happen,in the near future).This will minimize ur losses and maximize ur profits.

Dont try to recover ur losses by playing risky intra-day trades on the advice of anybody,u may lose the remaining sum as well.Be extremely cautious.And one more thing dont go for panic selling at any cost let ur actions b rational and well thought after.

@ Sripal

Wat price range,i mean the company price,do u want?

@Badulla

Keep visiting my blog for regular news and updates. :-)

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Today's Tutorial[28-6-08]

DONT LET UR PROFITS TURN INTO LOSSES.

LEARN TO TIME THE MARKET WELL.

WAIT FOR THE RIGHT TIME TO ENTER THE MARKETS.

KEEP SOME CASH ON SIDELINE SO AS TO ENTER WHEN THERE IS A FALL IN THE MARKET.

DONT LET GREED RUIN UR PROSPECTS.

WHENEVER U BUY ANY STOCK HV A VERY CLEAR IDEA AS TO WHAT TARGET PRICE U R LOOKING FOR(% RETURNS) AND AS SOON AS THE STOCK PRICE REACHES THAT POINT IMMEDIATELY SELL IT.AND LET THE TARGET BE REALISTIC.

IF U KEEP ON WAITING FOR THE STOCK TO MOVE UP FURTHER;IT MAY SO HAPPEN THAT IT MAY FALL BY A HUGE MARGIN AND U WONT GET ANY TIME TO EXIT.

DONT LET ANYONE'S OPINION INFLUENCE UR IDEAS UNLESS U R VERY SURE THAT IT MAY BENEFIT U(I M NO EXCEPTION)

DONT BELIEVE ON THE RUMORS IN THE MARKET.HAVE TRUSTWORTHY SOURCES.

IF U HV LOW RISK APPETITE BE AWAY FROM THE MOMEMTUM STOCKS,THEY SEEM TO BE VERY TEMPTING,MAY EARN UR THOUSANDS BUT ROB U OF LAKHS.

IF U WANT AN ASSURED RETURN THEN MAKE SURE U R INVESTING ATLEAST FOR A SPAN OF 9-12MONTHS.BETTER U INVEST IN A LARGE CAP STOCK.

THATS ALL FOR THIS WEEK FOLKS!!!

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Top Performing Mutual Funds

CLICK ON THE IMAGE TO VIEW THE LARGER IMAGE

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Tutorial 1

As a part of my initiative to educate the newbies and warn the rest abt the realities of Stock Market,i m starting with a new series TUTORIAL.In this i ll be highlighting the basics that hv to be borne into mind while investing.I ll be posting every saturday a new topic with regards to this Tutorial.With out wasting much of time,let me start with the topic for this Saturday.

What is a trading system?
A trading system is a collection of rules that define everything you may do before,and more imp,aft you buy any stock or investment.It is a planned approach that provides structure to your investment activity in the market.

The trading system is basically a plan that not only says how you are goin to trade successfully but what you are goin to do if things go wrong.

Building wealth is just like building a house.You wouldnt build a house without a plan and neither should you attempt to build wealth through trading without a solid trading system.

NEVER PUT ALL OF YOUR EGGS IN ONE BASKET


The most imp rule of investing properly in not to lose the money that you hv started wid,This might seem obvious , but it is amazing how many ppl's trading strategies dont look at ways of managing risks.

There is some form of risk involved in every kind of investment.Risk management means taking action that will significantly reduce the likelihood that you could lose the money u hv invested.

One of the 1st things that u can do to reduce the risk is diversify.You may b familiar wih the term "diversification".When talking abt investment this really means spreading the risk.

If u hv all of ur money in 1 stock u hv more possibility of losing it all.Imagine if that stock unexpectedly goes down.Even bfore u could sell the stocks u own,u may hv lost a major portion of ur investment.

On the other hand if u hd taken the same amount of money and spread it over four diff stocks it is unlikely that all of the 4 stocks will fall dramatically at the same time.This is esp true if you make sure that the stocks are in diff industries.

So how can u put this idea into practise?By creating a simple first rule in your trading plant that limits the amt of investment capital that you will risk in any one investment.

For example,if u hv Rs.10,000 to invest then u may wish to create a rule whereby u nvr put more than 10% into any one share.This means that u wud not invest more than Rs.1,000.That way if a particular stock goes bad,the most u can lose is Rs.1,000.

Whether u know it or not,u hv just introduced the concept of money management into ur trading plan.Money management means using rules to protect ur money regardless of whether the stock market goes up or down.We'll learn more abt money management in the next few tutorials.

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