Welcome to Bazaaredge.com “21 Essential In Investment”
Presentation. This presentation will provide you with information
to quickly and effectively plan, build, maintain and analyze your
History of Stock Market has repeatedly proved that investors are not
always rational. Just as they can bid up the price of a growth stock too
high because they are so enthusiastic about its prospects, they can also
pummel a good stock that has momentarily slipped to unrealistically low
prices. That’s where bargain hunters swoop in.
1. Diversify Your Investment
Maintaining a diverse investment portfolio is a relatively simple way to continue
to make investments while taking steps to insure that you're not going to loose
everything should certain stocks or sectors of the stock market drop in value.
Despite the usefulness of diversification, many people still maintain a very
limited number of investments in very similar stocks... often because the stocks
are given as part of a stock-option plan from their employer or because the
individual simply doesn't know how to take advantage of diversifying their
2. How to Choose an Investment
Setting your Investment Goals
Ask yourself, “What do I want to accomplish through my investments?” For most investors, the following investment
goals or objectives, or some combination of these, provide an initial answer to that question:
This objective reflects a conservative investment philosophy with minimal risk of loss of the original investment (the
An “income” objective is achieved by purchasing investments that provide a stream of income through regular payments,
which may or may not decrease the invested principal.
This category refers to investing for long-term growth or appreciation in market value. Growth investments carry a higher
risk than either safety or income oriented investments. Growth investments generally provide little or no dividend
Speculative investments carry a higher-than-average possibility of loss. This strategy often includes short-term trading of
new or unproven companies’ stocks or options. Although there is the possibility of higher and faster rewards, speculative
investments also are high risk, meaning there is also the possibility of larger and faster losses of some, or your entire
Balancing “Risk” and “Return” to meet your goals
As an investor, you choose your investment goals with an emphasis on one or more of the above categories. You may
also wish to allocate portions of your investment portfolio to more accurately express your investment goals.
3. Investment in property
Starting off with a small investment property can also help you become a better
property manager. It is easier to adequately address the needs of just one
tenant than it is trying to solve the problems of several tenants at once. Part of
making an investment property successful is adding value to the rental. If you
can learn how to please one tenant, then you will be in a better position to
extend what you have learned and please all the tenants in a larger complex.
Indeed, experience is priceless.
4. Dividends and Reinvestment
Reinvesting dividends is an easy way to make more money off of a particular
stock or investment... after all, the investment is doing well enough to be paying
dividends, and the reinvestment means that you have more of the stock or
investment than you did before.
If the dividends that you receive are paid to a money market account, you may
also choose to reinvest them into other stocks or investments than the one that
originally paid them... this can be especially useful if you are receiving dividends
from one of your investments that you have a lot of shares in, but you have
another investment that you don't have much of.
5. Remember these
No matter how you choose to invest your money there will always be a degree
of risk involved.
Risk and return go hand-in-hand. Higher returns mean greater risk, while lower
returns promise greater safety.
Do not invest in anything you do not fully understand.
6. Stock Tracking
Many financial sites offer stock and investment tracking services free of charge,
which enable you to get recent quotes from stocks and other potential
investments of your choice. In addition to simply being able to track the current
prices of these investments, you are also generally able to view the history of
the stock or investment for the past month or longer, sometimes viewing the
performance of specific stocks for the past one to five years or more.
By signing up with websites that offer stock and investment tracking, you can
also have sudden changes in the stocks that you're tracking e-mailed to you or
sent to your PDA or similar electronic device.
7. Diversify into no more than
twelve different companies.
Owning shares in twelve companies is plenty. It would provide the diversity to
sleep well at night, and provide a cash dividend every week of the year. Start by
owning three companies, and build from there.
Determine how many shares you want of each company before moving on to
the 4th, 5th, and 6th. Invest in sets of three different companies at a time, until
twelve are owned.
Success in the stock market is not so much derived by buying a company’s
stock at the lows, but is almost guaranteed successful through rupee-cost-
averaging over the years.
One of the most powerful methods of investing in the stock market is having the
perseverance to continue adding shares to your stock positions over the years,
through reinvested dividends and quarterly infusion of funds, be it 50 rupees, or
100 rupees a month. Persistence, persistence, persistence, and your stock
market investment philosophy will become unbeatable!
9. Investment Plan that never
lets you down
Let us find out why companies that give ever-increasing cash dividend income
are a good choice for investment
Your Share Holding Goes Up And So does Your Dividend Income.
Your Dividend Income Increases Even If Stock Prices don't.
You are not hit by Inflation.
10. Economical Retirement
A forethought example:
I want every stock market investment to supply me with ever-increasing cash for the rest of my life. I want my
retirement investment portfolio income to grow until the income from my portfolio replaces the income from my job
when I retire.
A patience example:
I will make quarterly investments into each security owned to raise the cash dividend supplied by each stock
market investment. I will start by owning three companies which will supply me with cash dividends every month of the
year. I will also add the cash dividends to the quarterly investments. I will build this stock market retirement investment
plan up until I own 500 shares of all three companies. Once 500 shares of each company are owned, I will begin
investing in three more companies. Owning six companies will provide ever-increasing cash dividends twice a month,
until I retire. My patience will eventually acquire 12 companies, providing me with income every week of the year.
A wisdom example:
I will only purchase those companies that have a historical record of raising their dividend each year. I know that a low
2% dividend paying stock is not necessarily bad. It means the company in question is a growth stock, using most of its
profits to expand. A growth stock makes up for the lower dividend yield by faster stock appreciation in the marketplace
(however, the company will still show a historical record of raising their dividend each year). I will diversify into 3
stocks, right from the get-go, even if it means I start off with as little as 5 shares of each company. I will not pay
commission-fees. I will place emphasis on increasing the cash income paid to me from all my stock market retirement
11. Choose Investments That
1. The stock market is risky business
Generally, most people believe that buying stocks are as easy as 1-2-3. Of course, it can and in fact anybody is capable
of doing it. But the problem lies on the fact that few people only know when to sell. And that is, in its greatest sense, the
heart of stock market.
So, the best advice for people to get the best stock market investment, it is best not to gamble everything that they have
on it, especially if they don't have a good understanding of how it works. It's better to loose a little than loose really,
2. The "trailing stop strategy."
Most experts incorporate this when getting stocks. What they usually do is to "ride" their stocks really high, and maintain
an exit strategy in the event that things get out of hand. This is where the liquidity of their investment is extremely vital to
one's business. That is, they should know that whatever liquidity they have can be easily converted into cash.
3. Invest only in what you are comfortable with.
Even if particular investment opportunity, say, an exciting IPO of a big company, looks very attractive, it is a must for
every investors not to invest on it if they are not prepared to risk losing their money on it. In this way, people will be able
to get the best stock market investment by following this very important advice.
12. Learn the Art of Timing
Stock Market Investments
Market timing determines whether a stock seller or a buyer will benefit
monetarily or otherwise from his purchases or sales. Most stock holders hold
their stocks up and wait for the value to increase. When the value of these
stocks increase in the market, this is the time when they plan to sell because it
is at this time that profits are projected to be high.
However, peaks and lows in the stock markets are unpredictable and irrational.
But this does not mean that timing stock market investments is not good. It is
not advisable to ignore the times when there is significant undervaluation and
overvaluation in the stock market. This is the importance of timing stock market
investments. To buy stocks which are guaranteed to peak while they are still
selling low; and to sell high value stocks which are expected to fall. If an
investor ignores these important market movements, then he is bound to lose
instead of gaining huge profits from overvaluation in the stock market.
13. Biggest Mistakes Made When
Designing Investment Portfolios
1. OMITTING APPROPRIATE ASSET CLASSES AND ASSET SUBCLASSES.
2. SELECTING INAPPROPRIATE ASSET CLASS WEIGHTINGS
3. UNDERESTIMATING THE IMPACT OF INFLATION
4. NEGLECTING THE EFFECTS OF PORTFOLIO MANAGEMENT
5. MAKING INACCURATE RETURN FORECASTS.
6. OVERESTIMATING THE LEVEL OF PORTFOLIO DIVERSIFICATION.
7. MISJUDGING THE IMPACT TAXES HAVE ON NET RETURN.
8. CONFUSING DIVERSIFICATION WITH ASSET ALLOCATION
14. Financial tools for
PRICE EARNINGS RATIO:
The most important ratio that investors should look at is the Price Earnings (P/E) Ratio. In layman’s terms this is the
share price divided by the profit per share. The P/E Ratio of a Company should be compared against other companies in
the sector and against the market as a whole. I also believe a good test is to compare the P/E Ratio of a company with
other similar companies quoted on stock exchanges.
NET ASSET VALUE (NAV):
Though there are many strategies that investors should follow, I tend to follow a strategy where I would buy investment
companies if they were at a discount to their NAV of at least 20%. I tend to find that the downside is restricted if
investors follow such a policy. If the market were in a bear market phase (i.e. falling market), I would widen the discount
to say 30%. If in a bull market then the discount could be narrowed to say 15%.
EARNINGS PER SHARE (EPS):
Another tool that should be used by investors is to look at the track record of the company concerned. By this I mean the
growth (or lack of it) in Earnings per share. A good management team should be able to register a solid annual increase
in EPS of say 15% per annum. It should be able to do this on a consistent basis.
15. Avoid Dumb Investment
Don't Forget to Diversify
Don't Ignore Investment Expenses
Don't Get Greedy
Don't Get Fancy
16. Things To Consider
Always set aside some of your money for emergencies before you
Ask for advice from a trained and licensed professional.
Be selective in your investment choices. Exercise your right to say
Develop a sensible investment plan and follow it.
Judge each company on its own merits. Do not invest on a company just
because it is part of a fast growing and successful industry.
Never invest based on information obtained from an unsolicited
Check the credentials of anyone you do not know who offers to sell you
17. Improving Your Financial
Situation With Investments ?
Stocks can be very risky but if you start small and give yourself time to get the hang of it, you may
enjoy it and may even discover that you have the gift of foresight.
Bonds on the other hand may have modest returns but they are probably the best and most secure of
Currencies are trickier to deal with as their value are affected by so many forces, local or within the
country involved, regional and global.
Debt is perhaps the single worst thing that you can do to damage your financial portfolio. Do not get the
wrong idea, debt can be good when used the right way. In fact, successful businessmen have debts
It will be risky but the fastest way you can earn big money is to venture on a business. Even something
as small as operating a cafeteria in a factory or school or engage in buying and selling of goods over
the Internet, can be a great start.
18. Insure Your Investment
You insure your home. You insure your life and the lives of your loved ones. Why
not insure your investments?
With current market conditions tossing most portfolios around, it would make
sense to protect your portfolio. After all, the work we do significantly lowers the risk
of losing money in an investment we choose to get involved in. But we never
completely eliminate all the risk in the market.
Buying a protective put will help protect your new stock purchases in the market.
This can be really helpful when you want to buy a particular stock, but the overall
bias in the market is down. What is a put? A put is a contract that gives the buyer
the right to sell stock at a certain price and during a defined period of time, up to
the expiration of the contract
19. It’s Stocks, Not Markets,
that Bring Investment
1. Invest regularly, regardless of the present outlook for the
economy or stock market.
2. Reinvest all earnings, letting the power of compounding work
3. Discover growing companies so that your wealth can grow as
their sales and earnings grow over the years.
4. Diversify your holdings, and don't put all your eggs in one
basket, regardless of how carefully you watch that basket.
20. What is Arbitrage
In the simplest of terms, Arbitrage means to exploit price differential.
Usually it meant looking at differing sources of an investment, and if there was a price difference
between Source A and Source B - then the investor / dealer / broker / manager would buy from the
lower priced source, and sell on the higher priced source.
The price of Stock ABC was Rs 20 per share on Exchange XYZ
The price of the same Stock ABC on another Exchange 123 - was Rs 15
The dealer would buy the stock from Exchange 123 for Rs 15 - then sell on Exchange XYZ for Rs
20 - making Rs 5 per share profit (minus costs).
Typically the price differential was very small - and trading had to be extremely quick and liquid -
otherwise the markets could go against you in a very short time.
This method is often enhanced by the use of leveraging (gearing up / borrowing) (remember
LTCM?) - and sometimes using Derivative Structures such as Options - or hedging methods
such as selling short.
1. Review asset allocation
2. Maintain liquidity
3. Selection of stocks
4. Stagger purchases
5. Don’t Fly Blind; Have a Financial Plan
6. Do control what you can
7. Do pay as little attention as possible to the financial media.
8. Don’t fall into “Invest and Ignore”
Congratulations! After reading the information in this guide, you should be better
informed about the overall planning of your investments.
The best advice may be to start slowly and grow your investment to meet the
needs of your retirement.
We hope that you feel well informed about investments for your wealth creation.
We would like to invite you to see how Bazaaredge.com blog can help you to
create a winning invesment plan.
Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment,
legal or taxation advice to you. And not soliciting any action based upon it.
The report is based upon information that we consider reliable,
but we do not represent that it is accurate or complete, and it should not be relied upon such.
We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person
from any inadvertent error in the information contained in this report
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