As someone who has dabbled a little in the stock market and made some money, I have to admit that it sure beats the hell out of putting your money in an FD. And it ain't no rocket science either. But there is a tremendous amount of chance involved and you could lose.
But the simple truth is that last calendar year I invested in and made money on icici bank, maruti suzuki, jk lakshmi cement, sobha developers, kingfisher airlines and a couple of others. Small money. Nothing big :)
My strategy was simple.
1. I only played with an amount I was prepared to lose.
2. I didn't do derivatives.
3. I didn't day trade ie. buy and sell a stock on the same day.
4. I read the economic times every day.
5. I reacted to pseudo bad news and hidden good news.
When you play with small money (twenty to thirty grand for me), your absolute returns will be small. Accept it. I understand derivatives theoretically but I don't understand the market forces that make them move and I avoid them. This limits me to being a bullish investor since I cannot profit from an expected downfall of a stock - but that's ok. Day trading is a tedious and stressful task and I just cannot be monitoring stocks all day along. I check stocks I am invested in, about twice a day only. Reading the ET is the real fun part. Scavenging for pseudo bad news that has a brought down a good stock unfairly and which you think will correct very soon. eg. during the manesar episode, maruti tumbled and I bought. Scavenge also for hidden good news which you think is likely to to push up a stock sometime soon. Un-hidden good news is no good since the market would have already reacted to the information before you ever got to know. eg. if you read in the headlines that infy has had stellar Q4 results do you really think the stock has not already moved up? but if you witnessed real estate prices sky rocketing in bangalore where sobha has many projects and decided to buy, you could be onto something - if you are patient.
I've not been active for many months now, but i know for a fact that using just these simple tricks I was able to nearly double my play money in just four months. Maybe I just got lucky with a bullish market, who knows? But luck or no luck, I hope you see now, why the idea of a 7.5% FD sounds ludicrous to me!
What do you think?
I've not been active for many months now, but i know for a fact that using just these simple tricks I was able to nearly double my play money in just four months. Maybe I just got lucky with a bullish market, who knows? But luck or no luck, I hope you see now, why the idea of a 7.5% FD sounds ludicrous to me!
What do you think?
Hallo!
ReplyDeleteooh nice, 100% in four months is great :)
each has its merits i'd say...i still go with some liquid cash in the accounts(FD ain't liquid, agreed), some cash to play with on the markets and maximize the tax saving investments for now...at least until i earn a little bit more ;) (i know, there is no end to wanting to see a bigger amount on your payslips)
FD would be good only if you wanted to keep your money locked so that you don't accidentally use it elsewhere, say for a year or so...it happens to give you greater returns than your savings back account too...besides, putting the same money in the market allows for the possibility of negative returns (which would destroy the idea of keeping money secure for a year to meet target at end of year)
target -> some payment, maybe educ fees or a holiday trip abroad etc.
Did you know you can get loans very easily against an FD? so I put bulk savings in FD, little liquid cash for emergency and some play money for equity. eventually when I have enough I'll look at property. that's my plan...
Deleteget a house loan then mate! this budget provided additional incentives for first time house loan takers too...
Deleteyes, but why pile up on the loans? when you have the cash? and that too a loan which does not provide any tax incentive to boot...
come to think of it, you can check out the variable RD introduced by icici bank...if you have an account with icici bank...i dont know the current rates with FD, but the RD rates go upto 9% i think based on the tenure...it's called iWish...
why bulk savings in FD? if it's savings, then why not ppf? secure, same interest rate i think, tax incentives again, kinda like a retirement corpus or some big expense/investment after several years...
dreadful that there is no email response to your reply to my comment...
Nice article Bugga.. Inspires me to start investing too :)
ReplyDeleteThanks man! if it sounds interesting to you then please do! I can tell you what you need to get started, apart from money that is :)
DeleteGreetings contra-investor!! Making money with KF, Suzuki and Sobha (Q2 entry was it??) means you command respect..
ReplyDeleteKeep going lad.. But as you rightly said- the real test with your strategy is WAITING: waiting for news: not bad enough to shake the fundamentals of the business but just bad enough to entice the emotional market adversely. So patience ought to be our best friend here. Wish u all the best.. And happy investing!!
Thanks man! Gotta get back to it soon. I remember how you used to invest virtual money back in the college days and in some way I guess you got me interested/started when you made that AWESOME prediction about Tata Motors!!
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