Category Archives: Investment

Repo & Reverse Repo Rate

Repo Rate- The rate at which RBI(The Central Bank of a country) lends money to banks is called repo rate in India.

Reverse Repo Rate- The rate at which borrows money from banks is called reverse repo rate.

The central bank makes changes in repo or reverse repo rates whenever it is required. By doing this the central bank maintains the cash flow in the economy.

Change in the repo rate:

I. To control the inflation rate: To control the inflation rate is one of the main objective of any government. If the inflation rate is very high, the purchasing power of people decreases. Sometimes it become

Analysis of stocks

If you want to invest in stocks, you need to analyse them at first. You have to check whether a stock can give you desired return in a period of time or not.

Maximum people invest in stocks recommended by experts on telivision, magazines or newspapers and books loss in maximum cases they have to book loss.

There are two types of analysis of stocks based on the investment horizon-

Technical Analysis- The analysis which is done by the help of charts and different technical indicators is called technical analysis.

Benefits of technical analysis:

I. It reflects traders’ mood: The technical analysis is very much useful in trading whether it is day trading or it is short term trading. Different indicators like Relative Strength Index(RSI), MACD etc shows the mood of traders about a stock. Are they interested to put money in stock or not? Their interest shows that the stock price may rise. It creates an opportunity to trade the stock.

II. It helps to secure your money: Today a number of technical indicators are available to analyse a stock. If maximum indicators are indicating the price rise, then you put your money in the stock. But, if maximum indicators are reflecting price fall, you don’t put your money in the stock. Thus, your money is very much secure.

Fundamental Analysis- The analysis which is done by the help of performance of the company in the previous quarters and years is named as fundamental analysis.

To become an investor i.e. to invest for a long time you need this type of analysis. Before choosing a stock you have to go through the past performance of the company. If the company is

There are lots of books available in the market on both types of analysis. Start reading them today.

I’ll also write on both types of analysis in coming posts.

SIP:A way to financial freedom

A majority of people are unable to fulfil their financial dreams and goals. This is not always due to their low income level but mostly it happens due to the unawareness of the instruments which can help them in achieving their goals.

Mutual funds are such an instrument by which we can not only achieve our financial goals but also grow our money faster than the inflation rate. There are several ways to invest in mutual funds but SIP is one of the most effective way.

SIP means Systematic Investment Plan. If you want to invest in mutual funds and you choose this option to invest, you’ll get these benefits:

I.Periodic investment-You have to decide an amount to invest every month through SIP. One can decide any amount but at least 10% of your income will be the right amount to use for investment. It helps you to build a corpus gradually whether to achieve your goal or to invest again.

II.Averaging-This is another benefit from SIP. If you invest all the amount at once, you can’t get the benefits of averaging which helps you to maximize your profit even in odd conditions.

Let me explain this through an example: Suppose you invested $10000 in a mutual fund through SIP at the price $10 per unit. After investment the unit price falls to $5 per unit. If you again invest $10000 at this price. Your average price will be $7.5. Again, your average price will decrease as you continue to invest more at a regular interval at lower prices. This process is called averaging.

I think it’s clear to you that the concept of averaging helps us to decrease our loss and grow our profit.

Strategies to make profit in the stock market

I’ve seen many persons who have stopped to invest in stocks after making loss in it. If you are one of them or you are going to start to invest in stocks, you must know the winning strategies to save yourself from losses and achieve whatever you wish. If we follow the principles made by successful investors throughout the world, we can easily and consistently make profit in the stock market. Here, they are-

I.Decide your investment capital carefully : Several people put all of their savings in stocks and sometimes they loose everything. It’s a wrong decision. You must start you stock market investment with a very small amount which you can loose without any hesitation.

II.Choose your stock carefully : Never choose any stock by the recommendations of other people or experts speaking on TV only. Pick any stock to invest on the basis of your own research and analysis.

At first make a list of stocks recommended by experts.Start your research with the first. Today there are several sites that make data available for stock research. You can find them by using Google search or any other search option.

However, I’ll explain you ‘How to analyze or research a stock?’ in another post, but here I’m giving you a few points to keep in mind while selecting a stock-

1.Is the profit of the company is growing year by year during the last 5 years?

2.Is the future of the company bright?

These two questions will certainly make you clear whether you have selected the correct stock or not.

But, if you don’t have sufficient time to search a stock for you, you must invest in some blue chip companies. Blue chip companies are those which have proved themselves in a long period of time.

III. Have a systematic plan to invest : If put all your money in a stock without any plan or strategy you may have to book loss many times. I would like to suggest that you should divide your whole money into 4 or 5 parts. Invest just one part at a time. If the start to fall and it falls more than 10% then invest the 2nd part and so on. This strategy is called Averaging.

IV. Pick more than one stock from different sectors : Sometimes a good stock of the present becomes a bad stock. Take an example of Satyam computers. So, never put all the eggs in the same basket i.e. invest in more that one stock at a time from different sectors. For example: If you choose one stock from banking sector then choose another from health sector.

V. Have patience : When you start to invest in stocks, patience is your best friend. Never try trading until you have sufficient knowledge about the stock market. Good stocks give huge return in a long period of time. Once the great investor Warren Buffet said that he can wait for infinite years to make profit from a good stock.

VI. Keep an eye on the performance of the company : This is the most important point if you have invested in one or more stocks. Today a number of apps are available which provide stock specific news. Give at least half an hour per day to know what’s going on in your company of investment. Go through the quarterly results of the company to decide whether to stay invested or to get out of it.

Benefits of investing into stock market

Stock market is heaven for those people who wish to start a parallel income with their regular income. It’s also a boon for those who wish to grow their savings at a faster rate. Even then only about 1.5% of Indian people invest into stocks. However, about 10% people in China and 18% people in USA  invests in stocks.

I feel that Indian people don’t invest in stocks because they lack knowledge about it and so they fear from it. Let’s have a look over the reasons to invest into stocks-

[1] Richdom or financial freedom- Each person in the world  wants to get richer. But, only a few are able to do so. Stock market is one of the most effective way to get richer. Try to know about Warren Buffet or Rakesh Jhunjhunwala if you have any doubt. Numerous people have changed their financial status by the help of the investment in stocks. You too can be one of them.
Mr Rakesh Jhunjhunwala started to invest into the stock market in India with only Rs 5000/-. Now his networth is more than 5000 crores. Mr W Buffet is one of the richest persons of the world.

[2] Less working hour –If we want to become a stock investor, 1 hour every day is not bad to study or analyze the stocks. It means that you can earn money from the stock market with your current job. What about this extra income? No other source of income can beat this time requirement. 

[3] A home based income- One doesn’t need to go here and there to get income from the stock market. You can do everything of it by the help of a laptop or mobile with an internet connection. You can do all the tasks related to stock market from wherever you are from your home or your office. 

[4] Sufficient time for family-while doing jobs, we are generally not able to spend sufficient time to enjoy life with our family. As an stock market investor, you get sufficient time to spend with your family. You can go on tour for three months or even more with your family and also you can manage your portfolio of stocks from anywhere in the world in this age of internet.
[5] Better returns-Stock market returns are generally higher than any other instruments for investment like mutual funds, real estates, fixed deposits etc. You can get more than 200% in two or three years, if you have invested in the right stocks. No other investment gives such huge returns.
[6] Easy &  anytime withdrawal –This is also a great benefit of investing in the stock market. You can get your money out anytime from your stocks if you need money. Instruments like real estates can’t give you this opportunity.
[7]Beating Inflation Rate-Have a look over the table-
Year       Inflation Rate

2015.            5.88%

2014.            6.37%

2013.            10.92%

2012.             9.39%

 This table shows the inflation rate in India from 2012 to 2015.We can see that the inflation rate is between 5% to 11%. So, we need an instrument that may give us more that 11% return to fight with inflation rate.Banks and post office can never give 11% or more on any investment options. Stock market fulfills our need.

So, it’s a wise decision to invest in stocks.

Mutual Funds : A Way To Financial Freedom

All of us wish to be financially free. Investment into stock market is one of the best ways to fulfill our wish. But, lots of people have not sufficient time for research which is required to find a good stock to invest. For such people Mutual Funds are the best options to invest in stocks.

A mutual fund is an instrument which is managed by a fund manager who invests your money in stocks.  These managers who take care of your money, are experts. Thus, you get a chance to earn good profit on your investments without spending even a second on researching stocks.

Mutual funds are now many types. Let’s see-

Types of mutual funds (On the basis of period of investment)- On this basis, there are three types of mutual funds-

I.Open Ended Funds- An open ended mutual fund scheme is that one which allows you to book profit any time you want.

II.Closed Ended Funds- A closed ended mutual fund scheme is that one which locks your money for a period of time.You can’t withdraw money within the period.

III.Interval funds- A fund that has the qualities of both open and closed ended funds is called an interval fund.

Types of mutual funds(On the basis of the nature of investment)-

I.Money Market/Liquid Funds- In such funds your capital is invested in government bonds, treasury bills etc to keep your money safe.

II.Equity/Growth Funds- These funds invest your money in stocks to pay you higher returns.If someone chooses a good equity fund for a long period of time, he/she may get great returns.

III.Income/Debt Funds- Such funds have been designed for those people who like fixed return instruments. These funds invest your money in some government and corporate bonds that pay fixed return.

IV.Balanced Funds-As the name suggests, these funds invest in both equities and fixed income instruments to give you constant return as far as possible.

V.Fixed Income Funds-The objective of these funds is to give you fixed return by investing in different government or corporate bonds like Income or Debt funds.

VI.Index Funds-There are several indexes in a stock market like S&P 500, The Nasdaq Composite Index, S&P BSE Sensex, NSE 50, S&P BSE Smallcap etc. These indexes also haven good returns with time. Index funds invest your capital in these indexes.

VII.Specialty Funds-People who want to invest in real estates.Specialty funds give them opportunity to do the same through mutual funds.

VIII.Fund of funds-Some funds also give you the benefits of other funds. These funds invest your mioney in multiple mutual funds.

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