How to Win Big in the How to Avoid Loss & Earn Consistently in the Stock Market PART -2

Hello and welcome to the second part of this blog. I hope you enjoyed the first part. If you haven't read that blog yet, I recommend you do so first. I've included a link to that blog below. So, in this blog, you will also learn a lot of new things, so without further ado, let's get started.

Chapter 6: When to BUY & When to SELL?

When to buy?

One thing I learned from this book is that you don't always have to wait to buy a good stock. If you find a good, fundamentally strong company with the potential for future growth, you should consider buying at any price.

"There is no right or wrong time to invest. There are only right and wrong stocks"

Misconception to Avoid:

1) Stocks that are in 52 weeks high range are not a safe investment.

2) Stocks that are near the 52-weeks low range have great potential to move up. When to sell A stocks?

If you realize that the initial buying decision was faulty, then sell the stock the right way if you are making a loss also.

I will share my mistake with you guys. Just a couple of months ago, I bought a share of Jet Airways. I thought when the company resumes its operations, the stock would go up. After that, I realized that I hadn't made any valuation for this company. I was just going according to the news. That was my biggest mistake. I sold all of the stocks at a loss, but I told myself that if I didn't have a valuation, I wouldn't invest a single penny in any company.

Change in Fundamentals: Exit the stock if you notice the company is changing its business or core business, or if you believe growth will be impossible. If you buy a high-growth stock and the growth expectation changes later or some external event makes growth impossible, you should sell it right away.

Change in Management: Bad management may convert a good business into a bad one, while strong management can turn a bad business into an outstanding one. A change in leadership should be viewed as a significant event by investors, who should act accordingly.

"Selling a stock won't be a problem if your purchase reason is clear"

Whenever you are buying a stock, write down why you are buying that stock. It will be quite easy for you to sell then.

Mistakes to avoid:

1) Investing in previous bull market stocks

2) Holding losers too long

3) Selling winners too early.

4) Selling buy at a lower level.

" Don't invest like a trader & don't trade like an investor!"

Chapter 7: Do's and don'ts to avoid loss in the stock market.

  • Don't check the daily stock price: It's a common mistake that we all make, and I made a lot of them when I started my first investment three years ago. I used to check every hour of my purchase stock as you say to know you don't like red in the stock market, which is the same mistake I made. Once you've invested in a good stock, don't pay attention to the stock price daily. Don't be alarmed if your stock moves upward or downward; in the long run, it can only move upward.

  • Don't Emphasize the purchase rate: Whenever you buy a stock, think that you are buying ownership in that company. Think that it's your business. If you buy a fundamentally strong company's stock, then you don't need to think about the buying price.

  • Don't try to predict the market direction: Never do this mistake most people see Sensex or nifty we invest in particular in stocks none of us invests in the market (Sensex or nifty)

  • Always Love bear (Falling) Market: If you don't love the bear market, then you will miss a chance to invest in a good company. This type of market comes once a year where you get a fundamentally strong company at a cheap price. So always try to invest in a bear market.

Chapter 8: How to construct your portfolio?

The author discusses creating a proper portfolio in this section. He recommends that a retail investor, such as me and you, keep a stock of 10 to 20. The creation of a proper profile is a critical task for any investor. So, keep 10 to 20 stocks on hand. It will be simple to keep track of that company profile with you. I believe that keeping 20 stocks and two companies in each sector is a fantastic idea. Even if one sector performs poorly, another will generate a good return.

  • The problem with a huge number of stocks is portfolio is difficult in tracking the stocks properly.

A misconception among investors:

1) Large-cap stocks always offer safety and a steady flow of return

2) Stocks that have already doubled in the recent past have less potential to appreciate further.

3) stocks that fall sharply must go up sharply

Stocks to avoid:

1) Hight debt companies

2) Lower promoter holding

3) High promoter Pledging (and increasing)

4) stocks touching NEW Low

Avoid stocks having a market capitalization of fewer than 300 crores with promoters holding less than a 20% stake

Chapter 9: Is it necessary to follow an Equity Advisor?

This chapter explains why the majority of stock market investors lose money. He claims that we are overlooking the most important aspect of our lives: money management. First, understand how to manage money that will be used for future investments. Second, he recommends allocating at least 2 to 3 hours every day to stock analysis. If you can devote this much time to this subject, you will be able to master it without the assistance of an equity advisor. Keep in mind that we are investing our hard-earned money, so we must not rely on other sources of information.

In the second phase, he also talks about how if you only have 1 or 2 hours, then you should go for an equity advisor, but don't just blindly follow any advisor. If you ask me, I don't agree with these things. If you don't have much time, then go for mutual funds. It's the best and safest investment on average. You will earn 15% per annum. Don't expect beyond that. That is OK. But for me, doing my analysis and learning new things is the best way of doing investment.

According to my opinion, if you are a new investor or you want to invest little by little, then you should start with a mutual fund. Yes, the return will be lower than that of stock investment, but it is also safer. I invest 40% of my income in mutual funds. Look at stock investing. It takes time to learn, and you will make a lot of mistakes. That's OK. In the interim, put some money into a mutual fund. That is my advice.

Step 1 :

a) Find the company where an average 3-year ROE & ROCE are both greater than 20% & it's should not be in a declining trend.

b) Debt to Equity should be less than 1 or reduced for a few years. One more thing I want to add to this if you find this type of company always see ROCE

c) Promoters pledge less than 10% of their total shareholding or nil is better

d) Last three-year CAGR sales growth rate is more than 10%

e) Last three-year CAGR profit growth rate is more than 12%

Step 2:

1) Valuation: Do your valuation and consider it an important step in stock investment.

2) Stock price movement:

a) If the stock's annualized return over the last three years has been less than 10% and the previous year's return has been negative, avoid it.

b) If the annualized return over the last three years and the one-year return are both negative, avoid the stock.

C) only consider stocks for investment if the previous three-year annualized return is more than 10% and the last one-year return is positive

Application of Quick formula:

Make this type of chart whenever you want to invest in a company. This will help you in selecting a good stock. All these numbers you will get from different stock market websites like Money Control or many other tikers. My thoughts on this book: Prasenjit Paul has written an excellent book that is also in simple language that anyone can easily understand. The true lesson you will learn from this book is easy and simple to understand. If you learn that art, like reading annual reports and learning ratios, I am sure you will love to invest your money in the stock market. Read this book once before you start investing in the stock market.

Thanks, the flock's reading to the Sharath Bangera blogs,! I hope you love this blog. I have been a reader for a long time, which led me to start a blog about online book bloggers in India. I chose to go through the best-selected books for enthusiastic readers and started my review line, known as, "online book review by Sharath Bangera."

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