Tuesday, 25 July 2017

special ratios for different sectors in economy for investors

Financial Ratios for Different Sectors

❖   Telecom Sector
❖   Engineering Sector
❖   Banking Sector
❖   Pharma Sector
❖   Information Technology Sector
❖   Cement Sector
❖   Oil & Gas Sector
❖   Power Sector

Over the last couple of lectures, we have discussed some of the most important financial ratios used to evaluate the financial health of a company. In this monthly e-letter, we will delve into some sector-specific ratios that will come in handy when you study companies from particular sectors.

Telecom Sector: Key Ratios
  1. Average Revenue Per User (ARPU)

    This is the total revenue earned by a telecom company from its wireless or wireline operations per user for a specific period of time. The time period is usually a month. This is calculated using the following formula:

    ARPU = Total Revenue / (Average Number of Subscribers during the period/12)

    The measure gives a relatively good idea on how the trend of revenues has been on a per subscriber basis. Investors can use this ratio to understand whether subscribers being added by the telecom company over time are high or low revenue generators.
  2. Minutes of Usage per subscriber per month (MOU)

    This is the average time spent by a subscriber per month (or year) on the network of the telecom operator.

    MOU = Total Minutes on the Network (on an absolute basis) / (Average Number of Subscribers during the period/12)

    It is a performance indicator that shows how long an average user uses the services of the operator in a month. It provides an understanding of the volumes of an operator.
  3. Realized Rate Per Minute (RPM)

    This is the measure of the realizations earned by the telecom operator.

    RPM = Total Service Revenues / Total Minutes on the Network

    OR,

    RPM = ARPU / MOU
  4. Subscriber Acquisition Costs (SAC)

    These are the costs related to acquiring a subscriber. It includes costs related to acquisition; costs incurred at the point of sale; free minutes or other benefits being offered to woo subscribers on the network; discounts, etc.
  5. Enterprise Value Per Subscriber (EV/Subscriber)

    This is a less commonly used valuation ratio for telecom companies. It is defined as Enterprise Value divided by Total (or average) subscribers.

    Enterprise Value in turn is defined as Total Market Cap + Total Debt - Cash and Cash Equivalents + Minority Interest

Engineering Sector: Key Ratios
  1. Book to Bill Ratio 

    Book to Bill ratio is the ratio of orders taken to invoices sent (sales) during a set period of time. A high ratio indicates a strong order backlog that should generate sales and profits in future periods while a low ratio indicates falling demand. It is one of the most important measures used to analyze the health of engineering companies. Thus, higher the ratio better it is.

    Book to Bill ratio = Order Book / Trailing Twelve Month Sales 
  2. Working Capital Cycle 

    Engineering is a working capital intensive business. Engineering projects typically have a high gestation period, prolonging the overall working capital cycle. Increasing working capital requirements increases the dependence on debt. This threatens the balance sheet strength. Hence, analyzing the working capital cycle of engineering companies is of utmost importance. Lower the working capital cycle better it is.
  3. Working Capital Cycle = Working Capital / Net Sales*365 

    Working Capital = Current Assets - Current Liabilities
  4. Capacity Utilization Rate

    For power equipment manufacturers - Boiler, Turbine, Generator (BTG) - capacity utilization levels is a key metric to gauge the industry competitiveness. Lower utilization signals that there is an overcapacity in the industry or demand is low. This may impact margins and return ratios. On the other hand, higher utilization levels signify that brownfield/greenfield expansions are likely to take place.

    Capacity Utilization Rate = Operational power capacity / Total power capacity x 100
  5. Realization per MW

    Amidst strong competition in the power equipment space realization per MW of critical power equipments like BTG have gone down in recent times. Realization per MW is a critical measure that helps us gauge the overall pricing scenario. If the company resorted to predatory pricing its realization per MW would be significantly lower than what prevailed in the past.

    Realization per MW: Value of the Order/ Size of the Order in MW

Banking Sector: Key Ratios
  1. Net interest Margin (NIM) 

    Just as we calculate and measure performances of non-financial companies on the basis of their operating performance (EBITDA margins), the performance of banks is largely dependent on the NIM for the year. The difference between interest income and interest expense is known as net interest income. It is the income, which the bank earns from its core business of lending.

    As such, NIM is the net interest income earned by the bank on its average earning assets. These assets comprise of advances, investments, balance with the RBI and money at call. As such it is calculated as,

    NIM = (Interest Income - Interest Expenses) / Average Earnings Assets
  2. Cost to Income Ratio

    Be it a bank or a manufacturing firm, controlling overhead costs is a critical part of any organisation. In case of banks, keeping a close watch on overheads would enable it to enhance its return on equity. Salaries, branch rationalisation and technology upgradation account for a major part of operating expenses for new generation banks. Even though these expenses result in higher cost to income ratio, in the long term they help the bank in improving its return on equity. The ratio is calculated as a proportion of operating profit including non-interest income (fee based income).

    Cost to Income Ratio = Operating Expenses / (Net Interest Income + Non-Interest Income)
  3. Credit to Deposit Ratio 

    This ratio indicates how much of the advances lent by banks have been done through deposits. It is the proportion of loan-assets created by banks from the deposits received. The higher the ratio, the higher the loan-assets created from deposits. Deposits would be in the form of current and saving account as well as term deposits. The outcome of this ratio reflects the ability of the bank to make optimal use of the available resources.

    Credit to Deposit Ratio = Advances / Deposits 
  4. Capital Adequacy Ratio (CAR)

    It is a measure of how well-protected a bank is against risks. It is ratio of capital fund to risk weighted assets expressed in percentage terms. The main objective behind the norms is to ensure stability of the banking system.

    The capital adequacy ratio is the sum of Tier 1 and Tier 2 capital, divided by the sum of risk-weighted assets. A bank's Tier 1 capital ratio takes a bank's equity capital and disclosed reserves and Tier II comprises of the subordinated debt. Total risk weighted assets take into account credit risk, market risk and operational risk. The capital adequacy ratio speaks of the strength of a bank in the light of risky assets.

    CAR = Tier I Capital + Tier II Capital / Risk Weighted Assets 
  5. Non-Performing Asset Ratio

    The net NPA to loans (advances) ratio is used as a measure of the overall quality of the bank's loan book. NPAs are those assets for which interest is overdue for more than 90 days (or 3 months). Net NPAs are calculated by reducing cumulative balance of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans.

    The NPA ratio is one of the most important ratios in the banking sector. It helps identify the quality of assets that a bank possesses.

    NPA ratio = Net Non-Performing Assets / Loans Given 
  6. Provision Coverage Ratio 

    The key relationship in analysing asset quality of the bank is between the cumulative provision balances of the bank as on a particular date to gross NPAs. It is a measure that indicates the extent to which the bank has provided against the troubled part of its loan portfolio. A high ratio suggests that additional provisions to be made by the bank in the coming years would be relatively low (if gross non-performing assets do not rise at a faster clip).

    Provision Coverage Ratio = Cumulative Provisions / Gross NPAs 
  7. Return on Assets Ratio 

    Return on Assets (ROA) ratio is the net income (profits) generated by the bank on its total assets (including fixed assets). The higher the proportion of average earnings assets, the better would be the resulting returns on total assets.

    ROA = Net Profits / Average Total Assets

Pharma Sector: Key Ratios
  1. Formulation Sales as % of Total sales

    Most of the Indian pharma companies generate their revenues from formulations (finished drug) or API (Active Pharmaceutical Ingredient - Important ingredient of a drug). The latter one has lower margins compared to the former one. Thus the companies which have large part of revenues coming from formulations segment will have better margins as compared to those selling more of APIs.

    Formulations Sales (%) = Total formulations Sales / Total Sales
  2. Domestic Formulations as % of Total Sales

    The Indian pharma companies have well established themselves in the global markets. Thus, various companies generate revenues from international segment as well. This ratio helps to understand how much exposure the company has in the domestic market and in international market.

    Domestic Formulations (%) = Domestic Formulations Sales / Total Sales 
  3. Domestic Sales Force Productivity

    Indian markets are known as branded markets. This means companies need sales force (known as medical representatives (MRs)) to promote their brands. Through this ratio, one can know how much revenues are generated per MR. Thus, higher the ratio better is the productivity.

    Domestic Sales Force Productivity = Revenues from Domestic Formulations / Sales Force
  4. Chronic Sales as % of Domestic Sales

    There are mainly two types of disease - one is chronic, and other is acute. The disease falling under acute category is mostly manageable and curable. However, chronic diseases, by nature, are not completely curable and so its treatment is more for managing the disease and hence is long lasting. The patients have to take drugs for longer duration as compared to acute. The margins of chronic drugs are much higher compared to drugs used for treatment of acute diseases. Thus, a company having larger part of its domestic revenues coming from chronic segment will have better margins. Higher the ratio, better the margins and even better sales force productivity can be expected.

    Chronic Sales as % of Domestic Sales = Revenues from Chronic Segment / Total Revenues from Domestic Formulation Sales
  5. Research &Development (R&D) as (%) of sales

    Pharma companies spend some part of their revenues in the research and development (R&D) of drugs. This ratio indicates how much a company is spending in order to develop new compounds for its future sales.

    R&D as (%) of Sales = R&D Costs / Total Revenues

Information Technology Sector: Key Ratios
  1. Utilization Rate 

    This is a measure of employee productivity in an IT firm. It measures the number of employees actually working on projects to the total employee base.

    Utilisation Rate (%) = Number of Employees Engaged in Projects/ Total Employee Base

    It is reported in 2 ways:
    1. Utilisation including trainees where the denominator will include the employees undergoing training.
    2. Utilisation excluding trainees where the denominator will not include the number of trainees.
  2. Man Hours 

    Man hours, also known as 'volumes' or 'effort' is a measure of revenue in a software business. Since IT companies derives most of its revenues in a 'linear' manner i.e. as per number of hours worked by employees, man hours indicate how much of the revenue is due to the amount of time worked by employees.

    It is usually reported in 'person months'. The formula is as follows:

    Man Hours (Person Months) = Number of Employees * Utilization Rate * Number of Working Hours in a Day * Number of Working Days in a Month

  3. Billing Rate

    The billing (pricing) rate is the hourly rate billed to the client for the work done by the employees of the IT company on that particular project.

    The formula is,

    Billing Rate = Final Amount Billed to the Client/ Number of Hours Worked

    The total revenue earned by the company will be the billing rate * man hours

    The billing rate is always in the currency of the client's country (e.g. US$/hour)

    The billing rate is a function of various factors. The main ones are:
    1. The competition for the project.
    2. The company's position in the value chain i.e. high end work like R&D and consulting command higher pricing power while low end work like application development and maintenance do not have high pricing power.
    3. Onsite or offshore: For work done at the client's location (onsite) the billing rate is higher than for the work done at the company's location (offshore).
  4. Onsite / Offshore Mix 

    This tells us the amount of revenues that has been earned from onsite/offshore work to the total revenues of the company. It is a measure of the management's ability to maintain the company's margins. Offshore work provides higher margins due to the lower expenses involved but it comes at a cost of pricing. Generally high end work like consulting is almost completely onsite and therefore command higher pricing. However, since the costs involved in onsite work is very high, the operating margin in lower than offshore work. Thus, managing the onsite/offshore mix in such a way that the margins are not compromised while growing the business is a test of the management's capability.

    The formula is,

    Onsite/Offshore Mix = Onsite Revenues (as a percentage of Total Revenues) / Offshore Revenues (as a percentage of Total Revenues)
  5. Attrition rate 

    This is a measure of the company's ability to retain the best talent. It measures the number of employees that have left the firm in the last one year to the total employee base.The formula is,

    Attrition Rate (%, on trailing twelve month basis) = Number of Employees that have Left the firm in the last one year/ Current Employee Base

    A company which is unable to bring down the attrition and keep it at low levels will struggle to deploy the best talent to handle crucial projects, thereby risking the overall quality of its solutions.

Cement Sector: Key Ratios
  1. Enterprise Value Per Tonne (EV/Tonne)

    Commodity stocks like cement are valued at their replacement cost, which is the cost of setting up a cement plant. The EV/tonne ratio is a measure that indicates set up or replacement cost of the asset in place. If the company were to be bought over, this is the likely price at which one would be interested in acquiring a company). The replacement cost of cement is about US$ 130 per tonne.

    EV Per Tonne = EV / Cement Capacity

    EV = Market Capitalisation + Total Debt - Cash & Cash Equivalents + Minority Interest

    Market Capitalisation = Share Price x Number of Outstanding Equity Shares

    Cement Capacity = Total Installed Cement Capacity in Tonnes

    Being a cyclical commodity, cement profit margins tend to be quite volatile. As a result, it is difficult to assign a valuation multiple based on earnings. Evaluating a cement company on the basis of EV/tonne may bring in a lot of clarity as compared to other valuation metrics. However, there are several factors that determine whether the company would be valued at a premium to replacement cost or at a discount. Companies with integrated cement plants, captive power plants, efficient technology, wide distribution network and geographical reach, healthy balance sheet and profit margins command a premium over replacement cost. On the other hand, small, regional companies with old cement plants, inefficient management, excess debt and poor margins may trade at a significant discount to replacement cost.
  2. Capacity Utilization Rate

    This ratio shows how much of the installed capacity the company is able to utilise in a given year.

    Capacity Utilization Rate = Cement Production / Installed Capacity (in tonnes)

    Cement has a limited shelf life because of its tendency to absorb moisture. As a result, cement production closely follows demand. Hence, a sub-optimal capacity utilisation rate is often an indicator of poor demand in relation to supply.
  3. Cement Realization Per Tonne

    This is the measure of the per tonne realization earned by the cement players.

    Realization Per Tonne = Net Cement Sales / Sales Volume 

    This metric indicates for how much the company is able to sell the cement. A study of the past trend of cement realisations may give an idea about the cyclicality of cement demand and whether manufacturers are able to pass on costs to consumers.
  4. EBITDA Per Tonne 

    This ratio measures the per-tonne operating profits of a cement company.

    EBITDA Per Tonne = Earnings Before Interest, Taxes, Depreciation and Amortization / Cement Sales Volume

    This metric helps to gauge the profitability of a cement firm relative to industry peers. A higher EBITDA per tonne reflects the efficiency of the company's operations.

Oil & Gas Sector: Key Ratios
  1. Gross Refining Margins (GRM)

    Refining is primarily a margin-based business in which a refiner's goal is to optimize the refining processes and yield of all products in relation to feedstock used. GRMs are the major indicators of a refinery's operational efficiency. Gross refining margins (GRMs) are weighted average prices of petroleum products minus cost of crude and other feedstock. Here, weights are assigned on the basis of volumes of products sold. GRMs are usually measured in terms of US dollars per barrels. Upturn in refining margins signal increase in the profitability of the refineries. GRMs for the Indian refineries are benchmarked to Singapore GRMs, (current pricing policy at the refinery gate level is trade parity pricing, 80% import parity pricing and 20% export parity pricing).

    Gross Refining Margins (US$ Per barrel) = Sum of Weighted Average Price of each Refined Product Extracted Per Barrel of Crude Oil - Per Barrel Cost of Crude Oil
  2. Capacity Utilization

    Refineries procure crude oil from various sources and refine it into petroleum products, thus earning profit on refined products. Higher capacity utilization leads to lower fixed cost per unit of refined products (though the fixed cost is not a significant part of the total cost). Lower demand for end products pushes the refining capacity utilization lower. Thus, higher utilization generally leads to higher margins.

    Capacity Utilization = Operational Refining Capacity / Total Refining Capacity
  3. Reserve Replacement Ratio (RRR) 

    This metric helps to judge the operating performance of an oil and gas exploration and production company. The reserve replacement ratio measures the amount of proved reserves added to a company's reserve base during the year relative to the amount of oil and gas produced. If the demand remains stable, a company's reserve replacement ratio must be at least 100% to stay in business long-term. Otherwise, it will eventually run out of oil.

    RRR = amount of Proved Reserves Added/ Amount of Oil and Gas Produced
  4. Enterprise Value / Daily Production

    This metric takes the enterprise value (market cap + debt - cash & cash equivalents + minority interest) and divides it by barrels of oil equivalent per day (BOE/D). All oil and gas companies report production in BOE. If the multiple is high compared to the firm's peers, it is trading at a premium, and if the multiple is low amongst its peers it is trading at a discount. A key drawback of this metric is that it does not take into account the potential production from undeveloped fields.

    Enterprise Value / Daily Production = EV / Barrel of Oil Equivalent per day
  5. Enterprise Value / 2P

    This metric helps in analyzing how well resources will support the company's operations. However, it should not be used in isolation as not all reserves are the same. Oil and gas reserves can be proven, probable or possible reserves. Proven reserves are typically known as 1P, having 90% probability of being produced. Probable reserves are referred to as P50, or having a 50% certainty of being produced. When used in conjunction with one another it is referred to as 2P. A high multiple for a company suggests that it might be trading at a premium for a given amount of oil in the ground. A low value would suggest a potentially undervalued firm.

    EV / 2P = Enterprise Value / (Proven + Probable Reserves)

Power Sector: Key Ratios
  1. Plant Load Factor (PLF) - Generation of electricity is a function of PLF and the capacity installed. PLF, in simple words, is like capacity utilization. The level of PLF varies depending upon the kind of generation plant. Generally, a hydro power plant or a wind energy plant would have low PLFs (industry average 35%-50%). Thermal and nuclear power plants have higher PLFs (industry average 60%-70%), which ultimately results in higher production.

    PLF = Amount of units actually generated / Total capacity in terms of units*

    *A ballpark figure that one could take to calculate the number of units (kilowatt-hour or kWh) is by multiplying every megawatt (MW) of capacity available with 8.76 million. In other words, 1 MW of capacity has the ability to produce approximately 8.76 m units.
  2. Plant Availability Factor (PAF) - The plant availability factor or PAF of a plant is the maximum time that it can produce electricity over a given period and is mainly linked to fuel availability. Higher the availability of fuel, higher will be the PAF.

    PAF = Total hours a plant is able to produce electricity over a certain period / Total hours in the period.
  3. Net Asset Value (NAV) per share

    As a cross check, for a generation company, one can value the stock based on the replacement cost ( approximate cost of setting up a thermal power plant with capacity of 1 MW) of Rs 60 m per megawatt (if a company has 100 MW, the asset value is Rs 6,000 m). Reduce the amount of total debt and add cash. Divide the figure derived by the number of shares to get an indicative net asset value.

    NAV per share = [(Total Capacity (in MW) x 60 (Rs million)) - Total Debt - Cash & Cash Equivalents] / Total number of Outstanding Shares
Posted by at No comments:

Sunday, 30 October 2016

What are few tips for trading in Indian stock market? What are the trading secrets?

 
The takeaway is this…
If you enter off the daily time frame, you set your stop loss and manage your trade on the daily time frame.
If you enter off the 1-hour time frame, you set your stop loss and manage your trade on the 1-hour time frame.
If you enter off the 15 minutes time frame, you set your stop loss and manage your trade on the 15 minutes time frame.
Get it?
2. Place your stop loss at a level where your trading setup is invalidated
Don’t set your stop loss based on a dollar amount you’re willing to lose.
Instead…
Set it based on the structure of the markets, where if your stop loss is triggered, you know you’re wrong.
For example, if you’re long at support, then a break of support would mean you’re wrong…
Or if you’re trading a breakout, then a close back into the range would mean you’re wrong…
3. Trading with the trend increases the probability of your trades
When the market is trending, it has an ebb and flow with two different “legs” in it.
Impulse move – Longer “leg” that trades in the direction of the trend
Corrective move – Shorter “leg” that trades against the direction of the trend
By trading with the trend, you’ll get a bigger bang for your buck as the impulse move is stronger than the corrective move. This gives you greater profitability for the same amount of risk.
Here’s what I mean:
 
Nowadays most of serious traders have facility to access advanced to technical chart as well as many automated trading system. Most of traders can’t understand that almost all trading systems have some cycles. Some systems will work in some market conditions for eg most of trend following systems will give tremendous profit in trending market.( either bullish or bearish) some Strategies like "covered call" will work on mild bull markets.

Since most of traders seeking Secret even though they already know many good system, this makes good business opportunities for Investment Gurus, Strategy sellers and trading system developers.
First of all ,no one will be revealing you the trading secrets at any point  over here!
Although people spend too much time in identifying  their stratgey,  they fail to understand the importance of Trading psychology and discipline .The below picture depicts it.

For example 2014 was very good bull year in Indian market. Many small cap and mid cap stocks rose multiple times during this year. So Many investors started to believe fundamentals than technical. So to fill this Gap many Investment Guru who sells their investment ideas or their investment methods to public are appearing on media like TV, Social media and online forums to teach Value investing .

Suppose the learning period of Value investing for normal investor is two year and he starts to learn value investing on beginning of 2015. he could able to pick right stocks by his own knowledge only at end of 2017. At that time he might not able to pick stock at right valuation. Chances there to buy some stocks by chasing market. In short……. it is better to adapt value investing at the early stage of bull market or late stage of bear market than late stage of bull market or early stage bear market. So it is vital to know when bull market ends or bear market starts.

The above scenario also applicable for trading system. most of trading system which uses leverage has smaller cycles than investment cycle. Most of Strategy sellers would start to claim as they have secret system that would give profit for life time. Most them may have given good profits in recent times but no one knows when it starts to give losses (whips or drawdown). Even some strategy sellers keep on teaching many new strategies time to time (to keep their regular customers ) . From traders point of view it is very tougher to find when that cycle (Or Trend ) end comparing to “when bull market ends”. I have seen many traders who had spent more money than their trading capital to learn trading/investing Strategies  and failing to meet out their expectations.

I have seen very less people (may be less than 5% ) who are doing well in both trading as well as teaching .So one has more probable to find a coach or a mentor who do not having good trade records than good one.

Most of people seeks the Secret outside and failed realize that the Secret is in inner side them.

I have tested many trading systems that looks very foolish that are not giving consistent loss. This suggests even fools can’t loss money if he follows a regular Strategy with right money management.

So if one traders follows any of proven rules like

• CUT YOUR LOSSES LET YOUR PROFIT RUN
• YOUR BIGGEST LOSER CAN’T EXCEED YOUR BIGGEST WINNER
• THE FIRST LOSS IS THE BEST LOSS
• DEVELOP A METHODOLOGY AND STICK WITH IT. DON’T CHANGE METHODOLOGIES FROM DAY TO DAY.
• CONSISTENCY BUILDS CONFIDENCE
• THE MARKET PAYS YOU TO BE DISCIPLINED
• DON’T RISK MORE THAN 2% OF YOUR CAPITAL IN A SINGLE TRADE

he/she will have definite edge than average traders.

One may have seen these kind of rules every where. But one should note that one may not create wealth over the night by using above rules. But I can assure that one can’t loose money at least if he is disciplined. Over the period this disciplined approach builds wealth slowly but steadily
 
Below are some tips for trading in Indian stock market:
Application Type
There are two types of application of online trading in a market, for which we can practice online trading skills and techniques. There is a way of performing stock market without much involve of real money, in this case there is no financial risk. The two types of stock market duplicate are the financial and the other one is the stock game of fantasy simulator. It is always the best thing to go for the guidance of good stock market consultant.
Market situations
So, the online trading systems are also very in making the simulators as they were very strict about it. They were afraid of the market situation also, since their information can affect the market. So, all the simulator of the on line trading ensures that all the information regarding the stock market as well as the data may not be used or function in the actual trading of the stock market after, before or during the stock market hours.
587 Views · View Upvotes
The amateur thinks winning in the market is about predicting the future. The amateur buys some shares and hopes the market rises. He has no idea what to do if something unexpected happens. He wings it completely and ends up trading with his emotions. There's nothing more destructive to wealth than emotional trading.
The market is a game of probability. It has nothing to do with predicting the future. When you treat the market as a game of probability, money management becomes your most important weapon. What I mean is, the stocks you buy become far less important than the position size you use and the decisions you make after you pull the trigger.
This is the secret to beating the stock market. Maybe one speculator in 1,000 knows this. Until you realize this, you have hardly any chance of making money in the market.
  • Risk a constant amount of capital in each trade... and keep it small.
  • Cut your losses. You are trading against some of the world's smartest people, armed with incredible research budgets and advanced supercomputers. They don't trade as a side job or as a hobby. These people live, eat, and sleep the market.
To control your losses, use a stop loss. This way you know exactly how much money you stand to lose if your stock falls, before you've even entered the trade. The stop loss applies at all times and can never be overridden.
  • If your trading idea shows a profit, add to your position. If it keeps rising, add more.
Social media predicts the stock market. Scientists reported an 87.6% accuracy rate in predicting daily changes in the Dow Jones Industrial Average when they studied the mood of large-scale Twitter feeds.
The market is run by robots, not people.
The "hottest deal" may in fact be an overvalued investment.
Education has a higher return on investment. The Brookings Institution (link is external)reported that long-term investments in stocks, bonds or housing may return less profit than getting a college degree. The benefits of a four-year college degree are equivalent to an investment that returns 15.2% annually.
Online traders don't have a direct connection to the market. You might expect that when you push send or call your broker that the trade is instantly placed. But your broker decides which market to send it to, and prices can change before it reaches its destination. Investors may not always receive the price they saw on their screen or the price their broker quoted over the phone.
You'll always pay more for a stock than it's worth, and you'll always sell it for less than it's worth. It's called a bid-ask spread. The reason for the discrepancy? Purchasers pay the ask price while sellers receive the bid price.
Your fully invested portfolio's returns and volatility depend on whether you've chosen high or low beta stocks. Never heard of it? High-risk stocks that have a beta of 2 will have higher volatility in the market. Apple has a beta of .74, while McDonald's has a beta of .40. If you want to reduce risk (and some profit) increase the number of low beta stocks in your portfolio.
Big bank institutions buy when the stock tanks and sell when it's high. We're all buying in the same market, so what's the catch? Most investors are wired to buy when the market is rallying. But institutions do the opposite.
 


I am not going to go into an every detail that explain the nature of trading( the learning curve and the evolvement of your strategy).
 As it seems that you are just looking for a one simple, yet effective tip.

"COMPLETE AT LEAST 1,000 PAPER TRADES"

I believe this is the most important advice I could ever give to anyone. Many starters want to deposit and start profiting as soon as possible. Eventually most of those fail to become successful.

Trading enough on the virtual currency account can certainly boost up your chances of joining the minority of profitable traders.

Of course, you should also learn about the trading itself and develop the needed skills and strategies. I wouldn't go into the detail,

The main tip - trade, trade, trade. And do analyse your trades before and after entering them. 

Posted by at No comments:

AMITABH BACHHAN PORTFOLIO AND EXPERIENCE


Amitabh Bachchan is turning to be the Big B for Indian stock market as well. Learning from the initial setbacks and mistakes,Bachchan is coming out as an investor we should follow. He started off his investment career in stock market in 2011 by investing in unknown penny stocks which turned out to be disastrous.
In July 2011, Amitabh Bachchan jumped into Birla Pacific Medspa IPO, a company which is engaged in the lucrative business of running a Spa and promoted by the high profile Yash Birla, a person from Birla family with zero business acumen.(Guys.. just search for Yash Birla in Google and you will find interesting guidance from Google).
Our poor Big B smelled a multibagger in Birla Pacific Medspa and bought 16,75,000 shares (1.49% of the total equity) by investing Rs. 1.67 crore at a rate of nearly Rs.10. Soon after listing, Birla Pacific Medspa spiked to an all-time high of Rs. 30, trebling his investment. But things went wrong from there. If you are brave enough, you can check the current price of Birla Pacific Medspa.
Then Bachchan tried his luck in Fineotex Chemicals. After its IPO price of Rs. 72, Fineotex Chemicals jumped to 350 levels. When it started sliding, Amitabh Bachchan thought it is a good opportunity to increase the stake and bought 3 lakh shares between Rs. 170 to Rs. 150 per share. Currently it is trading @ Rs. 42. Till now he has not sold a single stock and holding nearly 5% of the total equity,waiting patiently for revival.
Seeing these setbacks, a famous stock broker said-"He should not be investing in penny stocks and these unknown firms. He should not be wasting his money. A person of his stature should invest in blue-chip stocks. A regular trader can experiment with penny stocks. There are several other investment opportunities which Bachchan should explore".
And yes, he learned from the mistakes and for the third time, got it right. The Amitabh Bachchan bought 92,030 shares of Neuland Labs. At the CMP of Rs. 424, the investment has given 800% gain in the past four year.
Amitabh Bachchan Latest Stock Portfolio
In 2011, being the brand ambassador for Just Dial, Bachchan was given 62,794 shares at a throw away price of Rs 10 each. Originally, Bachchan's 62,794 shares were valued at Rs 6.27 lakh. The value of these shares spurted to Rs 3.83 crore on the debut day after IPO in 2013, as per its listing day price of Rs 611.45 each. Currently the stock is trading @ Rs.1250
His fourth pick, Stampede Capital, an unknown company to many, was a surprise to all. He bought the shares in several lots between 14th May 2014 and 6th June 2014. His first bulk purchase of 110,000 shares was on 14th May 2014 at a paltry price of Rs. 88 per share. Today, Stampede is at Rs. 520. This means that Amitabh has made a mind-blowing profit of nearly 500% in about a year’s time. His holding of 847,500 shares is worth Rs. 43 crore. Stampede Capital has molded itself into a global financial technology house specializing in "Automation of Knowledge Work" and Cloud Computing for financial markets.
Posted by at No comments:

TURN CROREPATI WITH THESE STOCKS

Tejas Khoday
Tejas Khoday, Co-Founder & CEO, www.fyers.in
To turn ₹10,00,000 (Ten Lakhs) to ₹1,00,00,000 (One Crore), you will need to clock a Compounded Annual Growth rate (CAGR) of 25.89% yoy as shown in the calculator below:
To do it yourself checkout our CAGR Calculator.
There are only a handful of stocks which have delivered that kind of CAGR growth in the last 10 years. You will have to bet on industries which have a massive scope for expansion and whose companies are all in the growth mode. In the long-run profits are what drives stock prices up regardless of short-term news and technical moves. So ideally, you got to focus on profitability of companies as the underlying deciding factor. Compounded Profit growth of some of them are:
  1. Bliss GVS Pharma = 54%
  2. Aurobindo Pharma = 48.3%
  3. Yes Bank = 44%
  4. Torrent Pharma = 38.8%
  5. HDFC Bank = 30.2%
  6. Lupin = 29.63%
  7. Sun Pharma = 27%
  8. Godrej Consumer Products = 26%
As you can see, the pharmaceutical industry in India is booming and Indian companies are increasing their market share in the generic drugs space. A little research will show you that Indian companies are going to play a major role in the world market in the coming years. All this growth has happened without any major patented drugs and R&D developments. This Industry has a big scope to expand and does offer long-term wealth creation.
Such stocks are an ideal match for your goals.
Even the IT sector has not clocked such growth numbers in the last 10 years. Now considering that past performance is not a guarantee for future results, you should be able to find great opportunities in the following sectors in my opinion.
  1. Large defense manufacturing companies.
  2. Private Banks
  3. Listed Insurance companies.
  4. Consumer goods that gain quick traction.
Hope it was fun reading this answer.
Co-Founder & CEO, Fyers - Your Next-Generation Online Stockbroker
P.S - Do NOT invest in mutual funds if you’re attempting such high returns. Mutual funds are a safe play and they often diversify their portfolio to a point that it hurts performance. This is a widely accepted fact. It’s just that its not spoken about so openly. The returns cannot be compared to individual stock investments. That’s the bottom line.
Posted by at No comments:

ADD AN HOUR EVERY DAY TO PROSPER

Neha
Neha, Life? Incomprehensible. Living? Peace.
In 30 days? While there's nothing better than determination and perseverance of doing the things you are supposed to do to make your life better, we also can't deny the fact that an efficient use of the early morning hour or the golden hour can do a lot better to you! But for that, you're gonna have to wake up early regardless of any excuses for procrastinating it.
Let me quote Richard Whately : “Lose an hour in the morning, and you will be all day hunting for it."
No wonder he might have applied the same in his life. Whately never woke up lately! (please pretend you didn't read this awful joke and kindly read further :v)
But we all know that waking up early could be a daunting task for most of us, it seems like a battle in itself! The moment alarm clock buzzes we just put it off with our partial vision as we are so badly trapped in that “slumbering hug”. Therefore, here are some tips that might help you pull away from that irresistible hug.
  1. Get excited. The night before, think of one thing you’d like to do in the morning that excites you. It could be something you want to write, or a new yoga routine, or meditation, or something you’d like to read, or a work project that’s got you fired up. In the morning, when you wake up, remember that exciting thing, and that will help motivate you to get up.
  2. Jump out of bed. Yes, jump out of bed. With enthusiasm. Jump up and spread your arms wide as if to say, “Yes! I am alive! Ready to tackle the day with open arms and the gusto of a driven maniac.” Seriously, it works.
  3. Put your alarm across the room. If it’s right next to you, you’ll hit the snooze button. So put it on the other side of the room, so you’ll have to get up to turn it off. Then, get into the habit of going to the bathroom to pee or brushing your teeth, once you’ve turned it off. Once you’re done, you’re much less likely to go back to bed. At this point, remember your exciting thing.
Now that you've woken up dear,
  1. Drink a glass of water. You’re dehydrated from not drinking any water all night. Drink a full glass of water if you can. It’ll make you feel more awake.
  2. Meditate. Even just for 3 minutes. It’s such a great way to start your day — doing nothing, just sitting, and practicing mindful focus.
  3. Exercise. Go for a walk or a run, or do a home workout. Even just 10 minutes.
  4. Enjoy a cup of coffee or tea. Either one of these makes the morning better.
Now you would feel confident, productive, fresh and most importantly positive!
These were some simple tips that if you apply in your regular life, it does show its results!
Now don't think much, set your alarm for tomorrow morning, and get set for a positive day in your way. Obviously, it doesn't just takes away all the problems you go through in your regular life, but having a fresh positive mind does give the strength to face them and believe me that is enough!
Posted by at No comments:

EARN ONE PERCENT PER DAY IN STOCKS


Dean Rubine
Dean Rubine
Sure.  I did it yesterday.  Oh, you meant every day.
There are about 250 business days in a year, so if you started with $1, after a year you'd have 1.01250=$12.03
, an annual return of 1100%.  That's of course a very good year for an investor, but not unheard of.  It's unlikely to have happened by a steady ratchet of 1% a day.
But if you could keep it up, after 30 such years, that's around 1032
 dollars, or more than 1018
times all the money on earth.
During their heyday, some high frequency trading firms were rumored to require very little capital, hold no overnight positions, and be profitable every day.  Technically (depending on how little capital was actually required) they would return much more than 1% a day, every day.   Maybe 10% a day, maybe 100%, maybe 1000%, maybe more.  But they couldn't really increase the amount every day, so they didn't get the crazy compounding effect.  That is to say, they were getting a huge return on the small amount of capital required to run the system, but a much smaller return on their total equity, which was mostly just sitting around in a cash account that kept increasing.  They did get zillions of dollars at a steady rate, like a broken ATM that just keeps spitting out cash, so don't feel too bad for them
Posted by at No comments:

HOW DOES FLIPKART WORK


Rahul Kanadia
Rahul Kanadia, about.me/rahulkanadia
The technical term for the model is Marketplace Model. The essence of these businesses is controlling inventory management over anything else. The execution may differ from company to company. Let me explain...

Firstly, all of this business models are centered around growth. They spend more in gaining customers as compared to retaining them.

Like a good e-commerce site, they offer two things primarily: range of products, and ease of use. This in turn gains them higher traffic. Essentially, more footfall, in retail terminology.

This model is based on a low-cost structure. The companies work towards reducing their costs so that they can offer a lower than marketplace price to its customers. This is not the same as gaining more customers. Here's how...

Let's say you are a book publisher. Traditionally, 10,000 copies of books are printed, stacked, and then you try to sell them. Once the copies are exhausted, you print another 10,000. Here, you reduce your printing costs marginally, but in turn invest in storage. By rule of thumb, about 16% of your stored products will go towards wastage i.e. copies torn, smudges, dropped, lost, et al. Plus, a reasonable amount of your capital is invested without guarantee of returns.

What these e-commerce sites do is, eliminate the storage part or reduce it to bare minimum. So if you order a book from amazon, it is printed exclusively for you - not pulled from a warehouse somewhere, but freshly printed for you. From the printer it goes to the courier, and from there it comes to you.

If it's electronics, they place the order with the supplier, who then sends it to the e-commerce company or to the courier, depending on size and policies. From there, it's delivered to you.

Do you see the beauty here... You pay upfront to a company that does not have the product you need. Then wait for the product to be prepared exclusively for you, and then it gets delivered.

The question is, why then do you need these companies at all? The answer: pricing. These companies survive and operate solely on reducing the cost of purchase. They do not invest in the product or in the storage. What they invest in is people who will follow through the entire process - from taking your money, to delivering your product

The suppliers agree to reduce the prices because of the quantities these companies purchase from them. For example, Flipkart buys more laptops from Toshiba on a daily basis, than many of their authorized franchisees do weekly.

The major investment for these companies is online presence and maintenance, and the people involved in the process. Flipkart started with an office in 2007. Today it has 6 office buildings and a transit-warehouse. All of this, while 9 of its 11 product lines are operating at a loss or near-loss classification. The e-commerce companies survive and operate on a single mantra: low cost = higher gains.

Some add-ons:

1. The suppliers and the products are generally managed with an open-ended ERP system. The websites hire people under the designation of Business Development to negotiate and follow-up with the suppliers on a daily basis. It is not left to call centre executives.

2. The products are stored by the supplier except for in-transit. In-transit as in, say a fridge arrives today and can only be delivered tomorrow. The e-commerce company stores it temporarily in such a case.

3. The ERP system and coaxing from the website BD executives is responsible for stock tracking and inventory management.

4. If a product is returned, the product goes to the e-commerce company and to the supplier thereon. The supplier bears the cost of bad delivery. Courier charges are generally fixed by pulse (100 deliveries daily, for e.g.) and hence are not a factor in such a case.

4. Order tracking is a combination of courier company's tracking system and of the company's executives maintaining the records using the same ERP module. The courier company executives input and update the delivery status.

5. The delivery addresses are not shared with suppliers; just the addresses for the courier warehouse or the company warehouse.

6. The payment of suppliers is handled weekly or monthly depending on the company policies, and the credit limits the supplier agrees to extend.

7. Genuinity-check is not a big process part. The suppliers are exhaustively back-checked before being allowed to sign-up. They get a limited number of strikes or bad deliveries before they are taken off the suppliers' list. These problems are generally reported by the customer. Checking every delivery eats into too much cost and time of the company.

8. The profit percentages differ from product to product, supplier to supplier. With books it is as high as 40%, with laptops and accessories nearer to 26%, while with phones it goes as low as 5%.

Conversion rates for these sites are of 2 types:

1. Visit-to-registration
This is the sign-up process. It is usually done as a precursor to purchase or to check if the registration leads to unique offers and discounts.

This rate is 5-8% including unique visitors, and people who have forgotten passwords or are creating a second login ID.

2. Click-to-purchase
This is the actual conversion to sale. Generalized trend is 2%. Anything above 1.5% is considered average. Above 2.5% is spectacular.

80% visitors leave the site within first 30-60 seconds - either due to undesirable usage experience, bandwidth issues or after checking the price of the product. The conversion rate among the users who stay longer is 3-5%. This is a subset of the previously mentioned 2%.

These statistics hold true for all 4 sites you have mentioned. The outliers are the special offers, promotions, and super-sale days. All of these statistics have a huge variation depending on the product lines you consider. They can be broken to many, many more levels of analysis.

The payment gateways used by these sites are generally 3rd party. Even by Indian standards, the dollar-converted charges are too heavy to be taken upon. Plus along with the power of owned payment gateways, comes the responsibility of security, and necessity of adherence to KYC, anti-money-laundering, anti-terrorism and such norms. Up until recently, even Amazon chose to use the PayPal services instead of developing an independent gateway. It's not without reason. Let the sites do the selling, let the bankers handle the money.

I think i have covered almost all aspects of the e-commerce business. At least as much within this space as i could, without making it boring.

Please write to me here or on huckster@outlook.com if you have any more queries and questions.
20.8k Views · View Upvotes

From Your Quora Digest
Is it possible to earn 1% per day in stock market?
Dean Rubine
Dean Rubine
Sure.  I did it yesterday.  Oh, you meant every day.
There are about 250 business days in a year, so if you started with $1, after a year you'd have 1.01250=$12.03 , an annual return of 1100%.  That's of course a...
 (more)
From Your Quora Digest
How is the job life in RBI?
Kakashi Malav Gupta
Kakashi Malav Gupta, Working at RBI
Updated Oct 28, 2015 · Upvoted by Naveen Kumar Singh, Manager-designate, Reserve Bank of India
I joined RBI 8 months back as an Assistant.

As I  interact with  officers on daily basis I know the salary, perks, facilities, lifestyle, overall career opportunities and work profile of direct re... (more)
From Your Quora Digest
What can I do an hour a day that will make my life better in 30 days?
Neha
Neha, Life? Incomprehensible. Living? Peace.
In 30 days? While there's nothing better than determination and perseverance of doing the things you are supposed to do to make your life better, we also can't deny the fact that an efficient use o...
 (more)
Top Stories For You
VvsVvs
What is your question?
Stock Market
Answer written
· 8h ago ·
How can I make 500 rupees daily from the Indian stock market if have only 10000 rupees to invest?
Akansha Sharma
Akansha Sharma, I love commodities
I will tell you exactly how to make Rs.500 or more everyday with Rs.10000. Everybody has a system and I’m willing to tell you how I would make Rs.500 almost everyday, if I were you.
Steps:
  1. Get a trad...
 (more)

Improve Your Feed

Visit your feed
Follow 20 more topics
Upvote 4 more good answers
Ask your first question
Answer a question
Posted by at No comments:
Subscribe to: Comments (Atom)