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What is the Summary of the Book “The Intelligent Investor”?
Summary of the Book "The Intelligent Investor" The Author of the Book "The Intelligent Investor" is Benjamin Graham, the book was first published in the year 1949. The book teaches us how to be a smart investor. It's like having a wise mentor guiding you through the stock market. The following are tRead more
Summary of the Book “The Intelligent Investor”
The Author of the Book “The Intelligent Investor” is Benjamin Graham, the book was first published in the year 1949.
The book teaches us how to be a smart investor. It’s like having a wise mentor guiding you through the stock market.
The following are the key learning from the book.
1. Investing vs. Speculating:
The author highlights the difference between investing and speculating. Investing is like buying a piece of a good business, while speculation is more like gambling. He encourages us to be investors, not gamblers.
2. Buy at Low Price:
In the book “The Intelligent Investor” the author talks about the importance of buying stocks when the current market price is below its true value. This ‘discount’ acts as a safety net if things go wrong. Always buy at a good price to protect your investment.
3. Mr. Market:
He introduces the concept of “Mr. Market,” a fictional character who offers to buy or sell stocks daily. Sometimes, Mr. Market is overly optimistic, and sometimes he’s very pessimistic. It’s up to us to decide when to listen to him.
4. Value Investing:
He emphasizes the idea of value investing. Look for solid, well-established companies with a history of positive growth. Buy them when their stock prices are low compared to their true value.
5. Long-Term Perspective:
Always prefer for a long-term approach. Focus on the future potential of a company rather than short-term market fluctuations. Analyse the financial progress of past 5 years and take a long-term move.
These are some key learnings from the book The Intelligent Investor, for more info. you can buy the book from amazon here.
See lessWhat is the Average Income of a Swing Trader?
Average Monthly Income of a Swing Trader A swing trader in India can earn a monthly income that is dependent on the initial capital, leverage, trading strategy, and tax implications. Below I have taken an example of 50000 investment. With a capital of 50000, practically how much a swing trader can eRead more
Average Monthly Income of a Swing Trader
A swing trader in India can earn a monthly income that is dependent on the initial capital, leverage, trading strategy, and tax implications.
Below I have taken an example of 50000 investment. With a capital of 50000, practically how much a swing trader can earn in a month was shown in the below sections.
Average Income per Month For INR 50,000 Investment
Let us maintain certain hypothetical assumptions to arrive at conclusions.
You as a swing trader can make an initial investment of INR 50,000.00 and obtain a leverage of 5x to trade a stock worth of INR 2,50,000.
In case, you plan to make 5% to 10% profit per trade and conduct about 10 trades per month.
That means, you will be able to earn INR 12,500 to INR 25,000 per trade or INR 1,25,000.00 to INR 2,50,000 per month for 10 trades.
Your net income will be total earning minus different taxes laid by your broker, IT dept, and others if any.
Expenditure Incurred in form of Services/Taxes:
Now, let come to the costs you incur in different ways, brokerage fees, stamp duty, securities transaction tax (STT), GST, and transaction charges to the broker.
Above all, you will have to pay income tax on your earnings every year, hence you will have to make a rough calculation that goes close to the net income left after taxation by IT.
Brokerage Charges:
Let us assume that your broker charges a fee worth 0.1% of the trading account capital. And, if you conduct a trade worth INR 2,50,000 then you will have to forgo brokerage fees worth INR 250.00.
In this manner, if you perform 10 trades in a month then you will be levied by INR 2500.00.
Your Net Income per Month: Swing Trade Earnings
In continuation to the above example given, you can calculate your net income earned per month for low profit margin (5%) or high profit margin (10%).
Low profit margin (5 %) Per Trade
Gross income – costs = taxable income.
INR 1,25,000 – INR 2,500 = INR 1,22,500
(Costs is the brokerage costs)
Taxable income – Taxes = Net income
INR 1,22,500 – INR 42,045 = 80,455
High profit margin (10%) Per Trade
Gross income – costs = taxable income.
INR 2,50,000 – INR 2,500 = INR 2,47,500
(Costs is the brokerage costs)
Taxable income – Taxes = Net income
INR 2,47,500 – INR 84,915 = 80,455
From the above cited examples, your net income per month will be INR 80,455 with a profit margin of 5 percent per trade.
Making a capital investment of INR 50,000.00 and obtaining a leverage of 5x from the broker can help you trade a stock worth INR 2,50,000.00.
Keeping all the dimensions the same, if you make a profit margin of 10 % per trade then you will be earning an income of INR 1,62,585 per month.
Income Tax on Individuals (FY 2023-24)
The Income tax Act does consider swing traders income as business income and the tax is levied on the basis of slab rates.
If you are an individual doing swing trading and are not yet 60 years of age will have to pay tax worth for FY 2023-24 is mentioned below.
If you earn an income of INR 3 lakh (Nill Tax), from INR 3 lakh to INR 6 lakh, will be 5%, from INR 6.0 lakh to INR 9 lakh you will have to pay 10%, and from INR 9.0 lakh to INR 12 lakh you will have to pay 15%. Whatever amount you earn above INR 12 lakh, you will have to pay 30%. Likewise, if your income goes above INR 50 lakh then you will have to pay an additional surcharge of 10% and a cess of 4 % on the total tax payable.
Ultimately, if you earn above INR 50 lakh, you will be under a higher tax bracket (30 % + 10 % surcharge + 4% cess) = 34 %.
See lessWhat are the Top 5 Strategies for Swing Trading?
Best Strategies for Swing Trading Although Swing trading is attractive for its short term returns with low risk all you need is you will have to master a strategy. Otherwise, your goal set may be unable to reach your niched objectives. Here is the list of top 5 strategies for swing trading that willRead more
Best Strategies for Swing Trading
Although Swing trading is attractive for its short term returns with low risk all you need is you will have to master a strategy. Otherwise, your goal set may be unable to reach your niched objectives.
Here is the list of top 5 strategies for swing trading that will give fruitful results when you master it. They can be classified as:
1. Simple Moving Averages, SMA:
SMA becomes the best technical tool to select the best option call and option put in the volatility of the stock market of your chosen asset.
SMA provides average price of an asset for a specific period, you can set a relation between current price and the SMA thus, enabling you in deciding the active trades.
The comparison between the current price and the SMA defines the available opportunities. For instance, if the Current Price is greater than the SMA, it is the right movement to enter the long positions. It means that the share market is experiencing a potential uptrend.
If the current price is less than SMA, then you must enter for the short positions and the market is said to experience a downtrend.
Experts suggest you to go for a longer hold as the shorter period length may not produce the accurate results due to sensitive volatility. If you believe in a longer period a fewer false signal may cause delayed signals.
2. Fibonacci Retracement
The Fibonacci Retracement strategy is a popular technical analysis tool derived from the Fibonacci sequence of numbers.
It is utilised to identify the support and resistance levels of an asset price movement in share markets.
How Fibonacci Works?
3. Trend Trading:
You can make profit on trades provided you enter the direction of the trend.
For your chosen asset price, you must apply moving averages, or trendlines for the identification of trend movements be it upwards, or downwards, or sideways.
If an asset is experiencing uptrend, then you must prefer to enter long positions to buy on pullbacks or breakouts. On the other hand, if an asset is experiencing downtrend, you should make a short position entry.
4. Reversal trading:
It sounds typical but yes, it is true, you can strategize to make profit from the reversal that means you should enter trading patterns that move in a direction opposite to the previously held trend.
You can identify such potential reversal trends by using indicators, support and resistance levels, etc.
For instance, you have observed a downtrend in your asset and suddenly you find a reversal thus making the chart appear bullish, or break above a resistance level. And, if you are eagerly waiting to utilise the reversal trading strategy then you must knock the opportunity and enter into long positions.
A converse to the above said can occur, an asset with an upward trend may show a reversal and enter into the or break below the support level. You should immediately jump into short positions and never let the opportunity miss out.
5. Breakout strategy:
You can adopt trading based on breakouts that are very well applicable to swing trading. And, here too for your chosen assets, you need to identify the potential breakout in the price movement.
You must identify the potential breakout by using chart pattern, support & resistance, and trend line
After identifying the breakout, you must enter the direction of it and conduct your trade activities and make a considerable amount of profit.
In a candlestick chart, if you draw a support and resistance levels for your asset then the movement you find signs of breaking above the resistance level, you must immediately enter long positions by making no delay. Likewise, if you find a sign of breaking below the support line then the trader should grab the opportunity and enter short positions.
See lessWhat Happens if IPO is not Allotted?
What happens if IPO is not allotted Companies are adopting ways to allot shares to their investors when the IPO gets over subscripted in the primary markets. SEBI has laid down rules and regulations that are to be precisely applied if the IPO is over subscripted. The article spots the reasons behindRead more
What happens if IPO is not allotted
Companies are adopting ways to allot shares to their investors when the IPO gets over subscripted in the primary markets. SEBI has laid down rules and regulations that are to be precisely applied if the IPO is over subscripted.
The article spots the reasons behind the non allotment of the shares to retail investors, qualified institutional buyers, traders, etc.
It also explains to retail investors the tips to obtain an allotment for an overly rated IPO script.
Investors & IPO Issuers Benefit Mutually in Money Markets
When a company plans to expand its business operations, or builds a new venture, it does require a good capital market.
Besides its partners, and business promoters the company opens up in the money markets to attract different qualified Institutional buyers.
It encourages retail investors, QIB, and traders to partner in its businesses. The public offer helps the companies to manage the public funds effectively and gives investors more opportunities to earn higher percentages.
Over-Subscription Minimizes the Allotment Possibilities
Usually, when an issue attracts more investors and the issue gets over subscripted then your chances of being allotted with shares becomes thinner. However, if you are lucky then you can get in a lottery established by the issuer.
In case of the retail investor, the shares are divided by a minimum lot size. Every issuer has a right to choose the number of lots, while each lot accommodates the shares.
If you divide the total number of the shares of allotment for the retail investor by the minimum lot size shall reveal the possible beneficiaries.
For instance,
When Quess Corp.’s IPO was announced in the stock markets, the issuer made each lot having 45 shares, and on calculating with the upper end of the price band, the application value for a single lot was 14,265.
It was observed that the retail investor had reserved 1.27 million shares and total shares on bid were 43.50 million.
As per the BSE records, the issuer got over subscription 34 times, it is clear indication that all will not receive allotment.
Validate your Approach towards IPOs
Before filling in an application of the Initial Public Offering, IPO, you need to make a careful study of the details published by the issuer. Every issuer mentions his specific requirements and you are expected to fit in and apply for the IPO as per the issuers terms and conditions.
For instance, each IPO defines its own lot size, bid price, etc. There are several reasons that keep you away from owning the IPO shares.
You must check thoroughly the reasons for non- allotment of shares by issuers. To illustrate them, you will have to evaluate them one by one.
See lessWhat are the Reasons for Non-Allotment of Shares in an IPO?
Factors Contributing to Non-allotment of IPO Shares: The following are some of the reasons behind non-allotment of shares in an IPO 1. Invalid Information in IPO Application Form: The application form must be thoroughly read before filling it. The information that you furnish must be correct and ifRead more
Factors Contributing to Non-allotment of IPO Shares:
The following are some of the reasons behind non-allotment of shares in an IPO
1. Invalid Information in IPO Application Form:
The application form must be thoroughly read before filling it. The information that you furnish must be correct and if wrong, your application shall be rejected immediately.
The IPOs applications are designed and presented as per the rules and regulations set by SEBI. The registrar of the application needs to follow the SEBI guidelines properly.
2. Bidding Price:
If you have filed an application at the IPO having confronted oversubscription, then the bid price defines the winning moment.
When your opted issuer’s IPO gets over subscripted then the issuer decides the final price. It is based on the bid investor offer.
You will fail to obtain an allotment when your bid price happens to be lower than the issue price.
Investors Bids Reduce Chance of Allotment:
As long as the number of shares and the applicants are in the same ratio and not overly scripted allotment is easy.
When the issuer’s IPO gets over scripted then the company does involve in the process of picking the application randomly. It is even known as the lottery.
Tips to Improve Probable Chances to Win Bidding
Follow these simple steps to maximize the chances of Allotment of shares
Fill in IPO Application Details Properly
You will need to fill in your application correctly. Remember, if you make wrong entries then you are most likely to get your application rejected.
Skip Big Applications for IPO Bidding
It is a myth to say that big applications are more valued by the issuer at the IPOs. You may prefer a big application but end up in trouble, there is no guarantee in obtaining an IPO.
In fact, SEBI has established a rule that states to provide the same importance whether it is big or normal application.
Cut-off Price is Suggestive for IPO Application:
In case of book building IPO, the issuer decides on the issue price after closing of the IPO submission date.
In such cases, if you have applied for the upper cut-off price then the probability of winning the bid is higher.
Apply through Multiple Demat Accounts
If you feel that the issuer has good market credentials then an over subscription is most likely to happen.
To strike a bid, if you attempt through multiple demat accounts then the chance of bid approval is higher.
Apply for IPO ahead in time:
It is quite usual that you procrastinate and the delay in submission of IPO applications can deliver wrong information. So completing the application and submission well ahead in time can save your energy and avoid stress.
Advantage in Holding Shares in Parent Company:
You can apply in the shareholders category and since you may find little competition here. Thereby increasing the chances of obtaining the share allotment.
Study thoroughly Company’s Prospectus:
The company’s prospectus explains in brief the important aspects of its performance, strengths, and risks. These details provide you a source of information before making final decisions on applying for IPO.
See lessHow Much can Algo Traders Make?
Profitability with Algo Trading Algo trading will save your time and efforts but you must be cautious in deciding your trading strategy. The most important aspect of trading is the predictions of trade positions such as entry/exit. Depending upon the kind of trading strategies you consider you willRead more
Profitability with Algo Trading
Algo trading will save your time and efforts but you must be cautious in deciding your trading strategy.
The most important aspect of trading is the predictions of trade positions such as entry/exit.
Depending upon the kind of trading strategies you consider you will have to take the relevant factors and run the strategy.
The algos function in its logical manner thus provides more accurate and precise results when compared to manual trading.
Factors that are taken in account for Trading Strategy:
You will have to utilise mathematical and quantitative tools like probability, regression, and calculus to obtain a well defined trading strategy.
The trading strategy must be backtested by collecting historical data to judge the viability of the selected strategy based on past market experiences.
During trading sessions, you may encounter a situation where the market moves in the opposition direction, a way different from your expectations. In such situations, you must employ the risk management techniques.
But such trade movements occur when there is a drastic change in political dimension, or transition in the technology. However, you are expected to trade only by weighing risks to gains.
Profitability is directly proportional to the trading strategy that deploys coding by the help of programming languages.
Algo trading can benefit traders when they operate multiple trade orders. Here too, depending on the conditions set you can obtain results with greater speeds and accuracy thus leading to higher profit margins.
Are you a trader? Then do Rely on Algorithmic Results
Trading desks, or consultancy firms help you earn at a much faster pace because of the transition from manual to algorithmic.
And, if the reasons are summed up, you can find it as:
The algo process involves zero human emotions.
The algorithm machine works with greater speeds and produces higher accuracies. For instance, a professional trader may take ten to fifteen seconds to identify the trade entry/exit forms. But in that period, the algorithm gives solutions that comprise many identifiable entry/exit levels.
Scalability: It is a technical term that states that the machine scans thousands of trading signals with tremendous computational power that humans fail to do so.
Portfolio and risk management: The machine logic can generate the best portfolio and also identify the possible risks to avoid in time.
Algo Trading Shall be the Future
Traders conducting stock trading at NSE/BSE can give a try for algorithmic trading. You can take the best advantage of technology driven industry when stock exchanges are coming forward to educate it.
SEBI has conducted a detailed study on the algos and proposed a framework for the participation of the retail traders.
You must have the technical knowledge of programming logic and quantitative logic to apply it in your trading strategies.
With the evolution of algo trading, you can make big profits if you utilise the algo services rendered by the notable companies like Zerodha.
See lessHow Does IPO Allotment Process Work?
IPO Allotment Process Investors in the IPO can be retailers, qualified institutional buyers (QIBs) and they include pension funds, fund managers, investment banks, mutual funds, and insurance companies. These qualified institutions invest a huge volume of stocks in trading. Securities and Exchange BRead more
IPO Allotment Process
Investors in the IPO can be retailers, qualified institutional buyers (QIBs) and they include pension funds, fund managers, investment banks, mutual funds, and insurance companies. These qualified institutions invest a huge volume of stocks in trading.
Securities and Exchange Board of India, SEBI, is the capital market regulator that sets in the rules and regulations in the allotment of the shares @IPO.
Allotment of Shares @IPO:
On the day of closing of the IPO, if an issue is fully subscribed then every investor shall be allotted the number of shares mentioned in the IPO application.
Condition:
Any company that hosts an IPO must obtain a subscription of at least 90 percent of its listing. Else, IPO is disqualified and the subscriber gets their investment refunded irrespective of the underwriter’s assurance.
Over Subscription @IPO
Yes, if you find an oversubscription at the IPO then it means more number of applicants have applied for the share allotment.
In such circumstances, an applicant shall always be eager to understand the share allotment from the total number of shares applied at the IPO.
The SEBI regulatory authority states that each retail bidder must get at least one bid from the allotted retail individual quota.
The company defines a lot that mentions shares per lot in the IPO application form. You (retail investor) can apply in lots for the equity share offerings.
Limitation:
You shall receive a minimum of one lot size or more and never shares allotted in a lot defined by the issuer. The company makes an allotment of shares on a proportional
If the subscription is over subscribed then the decision in selecting the subscribers for the allotment of the shares is simple.
The company will divide the total number of shares by the selected lot and arrive at the total number of available lots for allotment.
The company then checks the ratio between the total number of retail individual investors and the total number of available lots.
When the ratio is not in the 1:1 proportion then the company picks at random the retail applicants to allot the shares as a result several applicants are dropped out due to non-availability of the lots.
Note:
A retail investor is entitled to purchase share-lot up to a value of INR 2.00lakhs. Likewise, non-institutional investors can dream of getting allotted shares worth above INR 2.00 lakh. They do involve NRIs, companies, trusts, etc.
A thumb-rule states, an IPO governs retail investors ( 35 percent), NIIs ( 15 percent), and for QIBs ( 50 percent) that includes anchor book.
How to Check IPO Allotment Status:
There are multiple websites to check an IPO allotment status like linkintime.co.in, bseindia.com, kfintech.com
You must select the company name, enter the PAN, or Application number, or DP ID/Client ID. Further, enter captcha, and then submit the status query form.
Note:
In case you are not allotted with shares then two sections shall remain unfilled, and they are securities, and adjusted amount.
In the later stage, the registrar of the IPO will send information in regard to the ‘share allotment’ through messages, and emails.
The registrar of IPO sends emails and messages informing applicants about the allotment status.
Non-allotment of Shares for You:
After the finalisation of the allotment, if you are not allotted with shares then your spent money shall be refunded through the ASBA account. Else, your money gets deducted from the subscribers account against the allotment of the shares.
How Early Can I Put the Allotted Shares to Trade?
The retailers get their shares into their account on the fifth day from the IPO closing date and then subsequently they can do trading in the secondary markets.
Tabular column: Allotment of Shares @Overlysubscripted IPO
Allotment Procedure for Oversubscription Shares:
A comparative study is conducted on the investments made by the investors before selecting for share allotments. The software tool arranges a list of applicants and shares allotment in a tabular form.
Consider an example that states ten investors have placed an IPO, at a price which the shares are issued to the investor also known as cut-off price.
Let us assume that these investors have placed their bid in the range of 1 to 5 shares.
If you have observed you can find ten investors having applied for 29 shares. But as per the oversubscription, the demand may limit the allotment to say 5. Then, the computer makes a random pick and allotts the shares to investors.
As per the information made available in the tabular column, the investors Investors (2), (3), (7), (8), and (9) have obtained eligibility through lottery.
The registrar conducts the entire selection process against the IPO application.
Note:
In such circumstances, the registrar considers to pick up only investors having enrolled for the upper price band.
See less