Saturday, 21 March 2015

Monthly returns as well as long term returns

Every now and then we get this input that if you stay in stock markets for sufficiently long period, you will surly get good returns. But what is a sufficiently long period ? 2 years , 5 years , 15 years.

Anybody is bound to loose patience if the investments are not resulting into any kind of positive returns for months & years.

On the other hand, my expenses are on monthly basis. I need to pay my rent every month , need to buy groceries every month , need to pay school fee every month , need to pay my EMIs every month.

In such  a scenario, how will my investments in stock markets help me in my day to day living ?

If my objective is long term returns only , Should I invest only that much of money which I save after paying all the bills? In this case also, I don't know whether these investments will really support me at the time of need or not. If I want to en-cash them after 2 years, what are the chances that they will be giving me positive returns. So, may be I am better off with a safe bank deposit in such  a scenario.

But , what if I want to take benefit of higher returns in stock markets ?

There must be a way , wherein my investments can capture long term benefits as well as pay me something on monthly basis also .( You do not know which company's will survive 15 years from now).  Is this possible ?

Yes, this is possible. You can set up a trade wherein you are taking long term benefits of markets with short term gains. Short term gains are like small rent which you are capturing from the long term investment you have made for capital gains. So , even if in long term you are not getting huge returns, the overall returns look very attractive with small small short term monthly returns you have already pocketed. Additionally , these monthly returns are supporting me in my day to day living also.

Achieving this balance of monthly returns vis a vis long term returns is a sure shot way of creating wealth through stock markets. And let me tell you, its not rocket science. It just requires proper understanding of tools available in the markets such as stocks, index , futures & options. We need to combine our trades judiciously in these segments to achieve these goals.

Pradeep Singla

(We conduct options trading workshops in Bangalore,Hyderabad , Chennai, Mumbai, Delhi and Kolkata)

Friday, 20 March 2015

Why to trade in stock markets ? part 2

As we have discussed in our previous post , as a smart investor, you must trade in stock markets to beat inflation and taxes.

Question is how to trade , what are the tools which can guarantee success ?

We have two segments in equity markets.



Traditionally , cash segment was traded wherein you can buy shares and sell as and when you want. If you have paid the whole amount , you can hold the position for whatever period you want. But if you want to hold only for intra-day, you need to pay only margin money and hence you can leverage your investments. 

Here the problem is that even if you have funds available with you, you can take only buying position. This means you will make profits if and only if the stock goes up from the price at which you have purchased it. But if it falls, you have to take losses.So ,there is only one way i.e. the stock should go up only. Also, if you want to hold position for few days or few weeks, you need 100% capital. So no leverage on your funds is possible.

Solution to these issues is derivatives segment.

Here , you get huge leverage of funds , you can hold your position for whatever period you want , you can sell (without buying) and square it off later means you can make money in falling stocks / markets also.

There are two instruments available in Derivatives Segment.

1. Futures 

2. Options

They are traded in fixed lot sizes and their multiples.

A proper understanding ensures you do not loose your capital the way it is possible in cash segment.

We will talk about futures & Options in our next post.

Pradeep Singla

(We conduct options trading workshops in Bangalore,Hyderabad , Chennai, Mumbai, Delhi and Kolkata)

Wednesday, 18 March 2015

Why to invest in stock markets at all?

Many of my friends always ask - Why should we invest in stock markets at all ? You do not have any control on how things work and more often than not , you loose money , so we are better off with bank fixed deposit only.

Yes, Agreed that stock market is not an easy place to make money. But then , Nothing comes easily. Do you think doctor's job is easy ? Do you think Engineers's job is easy ?

We study for years. Spend lots of energy, money and time on our studies and land a job. And yes, No job is less than 12 hours a day. What after that ? Insecurities ! Boss ! Work - life Balance ! KRAs!

When it comes to stock markets , we say 

- I do not want to spend time
- I don't have much money to invest.
- I do not want to learn as nobody knows anything.
- I have never attended any training, but follow my neighbour's advice.
- I do not have patience.


I want extraordinary results.


Stock markets are no more part timers space.

You are happy with a bank fixed deposit which doesn't give you returns more than inflation. Plus you also pay taxes on that. In real sense, value of your money is depleting.

So , what to do. INVEST WISELY.

Investing in stock markets only can give you returns which will beat inflation plus taxes and in real sense , your money will make something for you. 

So, its not a matter of choice, but for any intelligent person with some financial acumen, its a compulsion.

Now , the question is not whether I should invest in stock markets but the question is how I should invest in stock markets. 
-What are the tools required ? 
-What are the instruments i should use ? 
-What kind of knowledge is required ? 
-What other inputs are required ?

Ok , we will talk about these details next time! 

Next blog :- Why to invest in stock markets at all ? - part 2

Pradeep Singla

(We conduct options trading workshops in Bangalore,Hyderabad , Chennai, Mumbai, Delhi and Kolkata)