I started my stock trading journey on April 1, 2023, the April fool’s day………. umm well. Reason: trading in stock markets is considered only for operators as they make money by fooling retail traders, so I took up the challenge to prove them wrong. Naah………. but to see if the hypothesis was right and can I make money, which is everybody’s primary objective, whether as an active income or passive income.
Little bit about me
I am 49-year-old and was working for a US based MNC related to oil field services as a pricing specialist some time ago in fact just two weeks. My prior experience of 20 years was working as a journalist and then by pure accident first as executive research associate and then as a market research analyst and a consultant for India’s two largest credit rating agency in India.
In terms of project and sector coverage, I worked on assignments related to market demand and supply assessment, pricing, market strategy, business plan, business model strategy, financial pre and final financial and commercial feasibility in oil and gas, LNG, Coal, Renewables, Chemicals, Industrials products, Petrochemicals, Automobiles, FMCG, Infrastructure and skill development.
In terms of education, I did my B. Com from Delhi university, Diploma in Journalism, MA Economics, MBA from IIFT and Financial Modeling and Valuation Analyst. Recently, I did training in Diploma in International Financial Reporting Standards (IFRS). But I am still learning with an ultimate aim to finish with CFA. Enough of me, lets start with the real thing - Equity investing.
Selecting a stock broker and Demat account
I opened a demat account with AngelOne stock broking after researching for different ones in the market with data source being Youtube. There are others like Zerodha, Upstox, Shrekhan, 5paisa, Motilal, to name the few. I found out that they have a simple stock trading interface with the required number of details to work with, at least till now. Factors that I have considered for selection where:
1. Account opening fees
2. Legal aspects in terms of registration with SEBI
3. Brokerage fees
4. Life time free trading
5. Number of clients
What to trade in?
Well, well, well…. here are the choices:
1. Equity
2. Debt: Corporate bonds, Corporate Debentures and Government securities
3. Currency
4. Commodities
a. Gold
b. Silver
c. Agriculture commodities
d. Crude oil and Natural gas
e. Ferrous metals
f. Non-ferrous metals
Quite a list. Yes. The problem with me is that I have some experience how business works in almost all of these markets or industry so making a choice was even more difficult. But it does not end here.
The next question that I was to answer was What shall be the investment route?:
1. Mutual Funds though lump-sump one time investment, Systematic Investment Plan (SIP)
2. Exchange Traded Funds (ETF)
3. Individual Shares in cash market
4. IPO’s
5. Futures
6. Options
7. Swaps
The Time frame problem
1. Indra-day, Weekly, monthly or
2. Long-term value investment
Till now I have settled with or is still experimenting with: IPOs, individual shares with weekly trading and value investing, Mutual Funds through SIP’s. Each having its own risks and rewards.
Risk and Rewards:
Coming to risks and rewards, what I had learnt, before even I thought of investing or trading, was more the risk more reward and vice versa. Also, I had learnt that though more risk has more reward but if goes against you, one can even loose their shirt. Note don’t get swayed away with more risk, more rewards shit, it can go against you.
Youtube investment advice and blah, blah, blah:
Top 10 best stocks that will earn you money in 2023, Invest Rs. 5000 month and earn Rs. 1 core in 5 years, or daily Rs. 10,000 profits guaranteed, Top 3 Mutual funds that will change your life and make you crore pati (millionaire for English audience), best stock market secrets or indicators that nobody will tell you but will make you millionaire, make money in stock market using Ichimoku cloud trading system, in 5 days earn 10% profit with secret swing trading system……… blah blah blah.
And then the interviews with best brokers that fought with life’s worst circumstances and now are millionaires after stock trading (welcome to dreamland). Nothing against it, but can you be next Rakesh Jhunjhunwala, Prakash Gaba, Vijay Kedia, Mohnish Pabrai, Radhakishan Damani, Mukul Agarwal, or Akash Bhansali, to name few. Let’s not even talk about Warren Buffet, The Oracle of Omaha.
The answer is yes but with what probability. Let’s do the math. According to two depositories, NSDL and CDSL, total number of demat accounts is 9.28 crore as on April 30, 2022 so there is 0.00000108% chance that you will become a successful retail trader like say Rakesh Jhunjhunwala. Well, if luck has it you can be next stock trading millionaire. But luck is like a brutal friend that never turns up when you need him or her. Again, it is a game of probability.
I remember reading a book by Nassim Nicholas Taleb called “The Black Swan: The Impact of the High” written in 2008, which explains why are we so bad at predicting future and how unlikely events dramatically change our lives if they do happen , as well as what you can do to become better at expecting the unexpected.
Books to get you to next level of investing or trading or confusion
Here is a small list of books to further confuse you[1] in your journey of investing. Remember almost all of them are written by American authors so ask yourself a question are they relevant to India, maybe I don’t know only time will tell.
1. Rich Dad Poor Dad by Robert Kiyosaki
2. Think and Grow Rich by Napoleon Hill
3. The Psychology of Money by Morgan Housel
4. The Intelligent Investor by Benjamin Graham
5. The Richest Man in Babylon by George S. Clason
6. Coffee Can Investing: The Low-Risk Road to Stupendous Wealth by Pranab Uniyal, Rakshit Ranjan, and Saurabh Mukherjea
7. One Up on Wall Street by Peter Lynch
8. Security Analysis by Benjamin Graham and David Dodd
9. Beating the Street by Peter Lynch
10. The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime! by M. J. DeMarco
11. Security Analysis by Benjamin Graham and David Dodd
12. Secrets of the Millionaire Mind by T. Harv Eker
13. I Will Teach You To Be Rich by Ramit Sethi
14. Fooled by Randomness by Nassim Nicholas Taleb
15. The Millionaire Next Door: The Surprising Secrets of America's Wealthy by Thomas J. Stanley and William D. Danko
16. The Black Swan by Nassim Nicholas Taleb
The Warren Buffet Way by Robert G. Hagstrom
Read them and you will get further confused and mind boggled but some of them are worth it. I have read only the following with a realistic assumption – No technology play was involved and not taking Indian economy into to consideration:
1. The Intelligent Investor by Benjamin Graham
2. Security Analysis by Benjamin Graham and David Dodd
3. One Up on Wall Street by Peter Lynch
4. Beating the Street by Peter Lynch
Currently, I am reading Equity Research for Technology Investor Value by Sundeep Bajikar because these days technology matters.
Investment Objective
If you are not clear about the objective you will fail. Create wealth through value investing and having fun with weekly trade is my mantra. Well, it is for me but I don’t know about you.
Money to be spent or shall I say invested
Well, there is no limit to it but remember this theory given by my macro-economic guru John Maynard Keynes. According to Keynes, desire to hold money arises because of three motives:
1. Transaction motive which is money for your day-to-day demand like food and fuel and sometimes luxuries
2. Precautionary motive with money in cash form or liquid form for unforeseen contingencies such as sickness, accidents, danger of unemployment and other uncertainties
3. Speculative motive with money in liquid form to take advantage of market movements – stock and bonds, currency or commodities
How do you allocate your money?
As the saying goes don’t put all your eggs in one basket so don’t put all your earnings in a single asset. Please, please, please before you even think of stock/asset investing put your money into: Health Insurance and Life Insurance and then rest follows. Here are the rules, given your age and priorities:
Age - 18 to 30 years, Priority – having fun and building your future
Transaction motive: 50%
Precautionary motive: 30%
Speculative motive: 20%
Age - 30 to 42 years, Priority – having some fun and building future of your family (wealth)
Transaction motive: 50%
Precautionary motive: 40%
Speculative motive: 10%
Age - 42 to till you live, Priority – having fun and taking care of yourself
Transaction motive: 40%
Precautionary motive: 45%
Speculative motive: 5%
Having said that make your own plan as there are no fixed rules or guidelines.
The web of Indicators and chart patterns
Go to Youtube and just search for best stock market indicators and chart patterns for value investing and intraday or weekly trading. What you get is everybody is calling themselves as an expert. All of them will make you millionaires in days, while they themselves are struggling to make their living apart form Youtube video monetization. So, believe them on your own peril including me who will become an expert soon to post Youtube stock investing videos.
I am experimenting with the following as of now:
1) Triangle Breakout and Parablic Breakout
2) Ascending Breakout
3) Failed Descending Traingle
4) Triangle Breakout in a Trend
5) Rounded Breakout
6) Bull or Bear Flag
7) Rectangle Breakout
8) Cup & Handle Breakout
9) Wedge Breakout
10) Double 0r Triple – Bottom/Top
Sounds complicated. Yes. They are and I am still in my learning journey so will post my understanding about the same soon.
What have I invested in till now – June 10, 2023?
Start with a low amount say Rs. 20,000 and increase your investment in a staggered manner as you learn rules of the game. I have invested into the following:
I. Value investment
A. IPO’s: I invested in Mankind Pharma after a lot of research with the objective of value investing. The research I did related to following parameters:
1. Industry growth to which company belongs to
2. Products it sells and consumers that buy it: Market segmentation, Targeting and Positioning
3. Competition
4. Financials: Sales growth, margin growth (EBITDA, EBIT, PAT), ROCE, and ROE, Cash flow from operations per share, Debt to Equity Ratio, Working Capital Cycle ratio, PE ratio, EPS compared to share price.
5. Management quality: Experience in related industry, years spent in company and carrier progression
I invested in one lot of 13 shares with price of Rs. 1080 per share (Total investment Rs. 14,040). The current value per share (June 10, 2023) is Rs. 1485 per share. I wish I had Rs. 1,00,000 to invest. I would have got 92 shares. The money I would have made would have been: (Rs. 1,485.30 – Rs. 1,080)* 92 which amounts to Rs. 37,288, a gain of whooping 266% in roughly one month. Lesson: Money talks and bullshit walks.
II. My Trading portfolio (April 20, 2023 – June 10, 2023)
I bought following stock in between for trading:
1. Tata Steel
2. IGL
3. Ashok Leyland
4. HBL Power
5. Lemon Tree Hotel
6. IRFC
7. Coal India
8. Tata Coffee
Total Investment across the shares is Rs. 6000 with small quantities of 10 shares, except for IGL with 2 shares only.
Trading in the future: June 10, 2023 to July 10, 2023
I will write, subsequent to the current monthly blog, my investing journey to showcase how is it going to go in the future and fulfill my promise of challenging the Operators. Happy investing and Happy reading. See you soon on July 10, 2023 !!!!!!!!
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