Stock Advice

Recently some of my advice on IPO saw huge activities Tech Mahindra got over 500 hits and the on going Shobha Developers got over a 1000. Hence I thought it would be wise if I published who I am before a thousand souls spend their life fortune on my words.

1) I am a small time investor in the stock market who never allows his Stock Market Portfolio to exceed 50% of my current Assets. ( I will drop it to 33% when I get married and to 25% when I will have a kid)
2) I hate people who believe in hot-tips and day trading. It is too risky and you are more likely to lose than the gain anything.
3) To me stock market is a very calculated risk in which you research and find the undervalued gold-mines and wait patiently till everybody realizes its potential. I hold no more than 4 scrips at one given time and trade less and once every 1-2 months.
4) However even a gold mine will never yield diamonds…. If a stock is trading above what I think it is worth, then quickly exit… maybe later on you can re-enter.
5) I never invest in companies whom I will never consider doing business with. (So no penny stocks. They might not be worth the paper it was printed on)
6) Make a target and buy a scrip in 2-3 phases and sell it off in 2-3 lots. You can never hope to buy at the lowest and sell at the highest price. So buying in lots is the best strategy as it keeps your investment low and allows you to encash on a bubble.
7) Stock market has a history of 1 nano second. It never cares what the stock was worth once. And for all practical purposes (except the Tax calculation) it does not give a damm of what price you paid for the stock. So why do you give a damm…. whenever you think the price is right sell of the scrip and limit your losses.

8. Be extra careful when you invest in IPO.
1.Most IPO are Overpriced/ aggressively priced. So you might make a small listing loss.
2.Under priced IPOs are too oversubscribed that the small allotment you get will not be worth your investment.

9) Be ruthless: If you feel the promoter has cheated you or is telling you fairy tales. QUIT and if possible Short Sell his shares. Stock market is not a Diwali gambling session but it is a serious place where you invest your hard earned sweat and blood.
10) For Mutual Funds/ ULIP check the amount of Asset Management Fees they are charging and see if it is worth the benefits you get.

Stock Market is all about buying a Dollar Bill at 60 cents.

Disclaimer: The opinions expressed here are personal views of a private citizen who has no formal training in Finance or Management. I hold positions in all the shares discussed in the stock.

4 replies on “Stock Advice”

1) Good policy. I adopt roughly the same, though I do not have strict demarcations
2) How about month trading ? I do that.
3) I trade as and when I get my salary (buy new stocks) When market seems high, I sell all. I sold everything last week. Right now I have nothing except applications to a number of IPO’s, which may or may not be allotted.
4) Good Idea indeed. But there are always stocks that outperform the market. Now, are you waiting for 14 K ? The bear market is going to come soon.
5) Can’t say about that. I look at what they are going to do with the aoney they are raising. Eg. For one which invests in manufactutring facilities having a long lag period, you can never make short term gains.
6) Scrip or stock ? Good policy. Has worked for bank stocks. Eg. Yes bank, IOB, BanBar, DCB.
7) True indeed
8. Be extra careful when you invest in IPO.
1.Well, tehre are always listing gains. Calculate P/E for the inductry and calculate the price.
2.I was not allotted Info Edge 🙁
Apparently 75 % of all IPO’s list above 10 % of their issue price.

9) This is irrelevant for short term investors like me.
10) True though I never invest in these.

thanks for the detailed comment.
6) scrip and stocks are almost the same thing. Sometimes companies goes for ADR, Class A, Class B stocks, foreign country listing… in which case a single company can have multiple scrips…. but for most purposes it means almost the same.
8) If you look at Shobha developers, Tech Mahindra and other good stocks, you will realize that good stocks are over subscribed tens of times. So even after an investment of 100k you get an allotment of 5-6k. No matter how high are the listing gains it is sometimes not worth the time value of money.

Similarly if you look at over priced IPO like Air Deccan (dhakkan) you will get 50% to full allotment and so even if it lists at 5% below the allotment price your gains are substantial.

But yaah… in stock market there is no golden rule… everybody does his or her own calculations.

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