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CA.Rudramurthy. ACA, CFTe, M.COM, MFM, M-PHIL, PGDBA, PGDMM. RESEARCH HEAD – VACHANA INVESTMENTS PVT LTD, www.vachanainvestments.com 9663 258 258/ 99 7225.

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Presentation on theme: "CA.Rudramurthy. ACA, CFTe, M.COM, MFM, M-PHIL, PGDBA, PGDMM. RESEARCH HEAD – VACHANA INVESTMENTS PVT LTD, www.vachanainvestments.com 9663 258 258/ 99 7225."— Presentation transcript:

1 CA.Rudramurthy. ACA, CFTe, M.COM, MFM, M-PHIL, PGDBA, PGDMM. RESEARCH HEAD – VACHANA INVESTMENTS PVT LTD, /

2 What is INVESTMENT? It is the sacrifice of Current Consumption in anticipation of a future benefit. Investment involves a certain cash outflow in anticipation of an uncertain future cash inflow. It is a strategic game of Risk and Return Tradeoff. Investment in short refers to Postponed consumption and a Game of Genius. 2 CA.RUDRAMURTHY

3 Things to be considered before Investing: RETURN RISK LIQUIDITY SECURITY CONVENIENCE ODDS – Stoploss Vs Targets 3 CA.RUDRAMURTHY

4 Various Alternatives of Investment: 4 EQUITY PREFERENCE DEBENTURES MONEY MARKET DERIVATIVES GOLD BANK COMMODITY POST OFFICE REAL ESTATE PROVIDEND FUND INSURANCE/ULIPS MUTUAL FUND GILT SECURITIES BULLION ART - MANUSCRIPT CA.RUDRAMURTHY

5 EQUITY SHARES EQUITY CAPITAL IS OWNERSHIP CAPITAL. EQITY SHAREHOLDERS COLLECTIVELY OWN THE COMPANY. THEY BEAR THE RISK AND ENJOY THE RETURN. EQUITY SHAREHOLDERS HAVE RESIDUAL CLAIM TO THE INCOME OF THE FIRM. THEY HAVE RIGHT TO VOTE AT EVERY RESOLUTION PLACED BEFORE THE COMPANY THEY ENJOY PRE-EMPTIVE RIGHT. THEY HAVE RESIDUAL CLAIM ON THE ASSETS OF THE COMPANY AT THE TIME OF LIQUIDATION CA.RUDRAMURTHY

6 STOCK MARKET CLASSIFICATION: BLUE CHIP SHARES GROWTH SHARES INCOME SHARES CYCLICAL SHARES DEFENSIVE SHARES SPECULATIVE SHARES CA.RUDRAMURTHY

7 HOW TO BUY: PRIMARY MARKETPRIMARY MARKET SECONDARY MARKETSECONDARY MARKET CA.RUDRAMURTHY

8 INVESTMENT PROCESS: 1. Investment Planning. 2. Choice of asset mix. 3. Portfolio Strategy. 4. Selection of Securities. 5. Portfolio Execution. 6. Portfolio Evaluation and Re-Allocation. 8

9 Asset Allocation and Wealth Management: Asset allocation refers to Investing different proportions of your wealth in various Real and Financial Assets. Investments can be made into different asset classes such as Bank Deposits, Debt Markets, Equity Markets, Preference Shares, Mutual funds, Real Estate, Precious Metals and stones, Insurance, Derivatives, Commodities, Currencies, Aesthetic articles, Vehicles, etc……. 9 CA.RUDRAMURTHY

10 Asset Allocation and Wealth Management: Do Remember that “ CASH IS KING” and never have liquidity crunch in your asset allocation. Sit always with some proportion of cash in your Portfolio for future opportunities. Consider various factors like Age, Income levels, Number of Dependents, Future growth, Business Cycles of various assets, etc. Making Wealth is Simple but Holding it is Very Difficult. 10 CA.RUDRAMURTHY

11 IMPORTANCE OF ASSET ALLOCATION IN BUILDING A PORTFOLIO: Over 60%-70% of Success in a Portfolio management process depends on ideal asset allocation. Asset allocation mainly depends upon Risk tolerance level and Investment time horizon. Monitoring the performance on expected lines is a must. Change in market outlook should result in rebalancing of asset allocation done earlier. 11

12 Terminologies used in Capital Markets: INVESTOR Vs TRADER Vs SPECULATOR: An Investor follows a Passive Approach to investment unlike Traders and Speculators who follow Active Approach. Investors risk levels and expected returns are much lower than trader and speculators. An Investor is a forced Trader or a Speculator many a times. An Investor is a Longer time Gambler !!! 12 CA.RUDRAMURTHY

13 Terminologies used in Capital Markets: INVESTOR Vs TRADER Vs SPECULATOR: A Trader is a calculated risk taker compared to speculator. Trader favors the ODDS whereas Speculator goes against it. Identify your Best Spot based on your Human Character !!! Be within your boundaries of operation and never change the spots. 13 CA.RUDRAMURTHY

14 Terminologies used in Capital Markets: STOCK MARKETS: A Stock market or Equity market is a Publicly traded market for Corporate Stocks and Derivatives at an agreed price determined by the forces of Demand and Supply. The size of world stock markets was estimated about $36.6 Trillion as of 2008, and world Derivative market about $791 Trillion, which is 11 times the size of entire World Economy. 14 CA.RUDRAMURTHY

15 Terminologies used in Capital Markets: BULL Vs BEAR: A BULL expects raise in the Price of the Underlying asset, whereas a BEAR expects fall in its Price. By being on a BULL, your probability of being right is only 1/3 rd since markets can either go up or come down or do nothing. Be versatile to change based on changing market conditions. 15 CA.RUDRAMURTHY

16 Terminologies used in Capital Markets: SENSEX AND NIFTY: Bombay Stock Exchange Sensitivity Index is a Value Weighted Index composed of 30 Stocks that started on 1 st Jan Nifty comprises of Fifty stocks drawn from National Stock Exchange. Index is consider to be the pulse of Domestic stock markets. If you don’t know how to invest in markets, at least go along with the markets. (Index Investing) 16 CA.RUDRAMURTHY

17 Terminologies used in Capital Markets: LONG Vs SHORT: LONG means Buying first and Selling next whereas SHORT means Selling first and Buying next. If you are Bullish on the markets go LONG and if you are Bearish go SHORT. Markets are more risky and dangerous on the SHORT side than on the LONG side but SHORT side gives you quick and big money with BIG RISK!!! 17 CA.RUDRAMURTHY

18 Terminologies used in Capital Markets: BLUE CHIP Vs MIDCAP Vs SMALLCAPS: Blue Chip also know as Large Cap Stocks are investments in companies whose risks are lower than the average risks of investing in stock markets. They are companies which have paid regular dividends, topped the Sectors and have high market capitalization. Mid caps and Small caps have comparatively lesser market capitalization. 18 CA.RUDRAMURTHY

19 Terminologies used in Capital Markets: BLUE CHIP Vs MIDCAP Vs SMALLCAPS: Look at the Percentage Returns and not the Absolute Price Movements !!! Have a Diversified Portfolio consisting of all with different weight ages based on your risk profiles. Have also stocks under different categories representing different caps. 19 CA.RUDRAMURTHY

20 Corporate Actions: 1. Bonus Issue: Dividend paid in the form of shares. Given to existing shareholders holding shares as on the record date. Share Price will always adjust after bonus. 2. Stock Split: Reduction in the face value of shares. Will result in price adjustment on the downside. 20 CA.RUDRAMURTHY

21 Corporate Actions: 3. Reverse Stock Split: Increase in the face value of the share. Results in upward adjustment of prices. 4. Right Issue: Any further issue of equity shares is made first to the existing shareholders. 5. Buy Back of shares: Company using its Cash reserves to buy shares at premium to market price. 21 CA.RUDRAMURTHY

22 How to Invest in Stock Markets: Open a D-Mat and Trading account with a Broker. Requires PAN card, Address Proof and Identity Proof. Bank account can be connected to D-Mat account for making and receiving payments. You Should know how to Select stocks that suits your Investment Theme and Styles. Know when to Buy, when to Sell, when to Hold and when to Do Nothing. 22 CA.RUDRAMURTHY

23 How to Place your Orders: You can Buy and Sell Shares either Online or through Offline. Offline trading involves placing orders through phone by calling the dealer. Online trading involves Placing orders yourself through internet and computer! Frequently Asked Questions: a) How many demat/trading a/c’s one can have? b) Minimum and Max Investment? c) Investment Plan? 23 CA.RUDRAMURTHY

24 PROCESS FOR SELECTING STOCKS: Set your Investment Theme. Determine the variables and Range of factors for Screening. (Fundamentals or Technicals) Collect necessary data and run the Screening test. Assess the result of Screening test and select a group of the best ones well diversified based on your Investment theme. Make the Investment Decision. Re-balancing, Re-Structuring and Feedback. 24CA.RUDRAMURTHY

25 BUFFETOLOGY CA.RUDRAMURTHY 25

26 BUFFETTOLOGY: CHOOSE SIMPLICITY OVER COMPLEXITY MAKE YOUR OWN DECISION THINK FOR 10YEARS RATHER THAN 10MINUTES BE AN INVESTOR AND NOT SPECULATOR BUY BUSINESSES AND NOT STOCKS 26CA.RUDRAMURTHY

27 BUFFETTOLOGY: BUY BUSINESSES THAT HAVE ENDURING COMPETITIVE ADVANTAGE. BUY LOW TECH AND NOT HIGH TECH. BETTER TO HAVE A SMALL PORTFOLIO WELL DIVERSIFIED. PRACTICE INACTIVITY NOT HYPERACTIVITY. DON’T LOOK AT THE TICKERS. VIEW MARKET DOWNTURNS AS BUYING OPPURTUNITIES. 27CA.RUDRAMURTHY

28 BUFFETTOLOGY: IGNORE THE MACRO AND FOCUS ON THE MICRO. TAKE A CLOSE LOOK AT MANAGEMENT. PRACTICE INDEPENDENT THINKING. STAY WITHIN YOUR CIRCLE OF COMPETENCE. IGNORE STOCK MARKET FORECAST. 28CA.RUDRAMURTHY

29 BUFFETTOLOGY: BE FEARFUL WHEN OTHERS ARE GREEDY AND GREEDY WHEN OTHERS ARE FEARFUL. WAIT FOR THE RIGHT TIME TO INVEST. AVOID THE COSTLY MISTAKES AGAIN. INVEST PRACTICALLY TO LEARN. 29CA.RUDRAMURTHY

30 “ A WINNER IS NOT ONE WHO NEVER FAILS BUT ONE WHO NEVER QUITS” CA.RUDRAMURTHY 30CA.RUDRAMURTHY

31 Common Mistakes in Investing??? Know the Company Better in terms of its Top management, Nature of Business, Financial health, etc If everyone has already bought the stock, who else will further buy the stock to take it up??? Investing is a Business and manage it like a Business!!! Have a well diversified Portfolio and rebalance the same based on market movements. 31 CA.RUDRAMURTHY

32 Common Mistakes in Investing??? It is just not the Company which you are buying is important, but also its Price for which you are getting it. (Value Investing) Invest with a Plan and have an Investment Theme. Do not base an investment decision just on tax concerns. After tax return of an another alternative may be higher than a tax free security. 32 CA.RUDRAMURTHY

33 Common Mistakes in Trading??? Just Calling the market direction is not enough, Timing it is also very important !!! If a stock has fallen down by some percentage, it should raise by more than its fall to reach back to its break even price. (Law of Gravity) Do not Chase good news as it may have already been discounted in Price. Do not Deviate from your Investment Objective. 33 CA.RUDRAMURTHY

34 Common Mistakes in Trading??? It is easy to PREACH but difficult to PRACTICE. Don’t Trade when you Can’t afford to Lose !!! Trading requires Time. If you Can’t take a smaller loss, sooner or later you will take the mother of all losses. Judging the underlying assets liquidity wrongly ends up in a place of No Control. Always Play with House Money. 34 CA.RUDRAMURTHY

35 Common Mistakes in Trading??? Being right more than 50% of the times when you call the market direction never makes you a successful trader. Figure out how to make money even if you are right 20% of the times. Trade with the trend. Have stop loss when you trade and stick to it. If you can control yourself, then you can definitely control the markets too. 35 CA.RUDRAMURTHY

36 VACHANAOLOGY: Identify your Investment or Trading Style and Stick to it. Knowledge gives you money in markets, but Luck makes you to retain the money made in markets. Remove at least 50% of your Profits when you make it and never put it back into markets. Stop listening to Inside news and all other advices. Do your own Homework. 36 CA.RUDRAMURTHY

37 VACHANAOLOGY: Never average a losing trade. You are adding salt to your wound. It is just not enough to follow the trend, but you should be a leader in it. Have enough margin of safety and identify the risk reward of every potent trade before taking it. Never buy or sell everything at one go. Also maintain enough cash for right opportunities. 37 CA.RUDRAMURTHY

38 VACHANAOLOGY: Have patience like the Tiger hunting for a Deer and jump on the opportunity at the right time only if you are sure to catch it. When you make or lose too much of money, take a holiday trip. Fear your loses and hope your profits and not the reverse. “IF YOUR CUSTOMER MAKES MONEY, WE WILL ALSO AUTOMATICALLY MAKE.” 38 CA.RUDRAMURTHY

39 RUDRAOLOGY: Have an Investment theme and Plan. Never change it come what may??? Be disciplined in markets or else markets are disciplined enough to punish you !!! Remove atleast 50% of money when earned in markets and put it in any other place other than markets. Follow the rule in Investing or Trading which gives you money !!! There is no THE RULE FOR MAKING MONEY OR SUCCESS IN MARKETS. 39 CA.RUDRAMURTHY

40 “Sir Isaac Newton” The most Intelligent Person who ever lived “I could calculate the motions of the Heavenly bodies, but not the madness of the people” He made 100% return (£7,000) on South Sea Shares and just months later got swept up in the wild enthusiasm of the market, and lost (£20,000). For the rest of his life he forbade anyone to speak the word “South Sea” in his presence. 40

41 What made Newton Lose ??? In the words of Graham, “Newton was far from an Intelligent Investor. By letting the roar of the crowd override his own judgment, the world’s greatest Intelligent person acted as a foolish Investor”. In the words of CA.Rudramurthy, “Being an Intelligent Investor is more a matter of Character and Control of Human emotions than just Intelligence” 41

42 Who is an Intelligent Investor ??? “To invest successfully over a lifetime does not require a stratospheric IQ, Unusual business Insights, or Inside Information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.” Warren E.Buffett 42

43 Who is an Intelligent Investor ??? “The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism. The Intelligent Investor is a realistic who Sells to Optimists and Buys from Pessimists.” Benjamin Graham 43

44 Who is an Intelligent Investor ??? “If knowledge gives you Money in Markets, Luck makes you to retain the Money made in markets. But Luck prefers only the Knowledgeable ones” “No one can give you more insights into the market than market itself. An average investor looks for reasons why markets are behaving like this? Whereas an Intelligent Investor acts according to the markets behavior” 44

45 “IF YOU FEEL, EDUCATION IS EXPENSIVE, THEN TRY IGNORANCE” CA.RUDRAMURTHY ACA, CFTe, M.COM, MFM, M-PHIL, PGDBA, PGDMM.www.vachanainvestments.com /


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