Commonly used investment options are:
Historically the Indian share market has outperformed all other investments with CAGR of ~15%. Warren Buffett, one of the richest persons in the world has created wealth through shares.
IPOs are not as safe as being known in investor circles. Before going public, companies are not required for as many disclosures as post IPO. Many a time it has been found that certain company policies changed post-IPO like Dividend payout, etc.
"It's almost a mathematical impossibility to imagine that, out of the thousands of things for sale on a given day, the most attractively priced is the one being sold by a knowledgeable seller (company insiders) to a less-knowledgeable buyer (investors)." - Warren Buffett
Whenever we buy some aticle we always compare the 'Price' we pay and the 'Value' we get, consciously or sub-consciously.
But when an investor buys a stock he hardly compares the current price with its worth. The worth of the stock is known by various names like Fair Value / Real Value / True Value / Intrinsic Value.
Simply stated, 'Fair Value’ is the sum total of all future receivables from the company at current prices. Even a small error in predicting the lifespan of the company or its growth rate or the discount rate used can make a big error in arriving at Fair Value.
Often investors use standalone PE ratio or compare the stock PE with Industry PE or look for high Dividend yield which is not the correct way. Apart from past performance, one needs to consider the future prospects, quality of management, promoter stake, etc. Thus finding worth is a combination of quantitative and qualitative tools.
We at Smart VERC use different techniques for Growth and Value stocks. PEG (Price Earnings to Growth ratio) works very well for Growth stocks and has proved a very effective valuation technique. While for Value stocks there is no single parameter, every stock needs to be dealt with differently. At the core of the core what we are looking for in this fast-changing world is 'If I acquire a stake in your company, when will my money get doubled?'
Overall, the valuation part is not as difficult as made to be. It comes through experience and a better connection with the sub-conscious mind. To compare with, it is like driving a car which for outsiders looks very simple but if you ask a driver to explain, he may find it very difficult even to tell you at what rpm he changes gear from 2 to 3!
Day Trading: The buying and selling transactions that are closed within the same trading day. Ask yourself what specialty you have that market should reward you against millions of investors fighting to earn returns in a short period. Investors should avoid it. It creates excitement, insomnia for many investors. Hardly anyone has created long term wealth. Highly risky!
These stock derivatives can be used for Hedging as well as Speculation. Hedging is safer, while Speculation has a very high degree of uncertainties and could be a risky proposition.
Warren Buffett describes Derivatives as “financial weapons of mass destruction”.
Ability to find ‘Fair Value’ with fairly good accuracy, big enough stomach to digest emotional upheavals, patience and efficiently managing a portfolio.
|Book name||Publisher||Writer||Price (approx.)|
|One Up On Wall Street||Simon And Schuster||Peter Lynch, John Rothchild||Rs 400|
|Beating the street||Simon And Schuster||Peter Lynch, John Rothchild||Rs 400|
|The Little Book of Valuation: How to value a company ...||Wiley India Pvt Ltd.||Aswath Damodaran||Rs 350|
|It's When You Sell That Counts||McGraw-Hill||Donal L. Cassidy||Rs 600|
|The Winning Investment Habits Of Warren Buffett & George Soros||Truman Talley Books||Mark Tier||Rs 1800|
Many people dream of striking rich, by playing the share market. To make this castle-in-the-sky a reality, one needs to be much disciplined.
Heeding to tips from brokerage firms or hot stocks from free advisors can break you very fast.
If someone is promising the moon and stars (unbelievably high returns), be cagey, be wary of shady business practices. Remember: Honest investment advisors will never make ridiculous claims. Anybody claiming to get you astronomically high returns should be watched with suspicion.
Look for the education, track record and experience of the advisor. Ask your advisor how many crashes he has seen and what he asked clients to do at that time.
Building long-term wealth under the guidance of a good investment advisor is very easy. Be ready to pay advisory fees about 2% to 3% if he is able to get you 20% long term returns.
We follow the bottoms-up approach. First the Company fundamentals, then the Industry and last the Economy. Occasionally, we do provide our views on the macro and micro parameters of the economy. In the long term mainly it is the company fundamentals that will create wealth for investors.
Worldwide it has been proved time and again, that beating a well-diversified large company portfolio consistently, is not an easy task. BSE Sensitive Index is derived from a basket of 30 stocks which are highly diversified (industry-wise) and mostly industry leaders. There are only handfuls of Mutual Funds in India and even overseas which have beaten the indices consistently in the long term.
We are proud to share that Smart Billionaire Picks (SBP) and many such other schemes have beaten the indices by wide margins SBP has outperformed BSE Sensex by almost 100% since its start on 30 May 2001
Any stock part of ‘Smart Billionaire Picks’ is a good buy at the current price. Those who wish to follow can replicate in proportion to the weights assigned. Since the start on 30 May 2001, the aggregate returns of these picks is almost double the BSE Sensex returns on a CAGR basis.
This collection of stocks is only for demonstration purposes. It should not be construed as a solicitation to buy or sell any stock. It can be very useful for those who wish to learn how to diversify in terms of weightages, sectors, Groups etc, how to Add / Hold / Exit from stocks and respond to changing market conditions. Advice is based solely on the valuation of the stock, with no bearing on past price behavior. As a policy we always remain fully invested, hence Cash not indicated which is always an insignificant amount, but captured in ‘Total’.
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Advised stocks have a reasonably good margin of safety in terms of the advised price and the intrinsic worth of the stock.
Still, there are chances of volatile stock returns:-
Thus there is no guarantee of returns, but long term track record indicates a very high success rate.
Categorically we state that ‘We do not promise or provide any guarantee for success for the advised stocks in any of our services’. Yes, we do claim to have expertise in valuing a stock with fairly good accuracy. We also claim to have patience and guts to start new schemes when our peers dare to even talk of the stocks. (In March ’09 ‘Smart Value Gains’ was launched with a notional sum of Rs 1 lacs and it surpassed Rs 4 lacs in just 11 months. Again in June 2009 a new scheme ‘Smart Fast Track Gains’ was launched with a notional sum of Rs 1 lacs which multiplied two times in just 10.3 months.)
Investors may consider buying more shares of the company, if:
For stocks advised by us, investors can exit If the stock price reaches Target or hits Stop Loss or we advise you to sell.
For the stocks not advised by us investors can check for the following:-
Any key development which can change the fortunes of a company (like acquiring a big order, Budget impact, changes in raw material prices, technology tie-up, Strategic investor acquires stake, changes in industry prospects, or any other event which can have significant impact on its future prospects) is scrutinized for other fundamentals like P/E, book value, liquidity, return on equity, trend in Profit margins, Debt /Equity ratio. Satisfied with fundamentals the stock is included in our ‘Watch List’. As and when the stock price recedes below ‘Fair Value’ by at least 20%, the stock is advised for various services suiting Risk-Return profile.
For our investment philosophy visit the page under 'Resources'.
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Since the start of the journey on 31 May 2001, it has delivered a CAGR of 25% plus. This portfolio has seen many ups and downs, the dotcom bust, several scams, elections and many more major events. Interestingly all the time it remains fully invested. Changes are made only on Wednesday morning around 10 am. Those who are ready to invest for long-duration (minimum 5 years) with average risk-return profile may follow it with matching individual stock weightages.
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The investment amount is to be decided by the individual investors depending on their capability and capacity to invest. To keep the investments diversified as per individual stock risk-return characteristics investors are advised to invest in line with the weightage assigned in the advice report.
Investors are strictly advised not to borrow for investment in stocks under any circumstance. Also, the amount to be invested should be for at least one complete business cycle of about 5 years.
One complete business cycle which lasts for about 4 to 5 years can be considered the as long term. To get rewards of compounding one should invest for multiple cycles. Often investors invest for much lesser periods and get trapped in down cycles despite the company under consideration having sound fundamentals.
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This is a model portfolio to demonstrate and educate investors about the importance of weightages, diversification in terms of market capitalisation, industry and business groups and last but not the least the way to generate better returns by picking fundamentally sound stocks and waiting patiently for the opportunity to exit or add more.
His command over managing Stocks in a portfolio is par excellent
Your success ratio is incredible
You have accomplished my long search for good investment advisor
Hats off to you sir, for your stupendous success of Smart Billionaire Picks. I am delighted to be associated with one of India's top share market expert who is really peerless
Surprisingly simple yet powerful recommendations
I have observed that your Recommendations have always been correct. I have been benefited tremendously by your recommendations. Keep it up
It's rare to find such honest advice. I knew there should be an easy way of making profits from stocks effectively.
By far the smartest investment advisor I have come across.