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Investment Vs Trading. Investment Basics. Why People Invest in Financial Markets To achieve financial goals To increase income To gain wealth and feeling of security Based on long term / short term financial goals investments could have Targeted Rupee amount Targeted maturity date.
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Investment Basics Why People Invest in Financial Markets • To achieve financial goals • To increase income • To gain wealth and feeling of security Based on long term / short term financial goals investments could have • Targeted Rupee amount • Targeted maturity date
Investment Vs Trading • They are often thought of as interchangeable actions while they are not • Commonality is the application of capital in the pursuit of profits • Investing is more open ended; trading is close ended with exit targets • With the same process and stock, intention and definition of objectives separate trading from investing
Investing • When savings are put buy stock that will earn a decent amount of income and/or go up in value over time • Decisions are made for the longer term. Stock is bought because it is valuable now or likely to become more valuable in the future
Trading • Time the market — buying low and selling high as quickly as possible • Successful trading requires close attention to price trends, insight to market movements and the courage to make quick decisions
Buy and hold/wait for the markets to come back Never Buy or hold/wait for the market to come back INVESTING v/s TRADING
Averaging Never Average INVESTING v/s TRADING
Never use a stop Never trade without a stop loss INVESTING v/s TRADING
Shorting is a integral part of trading Never short the market INVESTING v/s TRADING
Focus on the fundamentals Focus on Technical Parameters INVESTING v/s TRADING
Which One is Better? • Both the styles have numerous arguments in favor and in against. A client should stick to its goal and investment objectives. • HOWEVER combining both would be an excellent ‘style’ diversification. Obviously one should not miss the opportunity when market offers it on any given day.
The winning Combination 1. Have clarity in terms of investment objectives 2. Set targets / rules for opening and closing the position, closely follow the calls. 3. Define exposure. Follow it and manage it closely.
Before going for a transaction ask this very basic question:What type of transaction this is?
Decide Before Ordering • Investments • Positional Trade • Intra-day
Investments • Few months to few years • Fundamental Factors • BUY & HOLD till the theme & under valuation persists • Let long term remain long term and do not book short term profits.
Products • Inquire Research Reports • Updates, Visit & Result Notes • MOSt Value • Results Preview
Positional • Overnight to few days • Technical Factors • May not be in Sync with Fundamental factors • Always make use of STOP-LOSS loss levels • Should not be converted into Long-term Investments- HFCL, GTL etc..
Positional • Market Diary • Awacs or Derivative Products
Intra-day • Same day square-off • Technical Factors • May not be in Sync with Fundamental factors : Remember MAY 17th • Always make use of STOP-LOSS loss levels • Should not be converted to Positional or investments
Product Grid Market Analysis Technical Analysis Fundamental Research Thematic Research Regular ·Inquire Company & Sector reports Yearly ·Wealth Creation report ·Budget Coverage Quarterly ·Results Preview ·India Strategy Monthly ·MOSt Momentum ·MOSt Value ·MOSt Mutual Weekly ·Futures Weekly Guide Daily ·MOSt Commodity ·Morning Calls ·Derivative Strategy ·Market Dairy ·Pivot Points ·MOSt Market Action ·MOSt Morning Research Market Hours ·Market Information & Intraday Calls Investors are advised by dedicated relationship managers through various advisory products
Intraday- Assumptions • Success Ratio of not more than 60-65% • Reward –Risk Ratio of 2:1 • For an expected profit of Rs.2, you are accepting a risk of losing Re.1
