Share - The Market

As everyone has said (in our trading group) that we all are trying to recover from the situation we were in 2-3 months ago, I am too trying hard. I believe, we all earned good money before market saw Jan lows, and then suddenly market went into deep red and we lost not full but significant percentage of our portfolio. But from last month or so, market is in recovery process though we are still very low from Jan-08 highs. It is true that in some of the stocks we are in loss, but I'll be shocked if someone will say that they are in RED as far as there overall portfolio is concern. It should not be the case.

We all made some mistakes in stock market. I also did during my initial phase of trading (in fact still doing it but the number is less though). I do not want you guys to repeat it. So, I thought why don't I share some of my learnings with you guys. With that idea I'll try to share my ideas with you. It's totally up to you take it as a help or just ignore it and follow your own ideas and get the first hand experience.

1. Never buy or sell 100% in one shot: This was my first lesson I learnt way back in 2005. You might have heard several times from different people that don't put all your money in one shot in one company. Buy in steps to average out the price. What I want to say is not only while buying, but for selling too keep this theory in your mind. Never throw all the stocks of one company in one shot. Sell it in steps. I'll give you an example Diamond Cables. I bought 200 shares of it in Rs. 39 per share and sold it in Rs 62. The good news is I've made a decent profit. The bad news is recently it crossed 500 marks but still hovering around Rs. 400-450. You all are very good in Maths so leaving the calculation up to you. The problem is I made 60% but lost 1000% of the profit. True there is some level of risk involved. What would have happened if the stock might went down to Rs. 20 or so. That's hwy I am telling sell it in steps. I should have sold around 50 shares in Rs 62, then 50 shares at somewhere Rs. 80 and then 50 shares at Rs. 100. Then I could have save 50 shares just for my portfolio after getting good returns.

2. Buy when you see value: It's a recent lesson I learnt. Reliance Communication. I bought 10 shares of RELCOM at 505 two months back, because I felt that it is good buy I am getting. I also knew at that time that it could go down further. Within few days exactly the same had happened and it went to 485-490 levels, but I was happy that I bought shares at my comfort level. I was quite confident that it will go up very soon. It's just a matter of days. And within a week or two, it touched 575 levels. I didn't try to time the market rather bought it when I saw value in it. Might be in the process of timing the market I could had not bought even a single share and missed the rally. So, the choice is all yours.

3. There is nothing called long-term: Delete these lines from you mind. Some of us believe that in the market there is nothing called as long-term. The only way of making money is short-term. Due to which people try to time the market. There is one bad news for all of us and we should accept it that we are not the experts of trading market, but we pretend to be. Frankly speaking how many of us can read balance sheet and understand jargons of the share market. So to be on safe side why can't we leave timing the market and go for value-buying. One obvious benefit of trading long-term is, you can save 15% tax on the long-term profit which you have to pay in case of short-term investments. Even with the mix of big companies(large-cap) as well as growing companies (mid-cap) we can get some decent returns from the market. But some of my friends don't believe that 20% returns from the market is decent returns. They want to get at least 100% from it.

4. Friend's are here to help: I know that we follow our friend's recommendations and I believe this trend is going to stay. We can not just ignore our friend's recommendations. It's not that bad though. But try to find some simple information about the stocks before buying it. Anyways it won't take a toll for it. Rather it will always help you in increasing your knowledge, and involvement in the stock.

With all this bakwaas I'll end here and wish you all HAPPY TRADING!!!!