How to hit a SIX with 6 Mantra's in Stock Market ?

1. It is not about buying high quality assets. It is about buying assets for less than they're worth.
2. 100-baggers like Titan and Page Industries are hundred baggers only in hindsight. Stop looking for them.
3. You don't need complex math to value a company.
4. Diversification as powerful a force as concentration if you know how to use it.
5. Give each stock a performance deadline.
6. Do what you have to do; don't worry about what the stock market is going to do.You either get good news or good price, but seldom both.

No, I didn't come up with this gem.

It is one of my favourite quotes though. It nicely sums up the biggest mistake value investors make.

They wait for good news to arrive before investing in a stock that's trading at very good prices.

However, as the sixth mantra says, if you do so, the good price may no longer be a good price.

It is quite possible that the market has got a whiff of the good news and it has already bid the stock price higher. So it's either good news or good price but hardly ever both.

This is the same as saying do not ever wait for a catalyst to arrive. Because by the time it arrives, the opportunity may have already gone.

And in fact catalysts are extremely impossible to spot.

Graham himself called them one of the biggest mysteries in finance, something that works extremely well but is very difficult to explain.

Over the years, if you simply buy a group of stocks with consistently strong balance sheets and low enough valuations, you don't necessarily have to look for catalysts.

And I have seen this come true over and over again since the start of becoming a stock market freak, probably 10years.

Trust me, this works better than you think it would.

PPF vs ELSS

Since its launch in 1968, PPF (Public Provident Fund) accounts have become a tradition, which gets passed from one generation to another. Our parents managed their savings in PPF and asked us to do the same.

In most cases, when a child is born, a PPF account is opened in his/her name, and every year, Rs 1.5 lakh is duly deposited in the account.

PPF accounts are a favoured instrument to invest for the long term, as well as save taxes. It is the money you can stash away and forget about. A disciplined way to save for the long term.

Back in the '80s and '90s, PPF, with its superior returns and the fact that it allowed you tax savings, was probably the best saving instrument in the Indian market. But looking at current returns and availability of alternate instruments, it is definitely not the best investment.

In fact, you might end up losing about Rs 25-35 lakh over a period of 15 years if you invest in PPF.

Let me explain how:

PPF interest rates have been slowly reducing in line with market interest rates. Unlike earlier, when sometimes it was artificially kept high, now they are linked to market rates - which, in turn, are linked to prevailing inflation. Current PPF interest rates are eight per cent.

So, let’s say you invest Rs 1.5 lakh per annum in your PPF account, which is the maximum allowed at the end of 15 years. You will end up with a corpus of approximately Rs 40.72 lakh in your PPF account.

See the graph below to understand how your money grows:

So, a total investment of Rs 22.5 lakh over 15 years creates a final corpus of Rs 40.72 lakh - a growth of Rs 18.22 lakh.

In contrast, average returns on top Equity Linked Savings Scheme (ELSS) in the last ten years have varied between 12-14 per cent per annum on CAGR(Compunded Annual Growth Rate).

Taking a conservative return of 12 per cent, if you invest Rs 1.5 lakh every year (using a monthly SIP) in these ELSS schemes, your final corpus at the end of 15 years will be approximately Rs 63.1 lakh. This amount is approximately 57 per cent higher than returns from PPF.

*ELSS returns are assumed as 12 per cent per annum.

ELSS provide not just higher returns, but your money is blocked for a lesser period (three years). Whereas, in case of PPF it is 15 years. ELSS provides exactly similar benefits as PPF in terms of tax savings.

So if you are looking to invest for long term and save taxes, it is time to forget your father’s advice and bail out from PPF.

Equity Linked Schemes are better in almost every way. They provide higher returns, better liquidity and multiple options to switch investments.

Stay Smart...Happy investing!!! Maximise Wealth!!!

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ROAD that LED to BLACK MONEY

One 26th May 2014:

Shri. Narender Modi assumed office as the 14th Prime Minister of India. During his election campaign, he has addressed across all the regions that he would make Black money extinct.

On 28th August 2014:
Hon. Prime Minister launched the campaign Pradhan Mantri Jan Dhan Yojana(Prime Minister's People Money Scheme) where he wanted each and every individual of the country must have a bank account.

On August 2015:
RBI launched Sovereign Gold Bonds, it is a paper gold which is stored in Demat Form and moreover get a interest rate of 2.75% annually. It has equivalent value to physical gold. RBI has done this with due consideration of Modiji.

On March, 2016:
Many Indian celebrities/politicians got identified, as major amount was put in foreign banks. Thanks to Panama Papers leak(It was Modi's Trump Card came out). The amount was close to Rs 80000cr. It was major crackdown on Hoarders/Foreigners.

On June 2016:
Govt has mandated to produce PANCARD for the people who are buying gold worth more than Rs 2lakhs.

On September 2016:
Income declaration Scheme launched, where the government has asked the citizens of the country to declare the undisclosed income and pay 45% tax on it, post that no audit, no IT ride on the amount declared.

On 8th November 2016:
Hon. PM Modi has come out with a press conference late night at 9pm and bombarded everyone with the news "Rs 500 and Rs 1000 Notes no more stands valid from midnight and are DEMONETIZED".

Each and every stance there were link, and the people couldn't connect the dots. There was always a plan. Modiji himself warned twice about impending hard decisions. If you still didn't connect the dots then you are at stake. If you are one with Black Money, the govt will ensure that either you Declare or become mainstream or else that you are ruined.

He said open your Bank accounts...you asked why???
He said Declare your Income...you asked why???
He warned you about Black money...you asked why???
He talked about Financial Inclusion...you asked why???
He asked you to buy paper gold....you asked why???
He gave an answer in single shot...

Now ask yourself on why you asked him why???

Now, with Demonetization of the Rs 500 and Rs 1000 notes
Inflation will come down, misuse of cash will come down, no more hawala trade, no more black money during elections, no more supplying of funds to terror groups(Terror Strikes would come down). Real-Estate prices will fall, Gold Prices will fall.

With all the above factors, RICH will become POORER, POOR will become STRONGER.

Fixed Deposits vs Debt Mutual Fund

Bank deposits have been one of the most popular investment options when it comes to earning a regular income. Besides the safety factor, guaranteed income is one of the big pluses why investors opt for bank deposits. 

But what about the income tax factor?  In case of bank deposits, the interest income is simply added to the investors' income and taxed according to their respective tax slabs. 

Apart from falling interest rates, the tax factor is also one of the reasons to suggest systematic withdrawal plans (SWP) in debt mutual funds to be a better option for investors - particularly those in higher tax brackets - looking to earn a regular income from a lump sum. 

Debt funds also offer the advantage of liquidity in case investors want to withdraw. The outlook for debt funds also remains positive.  Debt markets rally when interest rates go down. "Globally debt markets have been in a structural down-move of interest rates due to subdued growth rates and lower inflation.  This is a part of the reason for the lower interest rates in India too in addition to the fundamental of the Indian economy strengthening. Systematic withdrawal plan is  a facility which allows investors to withdraw money from a mutual fund scheme at regular intervals. Investors looking for income at fixed intervals typically opt for this option. SWPs are usually available in two options. In the first option, a fixed amount as specified by the investor is withdrawn at regular intervals such as monthly, quarterly etc. In the other option, investors can withdraw the appreciated amount on monthly/quarterly basis. SWPs are more tax efficient compared to FDs, Debt funds are considered long term only if they are held for more than three years. Currently, the long-term capital gain on debt funds is taxed at the rate of 20 per cent. However, investors get the benefit of indexation on their original investment. This means that the original investment is adjusted for the price of inflation and taxed accordingly.  Since the original cost of investment goes up after factoring in inflation, long term capital gains tax comes to negligible levels. But if debt mutual fund investments are redeemed or sold before three years, the short-term gains are taxed according to the investor's tax slab. SWP in debt funds are tax efficient than fixed deposits even in the first three years of investment. 

SWPs are gaining popularity not only amongst small but high-networth investors as well - those who want a regular income stream. Debt-based SWPs allow safety of capital besides one can opt to receive a monthly inflow.

For example, a person, who falls in the 20 per cent tax bracket, has Rs 20 lakh to invest and wants regular income. For simplicity, let us assume that both the fixed deposits and the debt mutual fund offer 10 per cent return. 

On the Rs 2 lakh interest income generated for the first year from FD, the investor has to pay Rs 41,200 as tax. 

In the case of the debt mutual fund, the investor will receive Rs 2 lakh from the systematic withdrawal plan as per his instructions to the fund house. Let us assume that the NAV of the fund has risen from Rs 10 to Rs 11 in a year. 

So the fund house will redeem 18,182 units from his holdings to pay Rs 2 lakh. The cost of these 18,182 units for the investor was Rs 1,81,820 (18,182 X Rs 10).  So the income tax would be levied only on the capital gains of Rs 18,000 (Rs 2 lakh - Rs 1.82 lakh). So the tax payout for the investor would be Rs 3,700 - as compared to Rs 41,200 in as of bank FD.

Are you interested to gain more Profits from Equities, But confused which type of stock to invest in???

Are you an investor want to gain more profits???
Want to generate more funds than that you earn from Bank Deposits???

Here is a solution for you all which benefits if you are long term investor.

Investment strategy: Prefers companies which generate large profits by employing little cash. Such companies tend to be cash flow positive, and in bad years, the free cash flow turns into dividends.

My investment mantra:

1) Invest in companies that have a return on equity (in excess of 30 per cent) and that pay regular dividend. These two factors are a sign of sound management. Better the sound management, higher the stock prices.

2) Invest in companies with high sales growth: Companies that generate 25-30 per cent sales growth for 5-6 years are unlikely to be loss-making propositions.

3) Never buy into a company which is not a sector leader.

4) Buy companies, which are trading at market price/face value of more than 100.

5) Companies with debt can also be good bets provided the growth in debt is significantly less than growth in sales.

6) Check the macro-economic factors, see which companies will benefit from the governments development initiatives.

Fixed Deposits v Equities

Among some of the best practices followed by top investment managers, tax emerges as an important aspect to be considered. It is common to see advisors in other countries talking about pre-tax returns, and more importantly, post-tax returns. However, in India, we do not talk about post-tax returns when talking about the returns of bank fixed deposits.

As investors it is important for us to ask our financial advisors, bankers or agents about the post-tax returns. The impact of tax on investment decisions cannot be underestimated.

Fixed deposit - pre-tax vs. post-tax returns

Interest earned on fixed deposit (FD) is taxed at the tax slab rate of the individual. If an individual decides to invest Rs 10,00,000 in an FD for a period of 1 year at 9 per cent interest rate(approx), pre-tax interest earned during the year would be Rs. 90000. Tax on the interest earned at 10 per cent tax rate would be Rs 8000, and net amount earned by the investor would be Rs 81000.

This translates into a net return is 8.1 per cent, which is much lower that the presumed return.

Would you decide to invest in an FD, if the net return from it was viewed 8.1 per cent instead of an overall return of 9 per cent?

Fixed income - debt mutual funds

Long-term capital gains on investments in debt mutual funds are taxed either at 10 per cent flat rate on 20 per cent indexed. Average return of short-term debt funds in the last 3 years is 11 per cent. If an individual decides to invest Rs 10,00,000 in a short-term debt mutual fund, pre-tax returns earned for one year would be Rs 1,00,000. At a flat 10 per cent tax, Rs 10,000 would the tax amount. Net capital gain would be Rs 10,000, whereas post-tax interest earned would be 9 per cent.

Equity(Shares & Mutual Funds) - no long-term capital gains

Equity exposure is an important aspect of any portfolio that is built. In India, the government has provided an excellent incentive for long-term investors, by keeping capital gains at 0 per cent. Prudent portfolio building with long-term vision and enough risk weighted exposure to equities can go a long way in building wealth.

Lets say, you dont know in which stock to invest in??? You can switch over to mutual funds, where you can do a one-time investment and wait for a month/year or invest in SIP(Systematic Investment Plan) periodically i.e monthly for a period of 12months or according to your wish. Here you can generate a higher return as compared to other investments. Because in mutual Funds, the highly trained AMCs allocate limited amount in various stocks which will fetch you the best returns. If we see for last 3 years, the average return on all the mutual funds stand at 20% which is much much higher than the other investments, and moreover if you invest for a minimum of period of more than 12months, then there is no capital gain tax even as there is TDS in case of FDs(Fixed Deposits).
Conclusion

'Why should I not invest is FD?' is the most common question asked by many. As explained in the above example, a debt mutual fund could yield more than your FD investment, and equities can give much higher return than Debt funds. This is counter-intuitive and against the popular perception. However, introduction of tax has shown the reality of these decisions.

Stay Smart...Happy investing!!! Maximise Wealth!!!

PS: For investment strategies and for the best stock picks...

mail : kamlesh.konchada@gmail.com

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How to gain maximum by investing in stock market???

There are 3 things you need to know if you want to maximize how much money you make investing in the stock market:

1)  WHAT stocks to buy  2)  WHEN to buy and 3)  WHEN to sell

You must know all three to make the most money.  If you are missing any one of these, then you cannot maximize your returns.  Or worse, you could even lose money.

Of these three, knowing what to buy is by far the easiest.  There are a lot of good stocks out there that will make you solid returns over time.  For example, in the past four years, ten of the thirty stocks in the SENSEX i.e from Bombay Stock Exchange(BSE) Industrial Average have tripled!  That is one-third of the index!  With just a basic understanding of what drives stock prices, an investor can choose more of the stocks that will give this type of return.

The other two — when to buy and sell — that is where most investors get into trouble.  Looking  back, we can see that you could have bought almost any stock in 2009 and have made a profit by 2013.  Many have doubled or tripled or even more than that.  As long as you didn’t pick some deadbeat penny stock, nearly all stocks have gone up since 2009.  But it would have been terrifying to buy back in 2009 after a horrible drop in stock prices in October 2008.  I was in college at the time and was thankful I was not in the markets at the time.  I knew that other people, both amateurs and professionals, were experiencing a freakish hell as the stock market crashed.  However, if you know what to look for, you can make a reasonable estimate and buy somewhere near the bottom for a fine profit.

The hardest of the three is knowing when to sell.  Let’s say you have a nice profit in your stocks.  You don’t want to sell too early if stock prices continue to climb.  On the other hand, you don’t want to lose your profits if the market is headed for another bear market that wipes out 25-50% or more of your profits.  There are ways to know that the bull market is likely going to end soon, and signs that it has very likely already ended.  Like I have said before, a little knowledge goes a long way in the stock market.

So invest safely, trade smartly. Because Making Money Make Sense...