Engineer's Finance

Investing is a very scary topic these days. The whole world is facing the music and many are not sure about the future of the money. All that one feels is things will be back to normal and everyone reaps benefit out of it. No matter what the world economy is, there are always fundamentals in investing. No matter what happens to the world, the fundamentals don’t change. They remain the same way for a long time.

None of us are perfect as investors. Even the world’s most respected investors have confessed to making errors. I would like to quote Warren Buffet as an example. It is not because I am an ardent devotee of him but he is regarded as one of the best investors of the modern world. In various annual letters, Warren Buffett has told his shareholders: “You’d have been better off if I had gone to the movies [this year]” and “I have erred [by] not making repurchases [of shares].” Continue reading →

Please read the first part and second part before you go further.

Q: What about the other way around when you are making money, we often hear that people bought at Rs 100 and sold at Rs 110 and the stock moved from Rs 100 to Rs 200, they made small chunks of it but could not hold for the entire rise or doubling of the stock. Is it also to have that maturity to say that I am not playing for small gains and maybe something good is happening out here and I will play for a bigger game?

A: Yes exactly, they need to define, at the end of the day you have to define yourself, you have to define your system. Just as when people trade for Rs 10 and are able to take Rs 50 hit on the downside, similarly it should not be the other way round that I am ready to stand for Rs 50 on the upside, but my stop losses are very thin, so immediately the stop losses get triggered or there about. You really have to have great perspective in terms of time, in terms of entry, exit, stop losses and there’s always this ratio. You cannot have a stock that is a sure short and risk-free. Then why are you in the equity market? You should be having money in FD because that’s the only sure short method. So there has to be a balance and there has to be the risk-reward profile and it maybe 2:1 or 3:1 but the ratio always has to be there. Continue reading →

Please read the first part before you go ahead.

Q: Can you be both – a trader and an investor?

A: Yes. I also had these doubts till I met some successful people, where I found that they were able to keep a very different mindset as a trader, as a investor. I really think that’s a really fairly advanced stage in the whole mental makeup, maturity, intellectual and psychological. For example, as a trader you may be short but as an investor you would be having some long-term bets. So the conflicts that are there within you, would really come up. So you have really been a very good evolved person psychologically to be able to have this conflict. It’s possible but definitely very challenging.

Q: How important is it to just concede that the market is always supreme? Do you have to start by saying whatever I am seeing on the screen is a right price and I am often wrong? Continue reading →

I had read this article long back and had kept it in my collections. The intension of sharing such posts is that it has helped me in some way and whatever has benefited me can be helpful to others as well. The more I share with you, the more I reap. Please feel free to share some nice information that you have to the other readers of this blog. I will attribute it to you and many thanks for the same. Just mail me with the subject line : Share with Readers .

(Sorry for not providing you the URL from where I had got this information..)

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Psychology to seek out good deals is an intrinsic quality that cannot be taught to potential future traders. Investors need to decide, whether they are in the stock market for excitement or to make money.

CEO of Marathon Trends Atul Suri told CNBC-TV18 that successful traders used a fair amount of psychology to seek out good deals for themselves. It’s an intrinsic quality which cannot be taught to potential future traders but it does determine how much risk they may chose to take or a while striking deals. Investors need to decide, whether they are in the stock market for excitement or to make money. Continue reading →

I wanted to write about this from long time but I did not find much time to do this. Actually I have researched more than a week to write about this. You all will be aware of stock market and how people are hooked into it and how people make money in it. Let us see the other side of the coin today. As you are aware stock market is one of the most risky paths to earn money. there are huge number of people who make a living out of stock market.

Now, how do people lose money?

Let us assume that a company, say XYZ which is dealing in textiles is doing well as privately held company. Then after a couple of years, it becomes so big that it has to become a public company (there are certain rules as to how a company can go public, let us not get into it right now). Now since the company is publicly listed in the stock exchange, the shares are traded in exchange. The face value of a share is Rs.10, and company has 10,000 shares. Hence the total value of the company is Rs. 1,00,000 (10 * 10,000). Generally while issuing the IPO the company decides what is the value of a share can be. I don’t know how the company or someone decides the value. The point I want to make is that it will be generally higher than face value. Continue reading →