It is tempting to buy 1000 shares of a stock that is quoting

Investing Logic Frequently Asked Questions

Canada Goose Jackets A. Investments are made to achieve financial goals in future. An investment is expected to earn an estimated rate of return which will help you pay for your needs in future. Hence your investments should be purely based on factors such as your financial goals, your risk profile and time in hand. Canada Goose Jackets

canada goose store An investment can always help you to save tax. For example, an investment in tax saving bank fixed deposit fetches you a tax deduction up to Rs 1.5 lakh under section 80C of Income Tax Act. However that should not be the sole criterion to invest. Consider a situation Suresh is in his early thirties and has no financial liabilities. He intends to save for his retirement which is due 25 years from now. He should ideally be taking a bit more risk and investing in equities. Equity mutual funds and not fixed deposits is a better prescription for his financial goal of retirement. If keen to save on tax, he should ideally be in tax saving mutual funds and other diversified equity funds. canada goose store

buy canada goose jacket Also, the attitude of investing for the sole purpose of saving tax makes many individuals myopic. Investments have to be done regularly. But when one joins the ‘tax saving’ band wagon, he invariably ends up investing in last week of March, and in many cases, ends up buying something that does not serve his long term financial goals. buy canada goose jacket

Better take all round view of your finances while investing. Tax can be one buy canada goose jacket of the parameters of the checklist you use while investing, not the sole parameter.

A. Averaging or buying more is a typical Canada Goose Outlet action most traders and investors undertake when they trade or invest. Averaging down means buying more when the stock is going down contrary to expectations and averaging up means buying more when the stock is going up in the desire direction. Let us understand this with relevant examples.

Canada Goose sale Suresh bought shares of XYZ company at Rs 100 with a view that the price will touch Rs 125 in a month. However, soon after his Canada Goose Parka purchase the stock tumbled to Rs 98, so he added more to his kitty. The stock further went down to Rs 95 and he bought more. Here he is said to be averaging down. Canada Goose sale

canada goose factory sale Ramesh bought shares of PQR company at Rs 100 with a view that the price will touch Rs 130 in a month. Soon the stock hit Rs 105 mark and he bought more and he further added to his position when the stock canada goose deals crossed Rs 107 mark. He is averaging up in his trade, says the market jargon. canada goose factory sale

The logic offered by a trader who is averaging down is that the average cost of the holding goes down and the trader makes big profit when the price gains. However, an attempt to average down can be a loser’s game. When the stock price moves contrary to expectation, canadian goose jacket the trader may have got his analysis wrong. canada goose coats on sale A call that has gone wrong can further wipe out trader’s capital. The hope that the price will rebound make many traders add to their losing position which further aggravates overall losses if the price does not respond favourably.

canada goose uk black friday Hence market wisdom says that one should further add to the winning positions. If a trader is making money in a trade, it makes sense to add more to that position. If he has bought a share and the share is in bullish phase, he should ideally buy more than feeding capital to a loss making position. canada goose uk black friday

canada goose clearance The old adage of cut your losses and let your profits run is to buy canada goose jacket cheap be kept in mind when one trades. canada goose clearance

uk canada goose outlet Q. Why a stock hitting 52 week low does not necessarily make an attractive buy? uk canada goose outlet

cheap canada goose uk A. It is a dream of every investor to buy low and sell high. Where do you see a stock available low? Obvious answer to this question is to go for list of stocks quoting at 52 week low. Exchanges and media both are quick to offer this list which makes it a low hanging fruit for many. But the reality can be way different. One may not necessarily get a good ‘buying opportunity’ when he is looking at a stock quoting at 52 week low. cheap canada goose uk

To understand the risk one is exposed to when he buys a stock just because it is quoting at 52 week low, we should understand how the 52 week low stock list is made. When canada goose clearance sale a stock’s current price is lowest as compared to the prices it has quoted over last one year, the stock is included in this list. However that does not mean the downside in the stock is over. The stock price can tumble further the next day and it will again appear in the 52 week low list for that day. A stock in downward trend will keep appearing in the 52 week low list for many days. And one may not make any money buying a stock which is moving down because canada goose store the business fundamentals of the company are ruined.

canada goose clearance sale Classic example of this is the downfall in technology stocks post dot com bust. The stocks were in downtrend for months and ruled 52 week low list for long period of time, before disappearing from the trading screens. If one would have bought into one such name just because it is quoting at one year low, he would have lost his capital. canada goose clearance sale

canada goose black friday sale Technical analysts treat a stock hitting a new low as an opportunity to further sell that stock, as the stock quoting at new low confirms continuation of bearish phase. Fundamental analysts do look at stocks quoting at low prices, but they seldom buy them. The buy action in stocks quoting at 52 week low by a fundamental analyst, is generally backed by solid analysis of the business fundamentals of the company. Hence it pays not to solely rely on 52 week low price as a good buying price for a stock. canada goose black friday sale

Canada canada goose outlet Goose Outlet A. It is tempting to buy 1000 shares of a stock that is quoting at Rs 3 than to buy one share which is quoting Canada Goose Jackets at Rs Canada Goose online 3000. For some the thrill of buying hundreds of shares (large quantity) pushes them to buy a penny stock a stock quoting at an absolute low price. For some Rs 3 is very cheap and accessible whereas Rs 3000 is too costly to buy. Whatever be the reasons, many individuals are seen chasing the next canada goose coats Infosys and next Larsen Toubro. However, chasing penny stocks just because they are quoting in single digits may not be a wise idea. Canada Goose Outlet

Canada Goose Coats On Sale The first logical reason is a stock that has done well and is expected to do well is preferred by most investors which is why it quotes at ‘high’ price whereas shares of a company that has not done well and may not have a great future languish at canada goose low levels. No wonder penny stocks in most cases disappear from the trading screens than making it to the top it is an unwritten law of the market. It is not necessary that the story you heard of someone buying canada goose black friday sale thousands of shares of a stock at Rs 8 and then selling it at Rs 1000 has to be false. But it is the exception that proves the law. Canada Goose Coats On Sale

canada goose uk outlet The second reason why a penny stock may not be cheap as compared to a high priced stock is the price it commands may not be true representative of the underlying value. For example, a company which has gone bankrupt may have its shares trading at Rs 5, when in reality the value of these shares may be closer to zero. A company that is doing extremely well and growing 30% year on year will see the stock prices zooming over a period of time. A share quoting in thousands say Rs 5000, may actually worth much more and hence appear on the buy list of most analysts. canada goose uk outlet

canadian goose jacket If one looks at valuation parameters such as price to earning, price to book value; many penny stocks appear costly, whereas high priced shares may appear much cheaper. For example, a stock quoting at Rs 5 may have earning per share of 5 paise, which boils down to price to earning ratio (P/E) of 100. A stock quoting at Rs 5000 may have earning per share of Rs 100, which means the stock is quoting at P/E of 50. Higher the p/e costlier the share. Put simply, in aforesaid case, share priced at Rs 5000 is actually cheaper than Rs 5 share and may have better prospects too. canadian goose jacket

cheap Canada Goose Never buy a penny share because it is quoting at low price. Buy one if you know the business prospects buy value and not the price, says the old wisdom. cheap Canada Goose

Canada Goose online Q. Why you should choose investments that contain downside risk while participating in upside? Canada Goose online

canada goose A. When markets are in bull phase, most investors ask for cheap Canada Goose the best performing stock or the best performing mutual fund scheme. If a scheme has given 100% returns in past year, it is the best bet for them. But in reality one should look at the ability to contain downside as much as the ability to generate returns in the upside. canada goose

canada goose coats The old adage says that today’s investor does not benefit from yesterday’s returns. If an investment has shown good appreciation in the past, that Canada Goose sale does not make it necessary that it will keep giving similar returns in future. Hence there is no point focusing too much on returns generated by an investment. An investment that has done well in the past, may actually post a loss in future. For example, an individual who invested in January 2008 in equities looking at spectacular returns posted in CY2007, have lost money in CY2008. canada goose coats

canada goose coats on sale Downside cannot be ruled out altogether in financial market, and especially in volatile asset classes such as equity one has to be very careful. Consider this a stock has fallen to Rs 40 from purchase price of Rs 100. In this case the investor is sitting on a loss of Rs 60 or 60%. Now if he wants to recover the loss, his investment must show a gain of 150% and not 60%. An investment that contains downside helps the investors in bad times. Aforesaid example makes it clear that the required rate of return to recoup losses is higher than the rate of loss. Do canada goose clearance look for investments that offer high returns, but do not ignore how they are expected to behave in bad times. Short cut does not always lead us to our destination, says the old wisdom. Buying shares of a commodity manufacturer is a preferred way to invest in a commodity, prices of which are in uptrend. However, it may not necessarily offer capital appreciation to you, as share price of the commodity manufacturing company need not necessarily rise with the rising price of the commodity it manufactures canada goose coats on sale.

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