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• Stock Charts – Importance of Stock Charts in Share Market

  Posted by Mehul Kothari | Published on 15 Nov 2019

  Often when people begin their investment journey in the stock market, they are swamped with multiple questions in their mind. The very first basic question that comes to the mind is how to determine which stock to purchase and which to avoid. Well, the answer to this question is - stock charts. The stock charts help you in evaluating and gathering all the important information that you must consider before purchasing a stock. By learning stock pattern analysis you can not only become a successful investor but also a successful trader. In this article, you will be learning the different aspects of stock chart reading. Let us first understand what are stock charts? What are Stock Charts? Stock chart is a sequence of prices plotted on a graph over a different timeframe. The y-axis i.e. the vertical axis of the chart represents the price and the x-axis i.e. horizontal axis of the chart represents the time period. Learning and understanding stock chart reading may look like a tough task initially but with little practice, you can master the art. All you need is the correct understanding of the basics of chart reading. They can help you predict the future price movement correctly. Let us now understand the various aspects of stock charts. What are the aspects of Stock Charts? Price and Volume The charts are generally divided into two parts; the price of the stock and the volume of the stock. For correct stock chart analysis and reading of stock chart patterns, it is important to read both price and volume together. This is because if you look only at the movement of the price you would not know how genuine the buying or selling is. For example, a stock has fallen over 5%. Initially, it may look very bad but if the fall is with lower volumes than the average, you may continue to hold the stock because the selling is not done by large retailers who drive the market. The same is the case when the stock is rising but with lower volumes. This rise in the stock price could be fake because when the big players enter the stock there would be a huge rise in the volumes.  Moving Average Lines Moving average lines are very important to understand the performance of a stock. They represent the movement of the share price over a period of time. With the help of moving average lines, you can understand whether the stock is overbought or oversold by large retail participants. The mutual funds and big institutions follow the stock chart patterns and change their positions in stocks when the price rises or moves below the moving average point on the graph. The key moving average points can be a 50-day line, 15-week line, etc. When the stock falls below the benchmark moving average line, the big players often sell their holding and exit the stock. Similarly, when the price moves above the benchmark moving average line, the big players enter and the stock price can rise sharply. Relative Strength Line Relative strength line helps to identify if the stock is a market leader or laggard. This is done by comparing the performance of a stock with the index i.e. Nifty or Sensex. A sharp line rising upwards on the graph indicates that the stock is outperforming the market while a sharp line downwards is an indication that the stock is a laggard and underperforming the overall market. The stock comes in the leadership territory when the Relative Strength line is rising for a breakout and set for a new high in the market. After learning about the various aspects of stock charts, let us learn about some of the basic stock chart patterns. Stock Chart Patterns Daily Stock Chart A daily stock chart on a graph represents the movement of the stock price on a specific day of trading. The day traders use daily stock chart patterns to take intraday positions. The chart has multiple moving day averages like 50 days, 100 days, etc. which the traders monitor continuously to take positions. When the stock rises sharply it is represented by a sharp line rising upwards and when the stock falls, the graph shows a sharp fall in the line. Weekly Stock Chart Just like a daily stock chart represents the stock price movement on a single day, similarly, the weekly stock chart represents the price summary of stock for a single week. This chart is generally used to forecast the price of stocks for the long-term. The weekly charts can display longer-term data on the screen which makes it easy for the analysts and investors to determine the long term trend of a stock. The new investors often get confused between the weekly and daily charts. The confusion is mainly regarding which charts are suitable for them. This section of the article will try to resolve that dilemma. Daily Vs. Weekly Charts The daily charts are said to be good for the traders who are looking for volume and price action on an intraday basis. The stocks on daily charts are said to be giving a breakout when it breaches the 50-day line on either side. On the other hand, for long term investors, weekly charts are ideal. These charts forecast the long term price of a stock along with its trend. It also keeps the investor's emotions under control as they can take wrong decisions looking at the volatile daily chart movements. The Bottom Line There is no doubt about the importance of stock charts in the share market. You can decode the price movement on charts and take advantage of it by making profits. If you want to learn more about stock chart reading and indulge in trading or investing based on it, you can contact IndiaNivesh Ltd. We are one of the most trusted and value-enhancing financial group with new technologies in India.   Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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• Share Market Investment – Can I Invest all my Money in Stocks

  Posted by Mehul Kothari | Published on 14 Nov 2019

  Very often, you hear people making a fortune by making investments in the share markets and get lured to invest all our savings in it. Without a doubt, share market investments have helped investors grow their wealth and achieve financial goals. Investing in the stock market is essential for long-term wealth creation, as the returns generated by equities in the long-run have consistently outperformed the returns generated by any other asset classes, but investing all your money in share market is neither wise nor advisable. Shares are extremely volatile and carry a high degree of risk. If you are a beginner in the share market and the success stories of others have made you consider shares as an investment option, it is important to understand that there is no quick and easy way to make money in the share market overnight. Investing in the share market wisely requires you to have patience and also an understanding of how the stock market works. Why should you invest in the share market?1. Potentially higher returns which help beat inflation Equity investments have the potential to generate higher returns as compared to other investments in the long-run. One of the biggest challenges in the investment world today is finding investments where returns beat inflation.2. Dividend Income At the end of each financial year, a company declares dividends to be distributed to shareholders in proportion to their holdings, from the profits earned in that year. Thus, apart from long-term capital appreciation, investing in shares entitles you to the dividend income.3. Liquidity The shares are listed on the stock exchange and can be bought and sold through the exchange platform seamlessly. Share market tips for beginners If you are a beginner in the share market, here are few important stock market investment tips for you to help you guide with your investments1. Define your investment objectives Before considering investing in shares, or for that matter any instrument, it is important that you clearly define your investment objective along with the time frame for it. Investments in the stock market have the potential of higher growth in the long-term but are the extreme volatility in the short-run. If you are looking at investing your money for a fairly long time, you will benefit tremendously by investing in shares as compared to other less volatile assets. As stock markets are volatile in nature, investing for short-term investment needs is not advisable. 2. Assess your risk tolerance When it comes to investment decisions, assessing your tolerance to risk is extremely important as it is individual for each investor. Share markets are volatile and your ability to withstand the fluctuations in the market is crucial.  If your tolerance to risk is low, you are likely to get anxious about your investments; you are more likely to make emotional decisions about investments rather than logical decisions. However, once you start gaining more knowledge about stock market investments and also understand volatility, your perception will evolve considerably and allow you to take more analytical decisions. 3. Understand the basics of Share Market Before you start investing in the stock market, it is important for you to have basic understanding of the stock market and the individual securities in the stock market. Getting familiar with financial terms such as P/E ratio, EPS, CAGR, etc. stock selection strategies and stock order type will help in the research and selection process of stocks.4. Pick the right stocks Investing the shares is easy, but being successful with your investments requires effort. Whether you are seasoned investors or a beginner, stock selection plays an important role in determining the success of your investments. You should do proper research and analysis of the stocks that you are looking to invest in. Various aspects such as financial soundness, quality of management, competitor’s performance, the competitive advantage of the company will help you understand the strength of the company. You should invest in fundamentally strong companies for potentially higher returns.  5. Do not let emotions drive your decision The performance of stocks to some extent is driven by market sentiments. If the market sentiment is bearish, it tends to influence the stock price negatively even if the fundamentals of the company are strong. In such situations, long-term investors should not sell their investments just because the market sentiment is negative. Once you invest in the stock market you should not get influenced by short-term price changes of the securities on the account of speculation, rumours and in general the market sentiments.  6. Keep your expectations real All of us want to achieve the best possible returns from our investments. But at the same time, it is equally important to be realistic about the return potential. Even though some stocks have generated over 100% returns for investors in the past, it does not mean that every investment in stocks will fetch you similar returns. The idea of investing in the stock market is to have positive returns on your savings which can beat inflation in the long-run and help you achieve your financial goals with ease.  7. Diversify your portfolio Diversification is extremely important to optimise the returns on your investments. The basic tenet of financial planning is to have a diversified portfolio in different asset classes to achieve your investment objective by not relying on the performance of a single asset class. Even in the case of shares, you should diversify your portfolio in shares of different companies, sectors, and industries to avoid relying on the performance of one sector.  8. Invest only your surplusYour investments in the stock markets can fetch you high returns in the future. However, unlike fixed-income investments such as bonds and FDs, returns from the stock market are not guaranteed. The higher the chances of returns, the higher are the risk involved. Hence, you should only invest the surplus funds you have into the stock market without compromising on the other investments such as your life insurance, health insurance, emergency funds etc.   The final word Shares should be a part of your investments, as they offer huge growth potential, but they can’t be your only form of investment. You need to diversify your portfolio in various asset classes to get maximise your returns and minimise risk for your investments. Your investment objective, risk profile, time horizon all play an important role in ascertaining how much can you and should you invest shares. If you are wondering where to start, then just get in touch with our financial experts from IndiaNivesh to guide you with your investments.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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• Mutual Fund Performance - Five ways to measure Mutual Fund Performance

  Posted by Mehul Kothari | Published on 18 Sep 2019

  Mutual fund investment plans have emerged as a preferred investment choice for a large number of investors in the last few years. Earlier, most of the households invested their savings in traditional investments like FDs, PPFs, and gold. However, the need for better returns from their savings and growing awareness of other investment options, have led investors to move away from traditional investments and explore other options such as mutual funds.What are mutual funds? In simple words, mutual funds are pooled investments from a large number of investors. They collect money from various individuals and entities that have a common investment objective and subsequently invest this pool of money in various stocks, bonds, and other securities. Thus, mutual fund investment plans allow you to distribute your invested money in a large number of securities than you could put in your portfolio. As a mutual fund investor, you hold units that represent a portion of your holdings in the scheme. Why is it advantageous to invest in mutual funds? Mutual fund investment no doubt is one of the smartest investments for almost any investor. Here are a few of its advantages:1. Simple A mutual fund is the simplest way to invest in capital markets for higher returns. If you are a novice but wish to invest in the capital markets, then mutual funds provide you with the simplest platform to invest in a healthy mix of stocks, bonds, and other securities.2. Easily accessible Mutual funds’ investments are easily accessible for all investors and as an investor, you can start investing in mutual funds for an amount as low as Rs. 500. 3. Diverse Mutual funds allow you to diversify your portfolio as you can gain access to different segments of the market through various mutual fund investment plans. Thus, you can invest in a variety of assets, sectors, securities, etc. 4. Professionally managed Mutual fund schemes are professionally managed by fund managers who have the expertise, time and resources and make sound investment decisions based upon the objective of the scheme.As the number of mutual fund schemes available in the markets has increased dramatically, evaluating the performance of mutual funds is of utmost importance to make wise investment choices. If you are wondering which is the best mutual fund to invest right now and how to evaluate the performance of mutual funds, then here is a simple guide for you. Top 5 measures to evaluate the performance of a mutual fund1. Compare performance with an appropriate benchmarkFor every mutual fund, there is a benchmark index to which you can compare the mutual fund performance. If your mutual fund investment is consistently generating higher than the benchmark, then it reflects the ability of the fund manager to manage the portfolio better. The important aspect here is to compare the mutual fund performance with an appropriate benchmark.Even when you are comparing it with different mutual fund schemes always look at the returns of other funds from the same category with a similar investment objective. Comparing the performance of a midcap fund with that of a large-cap fund would be like comparing apples to oranges. Hence, be careful and make relevant comparisons to see the performance of mutual funds. 2. Alpha Alpha of the fund helps measure the performance of the mutual fund on a risk-adjusted basis. Alpha takes into account the volatility of the mutual fund and compares the risk-adjusted performance of the fund to the benchmark. A positive alpha indicates that the fund manager has managed to outperform your mutual fund investments as compared to the benchmark. Similarly, a lower alpha indicates an underperformance of the fund as compared to the benchmark. Thus, the more positive the alpha of a fund, the better it is. 3. BetaApart from the risk associated with the security due to the nature of the asset class, every investment is exposed to a systematic risk which is due to the state of the economy or market in general and is unavoidable.The beta ratio captures this market risk of your investment. A higher beta indicates that the fund will be more volatile than the market. So, if a fund has a beta of 1.15 then it is 15% more volatile than the market. Note: Alpha & Beta both are risk ratios and are crucial means to find out the performance of mutual funds. The two ratios help you to determine the returns generated as compared to the risks undertaken. As an investor, you should look at funds that have a higher alpha and lower beta. 4. Portfolio diversification The advantage of investing through mutual funds is that they help you diversify your portfolio. A well-diversified portfolio helps you to mitigate the risks associated with investing in funds focussed on too few stocks or sectors or asset classes. So, to ensure that you achieve the desired results, you should review the holdings in your mutual fund. You can check the portfolio of your mutual fund by looking at the fund fact sheet. 5. Expense RatioOne of the biggest challenges for mutual funds is the high fees associated with it. Running any mutual fund involves costs that need to be borne by the investor. The expense ratio is the percentage of money spent to pay the salary of the fund manager, his team and other expenses. So, if the expense ratio of a mutual fund is high then it will reduce the overall returns generated by your mutual fund investments. So, while choosing a fund you should also see that the expense ratio is not very high. Here is a list of best mutual funds for 2019 across popular categories you may consider for investing now: The Bottom LineChoosing to invest in mutual fund investment plans is just the start of your journey as an investor. The important aspect of any investment decision is that it helps you achieve your goals within the desired time frame and considers your tolerance to risk. Mutual fund portfolios are tailor-made to meet your unique goals and are one of the best ways to achieve your investment objectives.So, if you want help with your mutual fund investment portfolio or you want to find the best mutual funds to invest now or simply want guidance, you can always seek assistance from a platform like IndiaNivesh. Their experts will help you build a portfolio that’s best suited for you.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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