Every investment involves two important aspects – returns and risk. And every investor wants to get the maximum returns with minimum risk. In this post is described the significance of Alpha and beta parameters of the stock portfolio that are used to describe the two main risks inherent in investing in stocks. Alpha relates to factors affecting the performance of an individual stock or the fund manager’s skill in selecting the stocks while beta relates to market risks.

Alpha of a stock or portfolio:

Alpha is the risk-adjusted return on an investment. It is excess return of a stock portfolio or fund over a given benchmark and hence is usually used to measure the performance of fund manager in managing the fund portfolio. So usually an investor’s strategy should be to buy securities with positive alpha as these may be undervalued.

If an investment outperformed the benchmark, that means more reward for a given amount of risk. In that case α > 0.

If an investment underperformed the benchmark; that means the investment has earned too little for its risk. In that case α < 0.

For efficient markets, the expected value of the alpha is zero. i.e α = 0 and the investment has earned a return adequate for the risk taken.

Fund managers are rated according to how much alpha their fund generates. It is thus a measure of the fund manager’s ability to generate profits in excess of market returns. Fund managers are usually paid in accordance to how much alpha their fund generates. Higher the alpha, the higher is their fees.

Beta of stock portfolio:

Beta is a measure of a volatility of a stock and expresses the relation of movement of stock with the movement of market as a whole. The S & P 500 Index is assigned a Beta of 1. So a stock can have positive or negative value of beta.

If Beta = 1; that means security’s price will move in sync with the market.

If Beta is positive; that means stock moves more than the market and is more volatile.

If Beta is negative; that means stock moves less than the market and is less volatile.

High-beta stocks are generally riskier being more volatile but provide a potential for higher returns as these are in the early stages of growth. On other side low-beta stocks pose less risk and hence lower returns. Usually utilities stocks have a beta of less than 1 while high-tech stocks have a beta of greater than 1.

Having gone through the fundamentals of alpha and beta; it can be inferred that low beta and high alpha stocks are good. But blindly following this concept is not desirable because these parameters are calculated based on historical data and history is never the indicator of future performance of a stock portfolio.

Happy Trading !

Renuka Kinger

If you are already familiar with stock market, there is a small homework for you. Check out the contract note you have received from your stock broker. Or else, if you plan to enter into stock markets and seeking for a broker, exercise your mind a little to know the net brokerage being charged by your broker and study the various commission components. The reason is simple; the amount you pay to your broker may make difference your winning or loosing in the trade. Confused??…It is a common mistake that novice traders execute trade assuming they are earning atleast meagre profit margin, but if all the components including brokerage, taxes, and stamp duty are accounted for, the profit margin comes out to be negative. Isn’t it strange? Yes, so we are here to understand the computation of the net trading amount you pay to your broker.

RATES OF BROKERAGE

There are many brokers charging different rates of brokerage. For example, ICICI Direct charging @.75% and HDFC charging @ .5% of trading amount. However the net trading cost is computed as below:

Trading cost = Brokerage + STT + Stamp duty + other charges

So in addition to brokerage, there are below costs accounted in net amount:

1. STT – Sale transaction tax is imposed on the sale/purchase of securities by retail/institutional investors and is charged on total turnover (cost of each share * no. of shares). For delivery of shares it is charged at .125%. For intraday selling of shares, it is charged @.025%. For buying, there is no tax for intra day trades. Currently government is under consideration to remove/reduce STT because since it was introduced in 2004, the cost of transaction of trades has drastically increased. This leads to loss in business as Indian markets are becoming less competitive compared to other emerging markets.
2. Stamp duty: Stamp duty is also charged on total turnover. For delivery of shares it is charged at .01% and for intra day it is charged at .002%.
3. Other charges: it includes below component:
a. Transaction charges: For trading of shares at NSE, it is charged @ 0.0035% while for BSE, it is charged @ 0.0034%.
b. SEBI turnover charges: For equity transaction, this remains NIL but for derivative transactions, it is charged @ 0.0002% of total turnover.

c. Service Tax: Service tax is charged on all the components

So net brokerage will be calculated as below:
Net brokerage = Brokerage + STT + Stamp duty + Other charges

So next time you trade, try to find out how much earning have you shared with your broker. Happy trading!!

Renuka Kinger

For buyers; consider a share continuously moving down over a period of time and you find the fall in the price as a buying opportunity. To decide your entry price, support level is there to help you. Since the stock is unlikely to go below this level, you can opt to buy at this level without fearing any risk of further downfall and aiming to take an opportunity to buy.

For sellers; consider a share continuously moving up and your aim is to have maximum profit margin and take a profitable exit. Thus to decide upon an exit price, Resistance level is what you should look for. Since the stock is more likely to “bounce” off this level rather than breaking through it, you can sell your stock for better returns.

In generic terms, for a stock trading between support and resistance levels, the strategy of a trader should to buy a stock at support and sell at resistance. For traders involved in short selling short at resistance and then cover the short at support.

As a part of technical analysis there is no denying the fact that support and resistance can help you benchmark your decisions but it is very important not to assume that these levels will not breach at all.

It is likely that a declining stock breaches a support level and continues dropping until it finds another support level. This is called breakdown and usually occurs when number of Buyers willing to step in to buy exceeds the supply available from sellers willing to sell. On the similar note, a rising stock may also breach the resistance level and continue rising till it finds another resistance level.  This occurs when the supply available from sellers willing to sell is greater then the demand from buyers willing to step in to buy. This is as simple as the concept of “demand and supply”. But next time you make a buy/sell decision, do take few minutes to have a look at these levels to enjoy its crunch.

All the best…

Renuka Kinger

Wikipedia defines Forex Trading as “The foreign exchange market (currency, forex, or FX) trades currencies. It lets banks and other institutions easily buy and sell currencies.”

With the current economic scenario, increasingly more folks see themselves prepared wherever they have to help make additional funds to carry on living to their standards. Additionally , there are individuals who learn how to make very good utilization of present day condition and help to make a continual income. It doesn’t matter the truth, you ought to learn how to trade the Currency trading, considering that this turned out to be to be the most effective way to gain a little extra money, and get a good profit while doing so.


The Forex markets is known for a three trillion US dollars trade every single day, therefore being the biggest tradable market on the globe. Simply because, or even better mentioned thanks, to the belief that most trades are usually speculative, any kind of real movement of foreign exchange is small – this really is these people key to getting a huge profit having a small investment.
Forex market doesn’t trade on the central exchange, the interbank marketplace staying the actual place exactly where deals happen, therefore two entities may trade with out going trough an exchange. In Simple terms, trading in currencies indicates buying one foreign currency while at the same time selling another.
If you would like to learn to trade the forex and try to get a profit, you have to learn how to get the best trades possible, the quickest possible way. For this reason it is recommended to gather all of the knowledge you are able to. There are many available resources on the internet that you need to use and there are also tools which will help you trade 24 hours a day, five days a week – like Forex robots.
More informative info regarding the Forex Market in order to learn how to trade the Forex is available here.

Day trading conditions the most intense approach to stock market trading. To be on top of the fluctuations in stock prices, day traders spend hours together in monitoring the market. Day traders could make dozens of trades any day, sometimes in a matter of minutes hoping to grab the wave of price change. They avoid the risks of long term buy and hold. Day trading could be exciting, the fast pace attracting risk takers. Yet this strategy for stock market trading is only effective for day traders, who apply analysis rather then emotion to trading decision. Savvy day traders could turn profits quick. Emotional traders usually lose fast and leave disenchanted.

Swing trading uses a slightly longer time horizon than day trading, watching a stock for weeks or months before trading. This type of stock market trading relies on careful monitoring of fundamental and technical analysis. Swing traders often specialize in a certain business or industry so that they become experts in the movement within those stocks. They also have more time to study the company financial reports and industry forecasts. Since swing trading does not require hours of daily monitoring, it is a good strategy for the trader who wants to make money from stock market trading without turning it into a full time job. Even the study of reports could be done during the daily commute or lunch hour so that the swing trader stays well informed.

Position trading works well for investors who want to be involved in the stock market trading, but run short of time. Stocks are being held for months awaiting any changes in the trend. Position traders keep up with the fundamental and technical analysis as well as news events but apply a long term strategy to their stock market trading.

Short Selling

Looking at the flow of shares in above flowchart, one would ponder why to borrow shares for selling in market and then transfer them back to the lender? The logic behind shorting is very simple; earning profit margin. Let’s see how??

If you think a stock is overvalued and expect that the price would come down in future for sure; you would wish to sell the shares at current levels at higher price. So you borrow the shares and sell them at higher price. And when the stock actually falls as you had speculated; you buy it from market at lower price and return it to the lender and the difference between the selling price (higher) and buy price (lower) is what you earned in the deal. So at the end you must close the short by paying back the shares and this is called as “covering the short”. Concluding this, investors who anticipate fall in the stock price go short to take advantage of market fall. An investor can hold the short for as long as he wants but he is charged an interest as it is similar to a loan taken in the form of shares. Also if during the course of loan, the company declares dividend or rights issue, it must be paid to the lender who is the actual owner of shares because you are just a borrower.

Short selling is considered to destabilize markets directly or indirectly. In 2001, the stock prices crashed heavily owing to short selling by big operators after which SEBI banned it. After a gap of 6 years in December 2007 SEBI came up with updated norms of short selling to cover the loopholes and ultimately institutional investor were also permitted to short sell.

Concluding this, short selling no doubt gives you an opportunity to earn profit by taking advantage of downturn of markets, it might bring in huge loss to your investment if stock price moves up. Because in real sense, shorting is a bet against the current market trend. When stock is at current higher levels, you are expecting it to fall down and entering the arena. Speculation is what makes shorting a riskier job. So beware of the dark side of shorting before you actually go for it!

All the Best

Renuka Kinger

1.    Name of the company;

2.    Separate set of quotations for BSE and NSE;

3.    BSE code number assigned to the company;

4.    Closing price of the previous day;

5.    Opening price of the previous day;

6.    High and low prices of the previous day;

7.    Value of shares traded;

8.    Number of trades that took place in the share;

9.    Volume of shares traded;

10.    Current P/E ratio; and

11.    High / low prices of the year, or the past 52-weeks.

It is quite easy to read these quotations since almost all these newspapers provide easy-to-understand explanatory notes.

Here are a few tips you may like to follow:

1. Look for positives and learn lessons for the future. Shed a feeling of gloom and move on with head held high. Look at what you have, a good family, food on the table and life in a young democratic Country which is being applauded all over the world for having escaped relatively easily.

2.  Follow solid middle-class values, cautious, conservative and careful. Be humble and well grounded.

3.  Secure your present, provide for the future on an on-going basis and only then be adventurous.

4. Do not mortgage your future for instant pleasure through acquisitions today.

5. Income is variable ( job  permanence, business stability and growth etc. ) but Debt (loans, E. M Is  ) is permanent and the meter runs 24X7.

Two Prominent Investment Bankers of the Country have recently quoted their fathers, advising them never to take personal loans and to be risk averse with personal savings. Both claim to have followed this dictum and are happy.

6.Remember that there is no free lunch or free holiday in  life  . More seemingly enticing a proposition is to make quick or easy money, greater the danger and risk to loose your shirt ( due  to  high risk investments people have also lost their peace of mind, even life )

7.Money is important, never undermine it’s importance. Use it as one of the means and never as an end in itself. Enhance your horizons to increase your earning and wealth creation capacity, but on a sustainable model.

8.Beyond a limit, law of marginal diminishing utility kicks in and the bigger cars, larger  houses , luxury items, size of the business etc. all fail to give the thrill you expected them to provide .Then starts the race for more, which cannot be won, so why fall into that trap.

9. The trick is to stay hungry for success, be competitive, stay focused, stretch your targets (still achievable, though with lots of hard work and effort) but do not get carried away to indulge in big punts and gambles, which seemingly will propel you to a different league.

10.Except very few examples of people who have achieved wealth through huge gambles and betting on very long odds, law of averages does not  favour this model, i.e for every such success, there are countless failures .For staying lucky, be prudent.

11. Economic freedom should be the aim, but it cannot be achieved through borrowed capital. ( for conveniences and high leveraged debt for business)

12. Most of the things and events  which bring continuous happiness are free or inexpensive. The happiness achieved through physical proximity of the family, smile on the face of  the dear ones, creative success of the wife, best performance award to the son for the Quarter’s best sales results in his job have no substitute. Recognize and enjoy these on a regular basis.

13.Prepare a balance-sheet of your life and evaluate all your assets, starting from the kind of  parents , (affection, moral and spiritual values given by them) spouse, children, relatives (much maligned, but we do not hesitate to land up at their door-step un-announced with bag and baggage, so give them some credit), friends, education, money, assets etc.

This will give a holistic assessment of emotional  , spiritual  and physical assets which surely will far outstrip the liabilities.

14.Value what you have and then look at what you aspire to have. Aspirations and Dreams are good and make life worth living, but we must filter the actionables.

15.Spend enough time in soul searching to figure out what do you want in life what are you passionate about, do your own S.W.O.T analysis (Strengths Weaknesses Opportunities and Threats)  and Go for your Calling-patiently, persistently, without major short-cuts (they cut short the life) and chances of success will increase beyond expectations.

CONCLUSION

Life is interesting, take charge, enjoy the process and the journey  ,have faith, surely look at the emotional and spiritual aspects ,be prudent ( and upfront about it-Warren Buffet is known to be prudent and thrifty ) and Celebrate God’s Grace  every day for a Happy, Joyous and Free life. ( ….. to be concluded)

- Arun Vedhera

“ A stock broker is one who invests other people’s money until its all gone.” -Woody Allen, American Film Maker

“ Average investors who try to do a lot of trading will only make their brokers rich.” -Michael Jenson,
Finance Professor -Harvard.

“ We have two classes of forecasters: Those who don’t know and those who don’t know they don’t know.” -
-Jhon Kenneth Galbraith.

“ Most investors don’t even stop to consider how much business a company does. All they look at are earning per share and net assets per share.” -Kenneth L Fisher, Stock Market Guru.

“ Bulls make money.  Bears make money. Pigs get slaughtered.” -Anonymous

“ Buy high and sell low.  What investors should not do, but it happens far to often.” -Anonymous.

“ If you’re going to panic, panic early.” -Anonymous.

“ Markets change, tastes change, so the companies and the individuals who choose to compete in those markets must change.” -An Wang.

“  I never attempt to make money on the Stock Market.  I buy on the assumption that they could close the market the next day the next day not reopen it for five years.” -Warren Buffet.

“ Sometimes your best investments are the ones you don’t make.’ -Donald Trump.

“ Investment Management; An Exercise where you make major decisions, in public, on the basic of filmsy information in a system largely governed by chance, when you may be wrong 50% of the time, …and you have to go back and do it again.” -Richard Vancil, Harvard Business School

“ He’s called a broker because after dealing with him you are.”  -Anonymous

“ The road to success in investing is paved with independce of spirit, decisiveness and the courage of one’s conviction” -Peter L. Bernstein.

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