THE INVESTMENT LADDER

-VANI GUPTA

“India is a fast-developing country”, but ironically less than 3% of India’s
population invests in stock market, of these less than 40% are the ones who
directly invest, i.e., about 2% people from the whole 3% are investing through
brokers, mutual funds, financial intermediaries etc.

Many times after listening to your broker’s confidently proposed call options the
price of a stock might rise drastically but within no time it crashes!

Basic problem with most of the beginners is that they are unable identify their
starting point for investments, your starting should be safe and strong to build
your confidence in your portfolio.

Let’s answer a few questions to bring clarity about this market and pave your path
for a successful investment:

Is stock market risky ?
How much should i start with ?

Stock market might be risky but in short term, if we observe long run, we can
surely bet on stock results. Therefore, let your investments flourish for years and
gain capital gain tax advantage, dividends, bonus shares etc.

As a beginner you can start with a very small amount like 1000 -2000Rs. every
month and leave your purchases for years to flourish eg.:

1.WIPRO – In 40 years the price of these shares has raised from 100 Rs. to 7 cr. Rs.
2.BOSCH – Within 5 years the returns increased by 15% and after 10-15 yrs. the price doubled around 2015-2018
3.EICHER – In past 10-15 years the stock price and EPS of Eicher have risen at a rate of 51 % and 45% respectively.
4.YASH PAKKA – It has shown a drastic increase in its EPS from 0.96 to 7.85 within 5yrs.

To have better results you can increase your investment by 10% every year to
avoid risking money all at once.

How can beginners identify such good companies?

  1. Invest in companies acquiring a diversified share of consumer market, such companies have strong base and minimal chances of fall. e.g –

ITC Ltd. – It’s expanding in all areas and people’s myth about ITC dealing only in
tobacco will fall soon when they see ITC take over market.
GODREJ LTD.- Has a very wide consumer base and increasing share value in these
times.

  1. Changing consumer preferences can bring a particular industry at top, like an increasing shift towards organic food and health related products makes it very profitable to invest in medical industry. e.g.-PFIZER Inc. – Pfizer is expected to come up with corona vaccine and has a very bright future therefore.

3.For beginners it is best to enter the market through BLUE CHIP securities (defensive stocks), these stocks are premium priced and have been providing consistent dividends and returns to its shareholders since past, lack chances of dipping drastically. E.g.:

S.NOCOMPANYCURRENT PRICES (RS.)
1MIRAE3155
2SBI266.30
3HDFC1415.45
4ITC LTD.2016.00
5HINDUSTAN UNILEVER LTD.(HUL)2368.95
6RELIANCE INDUSTRIES1973.10

HOW AND WHERE TO NOT INVEST ?

  1. Never invest all your money in one single stock, as a beginner diversify your investment in different segments like 10% in infrastructure, 10% in banking, 20% in medical and so on.
  2. While some stocks might seem very lucrative from outside they might be
    sinking in debts from inside, so carefully review its debt.

COMPANIES AND WHY THEY SHOULD BE AVOIDED :

COMPANYWHY AVOID
AyPee InfratechHigh Debt
JP Power VenPower Sector, No pricing power
KSK Energy VenPower Sector, No pricing power
Hind CopperCommodity, No unique product

There are certain shares which have crashed after showing a gloomy picture:

COMPANIES- LISTING PRICE (Rs) V/S CURRENT PRICE (Rs)

S.NOCOMPANYLISTING PRICE (RS.)CURRENT PRICE (RS.)
1JET AIRWAYS1229.4027.2
2DEWAN HOUSING FINANCE LTD.65815.65
3RELIANCE COMMUNICATIONS300.551.20
4JAIPRAKASH ASSOCIATES323.751.95

Some shares might not seem promising during a crisis but are
always safe and profitable. These include:
1. BHARAT ELECTRONICS
2. NTPC
3. ONGC

Therefore, we all can invest our money ourselves better than any broker or agent by investing in blue chips, companies with strong consumer base like those dealing with FMCG (Fast Moving Consumer Goods) which always survive and provide greater returns towards end, being aware about the company before investing and allowing our investments to flourish for years and multiply many fold.

3 thoughts on “THE INVESTMENT LADDER”

  1. I am very impressed with the article. It covers all the aspects of investing in the stock market.
    Great piece of advice for the beginners.
    Do post more on other investments areas.

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