The four I's of investment

Whenever wherever the word investment comes, financial organizations or gurus of investment often suggest investment into 4 different pillars.

These particular modes of investments have been there with us since ages. But like every other business aspect, and every other scenario this is being looked upon from a new angle in every decade. But here this is bit of surprise component because this is the year 2020.Probably this year will be written in the history book as the year of Pandemic or lockdown or to beginning of New Era viruses. But whatever it will be written, the fact is all the studies each and every field is been checked upon lights of or the new findings of 2020. Because since World wars and plague attacks, the world has never head came to a standstill like this year. Globally to have been afraid of going out of homes, disrupting the daily life for not only days but for months. And for this particular reason only all the pillars of investment has to be looked upon from this new angle of post coronavirus era, or you can say in future we might see study is being deivated upon just because of COVID 19.

Fundamentally these Investments are mostly advised in

Gold

Let's discuss on gold. The yellow metal as it is often called is not only the most lovable for the feminine gender, but also regarded as one of the most useful investment material throughout the ages. From the valleys of Nile river to the shores of Yang Si kiang, gold has always been recorded as the metal for kings or nobles. If you take a time period of 10 years, 20 years and 30 years, you will find that value of the gold has almost increased by almost adding another 0, at the end of the financial year time frame.

While analysing you should also take the years of recession into the picture and how fast your investment will overcome the same. And particularly in this case, gold doesn't come out as positive as in other cases.

Also as when investing is mentioned, you should also have to have a hand in minimizing the losses. So, the moment gold price start going down, start eating out your profit, then there is no actual threshold where it can go down or stop.

Though one beautiful thing about gold is you don't have to check the prices everyday or keep a tab on it. You can do whatever you want as your daily routine it will give you the definite return, probably one of the best returns of all the four types of investment.

Mutual Funds

Now mutual fund concept is not as old as the other three options. One can always say it is the latest strategy to invest your money.

But the latest always might not give you the best of the strategies. As often each and every mutual fund advertisement says, read the offer document carefully, it is because there are quite a lot of detail understanding what needs to be done, before thinking of the mutual fund investment.  But most surprisingly if you see at any market any country, you will find that most of the investments are done in the mutual fund only.

People are often told that Mutual Fund all the benefits of share market but none of the negatives of it. And here lies the twist. Just think how blatant this lie can be. Because most of the mutual funds are invested in share market only. So is it that when the share market is down, just because you have invested in mutual funds the value of mutual funds will also go down. People say,I know you will be accumulated much more shares... What is the point?
Also whenever your investing in mutual funds you find that what is the transaction charge of 2% to 12% every year to maintain your Mutual Fund. It doesn't matter if you are any swip in or out. Moreover most of the cases if you doing more than five sweets in here then you will be pain heavily for those swips .So ideally, it means that you are actually paying for the salary of the people office for the furniture other things what an organisation supposed to spend, whether you like it or not. It doesn't matter if your Mutual Fund give a 2% return on investment or 15% return on investment you have to pay for the services each and every year. Most surprisingly, even if your Mutual Fund portfolio gives a negative return, still you have to pay for it.
And the worst thing is you don't have a control on the Mutual Funds if it is going for a loss. And just imagine, the case of mutual funds which have a lock in period to invest. So knowingly when your portfolio is making a loss, you have still pump money on top of it, so that once in a long run if your portfolio makes profit, then you can get percentage of it.

Our Gyan Guru says, the best financial people are the financial scamers, and you will never find them they have invested in mutual fund.

Real estate

Real estate as a type of investment is also a good glimmer. You often see the price of real estate increase like anything and always in some part of your mind it comes as a investment option. Let's go back to our time frame of 10 years, 20 years and 30 years. You'll often find that in these time frame the value of real estate has increased phenomenal in exponential graphs. So why not choose this as an option of investment?

Why choosing a real estate property to invest, as an ideal investor we should look into the properties which are low hanging and will bear great fruit in the near future. So ideally you should look into the suburbs of the city or a town to invest in. If you invest properly and periodically over the time your investment should give you a great return
But the worst thing in this kind of investment in the time of recession. Any kind of recession hits the first sector is the  real estate. And when it gets hit it gets hit badly. It starts you bleeding out, and most often not only eat out your profit ,but will incur you heavily loss.
Also the matter of worry is, you don't have a yard mark, to cut down your losses and stop taking any loss on top of that. So systematically, an investment where you don't have a control. It Might go up, it might go down ... And all these depends on phenomenas where you can't even think of control.

Share market and different bonds

You will be surprised to know that every private organisation and even government organisations are heavily invested in share market. But when it comes to coming people, share market is open dreaded. Be it gold, Mutual Fund, real estate all these are direct investment in share market. And if the share market does well, then they all do well. So when you are bullish about a market every sector might or might not be bullish, and that is the same in case of bearish market also. That's why the graphs of share market is never flat line in any country in any market for even 1 minute. Just for an example, Microsoft share in 2000 $48 dollar, in 2010 $45, in 2020 it is around $210. Here just to remind you that, 2020 is a disasterous year for many of the sectors.

It is seen that every 20 to 25 year, there comes a recession and financial history is being Re-written every time. So, If you buy a share for $100 today, down the line 10 year down the line it becomes $500, and again down the line next 10 years it becomes $100 again  .. Then how can you make a profit out of share market? Yes, that is the beauty share market. Not only you can make money when your price of share is increasing, toll free you can make money when the price of a share is decreasing. So external conditions might change the price of the investment, it cannot change your motive of making money out of the marketplace.
Let us take a complete different case. Say that, you have bought a share for $100 thinking the price will go up and we will make a profit out of it. Due to some whatever scenario, the price of the share starts going down. Can happen, have happened and it will continue to be happening. But in share market you have a safe guard against it. You can always buy this year with the condition that is your share price hits $95 then the share will be automatically sold and your loss will be Limited. So basically you have a control over the loss also.
The only thing what you need to do , when you are investing in share market, is you have to keep a tab, almost every other day to safeguard your investment. But all the sensitive good things always requires attention, isn't it?

Traders Psychology: Tips to balance the battle of Mind and Money

As you are here, we can assure you this is one of the most unanswered questions in the share market. And as you know when we find questions like these, the one and only person to help us is Harry chacha.  When we asked Harry chacha this question, his eyes shined a little bit, it was like we have asked something really meaningful.

 

And as usual Harry chacha threw some typical questions to us, which we need to understand. What is the age of the trader (and when I am saying age, I am saying both from the birthdate point of view and also the time spent since you were doing trading)? It takes a lot of discipline to be a successful trader. There is not a single trader who has not encountered loss, but to take the loss in the stride and continuing the journey to the profit is the journey to the successful trading system

 

First what you need to do is, you need to establish and believe in the trading system you are doing the trading. I hope you have gone through enough back-testing with sufficient data to analyze the market. So when you are trading in the market you have established one thing, only one thing, that is your trading system and your belief system in your system. I believe you have a lot of charts and graphs from past knowledge experience all mixed and jinxed :-) together in a single simplified trading pattern.

 

Everybody may have different formulas based on the same graph-based on different patterns and everybody might be successful. How is it even possible?

Let me give you another example for better understanding. If somebody has a chest pain and goes to a doctor, the doctor will ask, in most cases, to do an ECG. Once the doctor looks into the report then only he will start giving an opinion about the health of the patient's heart.  It doesn't matter whether the patient has a very good physique with six-packs or is zero figure or a family pack with a full tummy it does make an iota of difference. It is only the ECG report which will speak. 

 

The same analogy goes for traders. Also, it boils down to the calculation which you as a trader have formulated to do actual trade. There might be losses here and there, but you will see that the wins will overcome the losses by too much ratio, and obviously, you will succeed. When you make a loss don't think of that loss as of a particular trade, take the overall picture and you will see that you are in profit if your trading system is correct.

 

To boost the psychology of the trading system, what you should do is, you should write down each trade you have taken. Let's assume in a month, there are 22 trading days and you traded around 25 to 50 times in the month. Out of those 50 trades, you might see and 10 have given you losses but 40 given a profit.  So ultimately you have taken individual trades which you are at loss or win.  But when you club them to get an overall view, you will find that you have an 80% success rate, and you deserve a pat on your back... have an ice cream or chocolate or whatever you like.  As a treat to yourself at the year-end, these gestures will be enough and I repeat, more than enough to give you a big smile on your lips.

 

Boxing out of losses... this is the biggest or the best thing you can do to progress yourself. Let's say you are taken as a share of X at the price of Y, and it has hit stop loss at the price of 0.75 Y then the first thing you need to do is accept the stop loss Stop looking at that and start searching the new share according to your chart which you think will give you much more profit. But if you start thinking, as X has given me  the loss,  now let me sell it and recover the losses and  gain from it... to recover and get profit  then rest assured you will be getting too much more loss.

 

The first thing you need to do is limit your losses, accept that it has taken the stop-loss, try to see if the calculation that we use is correct or not, and accept it and leave it like that. It is not a war, but learning. Moreover, you are not going to disclose to everyone that you have made a great loss and if you do you are so loser and the stock market should not be your field. Stay away from the stock market as early as possible. The ideal way to box your losses is to forget about the loss that you have made and move on that's why it is known as boxing out of the loss box  your loss pack  it and send it home do not even bother to look at it 

 

Overcoming the Greed An old saying is that the greedy pigs always get slaughtered first. This refers to the habit that once, you are in a profitable position and your chart looks good, you don't know where to stop it. Once you make the profit you intended to take the profit get out of that particular trade hanging onto the last page to get much more profit, will eat-out the profit because no matter whatever the upwards group trend is it is going to be reversed and you need to make sure that you are not caught in the web of those tentacles. 

 

Do not break the rules Once in the share market, you have established a risk to reward ratio the moment you hit the reward ratio, take out your profit, and get out of the trade.  Let me give an example, you bought a share in 100 rupees, your goal is to make a 10% profit out of it.  Once in the upward direction, your share reaches 110... and according to the chart pattern you are following it should move more up, and hypothetically  within a fraction of a second, it moves to 112. The best you can do is put your stop loss at 112, and see how it goes. What the ideal way to go ahead is to book a 12% profit and get out of the trade. Because ultimately you got your intended profit and you should be more than happy with it. Remember that the risk-reward ratio is set to maintain not to break and you break it a couple of times then the obvious is going to happen it will break your entire strategy

 

Out of all of our exercises and all discussions with Harry chacha today he was more serious. I don't know why and that was the last question for today from my side to him and that was the first time for today I saw him smiling. His answer was if Psychology is correct then everything is going to be correct. So you need to treat yourself or get your Psych calculations perfectly fine-tuned to get optimum results for yourself.

Investment in Stock Market: The Paradox or Dilemma

 

Most often the best questions come long before you deep dive in …& in the case of Stock Market investment the most precious question often is “How Much?”

If you go through the different advertisements of the people who provide you the “best ideas” of the stock market you will often hear they have made millions in the stock market. More often you will hear in 1 day they have made some lakhs from the bare minimum. But if you ask them a single innocent question, “what was your first capital when you started investing in the Share-market?”

Knock ...knock….No answer.

You might be wondering...this is a simple question, then why nobody is answering... but this is true and the most innocent truth. Market Pundits will show you the snap-shots of shares taken, profit from it...will do a lot of other things also to gain your trust but will never answer you this simple question. This was the answer from our beloved all known Hari Chacha.

Hari chacha is a maestro of a little bit of all things in life you ask him how to shoot a Rhino to build an Igloo. He knows them all ... though how he knows them is quite a bit of mystery and we might need a combination of Sherlock Holmes and Hercule Poirot to reveal them but the advice Harry chacha provides never fails.

So the next question we threw to Hari chacha was so what to do? Is there any scientific method or any practical solution to this question? And to our utter disbelief, Hari chacha gives us some very simple methods on this.

His first question was first you need to know, in the share market what kind of shares or what kind of trading you want to do. There are ample and different ways to get into it. It might be

• Stocks number
• Penny stocks
• Cryptocurrency
• Forex 
• Commodities
• Gold
• Future
• Options

But in most cases, we find for beginners to start with are stocks also when we finalize what we should deal with the next question is how to deal with it. It might be :

• Daily trading
• Positional trading for long term trading.

Let us choose daily trading as this is one of the most preferable ways for most of the traders who are starting their journey in the market. 

So now we will look into only the initial investment for the share market. When you look at the share market picture there are huge differentiators. So while thinking of investing you have to choose which share market you want to invest in. As a Global Citizen in today's date you can invest in any market you can think of, be it Nasdaq or Dow or S&P or be it our very Indian BSE or NSE. Let us choose BSE or NSE to answer this question. if you are a beginner and don't have a plethora of experience in that case you should go ahead with the safe and sound Nifty 50 shares. Now the Nifty 50 shares range from around 50 rupees 12 to 2500 rupees. So your dilemma continuous... what to do

Now in the case of India while looking at the daily trading options there are a lot of brokerage platforms that give you a huge amount of leverage to do daily e-trading. Depending upon the brokerage platform and the share you are choosing sometimes you can even get 15 times (15x) of leverage, which ideally means if you have thousand rupees and investing in a particular brokerage firm for a particular share for daily trading you can get a chance to invest 15 times of thousand, which is 15000 rupees, so basically it depends on the share you are trying to buy and also the platform you are using if the combination is perfect then not only you get huge leverage but also the commissions and other charges are very less compared to the profit or loss whatever you are making. Now mind it whenever somebody says investing of share market if you fail to count not only the profit but also the loss which you might make then you should not be into the share market. It is always better to know both the positives and negatives before getting into it. 

Having stated all those now it's time for beloved chacha to shell out the different processes to understand what should be our initial investment 

 

X/ 3 strategy 

That as a beginner you should invest only one-third of all the money you intend to put in so if you have a capital of 10000 to start with you should put 3000 of it and start trading. In case your strategy is working well and you're doing well with your initial 3,000 then let it grow up to 6000 before putting in any single additional money on top of it.

 

100 minus current age 

This is one of the oldest strategies to understand what should be your investment. The premise of this strategy is based on the notion of reducing your risk gradually as you age. As for this strategy if you are 27 and your total savings is 10000 rupees then your investment should be 100 - 27 =73 Percent of your total settings which should be 10000 INR * 73% = 7300 rupees

Optimum Strategy

           

Like every other field, this strategy is also “A glass half-filled” strategy. This strategy says, your first investment should always be the amount of money which you think will not make a difference to you. So if you think that losing 5,000 doesn't make a difference to you then your initial investment should be 5,000 if you think that losing 10000 hours and minutes was to you then it should be 10000. Although a lot can be said about this the beauty of this particular strategy is it makes a mentally prepared that if you lose the money also mentally it will not Crush you because you have made up your mind that you have lost the money so whatever profit you make that makes you it's joyous.

 There are also at least another dozen strategies just and equitable and can be debated through over which I am very sure. But if you have Hary Chacha with you, you only look at what is the best of all the options right? 

If you properly answer these three questions and you know the answer to them then you know how much you need to invest in daily trading in the Indian share market.

But finally, Harry chacha winks and says you know in this covid pandemic, lockdown era a lot of new Pandit has emerged like a mushroom cloud. I don't know if it is better or worse but be rest assured to start with you should be confident Systematic disciplined and honest to start with not less than 7500 and also not higher than 15000 rupees and you can safely sail through.

Please do share your thoughts if you think we can put feedback to Harry chacha and share your thoughts wisdom with him. And you know Harry chacha is always full of wisdom to share with.