investing myths

7 Most Common Stock Investing Myths

7 most common stock investing myths- Nowadays, everyone is interested in investing. No one wants to have a single source of income. An investment seems to be a great source to get good returns from your hard earned income. From youngsters to retirees, everyone wants to achieve financial freedom through these investments.

Stock Market, which has given the best returns and beaten all other investments available like bonds, commodities, gold etc, is definitely one of the favorite choices of the people.

Although everyone has thought of investing on their own but stopped because of some common misconceptions heard from friends, family or media. So, today let’s take control of our freedom of investing by overcoming few common barriers – the investing myths.

7 Most Common Stock Investing Myths:

1. Investing in Stock Market is like GAMBLING.

This is one of the most commonly heard myth when it comes to stock market investing. And it is so popular that this investing myth has become one of the theories is few places.

So let’s compare the stock market and gambling so that we can have some clear vision about them. First of all, both involve money and element of chance. Second, Risk is involved in both gambling and stock investing. Third, both involves uncertainty of winning or losing.  Most people after considering these three points and comes to the conclusion that both stocks investing and gambling is same.

Now, let’s see the things from another point of view and note the differences. Although blindly investing in stocks is similar to rolling a dice, but successful investing is never a game of chances. The art of investing is based on risk and reward. Gambling doesn’t allow anyone to change the probability. There is always a 50% chances of getting a ‘head’ or ‘tail’ while gambling on a coin toss.

However, through knowledge and skills, Investors can change the probability of winning. Investors can reliably predict the outcome which follows trends, patterns and fundamental studies like balance sheet, profit loss statement, cash flow statement etc. Although, no one knows the future investors have been able to put the odds in their favor by thorough analysis, proper studies & training.

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Considering the above points, we can say that stock investing is nothing like gambling and a much much better way of utilizing your hard earned money.

If you are new to investing and want to stay away from common myths and mistakes in stock market, I will highly recommend you to read this book: One Up On Wall Street: How To Use What You Already Know To Make Money In the Market. It is one of my favourite books on stock market.

2. You need money to make money.

This is the second most common investing myth. People easily presume that you can’t start investing until you have a whole lot of money. And this makes investing ‘rich people’s game’.

But this isn’t true. You don’t need millions to start investing. A good thorough study about the company and just a few bucks in the bank is enough for start investing. Even the greatest investor of all time, Warren Buffett, started his first investment with only a few dollars at an age of eleven. He didn’t need a million dollars to make him a billionaire. So, why should you?

Everyone can start investing with even the little amount that they have.

3. Investing on your own takes too much time.

This third investing myth states that you need to give a lot of time to invest on your own. But this is also not true in today’s world. Technology has completely changed the way information is transmitted now. This has allowed an average investor to access information quickly and easily to make smarter and faster decisions.

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Now, you don’t need to give too much time to financial newspapers or magazines before you invest on your own. Just giving a couple of hours in a week, you can read all the company’s fundamentals which are easily available on the financial websites on the internet. Even, you can check these financials while traveling on a train or during breaks in office routine using the friendly financial mobile apps. Life is simple now!

4. Paying a professional is better than making your own investing decisions.

Today people pay a lot to professional managers just because they believe in this investing myth that hiring a professional is better than making your own investing decisions.

But in reality, it differs. It’s a proven fact that many professionals fail to beat the benchmark over a long time. Still they, they continue to charge a huge fee. There are also a couple of disadvantages of a large money manager.

First, they can’t move money easily as you can during any market swing. Second, these managers are slow to change models with models, but a retail investor isn’t. For example, a mutual fund investing in large-cap companies has to continue investing in large caps, and it doesn’t matter what brilliant opportunities are present in mid-cap or small cap.

But a retail investor is not obliged to do so. He can easily buy a stock if he sees the great opportunity there. Lastly, market managers need to answers to a lot of board of directors and can’t take independent decisions. They care more about the shareholders and their bosses than the public.

In the end, let me ask you a general question. Who do you think cares more about your money, you or anyone else? If your answer is first, then you definitely need to get over this investing myth.

5. Investing on your own is very risky.

In general, risk comes from not knowing what you are doing. Definitely, without proper education stock market is risky. But with proper training and knowledge, anyone can increase reward and reduce risk.

6. Investing is simple. Just buy low and sell high.

This is one of the most common investing myth among the non-investors. They think investing is simple. You just have to buy low and sell high. What they don’t understand is that it takes a successful investors years to learn what’s high and what’s low. Even, if you get a good start and bought the stock at a low price, it’s not easy to find an exit point.

7. Investors who invest on their own are intellectually gifted.

This last investing myth takes investing to a next level. It states that investing is not for everyone but only those who are intellectually gifted can succeed in investing. Now, although everyone knows that there is no connection between IQ and performance, let me quote the statements of two of the investing icons on IQ:

“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” – Warren Buffett

“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.” – Peter Lynch


Let me end this investing myth with a quick link which may change how you think about IQ and performance on investing: Isaac Newton was a genius, but even he lost millions in the stock market

So, these are the 7 most common stock market investing myths. I hope the readers will get over these investing myths if they have any. If you need any further help or explanation, please comment below. I will be happy to help you. #HappyInvesting.

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Tags: Investing myth, stock investing myths, top investing myths, common investing myths, value investing myths, myth about investing
10 Common Stocks that gave more than 100% return last year

10 Common Stocks that Gave More Than 100% Return Last Year -2017

10 Common Stocks that gave more than 100% return last year. Peter lynch, the legendary investor and fund manager, used to say ‘‘Invest in what you know’’ in his best-selling book “One up on the Wall Street”. By this he means –‘there are a number of common stocks which anyone can find easily around them if they are looking’. You do not need to find a rare petroleum stock which no over has ever heard.  You just have to look around and find some decent companies in your surroundings to invest in.

“Know what you own, and know why you own it.”

“The simpler it is, the better I like it.”

“The worst thing you can do is invest in companies you know nothing about. Unfortunately, buying stocks on ignorance is still a popular American pastime.”

– Peter Lynch

So, toady I have compiled a list of 10 such common stocks which a common people could have found easily while walking in their city or during travelling in the city-bus.

Here is the list of the 10 Common Stocks that gave more than 100 percent return last year. I hope few of them are in your portfolio for over a year.

10 Common Stocks that gave more than 100% return last year.

STOCK 8-May-17 9-May-16 % Change
SENSEX 29926.15 25688.86 16.49
NIFTY 9314.05 7866.05 18.40
INDIAN BANK 352 92.9 278.90
RURAL ELECTRIFICATION 216.6 84.82 155.36
FEDERAL BANK 118.9 49.15 141.91
BAJAJ FINSERV 4409.05 1875 135.14
SUN TV 851 364.5 133.47
PUNJAB NATIONAL BANK 176 82.8 112.56
BANK OF INDIA 185.4 89.35 107.49
INDIAN IOL CORP (IOC) 428.55 209.9 104.16
JAYPEE INFRATECH 14 6.95 101.43
MRF 67501 33650 100.59

Here is the list of other six common stocks that has given more than 50 percent return for the last year.

Best book to learn investing mindset: Rich Dad Poor Dad: What the Rich Teach their Kids About Money that the Poor and Middle Class Do Not! I highly recommend you to read this book.

10 Common Stocks that gave more than 50% return last year.

STOCK 8-May-17 9-May-16 % Change
GITANJALI  GEMS 68.75 35.65 92.84
HPCL 531.5 278.5 90.84
MARUTI SUZUKI 6626 3846.5 72.26
YES BANK 1616.25 945.05 71.02
APOLLO TYRES 240.45 157.2 52.95
TATA COMM 652.05 429.08 51.96

 

Tags: 10 Common Stocks that gave more than 100% return last year, List of 10 Common Stocks that gave more than 100% return last year 2016-17

BSE initial public offering in the market on 23 January at Rs 805- 806

BSE Initial public offering (IPO) is set to enter the market on 23 January. The bidding will be open until 25 January. The analysts are expecting a huge demand for the issue of the oldest stock exchange in asia.

The issue price for the Bombay stock exchange initial public offering will be Rs 805 – 806 per share. The minimum order quantity will be 18 shares.

Here are the details about the BSE Initial public offering:

Issue Open: Jan 23, 2017 – Jan 25, 2017

Issue Price: Rs. 805 – Rs. 806 Per Equity Share
Minimum Order Quantity: 18 Shares
Market Lot: 18 Shares

Face Value: Rs 2 Per Equity Share

Issue Type: Book Built Issue IPO
Issue Size: 15,427,197 Equity Shares of Rs 2 aggregating up to Rs 1,243.43 Cr

Know more here.

What are stocks? And what is a Stock Market?

What are stocks and what is a stock Market? This is probably the biggest financial question whose answer billions of people are searching for. “What are stocks?”,”What is a stock market?”,”How stock market works?”,”Why stock market exists?” You might have also wondered the answers to these questions if you are a newbie to stock market industry. Although a simple booking answer/definition of all the above questions can be found easily in a book or online, it would be simpler and more interesting if we explain the whole scenario in the form of a story.

In this article, we’ll cover the stock market story to understand what are stocks. In the later section, we will also give you the standard definition for all these for your better understanding. Let’s get started.

The Stock Market Story

It all starts with a company. Let’s say there is a company XYZ. It is private company which means that the company is totally owned by the owners (promoters). Further, let’s say that the Company XYZ is a manufacturing company and is doing well in its industry.

Now the owners wants to expand their company in new cities and also to perform new Research and development in their field for growth. And for all these, the company requires capital (money).

what are stocks and stock market

Now, let’s see what the options for the owners to get the required capital.

At first, the company will try to get the capital from its own promoters (owners) to expand the company. This is the easiest way to raise capital as the promoters can easily put their their savings/holdings in the company for its growth. A similar option can be going to FFF (Friends, Family, Fools) who might me ready to in invest money in the company. If both these are not sufficient, another option can be going to Angel investors or VC (Venture capitalists) for raising money. But here, the owners have to give a portion of their company (Stakes) to these investors or VCs. Moreover, Angels and VCs are a little difficult to find.

If none of the above options meet the full capital requirement for the company, then it has to go to the biggest money source, the BANKS. These banks can give big loans to the company for which they have to pay some interest and have to fully return the capital at the end of the term. However, paying debts along with interests can be a troublesome options for companies.

Them, what’s the option for the company XYZ now? From where can the company X get such a large capital? The answer is public. The company XYZ can get a large sum of money by giving a little ownership of the company to the people in exchange of their money. And here begins the journey of the company XYZ in the stock market.

A stock market is a place where the company will be able to sell its ownership (in the form of the stocks) to the public. And why will the people buy the stocks of the company XYZ? It totally depends on how positive the people is about the growth of the company in terms of sales, earnings, revenue etc. If the people think that the company will be able to grow to new heights or if they believe in the visions of the company X, then, the public will buy the stocks to trade their money with the ownership of the company. These stocks may rise in value as the company performs well in future, giving the public investors good returns.

Thus by giving the portion of the ownership, the company XYZ will be able to pool a great amount of money for its growth and development.

ALSO READ

How to Invest in Share Market? A Beginner’s Guide!

Now, generally, the company does not offer its complete shares to the public. Almost all of the times the owners (promoters) keep a portion of the stock with them to keep the ownership in their hands. For example, Mukesh Ambani from Reliance Industries own around 51% stake of the company. Rest they have sold to the public, FII, DII etc.

equity ownership

Let’s understand it better with another example. Assume, the company XYZ decided to provide 10,00,000 shares which constitutes the entire value of the company. Out of the total, it decides to offer 7,00,000 shares to the public and to keep remaining 3,00,000 shares with promoters. Here, the promoters 30% ownership in the company.

Quick Note: We would also like to define the term free-float market capitalization here. It is the product of the total shares offered to the public and the price of per share. Let’s say the company XYZ’s each share price costs Rs 50 and it offers 7,00,000 public shares. Then, the free float market capitalization here will be equal to 50*7,00,000. The total market capitalization will be 50*10,00,000.

Now, let’s move the story further. The company XYZ has decided to enter the stock market. When the first time the company enters the market, it has to provide an offering price of the shares for the public to buy. This process of entering the market is called initial public offering i.e. IPO (or going public). The IPO is offered in the primary market, where the seller is the company and the buyer is the public. After the IPO, the stock goes to the secondary market, where the buyer and sellers both are the public. Here, the public generally exchanges the ownership of the company in order to trade/invest or simply to book profits.

That’s the simplest story of the stock and the company XYZ from private stage to going public.

Stock Market Definitions

As promised, now that you have understood what are stocks, let us also look into the standard definitions of the above discussed stock market terms.

— Stock: A stock is a general term used to describe the ownership of any company. Stock represents a claim on the company’s assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Shares, equity, or stock, all basically mean the same thing.

— Stock Market: The stock market is the market in which shares of publicly held companies are issued and traded either through exchanges or over-the-counter markets. It is a place where shares of publicly listed companies are traded. The stock market can be split into two main sections: the primary market and the secondary market.

  1. Primary Market: It’s where new issues are first sold through initial public offerings. Retail Investors, mutual funds, domestical, and foreign institutional investors buy the share from the promoters. Institutional investors typically purchase most of these shares during this first-time issue by the company.
  2. Secondary Market: All subsequent trading goes on in the secondary market where participants include both institutional and individual investors.

— Initial Public Offering (IPO): An IPO is the first time that the stock of a private company is offered to the public. It is a source of collecting money from the public for the first time in the market to fund its projects. In return, the company gives the share to the investors in the company. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately-owned companies looking to become publicly traded.

— Market Capitalization: Market Cap or Market capitalization refers to the total market value of a company’s outstanding shares. It is calculated by multiplying a company’s shares outstanding by the current market price of one share. The investment community uses this figure to determine a company’s size, as opposed to its competitor, industry and market as a whole.

 

In this post, we discussed what are stocks and what is a stock market. By now, you would have a basic knowledge of stocks. However, this is just the beginning. Next, you need to learn little advance stock market terms like Sensex, NSE, BSE, Bulls, Bulls, etc.

I hope you continue your stock market education journey on Trade Brains. Have a great day and Happy Investing!