“I’m an Investor”
For newbies who want to start investing, the thought of uttering those words is a dream waiting to be explored.
But for many, it never transfers to reality.
Why?
For some, it’s a lack of time. Or you’re not clear on How to start? How to analyze stock? Where should I invest?…… but the reality is that the discipline it takes to successfully start investing eludes you.
What if I told you that you’re just 3 weeks away from having an optimized stock portfolio in your possession?
That’s how long it took me to start my own investing. Now, I have a portfolio of 8 excellent stocks (dated).
And in this post, I’ll share how I did it.
Hold on! First I need your acceptance on following standard (it may look awful at first but you’ll understand the usefulness of this standard by the end of this answer).
- Spare 3 to 4 hours each day (for 21 days)
- Consider starting these 3 steps from Monday.
- I’m assuming you know basic of stock like how the stock market works? etc. If not, have a google search.
- You’re above 18 and have PAN, personal bank account, Identity proof.
- At least, spend Rs 1,000 on books.
- Most important, be disciplined and strictly follow the steps. And follow it in prescribed sequence.
- First, read this whole answer to get a full overview and bookmark it for future access.
- Also, consider reading all the links in this answer. It’s relevant resource from all over the web.
- And just for now, grab a coffee and find a peaceful place to enjoy reading this guide (it’s 4000 words long, so spare at least 15 to 20 minutes).
- Keenly mark the words written with “Important” like the one below.
Important – I bet, it’ll take 3 weeks to start your first investment successfully but not complying with above standards might increase the time.
However, it’ll only take 1 week to start investing in the stock market but to make it “successful” you need another 2 weeks.
So finally, You’ll come over following sections in this 3 step and 3-week guide:
- How to start investing? (Procedure to get registered to broker and online resource to learn about investing)
- How to learn to invest? (Offline resources to learn to invest)
- How to pick excellent stocks? (You’ll learn analytic part of investing)
Here we go.
WEEK #1
Day 1: Contact a broker
This is the thing you need to do. You can’t directly invest in shares so you need a mediator to exchange stocks from one person to another. No substitute as the rule is executed by SEBI (Stock Exchange Board of India).
However, it’s on you which broker you want to choose. There are hundreds of brokers out there. For a starter, it might be hard to choose from them.
Nowadays it’s very easy to get a trading account up and running in a matter of a couple of days.
There are numbers of different brokers. They all offer you a similar service (equity + commodity) with a huge difference in price, but since I’ve dealt with and monitored many famous and recommended share brokers companies like RKSV, angel broker, Motilal Oswal, HDFC sec etc…
I now only use and recommend Zerodha.
Since I personally use Zerodha for all of my trades so I also suggest others use them. Their trading platforms are just awesome. Also, you can trade through web + android app + mobile browser + simply them and trade.
If for some odd reason you don’t want to use Zerodha, you can always choose another broker. I can’t promise they’ll be that good, but the registration and the setup process should be somewhat similar so consider following the steps stated in this answer.
Most probably, they will call you same day after you fill up 3 boxes but if not, proceed to next day.
Day 2: In continuation of day 1
They will guide you the whole process to get registered with them (they are good at customer interaction).
What they will say is:
- Download and print the form from their website.
- Sketch your signature at 17 different places (not sure) in the form. Also, provide your email and mobile no. that you want to get registered with them and stock exchange.
- Attest xerox of documents namely, PAN card, bank statement, cancel cheque and identity proof with the form.
- Deliver it to their registered office or the address they specified on the call.
Follow it all and You’re done.
Just keep your eyeballs on all the emails from Zerodha. You’ll get every information about your Demat and trading account from their emails. Most probably, you’ll receive your credentials in 3 to 4 days not considering weekends (that is why I said to start it from Monday).
Day 3: Learn about investing online and order some investing books.
Now till you wait for their confirmation, learn about investing online on Q&A sites, forums and investing blogs.
Important: Before you do this, order books that I’m going to show you in section step #2. At an average, it will get delivered to you in 4–5 days so that we can start step 2 just after the end of this week.
Q&A:
As you’re well aware of Quora. Follow or read all the questions that might interest you:
What is the key to picking stocks that are undervalued in the Indian stock market?
What are the best strategies in picking the stock in Indian stock market?
How does one pick successful stocks?
How do I successfully pick stocks in the Indian market?
And any other as per your knowledge.
Forums:
Considering participating in stock market forums. I tried many forums but highly satisfied. There are many forums but I suggest you to use Valuepickr because of their clean design and no ads. Also have a visit to my profile.
However, a simple search on Google “Forums + Indian Stock Market” will swamp you with more than enough results.
Blogs:
There are many blogs out there but I only follow safalniveshak.com. WHY? Read some articles on the blog and you’ll understand “why?”
However, there are many blogs like oldschoolvalue.com, value spreadsheet etc
Also, if you don’t mind, you can also interact with my blog – sowmayjain.com
Day 4: Become a internet geek
Now just read as much as you as can. Keep notifications “ON” and also set perfect email alerts in participated forums and also, don’t forget to subscribe to all the blogs/websites to receive a notification whenever they post a new article.
Rest, keep all other things aside.
Day 5: Broker’s Confirmation Email
Continue reading from an online resource.
And you might also receive an email confirmation from the brokers. Log-in to your account online, check all the details and understand the e-trade mobile & desktop platform (in case you registered with Zerodha).
Still, as you’re investing for the first time so stock exchange might take time to verify you in 1–2 days (it happened with even after registration with broker)
Day 6: Read online resources
Stay connected to all the online resource. This is the thing which will keep you updated with all the trends of market.
Day 7: Read online resources
Enjoy and copy above schedule. Now lets start your 2nd week.
WEEK #2
As you had registered with the broker so you can transfer funds to your trading account. (that’s the disadvantage of discount brokers, unlike banking brokers etc they don’t have 3 in 1 account policies)
Important – Don’t start trading. This will end you up with losing money in market. Keep patience and first learn about trading.
This week doesn’t need much explanation as you just have to read, read & read.
Remember, reading and learning is the crucial part to become a successful investor. More you’ve knowledge, more concise your decision would be.
Day #1 Read the books you ordered before
Reading online is a better way to stay updated but what you’ll get online is views from other mediocre investors. I’m not saying they are not good at investing. Read them too but understanding the opinion of great investors is best when it comes to Investing.
Below are 4 books that I would suggest to everyone who asks me about books on investing (I read most of them and still reading many others):
- Stocks to Riches: Insights on Investor Behavior
- The Little Book That Still Beats the Market
- The Essays of Warren Buffett: Lessons for Corporate America
- The Intelligent Investor
Consider reading first 2 books and if still have time read other 2.
Suggested read: 11 books that will change the way you look at stock market
Day #2 Read the books
Day #3 Read the books
Day #4 Read the books
Day #5 Read the books
Day #6 Read the books
Day #7 Read the books
Also, stay connected with online resources.
And don’t skip this part. Offline learning is far much better than online. No distraction and no access to market news which might change your mind while analyzing stocks due to lack of emotional discipline.
So to have emotional discipline, you should have a strong base which you can only get from books. However, it’s my personal advice.
WEEK #3
This week will the hard working week and if you succeed, I bet your portfolio will glow with excellent stocks. However, there’re no day wise day instructions as it’s all about analyzing stock and it’s on you how many shares you analyze per day.
The purpose is only to enter in a stock at the right time with right value. That’s all you need to do to govern excellent returns from the stock market.
And to fulfill this purpose, I had already written many guides, article, posts, answers…..
So instead of generating new content I would like you to read all of them one by one.
How to analyze stocks in not more than 2 hours (recommended)
The best and worst metrics to track in order to grow your stock portfolio
3 Effective Ways To Double Your Portfolio
Action Plan: Learn how to analyse stock and don’t invest until and unless you gather 6-8 stocks based on the tricks shown in above links. It would nearly take 1 week to do so. After you did it lock your money in that stock proportionately.
Still, I would add some additional tips that I didn’t share in above links. Also, consider reading this.
On paper, optimizing your stock portfolio seems easy enough. In fact, you’re probably following some sort of formula to pick stocks for your portfolio.
Follow a few basic principles, asked your friends, watched/read some recommendation, locked your money and next day your picked stock become top gainer.
Right?
In reality, it’s not this easy.
My experience has taught me that it’s hard work to create a sound stock portfolio.
There are principles to follow, sure. But there’s also a lot of information you need to gain before you can build your dreamed portfolio.
- How does the stock perform in past?
- How does the market treating the stock?
- How did you find that particular stock?
- Does news headline grab your attention to XYZ stock?
- What tools and resource are they using?
- What’s going to make that stock a multi-bagger?
That final question—what’s going to make them give you excellent returns?—is the most important one.
Do you want to know what I really care about when it comes to building a sound portfolio?
Overall performance.
I just want positive overall performance. It might possible that 2 or 3 stock gone negative but the overall performance of your portfolio would be positive, that too with great margins.
According to the studies, “93% of retail traders are losing their money in stock market”
Let me get to the point. Here are some stock picking tactics I’ve had immense success with and that can help you get great stocks for your own portfolio.
- Keep it Simple
Well said: Simplicity is the best policy.
What’s true in life is true in investing too.
Your Stock portfolio is not an exception.
The simpler, the better.
As a retail investor, keep a stock portfolio of 8 to 10 stocks. And if you’re good enough to pick excellent stocks then 4 to 6 stocks would be best.
The idea is: if you’re 99% sure that this half dozens stock (from 20 filtered stock) will outperform the market then why would you waste your money for the opportunity cost of getting more returns in the same duration of time.
Also, it’s too confusing to track 50 stocks at a time. When to buy? When to sell? When to hold? Where to invest?
It’s too confusing to manage bundle of stocks.
I too have a concentrated portfolio of 8 stocks. No more, no less.
Here the crux: Keeping more will reduce the return & Keeping less will increase the risk. So as per my opinion, a portfolio of excellent 6 to 8 stocks is the portfolio that outperforms.
- Use the five-ratio rule
You don’t need to waste your time analyzing each and every stock for hours. Just what you need is 5 minutes to conclude “whether XYZ stock is worth giving time or not?”
This is the default Screener.in stock screen:
And this is the customized screen of my screener account:
You can figure out some extra metrics added in the screen, that’s what help me to decide whether the stock is worth giving time or not.
These tactics are very much helpful to save time while you analyze stocks.
Of course, you can choose your own ratios. If you prefer companies that give 20% of earning as dividend then customized this ratio in the list.
- Never dump your money in top buzzing stocks.
It’s a great barrier to become successful investors. They normally invest in the stocks which are in trending talk. Step out of this internet world and then think as you’re investing a business, not in a product known as the stock that goes up and down on daily basis. This would help you to conclude perfect unbiased conclusions.
Also, consider asking yourself below questions:
- Do I like the stock just because it has fallen to its 52 weeks low?
- Am I biased towards this or that stock just because I’ve spent ten days researching it?
- Am I impressed by just the company’s recent performance?
- Do I like it just because I heard 2 or 3 positive news on web or channels?
When I started investing, I was highly excited for making fortunes but it all disappear after understanding the real world of stock market.
I keep myself up-to-date with latest news and announcements.
In just a week I created a portfolio of 6 stocks and to know, all from Nifty50.
Then I figure out the whole scenario. What the heck I’m doing? How can make fortunes by investing in stocks which are preferred by many? If it is the real way then most of the population would have make fortunes out of the market, as 70% of the total traded volume occurs in large cap.
Then again I optimized my portfolio and this time bought some excellent out-of-stocks which are not currently highlighted but are fundamentally strong and people will be dying to buy it in future.
- Never stuck with your computer/mobile screen
I don’t know about you, but when I first started investing, I keep checking my bought “stocks” about 20 times a day. It was exciting to see that the stock was increasing (even if only a teeny bit).
Same applies vice verse. A drop in the price ponders my heart at a high pace. That movement when I realize that I’m just losing my money for doing nothing but seeing the screen where the price goes up to down and down to up.
And it really hard to see your stock price going down and down and down and also that gasp when price rise.
But if you know that aversion of losing money is more than gaining from the stock market. That’s why you either end up panicking or losing your hard earned money.
- Try not to sell off your stock under year of buying
Many investors are not even aware of the taxes that government charged from you on the profit you made on your investments.
Of course, you might be earning a lot but it’s better to earn more than your existing earning.
If you sell your stock in 1 year, government will charge you 15% tax on profit. So if you made 1 lakh, government will take 15k.
And if you sell it after 1 year, tax rates are 0.
Now it’s understandable – which is the smart move?
- Stop digging when you find yourself in a hole
An uncle of mine once bought a huge amount of shares of Jaiprakash Associates.
He bought it 3 years back when it was quoted at 100 INR and now it is trailing around 8.
Why didn’t he sold out stocks when he found it’s going down?
Interviewing him a bit gave me a good conclusion. Here comes an emotional phenomena…. step by step.
- When the stock goes down to 75 from 100. The thought came to his mind was – “I’ll wait until it again gets recovered”
- When the stock goes down to 50 from 75. The thought came to his mind was – “I’ll wait until it again gets recovered, otherwise my 50% investment will get lost”
- When the stock goes down to 25 from 50. The thought came in his mind was – “I’ll wait until it again gets recovered. I already lost 50%, lets bet other 50 too. May be possible that it may go up”
- Now when the stock is trailing around 8. He may be thinking – “What the heck will I get by selling this crap? let me retain them and wait for any miracle”
At every downside of stock, his “emotions of losing money” and “hoping that stock may go high” conquer his decision. Instead of relying on the vicious circle of advisers, brokers, pro investors etc, he would have relied on financial data of the company.
I would also like to share one of my mistakes I made on betting stock of Tree House (sometimes I also react like a dumb investor)
I bought this stock @76. Now it’s trailing around 48.
My luck! here’s a good news. Guess what? I sold it when it was quoted 58. This decline in price came after Morgan Stanley Asia pull back its fund from Tree House…
You may have thought – “Is he gonna mad? It’s not something good happened to him instead he lose 18 Rs per share”
Yeah, exactly. You’re right at your place but according to me, it’s a good news because I saved myself from losing more 10 Rs per share. I didn’t act like my Uncle acted in the case of Jaiprakash Associates.
This behavior is termed as loss aversion, well explained by Robert Hagstorm in his book “The Warren Buffett Way” :-
“The downside of an investment (a loss) has a greater emotional impact than the upside. This fundamental bit of human psychology is known as asymmetric loss aversion. applied to the stock market, this means that investors feels twice as bad about losing money as they feel about picking a winner”
Side note – Consider reading this book.
- Be greedy when other are fearful and vice versa
I was always in the benefit for following this advice.
I tried it with Tata Steel when it hit by BREXIT – Brexit Fallout: Don’t stay out of market
I tried it with ICICI bank when it hit by NPA – 3 Effective Ways To Double Your Portfolio
Recently, I tried it on HCL tech hot by low EBIT margins – HCL Tech at its 52 weeks low: Is it a great buy?
This technique only works with BSE30 or NSE50 with some exceptions because these stocks are in the index which is representing INDIA. So high chances are they would be the best companies with good management. That’s why these companies 99% recovers their problems shortly.
- Last but most important.
Real success is not measured by how much you earned instead how much people love you. So keep helping others and yourself, stay happy even at the times of market downfall. It’s where the real meaning of life exist.
Well Quoted:
“Money to some extent, sometimes let you be in more interesting environments. But it can’t change how many people love you or how healthy you are”