Why should you consider investing in stocks?

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It’s impossible to predict the stock market’s movement, but amidst the unpredictability, the benefits of investing in stocks remain unchanged. What needs to be changed is the people’s perspective towards the risk and reward in the markets. You don’t need a million rupees to invest, rather you can just begin by investing the amount that you last spent on Dinner.

In the last few years, investors have started to look for ways through which they can take their investments to skyrocket levels. Who doesn’t want to see their money grow? The stock markets can be the right personification of a money plant if you invest right, make informed decisions, and consider the risks associated.

“If you don’t find a way to make money while you sleep, you will work until you die.”

Read On to understand the hard fact-based reasons to invest in stocks:-

  1. Monetary Growth :

When done right, you can grow the money you invest by anywhere from 7% — 10% per year over in the long run.

If you invest ₹10,000 in the stock market today and it gains roughly 7% per year, you’ll turn that ₹10,000 into ₹20,000 in just 10 years.

Think about that.

2. Invest because History repeats itself

Historically stocks have Gone up. Though there have been crashes, pullbacks and corrections but they’ve kept up along with the growth in economies.
For example: Here NIFTY 50– a benchmark Indian stock market index that represents the weighted average of 50 of the largest Indian companies from July 1990 to May 2021.

While there are a lot of fluctuations but the Uptrend remains intact, Imagine having invested for a period of 20 years; You would have made a handsome amount of money.

3. Enables Compounding


In simple terms; Compounding means to re-invest the money that you’ve made in terms of capital gains or interest to generate additional returns.

Imagine having invested the amount of ₹10,000 at an annual growth rate of 10%. By the end of the year you’ll be standing at ₹11,000 and if you do not withdraw the return and re-invest ₹11,000 over again at a growth rate of 10% By another year your investment would have grown into ₹12,100. That’s how compounding works.

4. Knock-off inflation

Inflation is the slow but steady force that makes things cost more over time. Remember how your grandparents could buy 10 candies for just ₹1 and now you just get 1 candy for ₹1. This means that over time money loses it’s value.

Today, if you’ve ₹1,00,000 and you keep it in a safe, After 10 years it won’t be worth what it is right now. If you can buy a Scooty with this amount right now, Maybe in 10 years, You’ll only be able to buy a bicycle.
Invest the money wisely that you’ve at hand and maybe over time you’ll be able to buy a BMW.

5. Save for retirement

If you start investing when you’re young, you can build a tremendous amount of wealth for when you’re older.

6. You can be a part owner of the company

When you buy even a single share of a company, you’re officially a part owner. Imagine having invested in TCS; Doesn’t it sound great to be a part owner of the company? Also it comes with great returns.

For example- You invested in TCS in 2009 at ₹100 per share, In 2021 TCS is trading at around ₹3,086; You could’ve been sitting over a return of around 2986% on your investment.

7. Invest to learn

Investing in stocks will teach you a ton!

You’ll learn a lot about the stock market, and how companies work, what makes them succeed or fail, how products come to market, how economies impact companies, and much more. It’ll widen your logical approach and will give you an edge over thoughtful reflection. You’ll log into your account one day and see how much you’ve made and be proud.

To Conclude, There’s no need to rush out right now and invest in the stock market. First, do your homework, set realistic goals and expectations, and figure out how to use the available information to your advantage. It takes commitment, patience, smart decisions, and steady work to make your money grow over time. Skip out on any of those things and you risk losing money in stocks.

Read about Investing- https://www.tradetales.in/what-is-investing-in-stocks/

What is investing in stocks?

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When you think of investing the first thing that comes into mind is this complicated world of stock market. Where there are so many charts and numbers. It’s easy to get confused. So let’s break it down and let’s try to make sense out of it through an example.

How do you grow a plant? You first sow the seed in the soil. Give it as much water, sunshine. Then, one fine day, you see a small stem and the first few leaves crop up. Over time, the small stem grows large. The plant them blooms flowers and even fruits. For the rest of our life, you benefit from your initial efforts in planting the seed. Investing is similar.

Investing is the art of committing resources (Money) into some endeavor or thing (Financial investment) in the expectation of a positive return (More money). There are ‘N’ number of options available for allocating money but let’s primarily focus on stocks.

What is a stock?
A stock is an investment in a company. When you purchase a stock from a company, you become a shareholder, and the small piece you own is called a share. Thousands of stocks are available for anyone to buy and sell on public exchanges. For this reason, stock investments are some of the most well-known and popular ways to invest and build wealth.

How does Investing work?

Investors buy and own stocks in hopes that the company will succeed. When the company does well, its stock owners share in those profits. Conversely, shareholders can also expect their returns to be diminished if the company underperforms or declines. And in the worst-case scenario, a stock owner’s shares could become worthless if the company was to go bankrupt.

How are returns offered?

There are two primary ways that shareholders can earn returns on their investments: capital gains and dividends.

1.Capital Gains-

Let’s say that you bought 100 shares of ABC company at ₹ 50 per share for a ₹ 5,000 investment. Ten years later, ABC shares are trading at ₹ 100. If you sold your shares at that moment, you’d receive ₹ 10,000. You’d profit ₹ 5,000 for an annualized return of 7.18%.

2.Dividends-

You purchase 50 shares of XYZ company which pays a quarterly dividend of ₹ 1. In this example, you’d receive ₹ 50 per quarter and ₹ 200 per year in annual dividend payments from the company. If the company raised its quarterly dividend to ₹ 1.10, your quarterly payout would increase to ₹ 55 (₹ 50 x ₹ 1.10 = ₹ 55) and your annual dividend income would grow ₹ 220.

Dividends give investors a means of realizing income without having to sell any of their shares – even during years that the stock price declines.

Investors may focus heavily on a company’s fundamental and long-term prospects. When you invest in a stock, You’re betting that over time the company will grow. Ignore short term fluctuations. However, there are no guarantees. Whenever a public company fails, it’s stock investors are likely to suffer as well.

The amount of money, needed to invest depends largely on the type of investment and the investor’s financial position, needs, risk appetite and goals. Despite how you choose to invest or what you choose to invest in, Read and research over it and ‘Never invest in a business that you do not understand.’

 

 

 

What are the different types of analysis a trader must be conscious about?

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By the above statement different types of analysis, it simply means how a trader or investor estimates the future price movements as it is a high probability game not gambling. 

There are a large number of organizations who pay to Equity and derivative analysts to do the analysis for them and if they were gamblers those bankers would be picking anyone randomly from the streets and get the job done.

So, in this blog post we are going to learn about the different types of analysis one Trader or Investor must learn before diving into the stock markets. Have you guys ever wondered that how these big players earn constantly from the markets? The reason is they are good at analyzing and estimating the market movements and if you’ll look at their trading or investing style, you’ll find that they are masters at so many different kinds of methods which are available for everyone. 

The main goal of Trade Tales is to cut the noise and provide you with new and back tested modern methods of trading and investing so don’t forget you leave without scouting.

The different types of Analysis used by Traders and Investors are as follow-

1.Technical Analysis.

2.Fundamental Analysis.

3.Derivative Data Analysis.

Well, all of these are very vast methods so we’ll try to cover them in small parts with different blog posts but just to give you a glimpse about them let’s continue…

Technical Analysis is all about studying the charts and estimating the price movements solely based on what charting has to say. There are a lot of methods which are used by traders to anticipate such moves ex- Price action, Harmonics, Fibonacci, Elliot wave theory and much more. Some people often get confused when technical guys on their social media uses terms like RSI of ABC stock is 55, Stock might take support from the moving average 20 well all these are types of technical analysis indicators. In the past a lot of research has been done in this field and it has produced a lot of methods to trade Intraday, swing or even invest money solely based on technical analysis. 

But why does technical analysis work?? The answer to this question is “HISTORY REPEATS ITSELF”. Now what do I exactly mean by History repeats itself? So, in technical analysis basically we study the behavior of price action patterns in the past and how it played out after that because of the greed and fear we humans have. The way people reacted to those patterns because of Fear and Greed in the past we estimate that the same way they’ll react to it again as the psychology never changes only time does. 

Have a look at this Nifty 50’s chart how a previous channel breakout led to 2 years of Bull market and after that same thing happened over again in 2020 so what is your view about this chart do comment below. There is always a debate going on between technical analysts and fundamental analysts that technical analysis focuses on short time frames but here we can also estimate a long-term view as Technicals are somewhere displaying what fundamentals have to say. It basically depends on you what kind of analyst you aspire to become as both of them will definitely help you make money if you use the right approach.

Fundamental Analysis is a totally different approach from technical analysis as here the analyst has to study the business from various aspects like Demand supply scenario in the economy, peer comparisons, politics as one has to forecast a long-term view over the asset class in which the investor is interested. For short- term gains technical analysis is a much reliable method or one can adopt Techno – Funda analysis a mixture of both.  It’ll take you some time to get comfortable around Fundamental analysis as there are a lot of Data points which needs to be decoded to make a view over the markets. The basic knowledge about the business, financial reports, balance sheets, ratios etc. will get you started in Fundamental analysis.

Derivative Data Analysis is a completely different approach from both of these types of analysis and Traders are the ones who mostly prefer this type of analysis in sync with Technical analysis. Derivative data also called Futures and options data helps us on having a view that what are the big players doing in the market are they net sellers or buyers in the index future & options and stock futures & options. Further, more some people also use Open Interest to determine the support and resistance levels based on OI data. We’ve discussed about derivative data analysis in detail click here-

So, these were the main types of analysis a Trader and Investor must learn before starting their expedition in the stock markets and if you go through them slowly and nicely, you’ll be able to figure out which type of trader you are. 

Types of Traders- 

 

 

Books you must read before hopping into the stock market

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Every Day many people start their journey in Trading and Investing without adequate knowledge so this post is going to focus on the books that I’ve read before starting my own journey.

  1. Technical Analysis of the Financial markets by John J. Murphy.
  2. Japanese Candlestick Charting Techniques by Steve Nison.
  3. The art and science of Technical Analysis: Market Structure, Price Action, and Trading Strategies by Adam Grimes.
  4. Stock Trading & Investing by using the Volume Price Analysis by Anna coulling.
  5. Trading in the zone: Master the market with confidence, Discipline and a winning attitude by Mark Douglas.
  6. Market Wizards by Jack D. Schwager.
  7. Stan Weinstein’s Secrets for Profiting in Bull and Bear Markets. (Currently Reading)

Well, these are the books that’ve helped me a lot in my trading journey but one mistake I made initially was to jump from one book to another and finishing them very quickly.

My advice to you here would be that first- understand the concepts clearly and then start with charting side by side which will give you an extra edge in building your own trading system later. After you get comfortable with your trading style, you can further learn some of the advance topics as learning never stops in this career. 

Investing Books–

  1. Dual momentum Investing by Gary Antonnaci.
  2. The Intelligent Investor by Benjamin Graham.

What is Stock Trading?

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What is Stock Trading?

To put it simply, when we exchange goods and services with one another in terms of cash or barter system it is called trading but in financial markets it is a little different because here we are trying to buy one company’s shares and when the value increases, we sell them in a very short span of time.
Here at Trade Tales you’ll learn how to trade and invest in the financial markets efficiently but let’s first understand what is like to trade in the financial markets?

Trading in Financial markets is same as we’ve mentioned above but think of a stock trader- what they actually do is buy shares of a company (or a small part) of a company and sell it when the prices go up. Now traders can also be classified into two categories mainly-
Intraday traders.
Swing traders.

Buy today sell tomorrow vice- versa traders.

Intraday Traders are the one who trade between (9:15 – 3:30) Indian standard time or between the Open and Close of a day. They mainly focus on trading hot stocks which have a potential of very good momentum or are at least volatile. All the orders for buy/ sell are squared off within the trading hours. Well, it requires high expertise to trade in stocks and indices on intraday basis. Along with that, one must have a good amount of capital to mitigate the risk.

Swing Traders mainly buy and hold till their desired targets are not achieved and their time span can be from 1 Day to 2-3 months. Swing trading carries lesser risk than intraday trading as sometimes market corrects very fast on account of any bad news so at that time if a trader is long in any stock, future or options he/she has to bear the consequences while the swing trader can hold the stock and has an option of doing discounted shopping if the conviction towards the upside of a trade is high.

Buy Today Sell Tomorrow traders are the guys who mainly trade gaps or the ones who estimate the moves well in advance and then trade them within 2 days. Let’s take one example of BTST traders-

Suppose Mr. Him is short on a stock ABC and aftermarket hours the company is going to announce the quarterly results which the trader has estimated to be bad and He is now expecting that the stock might gap down tomorrow. In this case, the trade is going to be Sell today buy tomorrow as the trader is short on ABC. If the stock gap downs tomorrow Mr. Him is going to be in good profits and if not then he has to bear the risk and square off the trade next day. Taking positions today and squaring it off tomorrow is called BTST or STBT.

There are ‘N’ number of instruments in which one can trade like stocks, crypto, commodities and indices. One can always plan according to their lifestyle in which instruments they want to trade ex- Office goers or salaried people mainly take swing trades in stocks and can trade intraday in commodities as it has long active hours as compared to stock markets.

After understanding what trading is and what are the main categories of traders, Don’t forget to tell us in the comments which one you wish to be?

 

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