What is Asset/Instrument? What is Asset Allocation ? Ideal Asset Allocation:

What is the meaning of asset/instrument?

While talking of investments we will use word asset and instrument almost in similar sense. Suppose, I want to invest in equity share of ABC LTD, then I will purchase it’s shares from stock exchange. Here equity share is an asset, an equity asset class, while similarly the listed equity share is instrument as well. Many times instrument are multiple then the asset class. For e.g. I want to invest into gold, so here gold is asset class (we will include gold into a broader commodities asset class, then say gold as an independent non-umbrella standalone asset). But there I can invest in gold via, gold futures, gold etf, gold mutual fund and physical as well; so here all these four are instrument, different instruments. However we will not complicate and use both words as mostly meaning same, as it is not of much importance for our fundamental understanding.

Main types of asset classes:

Main Head	Equities	Debt	Commodities/Real Assets	Real Estate
Includes	Equity shares, DVRs, Warrants, Depository Receipts, Equities of Foreign Country listed cos, Equity index etfs, Equity mutual funds.	Bond, Bank FD, Company FD, Government bonds, Corporate Papers, mortgage backed securities, debt mutual funds	Metals like gold silver copper etc. Energy commodities like crude oil, natural gas etc. Livestock like cattle etc. Agricultural commodities.	Real Estate Land, Rental property, listed real estate investment trusts REITs

IMPORTANT NOTE:

We have not included derivatives. So weather derivatives, carbon trading, and power/electricity trading are not included. Derivatives are not an asset class. They are hedging, arbitraging and speculating instruments.

Cash can also be an asset; however it does not incur any return and does not fall into any of 4 investment objective criteria, so not included.

It is not possible to write all possible asset names. We have put some names. There are hundreds of commodities trades. And variety of instruments in debt asset class as well (However one should beware and make strong distinction between actual debt instrument and a derivative of debt instrument).

Also if some mutual fund says it is investing in only ‘real estate companies’ then also it is an equity asset instrument. Similarly if any mutual fund/investment vehicle says it invests only in ‘commodities companies’, then it is also an equity asset instrument.

What is asset allocation?

Now, as we have understood what an asset is and also known different asset classes; we will go ahead.

Basic: Asset allocation is nothing but answering the question to: “What % of investible amount you will invest in each asset class?”

Advance: After answering the question no.1. You will decide which instrument to select in each asset class. You will also decide on monitoring these asset allocated portfolio and make changes to allocations as per your strategy based on pre-determined strategy or based on light of new facts and so on.

IDEAL ASSET ALLOCATION across all asset classes: (Ideally what % of investible should you invest in each asset class)

EQUITIES	DEBT	COMMODITIES	REAL ESTATE	Total
50%	25%	25%	0	100%

*Here we have assumed the investor to be of age 25 and so investment in debt is kept at 25%. We advise investment in debt as much as the age. I.e if you age is 30 you should invest 30% in debt and 70% in equities and so on.

*This allocation strategy is for average investors.

*For large sized portfolios mandated to be managed with asset allocation strategy and diversification (running into several crores and millions) we advocate investment into real estate at 20% which will be reduced from equities investment part.

*Many times the benefit of investing in commodities is inherent in investing in equities. However, direct investment in commodities are increasing and the return on commodities are decoupling day by day as has been emerging as a standalone and sustained long term asset class. Before one decade there was no such thing as commodities investment.

IDEAL ASSET ALLOCATION in Equities Only: (Ideally what % of investible should you invest in Equity Market Classification?)

Large cap, Front line	Midcap	Smallcap	Penny stock	Sectoral classification	International Equities
·         Top 100 market capitalization stocks	·         Top 201-300th list market capitalization stocks	·         Stocks in market capitalization list of 300th and above	·         Stocks having market price of rupees 10 and less.	·         For e.g., if you have provided for certain % to be invested in real estate stocks only then you are said to be investing in a sectoral classification.	·         Investment into foreign stock market must be classified separately as we are addressing average indigenous investor here
50%	20%	10%	10%	None	10%

*You will find many other classifications such as micro cap,

*Please find different article explaining better all these classification within Equities.

*There are at least more than 3 different definitions of large cap, mid cap and small cap stocks. According to one definition large cap=those stocks which are in the top 100 market cap list (market cap/market capitalisation= no of paid up equity shares x current market price of the share); while mid cap is those stocks which comes in 101 to 300^th list in terms of market capitalization, while all other i.e stocks that come in list of 301^st and ahead comes under list of small cap group of stocks. This is not a universal definition. Many people define differently. However we will go with this definition and classify stocks in this fashion for our purpose.

*Some people also put classification of ‘micro cap’. These companies are those whose market cap is very very low. However, we have let it out purposefully as it is not necessary to separately classify and increase complexity.

*Classification of Stocks into further any classifications will add only into complexity than utility.

*Separate provision for sectoral is not required due to the fact that when one is focusing on sectoral specific investing, one is indeed making a saperat portfolio itself. Also, the stocks in this sectoral portfolio will be included in calculating weightage under large cap, mid cap, small cap and penny stocks genres.

At this point it is important to note that ACROSS ASSET CLASS CLASSIFICATION includes Debt, Commodities and Real Estate separately while ACROSS EQUITIES CLASS CLASSIFICATION does not include them.

So, the point is that you have to decide while allocating (1) lump sum money, or (2) SIP money, that you are investing for which type.

We will emphasize mainly on ACROSS EQUITIES CLASS ALLOCATION, however if any investor want to include Debt, and Commodities also then we will devise portfolio accordingly.

What is Investment? Why Invest? Why Invest in Stocks ?

WHAT IS INVESTMENT?

Investment is nothing but parking your income/cash somewhere with an expectation or assurance of interest/dividend or capital appreciation or both (an instrument, of asset class). If you have cash piled up in a locker it is not an investment, it is merely currency or cash amount. Your bank savings account also doesn't come under instruments as it gives only 3-4% return and meant for primarily parking your cash rather than investment.
(However recently some banks have started giving 5-6% interest on savings bank account as well however their minimum criterion is to keep a minimum balance of 1 lack and above)

INVESTMENT OBJECTIVES:

Investment is done for following objectives,

• 1.    Beating rate of inflation
• 2.    Gaining return on money in access of over and above rate of inflation
• 3.    Gaining capital gains
• 4.    Specific Goals (fulfillment of financial planning goals etc.)

DEVASTATING EFFECT OF INFLATION ON YOUR MONEY:

This is how increases your expenses every year and how value of your money declines every year. You can see in the image how inflation rate of 5% increases the amount of your same expenses every year and decreases the value/purchasing power of your savings if not invested.

We have calculated only 5% rate of inflation but as you know the inflation rates are soaring above 7% to 10% many times in this globalized world and due to rising crude oil and commodities prices.

  

WHY INVEST? AND WHY INVEST IN STOCKS?

So, from the above image you can clearly see how Sensex/Stocks have outperformed inflation, which is the first objective of any investment, and given higher return over and above inflation and Bank Fixed Deposite or so called risk free investment instrument as well. This calculation is for over 30 years. But if you look at the history of entire stock market all over the world, equities have always outperformed inflation and debt instruments.

So, it is clear now that one must have investments into equities.

  

THE POWER OF COMPOUNDING RATE OF RETURN:

Just see the difference of investing 5 years more and 3 lakhs rupees more. It is a whopping 71.04 lakh rupees. You can calculate yourself to make sure!

You can also relate this to understand that Mr. B started investing 5 years earlier than Mr. A and look at the difference. So this also signifies the important of starting investing as early as possible.

Below you can see, the same calculation showing power of compounding rate of interest if rate of interest is 15%.

Now we will see below what happens to your investments if the rate of return is 20% on compounding basis.

What is a Stock or Share? What is a Stock Exchange?

What is a Stock or Share?

A stock or Share can be simply defined as a share or ownership into a business which has been formed under a legal registered company.

It is an ownership part. For example ABC Industries Ltd has 1 lakh equity shares.  Suppose Mr.A owns this shares are the owner of the company and so its profit and loss. 

A share is also known as ‘equity’, ‘stock’, ‘scrip’, ‘counter’ also in stock market parlance.

What is a Stock Exchange?

A stock exchange or Share Market is nothing but a place or platform where companies’ shares are listed (listed means –the company has completed formality so that everyday buy and sale can be allowed of its shares on the stock exchange)

In India there are mainly 2 stock exchanges. One is NSE and another is BSE. Notably BSE is world’s 2^nd oldest and Asia’s oldest stock exchange. This shows that Indians were one of the pioneers in investments in the world.

I don’t know much, I don’t have a demat or trading account yet?

No problem. Simply contact us and we will guide you through opening a demat account and trading account and explain you how stock investing works, the important Dos and Don’ts. 

Trading Opportunity in HCL TECHNO

HCL TECHNO=
This stock is currently ruling at 746. 
You can see the triangle on the daily charts. It can anytime break the triangle above 10-20 bucks and rise further. There could be sharp rises of 5% also.

Contact us OR Become member to get accurate TGT, SL level and HOLDING DURATION.

We, and our clients may or may not have any position in stocks recommended, many times we exit before the given target or SL. The stocks recommended to buy may already be recommended to our clients below the given levels earlier or sell recommendations may be already given at higher levels to our clients. We give regular updates to registered members. Become registered member and get benefits of strong research and advice. Click below for details,
http://www.meghainvestments.com/index.html

Technical analysis and stock movements as well recommendations are subject to changes in market condition and news flow of company and the economy. So please remain updated with us. Or contact us directly in case of any query on info@meghainvestments.com or 09377008708

BHARTI AIRTEL: Grab it !

Bharti Airtel is ruling at 314. As you can see it is forming a strong bullish invert head and shoulder pattern.
Above 336, it will catch fire and confirm the pattern. A fast surge could add another 40 bucks then after ultimately crossing 400 in days.

WHY ARE YOU TRADING AND INVESTING IN MARKETS? Welcome !

If you want Trading & Investment Advice because…

1.     You want to generate extra/side income source

2.     You want to build a long term portfolio for your family and kids

3.     You want to increase your standard of living

4.     You want to participate and benefit from the Indian economy and growing stock markets

5.     You have a certain risk capital and you want to try it on stock/commodity trading

6.     You are a full time trader or want to be a full time trader

7.     You are broker or stock market professional

…then you are definitely a smart person!  

MEGHA INVESTMENTS AND RESEARCH team welcomes you to become our client and fulfill your goals…

TATA CHEMICAL: It's not looking good this time

TataChem has strong support at 290-300 level. Below that freefall will take it below 250 in few sessions and even 5-15% intraday cuts possible. Investors should hang on still as the fundamental of the company are intact.
Sell only if sustains below 299 and gives close on weekly basis.
Then after sell on every rise as far as it remains below 299.
299 is its multiple bottom support level. The analysis of MACD, and RSI are convincing this time that it will break this level and go down to make new 3-4 years low. Previously on more than 4 ocassions it took support at this level due to recovery n MACD and RSI variables.
While if it starts consolidating at this level then may rise well above. So follow all notes.

This stock can fall further down. Exit investments

ICRA LTD. is ruling at 993 levels. It has been over 1500 without any fundamental reason.
We see the stock price weak in next few months or even for more than a year from now on.
Exits from investment based positions are recommended.
The stock is a 100% exit if breaks 975 level. And closes below 955 on weekly basis.
It will take support at 790 only then after.
In the given chart you can see how it risen with support of a cup and handle pattern span over 1.5 years.
Below Rs.790 it will halve from the current levels.
The 975 level is a most important double bottom support level.

We can relate the stock possibly resuming downtrend with a fundamental development of the company trying to expand in to European markets by recent tie up with a Portuguese rating firm.

STATE OF MARKETS: About Turn OR About Turn ?

The 1st About Turn means 'Will the markets resume its rally?' or the 2nd About Turn 'Will the markets resume its downturn persisted throughout February, and March? '

In our last article, we clearly wrote about the 5971 level.
It still is the most important level before 5758 and 5480. We believe this level has been held after a corrective last week on the back of global markets profit booking (how do you understand when some thing is a profit booking only or a panic selling or reversal? You can understand it easily See, when the market corrects without any reason it is profit booking and the possibility is highly likely that the present trend will resume again. For example, you saw that on 13 May markets dropped 500 points, there was some export import data, which were not of much significance; export import data have not been of much significance. Neither was there a global markets sell of of such event. Apart from that the Nifty steadied and closed just above the 5971 level which was a clear clear indication of a complete recovery in next or next to next day. So, the point is that when without any substantial reason markets fall in a visible uptrend or rise in a visible downtrend then it is just a profit booking correction and not a reversal)

Markets are looking like playing sea-saw to hold or cross 5971 level in next week and even if a downtrend is there on Monday and Tuesday you can not tell with conviction that it will go further down or will be below 6000 by the time the week ends. So, try to play cautiously next week. Remain long and short both.
Many stocks have again reached their March low levels. Many of them took support and bounced due to formation of mid term levels double bottom. If stocks decline below that then we will see 10-30% decline in next and pursuing week itself in many stocks like Tata Chem, Tech Mahindra, Bank India, and so on. There are many of them, while many stocks have broken their levels and are destined 100% to fall lower in if not next week then later irrespective of market making new high of not. And this happens nornally when market is rising slowly i.e. for example imagine Nifty rising 25 points daily about average and thus crossing 6350+ in 1 month. This type of move lets the bears hammer weak stocks without being affected with market's uprise.
The trader should position himself on both sides by buying strong and selling weak and then increase sizing which ever the market is going for a two day game. However, the bulls still seem to have control over the market, as you saw how on 13 may also bears' attempt to bring markets down went in vein as well as the bulls were successful to pull the Nifty up above 5971 and close 5982 level on last Friday. You can see the struggle in the form of the long 'shadow' on Friday candle.

Contact us OR Become member to get accurate TGT, SL level and HOLDING DURATION.

We, and our clients may or may not have any position in stocks recommended, many times we exit before the given target or SL. The stocks recommended to buy may already be recommended to our clients below the given levels earlier or sell recommendations may be already given at higher levels to our clients. We give regular updates to registered members. Become registered member and get benefits of strong research and advice. Click below for details,
http://www.meghainvestments.com/index.html


Technical analysis and stock movements as well recommendations are subject to changes in market condition and news flow of company and the economy. So please remain updated with us. Or contact us directly in case of any query on info@meghainvestments.com or 09377008708

NIFTY INDEX AS ON 11 AM 23 MAY 2013

Nifty decined from above 6200 due to a tell-a-tell bearish engulfing type of pattern.WE EARLY ALSO SAID MKT VERY BULLISH WHEN IT CLOSE ABOVE 5971. After it rallied above 6200.  Now watch out for 5971 level again if it breaks below that than market can drift down upto 5770 level support.
It looks like if market is going to give correction then it will be led by international market correction.
But go short only if nifty remains on the given level on weekly basis as market has huge appetite for volatility nowadays.
Don't miss opportunities of short selling in many stocks which can give 5-15% return. At the same time hedge position by remaining long in benchmark indices by trading in call and put options and index futures. IT sector is looking again like it will play its role of defensive. Infy, TCS, and TechM looking strong in the short run.
If market sustains the level, then we may see new high above 6360 in June itself. So, remain in market and remain alert.
Traders must not miss volatility. Yes, they should also beware of high volatility. Don't try to play 'catch up' with market or 'chase' market momentum.
Stay updated with us !

Contact us OR Become member to get accurate TGT, SL level and HOLDING DURATION.

Technical analysis and stock movements as well recommendations are subject to changes in market condition and news flow of company and the economy. So please remain updated with us. Or contact us directly in case of any query on info@meghainvestments.com or 09377008708

WHAT TO DO IN IRB INFRA?

NIFTY SPOT CHART AS ON 14 MAY 2013

NIFTY SPOT CHART AS ON 14 MAY 2013
Please enlarge to view.

ALL TIME TOP GOLDEN RULES FOR TRADING:

ALL TIME TOP GOLDEN RULES FOR TRADING:

1.     Always trade with an actual stoploss.

2.     Trade with adequate capital. Otherwise you can easily lose out early.

3.     Make a trading system of signals which determine your entry and exit. Don’t do it on your hunch or guesswork of market and stock moves. Test your trading system/rules until it proves itself wrong.

4.     Never trade on loan money.

5.     Never risk more than 5% of your trading margin on one single trade.

6.     Forget the result of your last trade; be it profit or loss. Every new trade is new game.

7.     Always keep your risk reward ratio above 1.5 or 2 or more.

8.     Never ever average your losing trades.

9.     Let your profitable trades run.

10. Stop trading/take break after consistent series of losses or profits.

11. Be completely clear why you are trading. Don’t trade for only money. Trading is a journey and not a destination. Trading is not a job, it is a business. Expect not to get paid for days, weeks, months and even for a full year as in business. Trade because you love it. Never trade for fun, excitement or kill the boredom.

12.If you are completely new, start with paper trading, but don’t remain in paper trading. If you are relatively old then start with smaller positions and increase your volume as you go ahead with development of your trading system and right trading mental attitude.

13.Remain emotionally detached and completely rational.

How To Develop A Trading System?

How To Develop A Trading System

           

How to develop a trading system and what are the key “ingredients” in a trading system.  The word ingredients is interesting because I think that trading plans or systems should mimic the way we might bake a cake – meaning, it’s important that there are very specific steps involved in taking a trade  setup, and that you need to know exactly what to do when you’re right or wrong.

 

Here are 5 key phases of development of a trading system:

1.    Logic of the trading system

a.    Use If / Then conditional statements that turn into conditional thought process

b.    Make some of the components dynamic

c.    Price is purest form of analysis. How did the market respond the last time this happened

2.    Syntax – Setup takes place before the trading signal.

a.    What conditions are present prior to entry?

b.    What causes entry?

c.    Stop placement (know where your analysis is wrong)

d.    Profit target (reasonable expectation about where the market will go when you are right)

3.    Testing

a.    Test for 30-50 trades (minimum) historically in one or multiple markets.

b.    How did it perform when you followed the exact rules?

c.    What was the max draw-down?

10 years trend in Equity ownership in India among Promoters, MFs, FIIS, and Retail Investors:

10 years trend in Equity ownership in India among Promoters, MFs, FIIS, and Retail Investors:

Here you can see in the table illustrating the changes in equity ownership in stock market share holding pattern over the last more than 10 years among promoters, FIIs, Mutual funds, and retail investors among others.

Reail investors have pulled out Rs.66000 crore out of equities in the year 2012-13.

We can see that the stake held by promoters has remained at average 50% over the decade, however we strongly believe this trend will change and the average promoters' shareholding in Indian stock markets during the next decade shall be over 40% but below 45%. The rest will be held by FII and FDI investors in the next few years and then and then only retail and mutual fund participation may be able to increase their pie out of the promoter stake decline in market capitalization of the Indian stock markets.

SHANGHAI COMPOSITE INDEX IN DANGER OF BREACHING 2000 AND GOING DOWN