Thursday, November 15, 2018

Notes for How to Avoid Loss and Earn Consistently in the Stock Market

Notebook for
How to Avoid Loss and Earn Consistently in the Stock Market: An Easy-To-Understand and Practical Guide for Every Investor
Prasenjit Paul

Chapter 8
Highlight (yellow) - Page 169 · Location 2781
Avoid companies where debt to equity ratio is more than 1 ( also increasing every year ) , and the interest coverage ratio is less than 3 . Following chart represents the companies with debt to equity ratio of more than 1 .
Highlight (yellow) - Page 171 · Location 2829
having a market capitalization of less than 300 crores with promoters holding stake less than 20 % stake .
Chapter 10
Highlight (yellow) - Page 203 · Location 3479
Average last three years Return on Equity ( ROE ) is less than 10 % .
Highlight (yellow) - Page 203 · Location 3481
Debt to equity ratio is more than 1 for the last three years and no sign of falling it down ( rather increasing ) .
Highlight (yellow) - Page 203 · Location 3482
Promoters pledge more than 30 % of their total shareholdings and no sign of falling it down ( rather increasing ) . For example , if promoters hold 50 % stake in the company , check out whether more than 15 % of the stake is pledged or not
Chapter 11
Highlight (yellow) - Page 219 · Location 3712
Investment Pledge to avoid loss I _____ ( your name ) ______ , hereby state that I will never involve in any form of short - term trading activities ( includes intraday , Futures and Options ) . I don’t purchase stocks with the intention of making profit ( sell ) within 1 - 15 days rather my target is to hold stocks for more than one year or as long as the purchase reasons are valid . I WON’T invest in any company ( stock ) if all the conditions hold true – Last five years average Return on Equity is less than 12 % , and Debt to equity ratio is greater than 1 and increasing for the last few years . Price to Earnings ratio is more than double compared to the last three year’s average growth rate . Promoters pledge more than 50 % of their holdings .
It doesn’t matter how many analysts or brokerage house recommend the stock or how many times the stock appreciated in the past ; I won’t invest if all the parameters hold true . I won’t follow any short - term stock tips provider ; it doesn’t matter how lucrative their offer is or whatever return they promise . I won’t invest blindly on any analyst’s recommendation . If the recommended stock meets all the criteria mentioned below then only I will consider it as an investment bet –
Return on Equity is more than 18 % or improving to reach the desired figure within the next few years . Current debt to equity ratio is less than 1 or reducing significantly over the last few years . P.E ratio is less than twice of the last three years average EPS growth rate . Less than 20 % promoter’s pledging or reducing every year / quarter from a higher level .
After any analyst’s recommendation , I will check all those parameters , if all those parameters hold true , then only I will consider it as investment bet .
I know that many times I will be tempted to invest in stocks because they have gone ( or “ are going ” ) up in price , and other times when I will be tempted to sell my stocks because they have gone ( or “ are going ” ) down.I hereby declare my refusal to take my investment decision just because of stock price movement . Annualised return of 18 % - 30 % from stocks will be sufficient enough for me . There will be few instances where my portfolio will show more than 30 % annualised return ; I will consider those as “ bonus ” and won’t expect the same trend will continue forever . Irrespective of the market condition , I will invest a pre - defined amount into quality stocks periodically ( preferably monthly ) . The investable amount will increase only while my income goes up , it won’t increase / decrease based on market movement or portfolio performance . I won’t follow the daily price movement of my invested stocks rather I will follow only company - specific news and announcements to stay updated . I won’t be bothered about short - term market ( Sensex ) movement , neither try to predict index movement and nor follow any analyst for short - term market prediction . After investing in stocks , I will consider myself as a part - owner of that company and behave like an owner , not like a speculator . I am , by signing below , stating my intention not only to abide by the terms of this contract but to re - read this document periodically ( at least once in a month ) . This contract is valid only when signed by at least one witness . Signed : ________________________
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