PRECAUTIONS WHILE INVESTING
MANAGE YOUR RISKS
RISKS OF INVESTMENT :
EXERCISE CAUTION WHILE INVESTING
SEBI TAKES ACTION AGAINST UNREGISTERED ADVISORY WEBSITES
Dated 25.03.2019 : Recently Security & Exchange Board of India ( SEBI ) has issued orders against certain persons who were running advisory websites assuring gullible investors of huge unrealistic profits .
As per SEBI Order dated 20.03.2019 , the modus operandi of the promoters was
" The promoters create unregistered investment advisory websites periodically and lure investors by promising assured monthly income with unbelievable returns of 300-800% on buying and selling of securities based on the tips provided by them. They gave fancy names to schemes as Jackpot package , zero loss package etc . Once the subscription is received, they either give stock tips for few days to the subscribers and then stop entertaining their calls, or avoid the calls of the subscribers entirely without giving any stock tips. They claim in their websites that they are SEBI registered Advisory firm without obtaining the SEBI registration as an Investment Adviser under SEBI (Investment Advisers) Regulations 2013. "
It is reported that many of the clients lost huge amounts , falling prey to the scam . Losses included advisory subscription payments and loss in trading . Based on the complaints received SEBI has acted against the websites and asked bankers to withhold operations in the accounts of the websites .
The concerned websites were
www.trade4target.com
www.niftysureshot.com
www.mcxbhavishya.com
www.callput.in
www.newsbasedtips.com
www.futuresandoption.com
www.optiontips.in
www.commoditytips.in
www.sharetipslive.com
www.thepremiumstocks.com
www.callputoption.in
www.tradingtipscomplaints.com
To read the complete order of SEBI , CLICK HERE
FAKE SMS TIPS LURING YOU TO BUY STOCKS
Dated 23.01.2018 : Now a days we are receiving number of SMS alerts advising us to purchase named stocks . These advises come from unknown entities . Many times we would hear the names of those stocks for the first time and many will be penny stocks . Messages typically claim Multibagger stocks , breaking news , insider news etc with a advise to buy certain amount of shares at a particular price with a target price of many fold increase the share prices .
Today we received one such message asking us to buy XYZ stock at Rs 63.95 with a sure target of Rs 65.20 and Rs 70 by weekend with a final target of Rs 120 . When we searched for the history of stock , we found
1. The company is making negligible profit for last many years
2. P/E Ratio is 407
3. The company has not distributed any dividend for last 5 years
4. Company has Return on equity of 0.09 % , Return on Asset 0.15 % , Gross profit of margin of -9% .
5 . Promoters are holding just 1 % of the stock which means balance have already sold by them .
6. The prices have come down from high of Rs 668 to Rs 52 by Dec17 and now it is trading around Rs 63 .
It is reported that game of such persons sending unsolicited advises is to artificially jack up the price of shares of the companies which have no base of good balance sheet . Once prices jump as gullible investors put their money in , the original investors sell their shares and disappear .
Be careful of such messages . Independently investigate and decide whether to buy or not . Don't be trapped by scamsters
LOOK BEFORE YOU LEAP , SPATE OF IPOS ARE COMING
Dated 11.09.2017 : We are finding surge in Initial Public Offerings( IPO ) and Offer For Sale ( OFS ) in recent weeks . Last week we reported two of such issues of M/S Bharat Road Networks Limited and M/S Dixon Techonologies ( India ) Limited . In current week we are witnessing another two issues of M/S Matrimony.com Limited and ICICI Lombard general Insurance Company Limited . Further there are host of companies who have lined up with issues , which are expected to hit the market early , including big names like M/S SBI Life Insurance Company Limited , HDFC Standard Life Insurance co Ltd , The New India Assurance Company Limited and smaller companies like Capicit'e Infraprojects Limited , Gandhar Oil refinery , Future Supply Chain Solutions etc .
Presently the markets are at their peak levels with NIFTY crossing 10,000 mark and SENSEX at 32,000 . While it is right time for companies to come up with IPO and for promoters with OFS , is it right time to subscribe for investors ? . Subscribers to many of IPO have also got a good return earlier in 2017 . With the positive mood in the market , issues get oversubscribed , even with ambitious valuations . Hence it has been a win-win situation for both sides so far .
OUR OBSERVATIONS
. Our observations on the subject are as follows :
1. With the market reaching its peak values , some analysts are expecting markets to reach new levels like 12,000 for Nifty and 40,000 for Sensex while some are expecting a correction of 20 % to reach back to 8,000 for nifty and 25,000 for sensex .
2. Whatever may analysts say , markets are having positive thinking and bullish on prices .
3. Many investors have got good returns in recent times by subscribing to IPO . However there are some issues wherein subscribers are incurring losses even when markets are at peak .
4. In the bullish atmosphere , many companies are pushing their IPO with issue prices at a premium . They are sure of success of their issues at these prices .
5 . IPOs are not only lined up with profit making big names , but also by loss making companies . Last week there was an IPO offer from a company which made continuous loss for 5 years . Another company had made losses for 3 years and had made profit only in the previous year .
6. The expectations of companies are proving right , and even the company making losses for last 5 years gets over-subscribed two times .
LOOK BEFORE YOU LEAP
We feel now that time has come to be cautious for investors and to look before we leap in to IPO Market .
1. When wind is blowing , we not only get cool wind , but also dust . Try to segregate
2. We should not participate in euphoria , but after doing analysis of the issues coming up .
3 . Do some home work on company , promoters , sectors and track record .
4. If you are unable to study yourself , take help of neutral analysts who have no interest in the issues . Better if they are not arrangers , managers or undertakers of the issue concerned .
5. Even if a company is growing and making decent profits , check whether it can sustain issue price .
6. Try to avoid such companies which have no good track records and profits are boosted up before issue dates .
After go through all the above factors , you can go through some of the Reviews of good & Reputed analysts and gather their opinions . Finally decide whether the issue is worth investing and how much you can invest in the particular issue .
AVOID SWAYING YOUR DECISION FROM GLOSSY ADVERTISEMENTS OF THE ISSUERS AND CHERRY PICK NEW ISSUES .
GOOD LUCK
PRECAUTIONS BEFORE INVESTING IN AN IPO :
WHAT IS AN IP0 ( INITIAL PUBLIC OFFER )
An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. 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. ( The stock of a corporation constitutes the equity stake of its owners. It represents the residual assets of the company that would be due to stockholders after discharge of all claims on the corporation . Stockholders' equity cannot be withdrawn from the company in normal course . )
With markets going up in recent months , many companies are planning to go public with an eye on realization of higher prices on their stocks in the boom period . However investors have to be cautious before putting in their money to avoid shocks after issue . Some of the precautions we recommend to our readers :
1. WHO ARE THE PROMOTERS ? Check on their back ground , expertise and track record . Integrity of the promoters , which is difficult to find out , plays a major role on the future of the company . Remember saga of SATYAMS
2. WHERE MY MONEY IS GO TO BE SPENT ? Check on the end use of the issue price collected . Whether it is for expansion of business , new venture , off loading of existing debts or just promoters taking back their investment ?
3. IN WHICH SECTOR COMPANY OPERATES ? Know about the operations of the company , its business , its competitors . Whether company can withstand in the environs of the market ?
4. TRACK RECORD OF THE COMPANY : If the company is existing one , check track record of the company and its financials over a period . Is company making consistent profits ? What is the history of dividend payments . Some times company would have already distributed as dividend to the existing promoters , all its reserves before going public . Study its present financial status
5. ISSUE PRICE : Even when all other parameters look good , check on the pricing of the issue .
FOR EXISTING COMPANIES The price to earnings ratio (this is price that the issue is offered upon earnings per share) which would throw light on the pricing of the issue.
operating margins (this is the income from operation less expenses from operation),
Market capitalization (it is the number of share multiplied by the price at which it is offered) with the current companies in the sector that are listed in the market.
FOR THE NEW COMPANIES , as there is no track record , check on the projections , feasibility of projections and status of existing players in the field . You have to be double cautious about new companies
After go through all the above factors , you can go through some of the Reviews of good & Reputed analysts and gather their opinions . Finally decide whether the issue is worth investing and how much you can invest in the particular issue .
AVOID SWAYING YOUR DECISION FROM GLOSSY ADVERTISEMENTS OF THE ISSUERS
PRECAUTIONS BEFORE INVESTING
in a stock market
Risks of an investment in shares is losing at the extreme of all the money invested while rewards are also unlimited . It is a high risk investment as entire money invested can be lost . It is like being a sleeping partner in partnership where business is managed by active partner and sleeping partner's gains depend up on the ability of active partners to generate profit . Only difference is sleeping partner has unlimited liability in a partnership while share holder's liability is limited to shares bought and money invested .
In spite of such a a risk , investors are attracted to Share market . Firstly because of their greed to make more money and secondly lured by the history of the market where many investors have gained with their prudent investments . While risk is a possibility of loss , history of the market shows better yield on share investment than many other modes of investments .
Before investing in shares , one has to study his own financial position , loss bearing ability and the greed he has for the money . A prudent investor will invest only that much funds which he is comfortable to invest in a risky venture . He allocates such a portion of his invest-able surplus which will not make him lose his good night sleep. Further he diversifies his investment in shares to various sectors and sub-sectors of economy so that his risk is not concentrated .
You are parting with your hard earned money , with an intention to make good profit , to a risky investment when you are buying shares . Please remember that there is no guarantee of profit or avoidance of loss , whatever a share broker may promise . Before taking risky adventure , you have to have safety guard to protect your self from huge losses in the venture . Some of the precautions we recommend :
1. TIME & ENERGY : Before parting your money , be prepared to spend your Time and energy to know about the shares that you are going to invest in . Try to understand the business of the company and the market for its share . Knowledge , Time , Effort and DISCIPLINE is necessary to be successful .
2. DIVERSIFY : Do not put all your money in single a basket . Distribute your investment in various sectors and various stocks . Not to invest , say more than 5 % , in any single stock .
3. PATIENCE : Once you have zeroed on any share , have patience to wait for the price you want to pay . Do not go by euphoria of the market .
4. PLAN : Have a plan when to buy , hold up to what price and a stop loss for your trade .
5 . BE READY FOR LOSS : All our knowledge and expertise may not yield desired results in all the time . If you can not afford LOSS , do not enter the market . LOSS is an essential component of the market .
Investment Decisions on stocks :
As a new investor , one requires some advise from the knowledgables and gurus in the absence of personal experience . Each one of the advisors will have his own favorites and he/ she would dish out few selections for action . However it will be prudent for the investor to independently study the company , its promoters , their track record , financial position of the company and the business of the company and be satisfied before investing . In fact it would be better to study various opinions available in the media on the stock and decide for himself to invest what percentage of excess fund reserved for stock investment in to this stock . One can make a short list of " his would be investing shares " for final selection . Investment can be done gradually over the period waiting for the dips to improve the buying cost . One should be careful about the advisors who have personal vested interest in making you to buy a particular stock .
One can think of investing in equity mutual funds before actually start investing in individual shares , as that will give glimpse of how the market movement affects our investment . Equity mutual funds are managed by professionals and would be more diversified than investing in individual stock . However risk level continues to be High Only .