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Investing in Equity for Beginners and Small Investors

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How should a beginner or a small investor invest in equity?

The answer widely available and promoted widely is ‘SIP karo’-invest in mutual funds through SIP.

Even if you have some lumpsum to invest chances are that you will be told “don’t take the risk of investing in one go, SIP karo”.

Some will suggest a few funds with the “best past returns”. And then quickly you will be told how simple it is to invest in MF, “App download karo aur invest karo”

For some reason, beginners and small investors are expected to be satisfied with these answers-answers that may be right if all you can invest in a few thousand every month but not if your lumpsum and monthly savings are a more than that.

Yes, it has become very easy to buy MF but it is not easy to invest in it successfully.

Challenges faces by new investors

  1. May want to invest in stocks but most advice is only on mutual funds.
  2. Need to deploy their lumpsum savings but most advice is on SIP in mutual funds.
  3. Everyone agrees that selecting mutual funds based on past performance is inadequate and incorrect but most advice is based on past performance.
  4. Market is ever-changing but most advice is one- time
  5. Selection and Portfolio management is not simple enough
  6. Don’t really learn how to invest in equity

There is a need for an investing solution beyond SIP in MF for beginners and small investors. So we decided to design a solution that addresses all the above challenges faced by them.

For whom: If your total investment i.e the lumpsum + 12 times the monthly savings you want to invest in between 1 to 5 lacs you need a better solution to investing than SIP in MF. Read on

What do you need? You need to invest your lumpsum and monthly savings in Stocks, Mutual and Index funds. You need to manage this portfolio i.e. buy, sell or hold these as the market goes through it ups and downs. And you need to do this with some understanding of the process and not just act blindly on someone’s recommendations.

Stocks, Mutual and Index Funds all have their advantages and with proper guidance, you can take advantage of all of them.

What are the benefits of investing in Stocks?

Investing in individual stocks gives you a higher level of control over your portfolio, where you can choose your allocation based on a specific industry and quickly exit once you earn a sizable profit. Since you are in control, there are no additional overheads like fund manager fees. Finally, your decisions are not impacted by external factors as is the case in a Mutual Fund, eg redemption pressure, large inflows, fund manager exit, etc.

What are the benefits of investing in mutual funds?

Mutual funds help you diversify easily with a very small investment. A typical MF holds around 50 stocks in its portfolio, thus presenting lesser risks if one stock was to perform poorly. A dedicated fund manager who understands the Indian markets actively monitors and oversees the fund so that inexperienced investors don’t have to sweat it. MFs make it easy for beginner investors in India to follow a disciplined way of investing through.

What are the benefits of investing in index funds? 

An Index Fund is a mutual fund where the portfolio of stocks is not actively selected by a fund manager but is a replica of the Index eg the Nifty 50 Index Funds’ portfolio matches that of Nifty 50. Mutual funds are called actively managed funds while investing in index funds is called Passive investing. The advantage of an Index fund is that its portfolio is predictable and it comes at a lower cost. So you get the benefit of diversification at a lower cost. However, the decision to invest in Index funds is similar to any mutual fund.

How do you invest in Stocks, Mutual and Index funds?

The answer is Think Portfolio! Ensure you have a diversified portfolio of strong companies and MFs.

But how do you select the few for your portfolio from amongst a larger set of strong companies and MFs. The answer is you select the ones which have an attractive upside potential over the next 3 years.

This prevents you from buying at expensive prices-thus avoiding the risk of mediocre returns and sharp fall in case the market/stock corrects for whatever reasons.

Why 3 years? So you choose like an investor-expect growth from the company’s performance and not the market price movement (which is a trader’s mindset) which is a bonus when it happens.

How to implement this?

It is not feasible for a beginner to screen stocks and MFs and select the ones to invest in. This is the job of your advisor. However, you should not be expected to follow someone’s advice blindly. What you need is to understand the process followed in making the recommendations and enough transparency to know that due process has been followed. This will enable you to invest confidently and stay invested.

When we search for a solution based on all the above- advice to build a portfolio of stocks, mutual and index funds to invest both lumpsum and monthly savings and provided transparently; we found that there is nothing available for beginners and small investors. So we decided to build one

MoneyWorks4me PRO

With PRO you will be able to invest

  1. In a portfolio of strong company stocks with an attractive upside potential
  2. Lumpsum in a set of funds with attractive upside potential
  3. SIP in a set of funds with different investment styles

You have the flexibility to choose where you wish to invest and how much. We recommend investing your lumpsum equally in the stock portfolio and in MFs for better returns and a diversified portfolio.

The PRO Dashboard is designed to give you the most important decision related information right there

  • For stocks, you can see how it is rated on its 10-year performance, Future Prospects, and its Upside Potential.
  • For MFs you can see its Investing Style (Momentum, Quality, Value, Small Cap), Fund Quality (as compared to other funds) and it Upside Potential

An analyst note explains the rationale for the recommendation in brief. And you will be able to get further details when you click the stock or fund name.

You can also do the stock transactions from the PRO Dashboard.

If your trading account is either ICICI Direct or available on the smallcase gateway (Zerodha, HDFC Sec, IIFL, Edelweiss, 5 Paise, and Alice Blue) you can safely and conveniently complete the transaction using the APIs on the PRO Dashboard.

This convenience enables you to SIP in the stock portfolio if you do not wish to SIP in MFs.

Finally, when you transact from the PRO Dashboard your portfolio is automatically updated in the Moneyworks4me Portfolio Manager (which has many benefits).

Visit the site to understand PRO better and see a video of how simple it is to use.

Click here to view our plans and sign up.


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The post Investing in Equity for Beginners and Small Investors appeared first on Investment Shastra.



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Share Market

3 Undervalued Dividend Stocks to Buy for Long-Term Gains

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Stock prices have been unpredictable in 2020 due to COVID-19. While the broader markets have staged a comeback after entering bear market territory earlier this year, several stocks across sectors still trade at a discount. We’ll look at three large-cap Canadian stocks that trade at cheap multiples, making them attractive to value investors.

An undervalued energy giant

When it comes to investing in dividend stocks, it is difficult to ignore Enbridge (TSX:ENB)(NYSE:ENB). The sell-off in the energy space has driven Enbridge stock to $40.2, indicating a forward yield of 8.1%.

The Canadian infrastructure giant has lost over 20% in 2020. However, despite volatile crude oil prices and tepid demand, Enbridge is on track to achieve its full-year forecasts. Enbridge has a resilient contract-based business model, making it immune to commodity prices.

Despite a high yield, the company’s payout ratio is less than 70%, giving it enough room to increase dividends once the market stabilizes. Enbridge currently has allocated $11 billion for expansion projects that include new oil and gas pipelines.

The company expects the expansions to increase cash flows at an annual rate of between 5% and 7% through 2022. The company has increased its dividends at an annual rate of 11% since 1995, making it one of the top income stocks on the TSX.

A banking behemoth

Shares of Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are trading at $55.15, which is 28% below its 52-week high. The high unemployment rates in Canada amid the pandemic have made investors wary, as there is a risk of rising defaults.

In order to boost spending, the federal banks have lowered interest rates, which will also impact the bottom lines of banking companies. However, the sell-off provides an opportunity for Canadians to buy a blue-chip company at an attractive multiple.

BNS stock is trading at a forward price-to-earnings multiple of 3.3 and a price-to-book multiple of 1.06. The banking Goliath also has a tasty yield of 6.5% and given its payout ratio of 70%, a dividend cut is unlikely.

In the last 20 years, BNS has increased dividends at an annual rate of 8%.

A utility heavyweight

The third stock on the list is Canadian Utilities (TSX:CU). Shares of this utility company are trading at $31.7, which is 26% below its 52-week high. This indicates a forward yield of 5.5%. Utility companies are some of the safest bets during an economic slowdown, and holding domestic heavyweights such as CU will recession-proof your portfolio.

Canadian Utilities has increased its dividends for 48 consecutive years due to its strong balance sheet and a steady stream of cash flows. The company has over $20 billion in assets, and its rate-regulated business ensures cash flows will remain constant and predictable.

Canadian Utilities generates 95% of sales from its regulated business and the rest from long-term contracts. CU has survived multiple slowdowns and is trading at a price-to-book multiple of 1.7.

The Foolish takeaway

The three companies discussed here have been around for several decades. They have a huge market presence and the potential to create massive long-term wealth. If you invest $10,000 in each of these three stocks, you can generate over $2,000 in annual dividend payments.

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The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends BANK OF NOVA SCOTIA. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

The post 3 Undervalued Dividend Stocks to Buy for Long-Term Gains appeared first on The Motley Fool Canada.



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Share Market

Tyson Foods: A Quick Discussion

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Just last week, Germany had a swine fever affect almost its entire hog population causing Tyson Foods to spike 5 percent. https://www.theguardian.com/environment/2020/sep/10/german-farmers-face-possible-pig-culls-as-african-swine-fever-discovered

About 16 months ago, China´s hog population was decimated from another swine fever.

It is going to take China 3 to 4 years to get their hog herd just back to where they were. https://www.reuters.com/article/us-china-meat-consumption/chinas-pork-consumption-falls-as-african-swine-fever-spreads-idUSKCN1SN0HG

Additionally, Each person in China eats 74 pounds of pork a year. It is very Hard to change a habit like that.

The US farming industry gets a lot of flack but the USDA and regulations we have here are superior to countries around the world. Tyson has had issues with workers getting sick, but for the last two quarters they have spent hundreds of millions putting in equipment such as thermal body scanners, air purifiers, and more extensive personal protection equipment that will be permanent investments that will help the health of their factories into the future.

About 12 months ago, Tyson has started actually making plant-based meat products, and hybrid protein products that are appealing to consumers who want to eat less meat. https://www.cnbc.com/2019/06/13/tyson-foods-unveils-plant-based-nuggets-in-move-into-meat-alternatives.html

Yes Beyond Meat and Impossible Foods are growing every year but the numbers are just not there. Tyson´s Revenue 2018 — 40.1 Billion. Tyson´s Revenue 2019 — 42.4 Billion. Beyond Meat 2018 Revenue — 31.5 Million. Beyond Meat 2019 Revenue — 98.5 Million. Beyond Meat projected 2020 Revenue — 440 Million. I really hope Beyond Meat succeeds and it is awesome this company is creating lasting revolutionary jobs, but I think we are simply comparing apples to oranges.

Tyson Foods is a BEHEMOTH and it is time to start saying how can they improve as a company rather than just telling people to stop eating meat! Tyson even produces all of the chicken and most of the beef products that supplies McDonald´s corporation! McDonald´s employs 2 Million people and has an annual revenue of 22 Billion dollars!

Maybe farmers can start giving their cattle a different diet(Wendy´s looked into this and proved that emissions from cows can be cut drastically just on the type of feed the cattle are given). Maybe Tyson can start to build smaller and more spread out slaughtering houses so that several thousand people do not have to come together and work at one location. Maybe we should stop condemning this company that employs 145,000 extremely hard-working Americans.

Because Brazil, with their enormous animal agriculture, is simply going to fill the vacuum if companies like Tyson shrink. Before you start thinking of Tyson as the enemy, just keep in mind that Brazil actively burnt down their rainforest last year in order to clear land to have more ranches and to further expand the amount of heads of cattle they can produce. Remember that hashtag that trended on Twitter #savetherainforest for about 2 weeks and then we all forgot about it and went back to browsing the internet. https://www.washingtonpost.com/world/the_americas/why-brazilian-farmers-are-burning-the-rainforest–and-why-its-difficult-for-bolsonaro-to-stop-them/2019/09/05/3be5fb92-ca72-11e9-9615-8f1a32962e04_story.html

More than 30,000 fires burned in the rainforest in August alone, a nine-year high, according to the space research institute.

The fires have prompted activists to call for boycotts of Brazilian goods. Fifteen fashion labels, including Vans, Kipling and Timberland, have said they will not import Brazilian leather. Finland has called for a ban on Brazilian beef imports to the European Union.

One last final thought – Yes, raising beef and chicken is very water intensive, but so is many other industries and crops. It requires 600 gallons of water to produce one pound of cheese.

https://water.usgs.gov/edu/activity-watercontent.php

One pound of potatoes requires 450 gallons of water to reap. Just one cup of coffee has a carbon footprint of 35 gallons of water! One pound of wheat flour has a carbon footprint of 200 gallons of water!

Let´s looks for solutions and ways to improve and understand the global and complex nature of feeding 8 Billion humans. Thoughts?

submitted by /u/chickenandcheesefart
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Share Market

Which Way Wednesday – Fed Edition

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And once again the Futures are up.  

As you can see from the S&P chart, we have had some massive gaps up in the thinly traded open and then drifted down during real trading at the end of the day.  This is like someone who works for the auction house shouting "100 Million Dollars" on the first bid for a painting to make sure the other suckers in the audience start bidding higher.

In the case of the markets, the Banksters buy up the Futures on thin trading (so it's very cheap to do) and cause the Retail Suckers to pour in and chase the momentum so the Banksters can dump their stocks all day long during real volume trading.  This is how rich people exit the market – they create a buying atmosphere and they take their profits while poor people follow their advice – which doesn't actually apply to their own actions.  You see the big brokerage houses doing that all the time, exiting positions while their analysts are pumping the Tesla stock.

We had a good day yesterday shorting the Dow (/YM) Futures from our trade idea in the Morning Report and congratulations to all who played along.  Our morning call for our Members was:

So we're sticking with our strategy of shorting the indexes (which didn't work yesterday) as we're likely to be rejected here (Dow (/YM) 28,100, S&P (/ES) 3,405, Nasdaq (/NQ) 11,475 and Russell (/RTY) 1,550) and, as usual, we can just short the laggards, which would be /ES crossing below 3,400 and /YM confirming below 28,000 – we should catch a quick ride down but the Fed goes tomorrow and that should give the marketsupport until they are disappointed by that so tight stops above!

As you can see, this wasn't rocket science, the pivot points on the Dow were 28,014 and 27,795 and we simply allowed for the pre-market BS pump job and took a stab at shorting early but once we confirmed the move below 28,000, it was a no-brained to jump in for the 200-point drop on the Dow (at $5 per point, per contract!).  This morning we're back to 28,000 again but we have a Fed Meeting at 2pm so it's not a good day to play the futures – too volatile.

Speaking of volatile, 

 

 

 

   

 

 

 

IN PROGRESS

 

 

 



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