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Showing posts from April 25, 2021

Beta- Analyzing mutual funds

Guru Prasad -
 The risk of any investment made always depends on the volatility in the following investment. If we can have a factor that could tell us about the volatility of a investment and help us judge our risk and corelate it with our capability to take risk, how would that be? Well Beta factor is one such factor that could help us know the sensitivity of our stock or portfolio fund that we have chosen to invest. Beta ratio:- Understanding Beta:-  Beta is a metric used in fundamental analysis to determine the volatility of a stock with comparison to the overall market that has a fixed beta ratio of 1 always. Stocks or funds that are ranked with a beta ratio above 1 generally tend to fluctuate more and hence give access to more risk but yielding higher returns too at the same time if gone in favour. While the risk is slightly less in the funds with beta ratio below 1 they give less but yet stable return on investments generally. Hence, the beta factor can be said as a risk- reward factor, helpi
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P/E Ratio in stock analysis

Guru Prasad -
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 P/E ratio or the Price to earnings ratio is the criteria which is used to compare with various other factors or is itself observed to understand weather a stock is undervalued or overvalued based on its share price. It can be calculated by simply dividing the price of the stock by the earnings per share of a stock.                                 P/E=  Share price / Earnings per share  The P/E ratio  helps investors determine the market value of a stock as compared to the company's earnings. In short, the P/E shows what the market is willing to pay today for a stock based on its past or future earnings. A high P/E could mean that a stock's price is high relative to earnings and possibly overvalued. Conversely, a low P/E might indicate that the current stock price is low relative to earnings or undervalued. However P/E ratio always individually can't be used to determine the value of a stock since sometimes a high P/E ratio could also show the sentiment and expectations of
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What are ETFs? How is it different from mutual funds?

Guru Prasad -
 What are ETFs:- An exchange traded fund (ETF) is a type of security that tracks an index , sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.  ETFs generally offer low expense ratios and fewer broker commissions than buying the stocks individually.  An ETF is called an  exchange traded  fund since it's listed and traded on an exchange just like stocks. The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market. There could be various types of ETFs such as Bond ETFs, Industry ETFs, Commodity ETFs, Currency ETFs, Inverse ETFs.  How is it different from a mutual fund or index funds:- ETF prices keep fluctuating throughout the trading hours just like any other st
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SPAC and equity based crowd funding

Guru Prasad -
 SPAC( Special purpose acquisition companies) and equity based crowd funding are generally two concepts of the U.S stocks which haven't really been ruled out in India but are being analysed by SEBI if they are vulnerable for the Indian markets too. But the question in what are they? SPAC (Special purpose acquisition companies):-  These are companies  with no commercial operations that is formed strictly to raise capital through an initial public offering  (IPO ) for the purpose of acquiring an existing company. Also known as "blank check companies. " These companies are strictly asked to asked to complete their acquisition within a time frame of just 2 years or else written all the collected funds back to the public.  In 2020, as of the beginning of August, more than 50 SPACs have been formed in the U.S. which have raised some $21.5 billion. The  Investors in these SPACs can range from well-known private equity funds to the general public. Usually when these companies bri
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Replacement cost theory

Guru Prasad -
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  Yes, he is none other than Harshad Mehta the well known market manipulator. You all must have seen the series scam 1992, the series which has blown everyone's mind in the last one year. If not no problem. But, what is this replacement cost theory that was propogated by him. Harshad Mehtha proclaimed that the rise of ACC stock was just due to the philosophy of  'Replacement Cost Theory'.  Replacement cost is a cost   that is required to replace any existing asset having similar characteristics or the cash outlay  that firm has to pay in order to replace  an old asset at the current market price . An organization often chooses to replace its assets when the repair and maintenance costs increase beyond an acceptable level over a period of time. It is found out by calculating the present value  of the asset, followed by its useful life. The insurance company’s primary function is to evaluate whether the decision of replacement is better than repair and maintenance or not. It
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Share holdings of a strong large cap stock

Guru Prasad -
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 Share holding of a company could be a really good criteria to understand the strength of any company and make your investment more secure. But what do I mean by share holdings? Yes, obviously it does relate to the percentage of holding the promoters have in the share. A very less holdings from the promoters could always be dangerous. Moreover this most importantly the decrease in promoter share holding could be a symbol of the companies reducing assets or funds. The year on year share holding pattern hence plays an very important role in the analysis of a stock. In this blog let us have a look at the pattern of share holding and its survivable capacity of few large cap stocks in particular.  Given below is the share holdings pattern of one of the most well known stocks in India:- The following stock is a large cap stock which has a 72.19% holdings by its promoters even after such a long period of time and hence it shows that the company is in safe hands and hence it has been continous
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Best Blogs

Financial literacy in India

Guru Prasad -
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"If you buy things you do not need, soon you will have to sell things you need." Hey guys. I hope you all must have heard this well known quote by Warren Buffet.  College graduates often spend 16 years gaining skills that help them command higher salary; yet little or no time is spent helping them save invest and grow their money. In a growing and developing nation like India where economy always remains the cause of concern, Do you all know that the financial literacy in India is just 24%, which is the least among it's well competing peers. You don't believe me! Well let me take you through a complete detailed study of the financial literacy in India. What financial literacy means? Financial Literacy is the ability to understand basic financial concepts and the possession of knowledge and skills required to make informed and effective financial planning, decisions using the available financial resources. It is about knowing how to generate, spend, invest and save mon
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Devaluation and depreciation of currency. Are they same???

Guru Prasad -
When the value of currency decreases, people often get confused between devaluation and depreciation. But what is the difference? Is the value of currency really important to be a developed nation? Devaluation:-   Devaluation is the deliberate downward adjustment of the value of a country's money relative to another currency or currency standard. It is done deliberately to reduce the export costs and shrink trade. It also helps in paying debts by printing of more notes which also decreases the value of money. Unlike depreciation, it is not the result of nongovernmental activities. This is often done to render themselves more efficient in the global market and gain better foreign investments by offering a low labour cost to the foreign companies. A export oriented country would always prefer to stay more committed towards a lower currency value as cheaper costs would attract more investors. Depreciation:-  Currency depreciation is a fall in the value of a currency in a floating exch
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SPAC and equity based crowd funding

Guru Prasad -
 SPAC( Special purpose acquisition companies) and equity based crowd funding are generally two concepts of the U.S stocks which haven't really been ruled out in India but are being analysed by SEBI if they are vulnerable for the Indian markets too. But the question in what are they? SPAC (Special purpose acquisition companies):-  These are companies  with no commercial operations that is formed strictly to raise capital through an initial public offering  (IPO ) for the purpose of acquiring an existing company. Also known as "blank check companies. " These companies are strictly asked to asked to complete their acquisition within a time frame of just 2 years or else written all the collected funds back to the public.  In 2020, as of the beginning of August, more than 50 SPACs have been formed in the U.S. which have raised some $21.5 billion. The  Investors in these SPACs can range from well-known private equity funds to the general public. Usually when these companies bri
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3 things to first see while choosing a stock for fundamental analysis

Guru Prasad -
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 When choosing a stock to invest there are obviously many things to look for, but what are those essential things that you should see while shortlisting at the first sight? It is obviously impossible to fundamentally analyse every stock at the first glance and waste time. So let us have a look at how to make it simple:- 1. The market capitalization of the company:- How big company are you looking for to invest? A large cap, medium cap or small cap. Generally a large cap which means a market capitalization over 50,000-60,000 crores is safer to invest comparatively. Smaller companies obviously do give better returns but the risk is also usually that high. Therefore a large cap or a mid cap would do better while choosing the stock. The market cap shows how much the company has expanded over years and how large the company is while investing. Hence this could be set as our first and for most factor. 2. The five year graph of the company:-  Have a look at these images. Looking at the above
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