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Calculating Correct Investment Returns?

Calculating Correct Investment Returns? The only reason people make investments is to get returns. Most people think that they know how to calculate actual returns. But many don’t use the right method to calculate returns. Using the wrong method to calculate returns can give an incorrect picture of your investments. For example, a person tells you that his investments of Rs 25 lacs in stocks are now worth Rs 75 lac. He is very happy to have tripled his original investment. But when he tells you that this increase has taken place in 15 years, will you still consider it to be a good investment? We try to answer this question by understanding the 3 main ways to calculate returns Absolute returns, Compounded annual growth rates & IRR Let's use the above example to understand these methods.   Absolute Returns Absolute Return (AR) is a simple way of calculating returns. It uses point-to-point values to calculate returns within a given period. It is calculated as follows: Absolute Returns = (Final Value - Initial Value)/Initial...

Introduction to Fundamental and Technical analysis of stock

Introduction to Fundamental and Technical analysis of stock Introduction to fundamental and technical analysis of stock  buying or selling stock should always be preceded by at least some or other form of rational analysis that is backed by data. This ensures that the investor or trader has done some groundwork before taking the buy/sell decision and is not just throwing darts in the dark. At a very broad level, there are two disciplines of doing the stock analysis: Fundamental Analysis of stock Technical Analysis of stock Both are very different from each other and attract market participants of different financial profiles and time horizons.   Fundamental Analysis of stock This analysis requires an evaluation of a company’s business by analyzing its qualitative and quantitative parameters. Qualitative parameters involve rational analysis and earnings projection by analyzing key financial indicators. For this, analysts delve deep into a company's past years balance sheets, income statement, cash flow statements, and disclosures. Quantitative parameters, on the other hand, require analyzing other non-financial aspects of the company like management quality, corporate governance, treatment of minority shareholders,...

Types Of Stocks

Types Of Stocks People invest in stocks to earn higher returns than what fixed income products offer. But all stocks are not the same. Like the companies and businesses, the stocks of different companies also have different characteristics. In general, companies issue two types of stocks– Preferred (have priority over other shareholders) & Common stocks. In line with its name, the common stocks are the first choice of retail investors. We will be focusing on common stocks in this article. Let’s evaluate different stock classifications that are commonly used:   Types of stocks 0n basis of Market Capitalization Stocks are often classified as large caps, mid caps, small caps, and micro caps on basis of their total market capitalization (Current Share Price x Total Number of Shares). Though there are no exact cutoffs about what exactly is defined as a large-cap and what isn’t, investors usually categorize companies under as follows: Large-cap: Market Cap > Rs 10,000 Crore (Cr) Mid-cap: Rs 2,000 Cr < Market Cap < Rs 10,000 Cr Small-cap: Rs...

Impact Of Inflation

Impact Of Inflation Do you remember how much a week’s worth of grocery cost you 2 or 3 years back? Does the same amount of grocery still cost you the same? We are sure that the answer is a big and an emphatic NO! This is the impact of inflation. To put it simply, inflation is a general rise in prices of various goods and services year after year. With each passing year, inflation reduces the number of things you can buy with a fixed sum of money. So if you were able to purchase 5 kgs of an item for Rs 200 in the year 2011, chances are that you would get lesser amount (maybe just 3 kgs) of the same item for Rs 200 in 2016. Causes of Inflation Sometimes, people have sufficient money and continue to buy goods and services, thereby increasing their demand. This increase in demand leads to an increase in prices, and hence - inflation. At times, the prices of raw materials used in production can...

BRACKET ORDER EXPLAINED

BRACKET ORDER EXPLAINED Every profitable trader looks to maximize gains while cutting losses. It is a fairly common knowledge that trading in financial markets always involves some amount of risk. What if we told you that you can control risk and also be away from the trading terminal? Yes! You heard that right! Wouldn’t it be nice if you can automate all your trades? And not be glued to your screen like your grandma watching her favorite soaps on TV? Yes? So let’s begin.   What is a Bracket Order? A Bracket Order is an advanced intraday order that is accompanied by a compulsory Target and Stop Loss Order. In simple words, this resembles a bracket which helps traders automate their trades. A Bracket Order offers high leverage and is available in Equity Cash, Equity F&O, Commodity F&O, and Currency F&O segments. It is a type of order where you can enter a new position along with a target/exit and a stop loss order. Hence, the order itself contains 3 orders embedded...