HISTORIC ONE MINUTE DATA FOR NIFTY AND BANK NIFTY

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30 THINGS TO START DOING FOR YOURSELF

#1. Start spending time with the right people. –

These are the people you enjoy, who love and appreciate you, and who encourage you to improve in healthy and exciting ways. They are the ones who make you feel more alive, and not only embrace who you are now, but also embrace and embody who you want to be, unconditionally.

#2. Start facing your problems head on. –

It isn’t your problems that define you, but how you react to them and recover from them. Problems will not disappear unless you take action. Do what you can, when you can, and acknowledge what you’ve done. It’s all about taking baby steps in the right direction, inch by inch. These inches count, they add up to yards and miles in the long run.

#3. Start being honest with yourself about everything. –

Be honest about what’s right, as well as what needs to be changed. Be honest about what you want to achieve and who you want to become. Be honest with every aspect of your life, always. Because you are the one person you can forever count on. Search your soul, for the truth, so that you truly know who you are. Once you do, you’ll have a better understanding of where you are now and how you got here, and you’ll be better equipped to identify where you want to go and how to get there. Read The Road Less Traveled.

#4. Start making your own happiness a priority. –

Your needs matter. If you don’t value yourself, look out for yourself, and stick up for yourself, you’re sabotaging yourself. Remember, it IS possible to take care of your own needs while simultaneously caring for those around you. And once your needs are met, you will likely be far more capable of helping those who need you most.

#5. Start being yourself, genuinely and proudly. –

Trying to be anyone else is a waste of the person you are. Be yourself. Embrace that individual inside you that has ideas, strengths and beauty like no one else. Be the person you know yourself to be – the best version of you – on your terms. Above all, be true to YOU, and if you cannot put your heart in it, take yourself out of it.

#6. Start noticing and living in the present. –

Right now is a miracle. Right now is the only moment guaranteed to you. Right now is life. So stop thinking about how great things will be in the future. Stop dwelling on what did or didn’t happen in the past. Learn to be in the ‘here and now’ and experience life as it’s happening. Appreciate the world for the beauty that it holds, right now.

#7. Start valuing the lessons your mistakes teach you.

 – Mistakes are okay; they’re the stepping stones of progress. If you’re not failing from time to time, you’re not trying hard enough and you’re not learning. Take risks, stumble, fall, and then get up and try again. Appreciate that you are pushing yourself, learning, growing and improving. Significant achievements are almost invariably realized at the end of a long road of failures. One of the ‘mistakes’ you fear might just be the link to your greatest achievement yet.

#8. Start being more polite to yourself. –

If you had a friend who spoke to you in the same way that you sometimes speak to yourself, how long would you allow that person to be your friend? The way you treat yourself sets the standard for others. You must love who you are or no one else will.

#9. Start enjoying the things you already have. –

The problem with many of us is that we think we’ll be happy when we reach a certain level in life – a level we see others operating at – your boss with her corner office, that friend of a friend who owns a mansion on the beach, etc. Unfortunately, it takes awhile before you get there, and when you get there you’ll likely have a new destination in mind. You’ll end up spending your whole life working toward something new without ever stopping to enjoy the things you have now. So take a quiet moment every morning when you first awake to appreciate where you are and what you already have.

#10. Start creating your own happiness. –

If you are waiting for someone else to make you happy, you’re missing out. Smile because you can. Choose happiness. Be the change you want to see in the world. Be happy with who you are now, and let your positivity inspire your journey into tomorrow. Happiness is often found when and where you decide to seek it. If you look for happiness within the opportunities you have, you will eventually find it. But if you constantly look for something else, unfortunately, you’ll find that too. Read Stumbling on Happiness.

#11. Start giving your ideas and dreams a chance. –

In life, it’s rarely about getting a chance; it’s about taking a chance. You’ll never be 100% sure it will work, but you can always be 100% sure doing nothing won’t work. Most of the time you just have to go for it! And no matter how it turns out, it always ends up just the way it should be. Either you succeed or you learn something. Win-Win.

#12. Start believing that you’re ready for the next step. –

You are ready! Think about it. You have everything you need right now to take the next small, realistic step forward. So embrace the opportunities that come your way, and accept the challenges – they’re gifts that will help you to grow.

#13. Start entering new relationships for the right reasons. –

Enter new relationships with dependable, honest people who reflect the person you are and the person you want to be. Choose friends you are proud to know, people you admire, who show you love and respect – people who reciprocate your kindness and commitment. And pay attention to what people do, because a person’s actions are much more important than their words or how others represent them.

#14. Start giving new people you meet a chance. –

It sounds harsh, but you cannot keep every friend you’ve ever made. People and priorities change. As some relationships fade others will grow. Appreciate the possibility of new relationships as you naturally let go of old ones that no longer work. Trust your judgment. Embrace new relationships, knowing that you are entering into unfamiliar territory. Be ready to learn, be ready for a challenge, and be ready to meet someone that might just change your life forever.

#15. Start competing against an earlier version of yourself. –

Be inspired by others, appreciate others, learn from others, but know that competing against them is a waste of time. You are in competition with one person and one person only – yourself. You are competing to be the best you can be. Aim to break your own personal records.

#16. Start cheering for other people’s victories. –

Start noticing what you like about others and tell them. Having an appreciation for how amazing the people around you are leads to good places – productive, fulfilling, peaceful places. So be happy for those who are making progress. Cheer for their victories. Be thankful for their blessings, openly. What goes around comes around, and sooner or later the people you’re cheering for will start cheering for you.

#17. Start looking for the silver lining in tough situations. –

When things are hard, and you feel down, take a few deep breaths and look for the silver lining – the small glimmers of hope. Remind yourself that you can and will grow stronger from these hard times. And remain conscious of your blessings and victories – all the things in your life that are right. Focus on what you have, not on what you haven’t.

#18. Start forgiving yourself and others. –

We’ve all been hurt by our own decisions and by others. And while the pain of these experiences is normal, sometimes it lingers for too long. We relive the pain over and over and have a hard time letting go. Forgiveness is the remedy. It doesn’t mean you’re erasing the past, or forgetting what happened. It means you’re letting go of the resentment and pain, and instead choosing to learn from the incident and move on with your life.

#19. Start helping those around you. –

Care about people. Guide them if you know a better way. The more you help others, the more they will want to help you. Love and kindness begets love and kindness. And so on and so forth.

#20. Start listening to your own inner voice. –

If it helps, discuss your ideas with those closest to you, but give yourself enough room to follow your own intuition. Be true to yourself. Say what you need to say. Do what you know in your heart is right.

#21. Start being attentive to your stress level and take short breaks. –

Slow down. Breathe. Give yourself permission to pause, regroup and move forward with clarity and purpose. When you’re at your busiest, a brief recess can rejuvenate your mind and increase your productivity. These short breaks will help you regain your sanity and reflect on your recent actions so you can be sure they’re in line with your goals.

#22. Start noticing the beauty of small moments. –

Instead of waiting for the big things to happen – marriage, kids, big promotion, winning the lottery – find happiness in the small things that happen every day. Little things like having a quiet cup of coffee in the early morning, or the delicious taste and smell of a homemade meal, or the pleasure of sharing something you enjoy with someone else, or holding hands with your partner. Noticing these small pleasures on a daily basis makes a big difference in the quality of your life.

#23. Start accepting things when they are less than perfect. –

Remember, ‘perfect’ is the enemy of ‘good.’ One of the biggest challenges for people who want to improve themselves and improve the world is learning to accept things as they are. Sometimes it’s better to accept and appreciate the world as it is, and people as they are, rather than to trying to make everything and everyone conform to an impossible ideal. No, you shouldn’t accept a life of mediocrity, but learn to love and value things when they are less than perfect.

#24. Start working toward your goals every single day. –

Remember, the journey of a thousand miles begins with one step. Whatever it is you dream about, start taking small, logical steps every day to make it happen. Get out there and DO something! The harder you work the luckier you will become. While many of us decide at some point during the course of our lives that we want to answer our calling, only an astute few of us actually work on it. By ‘working on it,’ I mean consistently devoting oneself to the end result. Read The 7 Habits of Highly Effective People.

#25. Start being more open about how you feel. –

If you’re hurting, give yourself the necessary space and time to hurt, but be open about it. Talk to those closest to you. Tell them the truth about how you feel. Let them listen. The simple act of getting things off your chest and into the open is your first step toward feeling good again.

#26. Start taking full accountability for your own life. –

Own your choices and mistakes, and be willing to take the necessary steps to improve upon them. Either you take accountability for your life or someone else will. And when they do, you’ll become a slave to their ideas and dreams instead of a pioneer of your own. You are the only one who can directly control the outcome of your life. And no, it won’t always be easy. Every person has a stack of obstacles in front of them. But you must take accountability for your situation and overcome these obstacles. Choosing not to is choosing a lifetime of mere existence.

#27. Start actively nurturing your most important relationships. –

Bring real, honest joy into your life and the lives of those you love by simply telling them how much they mean to you on a regular basis. You can’t be everything to everyone, but you can be everything to a few people. Decide who these people are in your life and treat them like royalty. Remember, you don’t need a certain number of friends, just a number of friends you can be certain of.

#28. Start concentrating on the things you can control. –

You can’t change everything, but you can always change something. Wasting your time, talent and emotional energy on things that are beyond your control is a recipe for frustration, misery and stagnation. Invest your energy in the things you can control, and act on them now.

#29. Start focusing on the possibility of positive outcomes. –

The mind must believe it CAN do something before it is capable of actually doing it. The way to overcome negative thoughts and destructive emotions is to develop opposing, positive emotions that are stronger and more powerful. Listen to your self-talk and replace negative thoughts with positive ones. Regardless of how a situation seems, focus on what you DO WANT to happen, and then take the next positive step forward. No, you can’t control everything that happens to you, but you can control how you react to things. Everyone’s life has positive and negative aspects – whether or not you’re happy and successful in the long run depends greatly on which aspects you focus on. Read The How of Happiness.

#30. Start noticing how wealthy you are right now. –

Henry David Thoreau once said, “Wealth is the ability to fully experience life.” Even when times are tough, it’s always important to keep things in perspective. You didn’t go to sleep hungry last night. You didn’t go to sleep outside. You had a choice of what clothes to wear this morning. You hardly broke a sweat today. You didn’t spend a minute in fear. You have access to clean drinking water. You have access to medical care. You have access to the Internet. You can read. Some might say you are incredibly wealthy, so remember to be grateful for all the things you do have.

INCREASE YOUR GENERAL KNOWLEDGE

1 MOPED is the short term for 'Motorized Pedaling'.
2. POP MUSIC is 'Popular Music' shortened.
3. BUS is the short term for 'Omnibus' that means everybody.
4. FORTNIGHT comes from 'Fourteen Nights' (Two Weeks).
5. DRAWING ROOM was actually a 'withdrawing room' where people withdrew
after Dinner. Later the prefix 'with' was dropped..
6. NEWS refers to information from Four directions N, E, W and S..
7. AG-MARK, which some products bear, stems from 'AgriculturalMarketing'.
8. JOURNAL is a diary that tells about 'Journey for a day' during each
Day's business.
9. QUEUE comes from 'Queen's Quest'. Long back a long row of people as
waiting to see the Queen. Someone made the comment Queen's Quest..
10. TIPS come from 'To Insure Prompt Service'. In olden days to get
Prompt service from servants in an inn, travelers used to drop coins in a Box on which was written 'To Insure Prompt Service'. This gave rise to the custom of Tips.
11. JEEP is a vehicle with unique Gear system. It was invented during
World War II (1939-1945). It was named 'General Purpose Vehicle (GP)'.GP was changed into JEEP later.
12.. Coca-Cola was originally green.
13. The most common name in the world is Mohammed..
14. The name of all the continents end with the same letter that they
start with..
15. The strongest muscle in the body is the tongue.
16. TYPEWRITER is the longest word that can be made using the letters
only on one row ! of the keyboard.
17. Women blink nearly twice as much as men!!
18. You can't kill yourself by holding your breath.
19. It is impossible to lick your elbow.
20. People say "Bless you" when you sneeze because when you sneeze, your
heart stops for a millisecond.
21. It is physically impossible for pigs to look up into the sky.
22. The "sixth sick sheik's sixth sheep's sick" is said to be the
toughest tongue twister in the English language. If you sneeze too hard,you can fracture a rib. If you try to suppress a sneeze, you can rupture a blood vessel in your head or neck and die.

23. Each king in a deck of playing cards represents a great king from
history.. o Spades - King David
o Clubs - Alexander the Great,
o Hearts - Charlemagne
o Diamonds - Julius Caesar.
24. Horse Statue in a Park...
* If a statue of a person in the park on a horse has both front legs in the air, the person died in battle.
* If the horse has one front leg in the air, the person died as a result of wounds received in battle
* If the horse has all four legs on the ground, the person died of
natural causes.
25. What do bullet proof vests, fire escapes, windshield wipers and laser
printers all have in common? Ans.. - All invented by women.
26. A crocodile cannot stick its tongue out.
27. A snail can sleep for three years.
28. All polar bears are left handed.
29. Butterflies taste with their feet.
30. Elephants are the only animals that can't jump.
31. In the last 4000 years, no new animals have been domesticated.
32. On average, people fear spiders more than they do death.
33. Shakespeare invented the word 'assassination' and 'bump'.
34. Stewardesses is the longest word typed with only the left hand.
35. The ant always falls over on its right side when intoxicated.
36. The electric chair was invented by a dentist.
37. The human heart creates enough pressure when it pumps out to the body
to squirt blood 30 feet.
38. Rats multiply so quickly that in 18 months, two rats could have over
million descendants.
39. Wearing headphones for just an hour will increase the bacteria in
your ear by 700 times.
40. The cigarette lighter was invented before the match.
41. Most lipstick contains fish scales.

THE ART OF BEING WELL

If you don’t want to be ill......Speak your feelings.

Emotions and feelings that are hidden, repressed, end in illnesses as: gastritis, ulcer, lumbar pains, and spinal. With time, the repression of the feelings degenerates to the cancer. Then, we go to a confidante, to share our intimacy, ours "secret", our errors! The dialogue, the speech, the word, is a powerful remedy and an excellent therapy!

If you don’t want to be ill......Make Decisions.

The undecided person remains in doubt, in anxiety, in anguish. Indecision accumulates problems, worries and aggressions. Human history is made of decisions. To decide is precisely to know to renounce, to know to lose advantages and values to win others. The undecided people are victims of gastric ailments, nervous pains and problems of the skin.

If you don’t want to be ill......Find Solutions.

Negative people do not find solutions and they enlarge problems. They prefer lamentation, gossip, and pessimism. It is better to light a match that to regret the darkness. A bee is small, but produces one of the sweetest things that exist. We are what we think. The negative thought generates negative energy that is transformed into illness.

If you don’t want to be ill......Don’t Live By Appearances.

Who hides reality, pretends, poses and always wants to give the impression of being well. He wants to be seen as perfect, easy-going, etc. But is accumulating tons of weight. A bronze statue with feet of clay. There is nothing worse for the health than to live on appearances and facades. These are people with a lot of varnish and little root. Their destiny is the pharmacy, the hospital and pain.

If you don’t want to be ill......Accept.

The refusal of acceptance and the absence of self-esteem, make us alienate ourselves. Being at one with ourselves is the core of a healthy life. They, who do not accept this, become envious, jealous, imitators, ultra-competitive, destructive. Be accepted, accept that you are accepted, and accept the criticisms. It is wisdom, good sense and therapy.


If you don’t want to be ill......Trust.

Who does not trust, does not communicate, is not opened, is not related, does not create deep and stable relations, and does not know to do true friendships. Without confidence, there is not relationship. Distrust is a lack of faith in you and in faith itself.

If you don’t want to be ill......Do Not Live Life Sad.

Good humor. Laughter. Rest. Happiness. These replenish health and bring long life. The happy person has the gift to improve the environment wherever they live. “Good humor saves us from the hands of the doctor". Happiness is health and therapy.

THE STOCK MARKET

6.1 – Overview

Having understood the IPO process and what really goes behind the company’s transition from primary to secondary market we are now set to explore the stock markets a step further.

By virtue of being a public company, the company is now liable to disclose all information related to the company to the public. The shares of a public limited company are traded on the stock exchanges on a daily basis.

There are few reasons why market participants trade stocks. We will explore these reasons in this chapter.

6.2 – What really is the stock market

Like we discussed in chapter 2, the stock market is an electronic market place. Buyers and sellers meet and trade their point of view.

For example, consider the current situation of Infosys. At the time of writing this, Infosys is facing a succession issue, and most of its senior level management personnel are quitting the company for internal reasons. It seems like the leadership vacuum is weighing down the company’s reputation heavily. As a result, the stock price dropped to Rs.3,000 all the way from Rs.3,500. Whenever there are new reports regarding Infosys management change, the stock prices react to it.

Assume there are two traders – T1 and T2.

T1’s point of view on Infosys – The stock price is likely to go down further because the company will find it challenging to find a new CEO.

If T1 trades as per his point of view, he should be a seller of the Infosys stock.

T2, however views the same situation in a different light and therefore has a different point of view – According to him, the stock price of Infosys has over reacted to the succession issue and soon the company will find a great leader, after whose appointment the stock price will move upwards.

If T2 trades as per his point of view, he should be a buyer of the Infosys stock.

So at, Rs.3, 000 T1 will be a seller, and T2 will be a buyer in Infosys.

Now both T1 and T2 will place orders to sell and buy the stocks respectively through their respective stock brokers. The stock broker, obviously routes it to the stock exchange.

The stock exchange has to ensure that these two orders are matched, and the trade gets executed. This is the primary job of the stock market – to create a market place for the buyer and seller.

The stock market is a place where market participants can access any publicly listed company and trade from their point of view, as long as there are other participants who have an opposing point of view. After all, different opinions are what make a market.

6.3 – What moves the stock?

Let us continue with the Infosys example to understand how stocks really move. Imagine you are a market participant tracking Infosys.

It is 10:00 AM on 11th June 2014 ,and the price of Infosys is 3000. The management makes a statement to the press that they have managed to find a new CEO who is expected to steer the company to greater heights. They are confident on his capabilities and they are sure that the new CEO will deliver much more than what is expected out of him.

Two questions –

1. How will the stock price of Infosys react to this news?
2. If you were to place a trade on Infosys, what would it be? Would be a buy or a sell?

The answer to the first question is quite simple, the stock price will move up.

Infosys had a leadership issue, and the company has fixed it. When positive announcements are made market participants tend to buy the stock at any given price and this cascades into a stock price rally.

Let me illustrate this further :

Sl No	Time	Last Traded Price	What price the seller wants	What does the buyer do?	New Last Trade Price
01	10:00	3000	3002	He buys	3002
02	10:01	3002	3006	He buys	3006
03	10:03	3006	3011	He buys	3011
04	10:05	3011	3016	He buys	3016

Notice, whatever prices the seller wants the buyer is willing to pay for it. This buyer-seller reaction tends to push the share price higher.

So as you can see, the stock price jumped 16 Rupees in a matter of 5 minutes. Though this is a fictional situation, it is a very realistic, and typical behavior of stocks. The stocks price tends to go up when the news is good or expected to be good.

In this particular case, the stock moves up because of two reasons. One, the leadership issue has been fixed, and two, there is also an expectation that the new CEO will steer the company to greater heights.

The answer to the second question is now quite simple; you buy Infosys stocks      considering the fact that there is good news surrounding the stock.

Now, moving forward in the same day, at 12:30 PM ‘The National Association of Software & Services company’, popularly abbreviated as NASSCOM makes a statement. For those who are not aware, NASSCOM is a trade association of Indian IT companies. NASSCOM is considered to be a very powerful organization and whatever they say has an impact on the IT industry.

The NASSCOM makes a statement stating that the customer’s IT budget seems to have come down by 15%, and this could have an impact on the industry going forward.

By 12:30 PM let us assume Infosys is trading at 3030. Few questions for you..

1. How does this new information impact Infosys?
2. If you were to initiate a new trade with this information what would it be?
3. What would happen to the other IT stocks in the market?

The answers to the above questions are quite simple. Before we start answering these questions, let us analyze NASSCOM’s statement in a bit more detail.

NASSCOM says that the customer’s IT budget is likely to shrink by 15%. This means the revenues and the profits of IT companies are most likely to go down soon. This is not great news for the IT industry.

Let us now try and answer the above questions..

1. Infosys being a leading IT major in the country will react to this news. The reaction could be mixed one because earlier during the day there was good news specific to Infosys. However a 15% decline in revenue is a serious matter and hence Infosys stocks are likely to trade lower
2. At 3030, if one were to initiate a new trade based on the new information, it would be a sell on Infosys
3. The information released by NASSCOM is applicable to the entire IT stocks and not just Infosys. Hence all IT companies are likely to witness a selling pressure.

So as you notice, market participants react to news and events and their reaction translates to price movements! This is what makes the stocks move.

At this stage you may have a very practical and valid question brewing in your mind. You may be thinking what if there is no news today about a particular company? Will the stock price stay flat and not move at all?

Well, the answer is both yes and no, and it really depends on the company in focus.

For example let us assume there is absolutely no news concerning two different companies..

1. Reliance Industries Limited
2. Shree Lakshmi Sugar Mills

As we all know, Reliance is one the largest companies in the country and regardless of whether there is news or not, market participants would like to buy or sell the company’s shares and therefore the price moves constantly.

The second company is a relatively unknown and therefore may not attract market participant’s attention as there is no news or event surrounding this company. Under such circumstances, the stock price may not move or even if it does it may be very marginal.

To summarize, the price moves because of expectation of news and events. The news or events can be directly related to the company, industry or the economy as a whole. For instance the appointment of Narendra Modi as the Indian Prime Minister was perceived as positive news and therefore the whole stock market moved.

In some cases there would be no news but still the price could move due to the demand and supply situation.

6.4 – How does the stock get traded?

You have decided to buy 200 shares of Infosys at 3030, and hold on to it for 1 year. How does it actually work? What is the exact process to buy it? What happens after you buy it?

Luckily there are systems in place which are fairly well integrated.

With your decision to buy Infosys, you need to login to your trading account (provided by your stock broker) and place an order to buy Infosys. Once you place an order, an order ticket gets generated containing the following details:

1. Details of your trading account through which you intend to buy Infosys shares – therefore your identity is reveled.
2. The price at which you intend to buy Infosys
3. The number of shares you intend to buy

Before your broker transmits this order to the exchange he needs to ensure you have sufficient money to buy these shares. If yes, then this order ticket hits the stock exchange. Once the order hits the market the stock exchange (through their order matching algorithm) tries to find a seller who is willing to sell you 200 shares of Infosys at 3030.

Now the seller could be 1 person willing to sell the entire 200 shares at 3030 or it could be 10 people selling 20 shares each or it could be 2 people selling 1 and 199 shares respectively. The permutation and combination does not really matter. From your perspective, all you need is 200 shares of Infosys at 3030 and you have placed an order for the same. The stock exchange ensures the shares are available to you as long as there are sellers in the market.

Once the trade is executed, the shares will be electronically credited to your DEMAT account. Likewise the shares will be electronically debited from the sellers DEMAT account.

6.5 – What happens after you own a stock?

After you buy the shares, the shares will now reside in your DEMAT account. You are now a part owner of the company, to the extent of your share holding. To give you a perspective, if you own 200 shares of Infosys then you own 0.000035% of Infosys.

By virtue of owning the shares you are entitled to few corporate benefits like dividends, stock split, bonus, rights issue, voting rights etc. We will explore all these shareholder privileges at a later stage.

6.6 – A note on holding period

Holding period is defined as the period during which you intend to hold the stock. You may be surprised to know that the holding period could be as short as few minutes to as long as ‘forever’. When the legendary investor Warren Buffet was asked what his favorite holding period was, he in fact replied ‘forever’.

In the earlier example quoted in this chapter, we illustrated how Infosys stocks moved from 3000 to 3016 in a matter of 5 minutes. Well, this is not a bad return after all for a 5 Minute holding period! If you are satisfied with it you can very well close the trade and move on to find another opportunity. Just to remind you, this is very much possible in real markets. When things are hot, such moves are quite common.

6.7 – How to calculate returns?

Now, everything in markets boils down to one thing. Generating a reasonable rate of return!

If your trade generates a good return all your past stock market sins are forgiven. This is what really matters.

Returns are usually expressed in terms of annual yield. There are different kinds of returns that you need to be aware of. The following will give you a sense of what they are and how to calculate the same…

Absolute Return – This is return that your trade or investment has generated in absolute terms. It helps you answer this question – I bought Infosys at 3030 and sold it 3550. How much percentage return did I generate?

The formula to calculate the same is [Ending Period Value / Starting Period Value – 1]*100

i.e [3550/3030 -1] *100

= 0.1716 * 100

= 17.16%

A 17.6% is not a bad return at all!

Compounded Annual Growth Rate (CAGR) – An absolute return can be misleading if you want to compare two investments. CAGR helps you answer this question – I bought Infosys at 3030 and held the stock for 2 years and sold it 3550. At what rate did my investment grow over the last two years?

CAGR factors in the time component which we had ignored when we computed the absolute return.

The formula to calculate CAGR is ..

Applying this to answer the question..

{[3550/3030]^(1/2) – 1} = 8.2%

This means the investment grew at a rate of 8.2% for 2 years. Considering the fact that Indian fixed deposit market offers a return of close to 8.5% return with capital protection an 8.2% return suddenly looks a bit unattractive.

So, always use CAGR when you want to check returns over multiple years. Use absolute return when your time frame is for a year or lesser.

What if you have bought Infosys at 3030 and sold it at 3550 within 6 months? In that case you have generated 17.16% in 6 months which translates to 34.32% (17.16% * 2) for the year.

So the point is, if you have to compare returns, its best done when the return is expressed on an annualized basis.

6.8 – Where do you fit in?

Each market participant has his or her own unique style to participate in the market. Their style evolves as and when they progress and witness market cycles. Their style is also defined by the kind of risk they are willing to take in the market. Irrespective of what they do, they can be categorized as either a trader or an investor.

A trader is a person who spots an opportunity and initiates the trade with an expectation of profitably exiting the trade at the earliest given opportunity. A trader usually has a short term view on markets.  A trader is alert and on his toes during market hours constantly evaluating opportunities based on risk and reward. He is unbiased toward going long or going short. We will discuss what going long or short means at a later stage.

There are different types of traders :

1. Day Trader – A day trader initiates and closes the position during the day. He does not carry forward his positions. He is risk averse and does not like taking overnight risk. For example – He would buy 100 shares of TCS at 2212 at 9:15AM and sell it at 2220 at 3:20 PM making a profit of Rs.800/- in this trade. A day trader usually trades 5 to 6 stocks per day.
2. Scalper – A type of a day trader. He usually trades very large quantities of shares and holds the stock for very less time with an intention to make a small but quick profit. For example – He would buy 10,000 shares of TCS as 2212 at 9:15 and sell it 2212.1 at 9.16. He ends up making 1000/- profit in this trade. In a typical day, he would have placed many such trades. As you may have noticed a scalp trader is highly risk averse.
3. Swing Trader – A swing trader holds on to his trade for slightly longer time duration, the duration can run into anywhere between few days to weeks. He is typically more open to taking risks. For example – He would buy 100 shares of TCS at 2212 on 12th June 2014 and sell it 2214 on 19th June 2014.

Some of the really successful traders the world has seen are – George Soros, Ed Seykota, Paul Tudor, Micheal Steinhardt, Van K Tharp, Stanley Druckenmiller etc

An investor is a person who buys a stock expecting a significant appreciation in the stock. He is willing to wait for his investment to evolve. The typical holding period of investors usually runs into a few years. There are two popular types of investors..

1. Growth Investors – The objective here is to identify companies which are expected to grow significantly because of emerging industry and macro trends. A classic example in the Indian context would be buying Hindustan Unilever, Infosys, Gillette India back in 1990s. These companies witnessed huge growth because of the change in the industry landscape thereby creating massive wealth for its shareholders.
2. Value Investors – The objective here is to identify good companies irrespective of whether they are in growth phase or mature phase but beaten down significantly due to the short term market sentiment thereby making a great value buy. An example of this in recent times is L&T. Due to short term negative sentiment; L&T was beaten down significantly around August/September of 2013. The stock price collapsed to 690 all the way from 1200. At 690 (given its fundamentals around Aug 2013), a company like L&T is perceived as cheap, and therefore a great value pick. Eventually it did pay off, as the stock price scaled back to 1440 around May 2014.

Some of the really famous investors the world has seen – Charlie Munger, Peter Lynch, Benjamin Graham, Thomas Rowe, Warren Buffett, John C Bogle, John Tempelton etc.

So what kind of market participant would you like to be?

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Key takeaway from this chapter

1. A stock market is a place where a trader or an investor can transact (buy, sell) in shares
2. A stock market is a place where the buyer and seller meet electronically
3. Different opinions makes a market
4. The stock exchange electronically facilitate the meeting of buyers, and sellers
5. News and events moves the stock prices on a daily basis
6. Demand supply mismatch also makes the stock prices move
7. When you own a stock you get corporate privileges like bonus, dividends, rights etc
8. Holding period is defined as the period during which you hold your shares
9. Use absolute returns when the holding period is 1 year or less. Use CAGR to identify the growth rate over multiple years
10. Traders, and investors differ on two counts – risk taking ability and the holding period.

SOURCES : EMAIL