Vishal Bharadwaj

  10 common mistakes in the share market by beginners:- Mistakes? way of learning. Always learn from your mistakes, take a responsibility of own mistakes and try to avoid it, it shows high morals of man. But in share market, one thing always keep in your mind that mistakes in share market never be forgiven. So it never be good to commit any error, always try to learn from others. Maybe after your own mistakes, you would not able to stand again. There are 10 very common mistakes in the share market by the beginners:- 1. Looking on stock market as a tool of making quick money:- Beginners enter in the share market with the mindset that “ share market is gambling and they can make quick money here ” it’s wrong mindset. They mix Gambling with share market that is not right and it dishonor the share market and create bad reputation on others mind. In the gambling you put your money in bets but in share market you invest on companies. And with some basic knowledge you will never lose. So ...

  How to invest in the stock or share market?   There are three ways through which you can invest your money in stock market. The sole purpose of investing is making profit, which investing style you adopted didn’t matter until and unless that style is not contrary to law like spreading false news in the market or pump and dump techniques. There are mainly two ways of investing style which broadly followed in the stock market (i) value investing (ii) growth investing. Except this, here one more investing style is, about this investing style we will talk in the last. Value investing:-  Benjamin Graham known as the father of value investing. Although he never used value investing word. The book “ The Intelligent Investor ” best known for value investing. if you have taken your investing decision based on analysis of company’s balance sheet, profit and loss statement, cash flow statement and other ratios like P/E, EBITDA, Debt to equity etc. then you are value investor. Valu...

  What is intrinsic value? Intrinsic value is hidden or real value of any share. Then how it is different from market value of shares? To answer this you need to understand that market value of any share is influenced by so many external factors like news in market, greed in investors and political condition etc. And calculating intrinsic value we exclude all these factors so that we can reach the real value of any given share. Now we easily understand that market value and intrinsic value can be differ with each other. Need of calculating “intrinsic value” It excludes all the external factors from shares which influenced its price and tell us real value of it. It provide margin of safety and minimize our risk factor  if rightly calculated . It tells estimated amount which we will earn in future. It reveals the secret that stock in undervalued or overvalued. How intrinsic value of stocks is calculated? There are mainly two ways through which anyone can calculate intrinsic valu...

  Introduction:-  PE ratio also known as Price to Earning ratio and is the most popular ratio among the investors. They use this to identify undervalued or overvalued stocks. By using it investors enhance the area of margin of safety and secure their investment. How to calculate PE ratio? PE ratio = market value per share / EPS(earning per share) Examples of calculation Assume:- Market value per share = 40 EPS (earning per share) = 12 PE ratio = 40/12 = 3.5 Market value per share = 40 Earning per share = 5 PE ratio = 40/5 = 8 How to use it? Or PE ratio using tips:- Lower PE ratio is better than higher PE ratio for selection of stock because low PE mean high earning per share and high PE mean low earning per share. And we need high earning per share. Stock/share’s PE ratio compare with other same industry’s PE ratio. If both companies market cap nearly same then better to compare. Compare Company’s PE ratio with nifty and sensex PE ratio. First:- take the average of 10 years PE...

  Introduction:- Just like the PEratio (price to earning), the EV/EBITDA is very famous for the valuation of the company.  EV stands for enterprise value and EBITDA stand for Earnings before interest, tax, depreciation and amortization (EBITDA) . A nd it compares company on very different stages on the basis of the company’s earning. If it is rightly calculated then it reveals the secret that what is the current position of the company? Is company’s share is undervalued or overvalued? Although the PE ratio typically used as the go-to-valuation tool, there are benefits of using the PEratio along with the EV/EBITDA. By using both ratios you get more accurate results about company’s current status. Many investors look for companies that have low valuation by using PE and EV/EBITDA and solid dividend growth. How to calculate? The enterprise value to EBITDA ratio is calculated by:- Ratio = EV/EBITDA Where EV is the company’s enterprise value (EV) ...

  Introduction:- This method is not popular as the  DCF  model for calculating intrinsic value of any stock because of its simplicity.    In this method you compare your stock with other companies stocks to get your intrinsic value. Intrinsic value and how to calculate intrinsic value of any share? Formula:- Intrinsic value = [industry PE ratio] * [earning per share (of my company)] Example:- Let assume, there is one cement company ABC and share of it trading at the price of Rs. 60 and earnings per share of ABC company is Rs 5. Then for calculating its intrinsic value we need cement industry’s PE ratio that is 28. Now calculate intrinsic value:- Share price of ABC company = Rs 60 Earnings per share of ABC company = Rs 5 Cement industry PE ratio = 28 Intrinsic value = [industry PE ratio] * [earning per share (of my company)]                      ...

  Preference Shares: Such shares enjoy preferential rights like payment of dividend at a fixed rate during the life of the company, and  the return of capital on winding up of the company. Normally preference share holders do not enjoy voting rights like equity (common share) holders but they have voting right in distinguish circumstances. What is Preference Shares and its kinds? A company may issue the following types of preference shares– Cumulative Preference Shares:  If company failed to pay dividends in previous years then holders of that shares have first right to receive that dividend if company decided to pay dividend in near future. The accumulated arrears of dividends shall be paid, if any dividend is declared in subsequent years, before any dividend is paid to the equity share holders. It must be remembered that all preference shares are always presumed to be cumulative unless the contrary is stated in Articles or the terms of issue. Non-Cumulative Prefere...

  Equity Shares it’s a very common form of shares and first choice for most of the investors. They have full right over surplus profit on winding up of the company after preference shares and creditors. In the matter of dividend, directors have sole right to decide whether equity share holders receive dividend or not? It’s directors choice. The fortune of the equity shareholders is tied up with the ups and downs of the company that reflect on its share price. Equity share holder earn by buying and selling of that shares. It is also known as the “Risk Capital” because if company fails then holders of these shares may end up with nothing in their hands. Equity shares are of two kinds. These are– Equity Shares with Voting Rights:-  the holders of any such equity shares have normal voting rights on every resolution placed before the company at any general meeting, his voting right on a poll shall be in proportion to his shares of the paid up equity capital of the company. Equity S...

  Kinds of Shares Most of the investors didn’t concern in which type of share they were investing and because of that sometime they ends in wrong place. It is best for every investor to know about all type of shares because different shares are subject to different risks. Every investor can tolerate different level of risk and by knowing that they can chose according to their risk potential. The Share-capital of a company limited by shares, formed after the commencement of  the  companies Act, 1956  or issued thereafter consists of two kinds of shares: Preference shares:-  Such shares enjoy preferential rights like payment of dividend at a fixed rate during the life of the company, and  the return of capital on winding up of the company. Normally preference share holders do not enjoy voting rights like equity (common share) holders but they have voting right in distinguish circumstances.  Equity Shares (also known as ordinary shares):-  It’s a ver...

  Important ratios for stock analysis PE ratio:-  PE ratio also known as the price to earning ratio and very famous between the investors. Investors use this ratio with other ratios or data to find out undervalued stocks. Read more Earning per share:-  In simple meaning it means “distribution of company’s profit between each shares” it can be used as the indicator for determining company’s profitability. It is best to use PE ratio and Earning per share comparatively. Return on Assets:-  Is company using its assets effectively to generate income, yes or not? This ratio tells us the truth. This ratio gives us idea about management efficiency or capability to run company profitably. It compares company’s earnings as compare to its assets Dividend payout ratio:-  It means “amount of dividends paid to stockholders relative to the amount of total net income of a company”  Dividend payout ratio = Dividends / Net Income. Retention Ratio:-  What company wi...