10 tips to become a SMART stock market INVESTOR

Morningstar.in

We've boiled down some of our most salient observations into 10 suggestions we think will make you a better stock investor.

At Morningstar globally, our analyst staff has about a thousand years of collective investment experience. Here, we've boiled down some of our most salient observations into 10 suggestions we think will make you a better stock investor.

1. Keep it simple

Keeping it simple in investing is not stupid. Seventeenth-century philosopher Blaise Pascal once said, 'All man's miseries derive from not being able to sit quietly in a room alone'. This aptly describes the investing process.

Those who trade too often, focus on irrelevant data points, or try to predict the unpredictable, and are likely to encounter some unpleasant surprises when investing.

By keeping it simple -- focusing on companies with economic moats, requiring a margin of safety when buying, and investing with a long-term horizon -- you can greatly enhance your odds of success.

2. Have the proper expectations
Are you getting into stocks with the expectation that quick riches soon await? Hate to be a wet blanket, but unless you are extremely lucky, you will not double your money in the next year investing in stocks.
Such returns generally cannot be achieved unless you take on a great deal of risk by, for instance, buying extensively on margin or taking a flier on a chancy security. At this point, you have crossed the line from investing into speculating.
Though stocks have historically been the highest-return asset class, this still means returns in the 10 per cent to 12 per cent range. These returns have also come with a great deal of volatility.
If you don't have proper expectations for the returns and volatility you will experience when investing in stocks, irrational behavior -- taking on exorbitant risk in get-rich-quick strategies, trading too much, swearing off stocks forever because of a short-term loss -- may ensue.

3. Be prepared to hold for a long time
In the short term, stocks tend to be volatile, bouncing around every which way on the back of Mr. Market's knee-jerk reactions to news as it hits. Trying to predict the market's short-term movements is not only impossible, it's maddening.
It is helpful to remember what Benjamin Graham said: In the short run, the market is like a voting machine -- tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine -- assessing the substance of a company.
Yet all too many investors are still focused on the popularity contests that happen every day, and then grow frustrated as the stocks of their companies -- which may have sound and growing businesses -- do not move. Be patient, and keep your focus on a company's fundamental performance. In time, the market will recognize and properly value the cash flows that your businesses produce.

4. Tune out the noise
There are many media outlets competing for investors' attention, and most of them center on presenting and justifying daily price movements of various markets. This means lots of prices -- stock prices, oil prices, money prices, frozen orange juice concentrate prices -- accompanied by lots of guesses about why prices changed.
Unfortunately, the price changes rarely represent any real change in value. Rather, they merely represent volatility, which is inherent to any open market. Tuning out this noise will not only give you more time, it will help you focus on what's important to your investing success -- the performance of the companies you own.
Likewise, just as you won't become a better football player by just staring at statistical sheets, your investing skills will not improve by only looking at stock prices or charts. Athletes improve by practicing and hitting the gym; investors improve by getting to know more about their companies and the world around them.

5. Behave like an owner
We'll say it again -- stocks are not merely things to be traded, they represent ownership interests in companies. If you are buying businesses, it makes sense to act like a business owner.
This means reading and analyzing financial statements on a regular basis, weighing the competitive strengths of businesses, making predictions about future trends, as well as having conviction and not acting impulsively.

6. Buy low, sell high
If you let stock prices alone guide your buy and sell decisions, you are letting the tail wag the dog. It's frightening how many people will buy stocks just because they've recently risen, and those same people will sell when stocks have recently performed poorly.
Wake-up call: When stocks have fallen, they are low, and that is generally the time to buy! Similarly, when they have skyrocketed, they are high, and that is generally the time to sell! Don't let fear (when stocks have fallen) or greed (when stocks have risen) take over your decision-making.

7. Watch where you anchor
If you read our article on behavioral finance, you are familiar with the concept of anchoring, or mentally clinging to a specific reference point. Unfortunately, many people anchor on the price they paid for a stock, and gauge their own performance (and that of their companies) relative to this number.
Remember, stocks are priced and eventually weighed on the estimated value of future cash flows businesses will produce. Focus on this.
If you focus on what you paid for a stock, you are focused on an irrelevant data point from the past. Be careful where you place your anchors.

8. Remember that economics usually trumps management competence
You can be a great rally driver, but if your car only has half the horsepower as the rest of the field, you are not going to win. Likewise, the best skipper in the world will not be able to effectively guide a yacht across the ocean if the hull has a hole and the rudder is broken.
Also keep in mind that management can (for better or for worse) change quickly, while the economics of a business are usually much more static. Given the choice between a wide-moat, cash-cow business with mediocre management and a no-moat, terrible-return businesses with bright management, take the former.

9. Be careful of snakes
Though the economics of a business is key, the stewards of a company's capital are still important. Even wide-moat businesses can be poor investments if snakes are in control. If you find a company that has management practices or compensation that makes your stomach turn, watch out.
When weighing management, it is helpful to remember the parable of the snake.
Late one winter evening, a man came across a snake on the path. The snake asked, 'Will you please help me, sir? I am cold, hungry and will surely die if left alone.'
The man replied, 'But you are a snake, and you will surely bite me!'
The snake replied, 'Please, I am desperate, and I promise not to bite you.'
So the man thought about it, and decided to take the snake home. The man warmed the snake up by the fire and prepared some food for the snake. After they enjoyed a meal together, the snake suddenly bit the man.
The man asked, 'Why did you bite me? I saved your life and showed you much generosity!'
The snake simply replied, 'You knew I was a snake when you picked me up.'

10. Bear in mind that past trends often continue
One of the most often heard disclaimers in the financial world is, 'Past performance is no guarantee of future results.' While this is indeed true, past performance is still a pretty good indicator of how people will perform again in the future. This applies not just to investment managers, but company managers as well.
Great managers often find new business opportunities in unexpected places. If a company has a strong record of entering and profitably expanding new lines of business, make sure to consider this when valuing the firm. Don't be afraid to stick with winning managers.

Courtesy 

Gold prices to increase 19 percent in 2011

Although gold prices fell on Friday, leading towards the biggest weekly loss since July last year, partly due to the recovering U.S. economy and its slipping demand, however, the commodity prices in 2011 are expected to be 19 per cent higher than last year.

According to experts, surveyed by the London Bullion Metals Association (LBMA), the average gold price forecast was $1,457 per ounce.

2 year gold silver ration history chart     Source :- gold price. org

Analysts surveyed by the group predicted that silver prices will average $29.88 per ounce, which would represent a 48 per cent increase on the average price in 2010.

The average platinum price in 2011 was forecast to rise 12.6 per cent from the average 2010 price, to $1,813 per ounce.

"And palladium shows no sign of slowing down with an average 2011 price prediction of $814,65, a 54. 

Budget Expectation 2010

This Year Finance Minister of India Mr Pranab Mukharji will present the Union Budget in the parliament for the Financial Year 2010-2011 on 26th February 2010. Everyone (Including all types of citizen of India & NRIs) is as eager to know the India Budget 2010 expectations as the final budget itself. After recession or Economic slowdown this is the 1st Union Budget will be going to  Present in front of the House.This year Corporate house have more expectation from this budget as well as Common people too.

Corporate House:- Corporate house is waiting for Some stimulus package for the industry.Specially IT & Banking industry most affected from this economic slow down.

Common People:- Common People Expectation have a  to control Sky Rocketing of the food prices.

This time Government should more focus on

1. Control on High Inflation Rate

2. Sky Rocketing Food Prices

3. Education Sector

4. Control on Government Expenditure.

5. Tax Rebate for Corporate & Individuals

6. More Focus on Priority Sector (Agriculture & Service) & ETC.

Taxes:

The common men and the corporates are looking for decrease in taxes. The Finance Minister is likely to augment exemption limit of individual taxes to Rs 3 lakh from Rs1.60 lakh for salaried people. Exemption limit for women is expected to be increased from 1.80 lakh to 4 lakh and for senior citizen from Rs 2 lakh to 5 lakh.

However, taxes levied on the perks availed by income earners are expected to be restructured on higher level. This arrangement may satisfy junior employees and senior citizens. But, it may not go well with the people belonging to higher position.

Corporate Tax:

A reduction of 30% is expected in the corporate tax. The expectation is found in line with the introduction of Direct Tax Code (DTC) suggesting a 25% rate. The individual rate was lowered by 30% previous year also.

Capital Gains Tax:

As far as the 2010 India Budget expectation in the area of capital gain tax is concerned, finance minister is unlikely to bring any reform in this category of tax. It is predicted to be included under the Direct Tax Code, to be implemented from April 2011.

Re-fixing of Tax Slabs:

As mentioned earlier, the tax slab for women is expected to be revised to 4 lakh and senior citizens to Rs 5 lakh. However, second and third slabs of tax would see significant change.

The second tax slab is expected to be augmented from the existing Rs 3 lakh to Rs 1 million to be taxed at 20%. The third slab is likely to be increased from Rs 5 lakh to Rs 25 lakh to be taxed at the rate of 30%.

These revisions would act in favor of the reputed advocates as well as the doctors.

Stimulus:

India Budget 2010 speculations suggest that it is not the right time for the government to roll back stimulus packages, despite the fact that GDP growth of the nation in the Q2 (July – September) of the current fiscal stood at 7.9%.

However, experts believe that government would withdraw few of the subsidies from the market. The oil companies were aided with the stimulus package to check loss. Government did not allow the Oil companies to raise product costs of kerosene and diesel, which would have forced the common men to pay more.

As high prices of diesel and petrol would bear adverse effect on the transport rates of food products, the stimulus packages are expected to continue in the oil industry. However, partial withdrawal of the stimulus aid can be expected in this sector to tackle the situation of increasing fiscal deficit.

Agriculture Sector:

According to India Budget 2010 expectations, the agriculture sector would be the highlight of the session. This sector is likely to receive enormous boost from the government. Finance minister's invitation to the farmers for the pre-budget meet is held to be the main reason behind such speculation.

Infrastructure and Social Sector:

Infrastructure industry is also expected to be the focus of the budget results of 2010. Many believe that development in this sector would account for massive growth in GDP. However, it is unlikely to ease monetary policy to better infrastructure. Interest rate cannot be reduced as well.

Other Sectors:

While taking into account the India Budget 2010 expectations of various sectors, it was found that the garment industry of India is looking for considerable cut in interest rates in its exports segment. The garment exporters also want the ministry to remove all the confusion faced in the case of excise as well as custom duties. The sector wants major commercial as well as fiscal relief. Similarly, the Indian tea industry is expecting to get an allocation of more than Rs 130 crore, which was granted in the fiscal year 2009-10.

List are many and expectations are more. In a very few days the government will open their magic box to lure the Indian Common people or they will only for the Corporate House.

Six Ways To Cut Business Costs

In times of financial crisis, every business needs to focus on cutting costs, just to stay afloat. Here are the top six ways any business can make reductions in expenditure, without reducing the quality of product or service the business offers its customers.

1 – Reduce Employee Costs

Even if your business is not looking to reduce the number of staff, there are ways of reducing staffing costs during lean business times. Offering overtime to individual employees means you pay that employee up to twice their usual hourly rate.

Rather than pay overtime rates, try re-organising the work rosters and routines to prevent the need for overtime. Perhaps some staff members would prefer to start earlier in the day and others to work later in the afternoon, allowing coverage during all opening hours, without the overtime costs.

Another way of reducing labour costs is to offer staff incentives for reducing their personal days and sick leave taken. Each time a staff member is sick, you need to replace the employee, either by offering another employee overtime, or by working a shift down and reducing productivity. Either way, sick days and personal leave add costs to the company.

Some companies have successfully introduced a reward scheme for employees who do not take any sick days in a year or six-month period. The cost of the reward is minimal compared to the savings made by the company.

2 – Increase Safety

Safety is one area where an increase in initial spending can cut overheads dramatically. Think about all the costs, direct and indirect, involved in an injury in your workplace. These costs include:

* Medical costs;
* Increased insurance costs;
* Loss of productivity while the injured worker is taken care of;
* Resources and time to investigate cause of injury;
* Shift coverage and loss time for injured worker;
* Decrease in employee morale;
* Loss of company’s reputation and public relations costs; and
* In some cases, fines and court costs from government authorities.


Therefore, increasing safety measures and preventing injuries in the first place will cut costs for the business.

3 – Review Procedures and Ensure Efficiency

This is a good time to review all your procedures and work processes to trim the fat. Is your team double handling a particular task? Can you reduce the amount of photocopying and therefore save paper and toner costs? Can you encourage employees to reduce printing by saving electronic files rather than hard copy files? Are there other processes that have become redundant but employees are still spending time completing them? Is there a more efficient method of completing the task?

Look at where you can save someone’s time or resources that the company pays for. Consider saving energy by turning off office lights at night and only having the office cleaned every two days instead of daily. Working more efficiently saves valuable resources.

4 – Reduce Damage to Equipment

Damage to equipment affects business expenditure in two ways. Firstly, damage reduces productivity while the repairs take place. Depending on the importance of the piece of damaged equipment to the overall process, this could put a whole factory floor out of production for some time. Secondly, damage to equipment costs to repair in labour, time and parts.

Ensuring that employees follow processes to prevent damage to equipment can add up to huge cost savings for the company in the long term. Regular checks and maintenance of equipment can replace worn parts before more serious and costly damage occurs.

5 – Shop Around for Suppliers

Make sure you are getting the best deal for essential supplies for your business. You may need to invest some time to shopping around but the cost savings can be enormous.

For example, if you can buy the same quality of paper for the office cheaper by just 50 cents per ream, how much could your business save over a year? If your business purchases just 100 reams of paper in a month, you would save $600 a year. If you made this kind of saving on every product you purchase by switching suppliers, you could add up substantial cost savings over a year.

Obviously, this kind of saving does operate on economies of scale and the larger business will achieve greater savings, but any business can save by switching suppliers to cheaper options.

6 – Staff Incentives for Cost Cutting

Some companies are offering employees a share in the cost savings made over a specific period. This encourages and motivates staff to work more efficiently, reduce injuries, damage and to participate in reducing costs themselves, rather than leaving it all up to the managers.

For example, if your employees can reduce costs by $10,000 a month for six months, your company will save $60,000. If you give even 50 per cent of that back to the employees in staff incentives and bonuses, your business will still save $30,000 in six months. Offering staff a share of 25 or 10 per cent of the cost savings would give your company even more benefits, while still encouraging the staff to reduce expenditure on behalf of the business.

There are many other ways of reducing expenditure by the business. Every cost saving you can make, gives the company more profit and reduces the impact of the global financial crisis. Cutting costs now can ensure the business survives the tough times and is still viable when the economy improves.
Link for this article:- http://www.yourstory.in/resources/finance/1333-six-ways-to-cut-business-costs-