How To Make Money In Stock Market

How To Make Money In Stock Market


Hi guys Nrupen here and in this video I’ll
give you little information on How To Make Money In Stock Market. In my last video “Stock
Market For Beginners” I tried to explain there can not be any one specific method of
Fundamental or Technical Investing. In this video I’ll try to elaborate same concept
to help you understand how you can learn to invest and make money in stock market. To make money in stock market all you have
to do is buy stocks for cheap and sell for higher price. The logic is as simple as that
but procedure to do so is not as simple as it sounds. Now either you want invest as Fundamental
investor or Technical Investor, investing or trading is always 3 step process. Step number 1 is always Stock Analysis, the
analysis part helps in determining quality of stock and is it worth investing or not.
Now analysis is nothing more than probability, and
every probability comes with only one guarantee. That it can be wrong and therefore we have
second step as Risk Management. With help of proper risk management we try to avoid
losses that we may incur due to failed analysis. The 3rd and final step is Strategy, it helps
in multiplying profits when your analysis goes as expected. In short strategy is real
money maker in process of investing. Just by investing on analysis, you’ll only make
profit by chance. But with good strategies you are as good as
guaranteed to make it. Remember your job in stock market is not to remain right all the
time, it is making lot of profit when you are right and avoiding losses when you are
wrong. Risk Management and Strategy are mostly always
bundled together but do not live with idea that Risk Management Methods and Strategies
are same for both Technical And Fundamental analysis. They are not only different with respect to
Fundamental and Technical Analysis but they are also different based on which system of
Fundamental and Technical Investing you prefer. Now you might have heard it several times
that Technical Analysis is easy, whereas Fundamental Analysis is hard and requires serious skills.
But reality is totally opposite Fundamental Analysis is easy whereas Technical Analysis
is difficult and requires serious skills. Investment industry has spent quite good effort
to maintain this myth because it is beneficial for the investment industry. It scares new
players from learning skills that are easy to master and force them to learn skills that
are hard to master. There are lot of fundamentally strong businesses
in market but just because a business is fundamentally strong does not mean its stock prices gonna
soar. Next we just call it Fundamental Analysis of stock. But in reality, when we are analyzing business
for investing, we are doing security analysis, a stock is financial security, in more correct
terms a Debt Instrument Security. And value of this Debt Instrument Security
keeps fluctuating, not the actual fundamental value of business. And when you buy a stock
of any business you bought debt instrument for that business, which is marketable security
and can be sold and bought like any other product. “Fundamental Analysis Of Stocks” is kind
of not very correct term to describe how we analyze stocks, the real term should be “Security
Analysis Of Business” and Benjamin Graham was the only one who as per my knowledge used
term Security Analysis instead of Fundamental Analysis. Benjamin Graham was first to introduce risk
management and strategy to Security Analysis and thus value investing came into existence. The risk management he introduced was better
known as “Margin Of Safety” and Strategy was systematic diversification of portfolio
in different stocks with margin of safety. In simple words value investing just means
investing in stocks that have margin of safety. Margin of safety in stock usually means very
low potential risk on purchase with very high potential rewards as returns. Now almost 90% of videos on internet tell
that Benjamin Graham told to buy stocks whose current price is less than its book value.
Which is plain stupid lie, over simplification or misinterpretation of his work. Graham’s investing system focuses on finding
intrinsic value or you can say real of business and matching it with security value or you
can say market value of stock. In his books he only explained those factors
which he considers to be important for intrinsic value calculation of business along with how
they can be used for finding good stocks. For Graham a value stock was a business whose
intrinsic value is higher than current market value of business. And one of the conditions for an high intrinsic
value stock is lower market value of stock than book value. A higher intrinsic value
of business was actually margin of safety for Benjamin Graham. Nowhere in his book Benjamin ever wrote when
book value is higher than market value it is value investing. Just remember any stock either it be fundamentally
strong or technically strong if holds potential to deliver good returns with possible minimum
risk involved is value stock. And if a stock is really a value stock fundamentally, then
that value will also appear on its technical chart. You heard it right Fundamental Analysis does
not hold any authority over a stock to be value stock or not. If that is hard to swallow,
then take words of world’s greatest value investing fund manager of our century Bill
Miller. In one of his interviews he said, “Real value investing means really asking
what are the best values, and not assuming that because something looks expensive that
it is, or assuming that because a stock is down in price and trades at low multiples
that it is a bargain.” “Value funds tend to have almost all their
money in low P/E, low price-to-book or cash flow, and growth funds have the opposite.
The question is not growth or value, but where is the best value?”. And best value is always potential low risk
with very high potential rewards. And since you can find such kind of stocks with both
fundamental as well as technical method of analysis, you can be a value investor no matter
which investing method you prefer. Next step is to understand whose system of
fundamental analysis you would like to learn and master because it is not the system that
holds power. Its the man who applies those systems hold the power. So even if you master any one system of fundamental
or technical investing you are good to go. Remember investing just based on analysis
will not help reap profits, you need proper risk management and strategy too. Personally, while investing fundamentally
I favor to invest in stocks that are currently entering growth phase of their economic cycle
along with Batched Over Diversification Strategy. The method of analysis is not money maker
for me, its Batched Over Diversification Strategy. My investing strategy allows me to systematically
invest without having to spend time on monitoring my stocks regularly. Getting out of stock monitoring hassle was
my main objective while investing, depending on it I designed my investing system. Now you might ask why I think Fundamental
Analysis is easier than Technical Analysis. Because I have read lot of books on both Fundamental
and Technical Analysis. For fundamental investing system all you have
understand is why some particular factor is important for some particular style of fundamental
investing. Once you know about them, all you have to
do is find stocks that fit in your style of fundamental investing and majority of times
it is nothing more than comparing few ratios here and there. Future prediction of market condition is not
part of analysis, it is decoy used by analyst to fool people to believe what they are doing
is difficult. No one can predict future market conditions and analysis based on future prediction
don’t work either. And if you are watching this video then most
likely you already have suffered loss due to such future prediction of market conditions.
Learn from your mistake and do not believe in any analysis that depends on prediction
of future market conditions. Remember you can not master all styles of
investing but you can learn about them just to satisfy your curiosity or to develop investing
system exclusive to your need. You can master only any one system of investing and that
is what recommended. Same can’t be said for Technical Analysis.
Because Technical Analysis is Applied Mathematics and Applied Mathematics is harder than just
comparing few ratios. You have to remember concepts, calculate probabilities, risk and
use proper strategy based on risk. Majority of books that now a days are written
about Technical Analysis cover only non mathematical format of analysis. Understand a simple fact, “The more maths you remove from Technical
Analysis, the lesser effective it becomes. To make sure it works for you, you have to
include Mathematical Technical elements to your analysis. Else it’ll not work.”. So majority who think Technical Analysis is
easy or does not work have only spent time understanding non mathematical format of Technical
Analysis. The format of Technical Analysis that by default is less effective due to less
mathematics. Next only Analysis part doesn’t make money,
you also have to apply proper risk management and strategy. Without it your investments
and trades will not turn into profits. If you have slightest doubt that I am wrong
then read “The Intelligent Investor” by Benjamin Graham and “The Profit Magic of Stock Transaction
Timing” by J M Hurst. One is Benjamin’s Guide to Fundamental Value
Investing System, other is Hurst’s Guide to Technical Investing System. After reading,
rate Fundamental and Technical investing on basis of which was easier to understand and
apply. I am very much sure that majority of you would
to some level understand Benjamin’s Guide which is one of the tough guides ever written
on value investing. On other hand Hurst’s Guide will burn hairs
of majority because its not that easy to understand and apply even for an individual who understands
and teaches applied mathematics. Let’s summarize this video in short. Investing
is 3 step process. Step 1 is Analysis, it gives us probability
about direction of stock price. Step 2 is Risk Management to avoid losses
because Analysis is just Probability and Probabilities can be wrong.
Step 3 is Strategy to maximize profits in case stock starts moving as per your expectation. A strong Investing System is made up of these
3 steps. Next there can be several ways to analyze
stocks both fundamentally and technically and you can not master all of them. So pick
any one system and spend time mastering it. There is no superior or inferior method of
investing, superiority or inferiority of any method is only as good as person who is analyzing
using that method. If you have mastered your method of investing you’ll make killing profits
else you’ll kill yourself. Every investing system guide comes with its
own risk management and strategy. They should be more than enough to support your analysis.
Either you should go for fundamental or technical investing depends on how good are your mathematical
skills. If you are really good with your applied mathematical
skills, my advise would be pick all books that teach mathematical system of investing
and then master what you find most lucrative. In case you are interested in learning my
method of Fundamental and Technical Analysis then I have courses on both on Udemy. My Technical
Analysis course is one of the highest rated Technical Analysis course on Udemy and it’ll
also comes with my personal support for 30 days if you’ll use link given in description
of this video. As cheaper way to learn, books are already
there. With that said, if you found this video helpful then don’t forget to share it, if
you think it wasn’t helpful dislike button is also there. Thanks for watching and have a nice day.

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