Moneylife Events
Buying stocks: What you need to know to invest safely

Moneylife Foundation conducted its first exclusive workshop on investing in stocks. Debashis Basu, editor, Moneylife, took the participants through how and why many investors lose money in stocks and addressed how to pick stocks safely

Moneylife Foundation conducted its 170th and its first exclusive workshop on investing in stocks. At a packed session titled “Buying Stocks Safely” at the Moneylife Knowledge Centre, Debashis Basu, editor, Moneylife, took the participants through how a why many investors lose money in stocks and addressed many myths revolving around investing in stocks. He also highlighted some facts about investing in stocks and how one can develop a method for investing in stocks safely.
One of the main reasons investors lose money, explained Mr Basu, is because many blindly follow tips and advice that are freely available. Many do not follow the process or have a discipline to cross-check the facts and invest directly. Others give into their emotions of panic, greed or overconfidence. Some may have done a little reading and feel that they have a method of investing, said Mr Basu. Giving an example, he said that if an investor is looking for high dividend yield stocks it may be good but the price may not appreciate. Many investors look for big blue-chip companies. Though these companies may be fundamentally strong they are highly priced and thus price appreciation would be low. Some investors chase momentum, but this leads to high risk as well. Many do not know when to exit, leading to a high loss. Many look at investing in IPOs. There was a time people made money in IPOs, that time is gone. Most IPOs are avoidable as they are always priced too high, cautioned Mr Basu. All the IPOs of the last four to five years, including PSUs, have performed terribly.
Many have false beliefs of the stock market such as inflation and GDP is correlated to the stock market movement. All these can be both right and wrong as certain rules work under certain conditions. As far as GDP growth versus stocks is concerned, there is little or no correlation. Before investing, one also needs to accept the fact that stocks are risky. “Stocks fetch higher returns in the long-term but can fall by 30%-70% in one year; may take years to recover. It takes years to understand this. You don’t need to focus on the price when you are analysing the business” said Mr Basu. If the business is good prices will appreciate over the long-term. “Daily movement of price is pure noise,” he explained.
Two factors that essentially drive the market are expected profit growth and valuation. Explaining these two factors he said, “Earnings growth determines the trajectory of the stock, whereas, valuation determines the profit or loss. If one can pick a stock with high earnings growth and which is under-valuated, you can almost never end up with a loss.” Great businesses at low prices over a long period of time is what one should look for, he advised.
 Mr Basu also advised on buying stocks, for example, one should look to buy good companies in market panic. He also mentioned which sectors can do well giving India’s consumption demand. “The maximum gains have come from the consumption sector”, he said. If one does not wish to try and time the market, one could invest is through a systematic investment plan.
As important as buying is, when to sell is a common dilemma faced by investors. Mr Basu informed the audience on how to avoid making bad sell decisions. “If a stock has fallen 30%-40% in a fundamentally good company you should not sell unless you need the money, on the other hand you should invest more,” he said.
The session was followed by a interactive question and answer session where Moneylife Foundation member raised their queries. On a question relating to whether one should try momentum investing, Mr Basu said, “Momentum investing is for traders. It is difficult for an average saver to be a successful trade because they would have to unlearn a lot of things. To be a successful trader one needs to overcome a lot of emotional biases”
This session was attended by savers across categories. If you would like to be informed of many more such events in future become a Moneylife Foundation member. Click here to register. (Join Moneylife Foundation)




4 years ago

Enjoyed watching on Moneylife TV. Ever so grateful. Thank you Mr. Basu!


4 years ago

Very good Article, containing lessons for wise investing. In the end, Investors always likes certain scrips identified for investment. It will be nice if Shri Debashis Basu periodically shares his expertise regarding particular good scrips, which one could consider for investment. Thanks.

Suiketu Shah

4 years ago

Excellent topic by ml what investors find difficult to understand for yrs together inview of misleading methods to buy right shares by so-called share experts.A must-watch on mltv for those who missed it.

Aadhaar number not a must for EPFO members

The EPFO stated that its 5 crore members need not necessarily have Aadhaar numbers to avail the benefits of PF body's schemes as these are excluded from Centre's Direct Benefit Transfer programme

Now the Employees Provident Fund Organisation’s (EPFO) over 5 crore members need not necessarily have Aadhaar numbers to avail the benefits of PF body's schemes as these are excluded from Centre's Direct Benefit Transfer (DBT) programme.


“The schemes under EPFO and ESIC have been excluded from the list schemes identified for implementation of Direct Benefit Transfer,” a labour ministry letter to the EPFO’s Central Provident Fund Commissioner stated.


Subsequently, the EPFO head office issued an office order to discontinue submission of monthly report on the progress of the work under the DBT scheme by regional offices.


At present, the money is transferred through NEFT and cheques. The scheme was excluded from the DBT scheme mainly because it was for distributing subsidies and grants and PF money is not a subsidy, an official explained.


Earlier this year in January, EPFO has asked the field staff to ensure the collection of data (Aadhaar) in respect of member joining on or after 1 March 2013 on a monthly basis and in respect of existing members by 30 June 2013.


According to the office order issued then, in case an employee does not have the Aadhaar number, the employer can issue an Enrolment ID (EID) as per the guidelines of the body. This EID would be converted into Aadhaar number later on, the order had said.


The body had also decided to seek the Aadhaar numbers of its pensioners through the banks.


Later in February this year, after drawing flak from unionist for the move, the PF body decided to put on hold the decision to make it mandatory for new members joining EPF scheme to provide Aadhaar number as credential for enrolment from 1 March 2013.


The EPFO order circulated in February had observed that getting the Aadhaar was a time consuming process and the (UIDAI) scheme covers only 18 states.


The remaining states are covered by the Register General of India under the National Population Register which would be digital database of country’s residents.


Mumbai property tax: BMC extends deadline till 30th September

Following an uproar about the flawed methodology of calculating property tax, the BMC has now extended the last date for paying tax by three months

Municipal Corporation of Greater Mumbai (MCGM) or BrihanMumbai Municipal Corporation (BMC) has extended the last date to file property tax to 30th September. As per the previous order, the last date for paying property tax was 30 June 2013. When contacted, the official at the public relations department at BMC confirmed the extension.


As reported earlier, Moneylife Foundation has conducted several seminars and counselling sessions on the property tax issue affecting Mumbaikars, ever since the MCGM sent out demands for its hefty revised property taxes with arrears for the past three years. Anomalies in computation and the hefty new taxes have caused serious concern for home and property owners. The new taxes carry the threat of hefty penalties for non-payment; however after public outrage over the short time allocated to pay up, the MCGM deferred tax payment deadline from March to June.


Several persons had called us at Moneylife and were calling property experts to find out whether they are obliged to pay by 30 June 2013. All such people can now pay the tax until September end.


When the revised property tax notices were sent out, several organisations, including the Property Owners Association had announced plans to move court, but we find that none of the cases has been filed yet.


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