Long term investment gives you good gains but at the same time it requires lot of patience.
“Invest like a bull, sit like a bear and watch like an eagle. (mantra for long term investing)” – Vijay Kedia
You might be wondering why do I quoted the above line in this chapter as we are here to do short term investments? You can earn a CAGR of 20% to 50% on your investment if you follow my step investment strategy but longterm investments provide more ROI.
For majority of new investors lack of patience is the big obstacle. For those investors here is an easy and quick earning strategy.
For this strategy I will choose only 10 companies, and I will be investing in those ten company stocks only.
Go to moneycontrol or Screener and get the report of top 100 companies by market capitalisation. Out of these 100 companies choose only ten companies which you trust. No need to worry much about the company’s profile since you have already selected the top 100 companies in the country. One quick filter is not to take more than two companies from the same sector.
For example in the top 100 companies by market capitalisation, you can find TCS, infosys and wipro are from IT. But you can’t choose all three, as the maximum number of companies allowed for any sector is strictly TWO.
So take 1 or 2 companies from IT, Pharma, etc
As you are aware I always suggest you to enter in any stock when it is trading below 30% of year high value. But all these are top 100 companies of the country and finding them at 30% correction is rare. Hence I suggest you to enter when there is a correction of 15% or more.
Invest 5% of your total investment in each company, that means you have utilised 50% corpus for your first tranche investment. And now you are holding 10 company stocks.Make sure, if a company’s stock is not trading below 15% of year high you should stay away from it.
Now your portfolio has 50% equity and 50% cash.You calculate the 10% year high value of each stock and use it to buy and sell (profit booking) the stocks.
Buying the stocks:When the stock corrected more than 10% of year high value from the last buy value, make an investment of 2.5%
Note: in the above calculation I’m considering the correction 10% of Year High Value. Dont consider the last buy value for calculating correction.
Selling of stocks:Here also we follow the same rule used for buying the stocks. If there is an appreciation of 10% or more we will sell 2.5% of stock. That means we are selling 50% of the holded stock when there is an appreciation of 10%. If there is a further appreciation of 10% of year high value we will sell the remaining 2.5% of the stock ( or remaining 50% of the stock). That means, if a stock appreciated 20% we are exiting from the trade.
Note : here we are exiting from trade not from the stocks.
In this strategy we never average down the value of stocks. We always consider each trade is different, even if you purchase same stock multiple times also you should not club them.
For example, Company A’s year high share value = Rs. 100
Using Step Trading strategy, you can earn 25% to 50% returns on your investment.
Hi, I’m Sreekanth Thattikota. I use only Fundamental Analysis to find undervalued stocks. I share the stocks that I trust and I invest. Investing in Stock Market doesn’t require any financial expertise, provided it is long term. For any help regarding Stock Market Investing, reach me @ thattikota.sreekanth[at]gmail.com. Happy Investing.