Sunday, March 8, 2009

How to make money in the stock market?

The safest way to double your money is to fold it and put it in your pocket.

Being an accountant, the most frequent request I face is advice on making money in the stock market. I am sure they must be out of their mind to actually know my 'financial situation' and still ask for my advice on 'making money'.

Hence, I have decided to write this post so that people can follow this advice, become millionaires, pay me royalty and thereby make me a billionaire. I assure you that this blog will change your life forever, particularly considering the current market conditions. By the way, do you know why advice is always so cheap? Because supply exceeds demand manifold.

The most successful investment manager was Noah: He 'floated stock', while everything around him went into 'liquidation'. While the most unsuccessful one was King Midas. He sold all his 'gold' and invested in stocks.

One sure way of making money is to forget who you borrowed it from, but I wouldn’t advice that if you are not willing to relocate often. For others, here are my ten commandments on how to make money in stock markets:

1. You need to understand the market. Understand the different instruments in the market, like the stock, which is a magical piece of paper that is worth Rs.250 until the moment you buy it and will be worth Rs.50 after you buy it, or the bond, which is what you had with your spouse until you pawned her jewellery to invest in stocks. Then there are the ‘gilt-edged negotiable blondes’, which I will not discuss here as this is a family blog.

There are two types of market. Bull Market is a random market movement causing an investor to mistake himself for a financial genius. Bear Market is a 6 to 18 month period when the kids get no allowance, the wife gets no jewellery and the husband gets no sex. If you are ignorant of these, then the next time you put your money in the market, you will neither be a bull or a bear, but an ass.

2. Understand the actions of others. Successful investing is nothing but anticipating the anticipations of others. Don’t put yourself in a situation where you justify a short-term investment gone wrong as a long-term investment. They say that the best way to make a million in the current turbulent markets is to start with two!

3. Spend at least as much time researching a stock as you would while choosing a camera or a television. If you hear that everybody is buying a certain stock, ask who is selling. The amazing thing about the stock market is that every time somebody sells, another one buys, and they both think they're smart!

4. Get your timing right. A study of markets reveals that the best time to buy anything is yesterday. There are basically two methods of investing based on timing - momentum investing, the fine art of buying high and selling low, and value investing, the art of buying low and selling lower.

October is one of the peculiarly dangerous months to speculate in stocks. The others are: July, January, September, April, November, May, March, June, December, August and February. In fact, your best investments are the ones you did not make.

5. Diversify. Don’t put all your eggs in one basket, but while putting in different baskets, you still need to take care that you don’t break them. Remember, they are still eggs!

By diversifying, I managed to double my interest income from term deposits. I put half my money in one bank at 5% and the other half in another bank at another 5% and thereby earned 10%!

6. Cut your losses. If investments are keeping you awake at night, sell down to the 'sleeping point'! Don’t put yourself in a situation like my friend who sleeps like a baby every night ever since the markets are bad. He wakes up every hour and cries.

7. Get the help of a stockbroker. A stockbroker is a man who is always ready, willing, and able to lay down your money for his commission. It is quite strange that the person who invests your money is called a ‘broker’. It is only a matter of time when the broker ensures that all your disposable income gets disposed off. The joke ‘it was so cold today that I saw a lawyer with his hands in his own pockets’ is more applicable to a stockbroker. The only thing more dangerous than a stockbroker is an amateur stockbroker. And the only thing more dangerous than an amateur stockbroker is a professional stockbroker!

In fact, a stockbroker friend of mine down at Wall Street confided his unwritten philosophy: A man is a client until proven broke. He used to have a corner on the market. Now he has a market on the corner. I doubt if he took to stockbrokerage when he realized that he doesn't have the charisma to succeed as an undertaker.

It is called a bull and bear market for nothing; your stockbroker will feed you all the bull you can bear. Actually, my stockbroker and I are working on a retirement plan. The only problem is that it is his! I have a doubt whether my broker was a fisherman, because every time he hangs up the phone, he laughs, rubs his hands together and says 'I just caught another fish'.

8. Heed to market forecasts. People who criticize weather forecasts have not followed market forecasts closely. Technical analysis is the art of drawing a crooked line from an unproven assumption to a foregone conclusion. A stock market analyst is like a cross-eyed javelin thrower: He doesn't win many contests for accuracy, but he keeps the crowd's attention.

There are a couple of laws of market analysis that one should be aware of. The first law is that for every market analysis, there exists an equal and opposite analysis. The second law is that they are both wrong!

9. Hire a good financial planner if you can afford one. Financial Planner is a guy who will tell you, “I've reviewed your financial picture, and if we manage your money properly, there should be plenty for both of us.” He will tell you tomorrow exactly why the things he predicted yesterday didn't happen today. There are two types of financial planners; those who don't know, and those who don't know they don't know!

10. I have saved the best tip for the last. This is the most foolproof advice which will definitely make you a millionaire. Buy into a stock as per your investment appetite. If it goes up, sell it. If it doesn't, don’t buy it.

By the way, you can send those royalty dollars either through check or direct deposit.


Renu said...

very good post, though written in a humorous way..its all truth:)

I liked this explaination...

By the way, do you know why advice is always so cheap? Because supply exceeds demand manifold.

Anonymous said...

Excellent post Salil. The cross-eyed
javelin thrower bit was a gem.

Devika Jyothi said...

Hi Salil,

Aspects of money making and counting goes over my head usually, but your post makes sense...

the only advice I could take was "The safest way to double your money is to fold it and put it in your pocket." ---

Again, the problem is I don't have a pocket in my dress!! :)

And royalty for this common sense knowledge --palliyil poyi paranjaal mathi!

thats why evil spirit talking -- now coming to the point, I agree with all your other way; we reporters have to agree with analysts :)

but you put it so humourously straight..i love reading more often my dear friend, :)


Devika Jyothi said...

"that's MY evil spirit talking -- now coming to the point, I agree with all your commandments"

Don't know which spirit was moving my hands! :)


Preeti Sharma said...

funny funny funny.

And also insightful. You have delightfully busted open the secrets of the trade.Loved among others - the javelin thrower, the right time to invest and the complicatied issue of selling when things are up and buying when they are down!!

Good one.

Gauri said...

Hilarious !!!:)
Looks like you picked up more than a thing or two at management school ;)
Enjoyed reading this post.

Anonymous said...

Hilarious. But you are not going to get a penny from me for all the trouble. I am hoarding them all!! ;)

Gazal said...

i am going to follow none of the above...but the one on the TOP.

i believe in folding my money and doubling it....

btw going by the recession hit times...are you accepting loose change??

kudos for the post !!!

man in painting said...

economics was always a difficult subject.But when you write, concepts become simple and funny...
expecting more..

Unknown said...

Salil that's a masterpiece of satire - I think you ought to take this up full-time.

Rakesh Vanamali said...

Lol! ‘gilt-edged negotiable blondes’ not being mentioned on a family blog! lets hope somebody from the Ministry @ Home isn't watching!!!!

Ramkumar Menon said...

amazing stuff dude ... u shd become a columnist!

Anonymous said...

LOL! Brilliant. So perfectly true. The best investments are indeed the ones we never make!! But how is it, that every time we take the plunge, we fall headlong instead of just bouncing with the tide?!! Phew! You make a good columnist/management consultant. Either way, great going!

the blogger formerly known as sansmerci said...

u will make a great teacher :)

Ranjani said...

That's an awesome post!!

Salil said...

Nice to have you back here.
Talking about advice reminds of an Oscar Wilde quote : “The only thing to do with good advice is to pass it on. It is never of any use to oneself.”

Thank you sir.
Btw, to call an analyst a cross-eyed javelin thrower is a gross underestimation!

Ah, not having pockets is the easiest problem to solve – you could just buy some dresses with pockets. My problem is not having the money to fold and put it in them!
Palliyil paranjal royalty kittumenkil, daily poyi parayam…

Welcome to my space.
And don’t tell the stock market players that I have busted open their trade secrets. The way the markets are behaving these days, they might just believe me!

Thank you for leaving your footprints here.
For a guy who has only visited (and not studied at) management schools, that is a lot of learning :-)

Well, hoarding is an alternate to folding money and putting in your pocket.
Whoever holds on to his penny rather than part with it for a cake, at least is not the slave of gross appetite; and shows besides a preference always to be esteemed, of the future.

Well, people who have money can afford to fold it and keep it with them, teachers included :-)
And btw, people like me who are hit hard by the recession do accept loose change in the name of royalty.

Salil said...

Thank you for passing by.
Ha, I can go on talking about economics. But the point is, can you go on listening?

Thank you buddy.
Not doing so for the benefit of other satirists around, who do it for a livelihood :-)

Thanks for dropping by.
But why do you have to invite the attention of Ministry @ Home? Aren’t we all better off without that?

Thank you. 'This' is my column and I am the columnist here :-)

Appreciate the comments.
Not sure if I should take the comment that I will make a good consultant as a compliment or an insult, because as per me a consultant is someone who takes a subject you understand and makes it sound confusing.
But then, I guess when you mention consulting we are talking big money, and which is the topic of the post :-)

Thank you. I hope I will make a better teacher than a few readers here, ahem, ahem..
Btw, Mark Twain once said, “To be good is noble, but to teach others how to be good is nobler—and less trouble.”

Ha, look who’s back after a long hiatus. Nice to have you back.

Renu said...

I always read all your posts, but comment only when I find something to say:)

Maddening Silences said...

Hey Salil... excellent post... I feel I ve already lost my million dollors as I read your blog 1 week late :)

you are amazing.. and its so nice to see you put such serious thoughts in such humourous way... keep posting..

hitch writer said...

Tht is a terrific post....

I came to this post coz you left a comment on mine... however I aint commenting here coz you left one at mine.... ;)

but this is a seriously humourous post... this is coming from a guy who has succesfully invested 900,000 and made them into 285,000


again the humour seems to have gone sour...


your on my blog roll... !!!

Arch said...

Hi...just the other day my husband pointed to my son's piggy bank and said THAT is most probably where we should be putting the little we have as well! Safest place at the moment. Enjoyed reading this :)

Mampi said...

What would we do without this gyan? Thanks. You sure help us invest better. Would rather pay up-in the Punjabi way.

Salil said...

@You Know:
Appreciate the kind words.
Well, since you lost a million dollars being a week late, I will make a concession for you and accept lesser royalty. But make sure you are not late in future – you never know how many millions you will lose!

Thank you for leaving your mark here.
But how in world did you know about the current value of my portfolio?! You see, actually, that is not how to look at it, you know, ahem, the 285,000 today is worth 2,850,000 tomorrow, you see, that is what successful investing is all about, identifying future growth stories and investing in them today.
And I am honoured for the blog roll.

Glad to see you here.
Your husband is bang on. I have mentioned the same thing on my post on banks – may be worth a read if you have time.

Ha, Punjabi way, eh? You haven’t seen my physique yet; you wouldn’t dare say that if you saw me!
By the way, will leave with a dua for you:
Allah ke naampe, maula ke naampe,
Apni biwi bachhon ke naampe,
Mere is post padhnewali dost ko paise de do,
Ye mujhe royalty nahi deti… :-)

ബോണ്‍സ് said...

Hey, Thought I would comment at last. This is the third time I am here. My hands are itching to make money in stock market. Let me try your tricks. Not now! when I have enough to play with..;)

Anonymous said...

that was hilarious... good one..

Unknown said...

Oh this one is a classic!!!!!!

ramesh sanijeeth sadasivam said...

Brilliant. Hilarious. Educative too. If I have to quote some of my favorite lines then it would another post with the same content. :)

the blogger formerly known as sansmerci said...

m here to tell u that m bak in blogosphere, wud love to have u read my latest post and leave ur valued comments! :)

the blogger formerly known as sansmerci said...

m here to tell u that m bak in blogosphere, wud love to have u read my latest post and leave ur valued comments! :)

Anonymous said...

great blog.

Anonymous said...

Very nice! :) I'm talking about the blog in general - wordplay and clever opening lines. Couldn't comment on the About page; hence the next best thing - a misplaced comment :)

Will be back.


radha said...

no posts for a long time now!

Mad Blogger said...

Beautifully written

Rinku said...

nice work salil
keep it up
very fuuny
i like your posts very much
keep it up friend

Devika Jyothi said...

High time for a new one Salil...People would forget the way to this place :)


Salil said...

Once bitten twice shy I am told. But how come you have been here three times?!
And remember, to send me my royalty dollars once you make money.

Your comment is good too :-)

Nice to see you here.
A classic is normally something that people praise but doesn’t read. Ahem ahem..

Thanks buddy.
Then don’t quote, save yourself the trouble :-)

Been there, read that.

Great comment :-)

Salil said...

Appreciate the kind words of encouragement.
Hope to see you around.

Nice to hear that readers are missing my posts.
You have waited for so long; wait for few more hours.

@Mad Blogger:
Thanks for the beautiful comment.

Thank you for leaving your footprints.
Hope to see you back.

That would be very bad. I will post one rightaway.

Usha Pisharody said...

Hilarious as always, Salil. But then you always are, and this blog is one place that can lift spirits out of any doldrum, financial or otherwise :)

Thank you for the gyaan, am enriched by it! But let me take it all with a large pinch of salt :P! Might get my pressure up, but then what the heck! A bit of pressure always helps too! :D!

Lol@ Commandments
No 2 [the types of markets that make one an ass :P1]

No 4.. isn't it always??

No 6.. :) :)The comparison to babies is so apt!

No 7. "It is called a bull and bear market for nothing; your stockbroker will feed you all the bull you can bear. " Out of this world, entirely! Seriously funny!

Luckily the markets are up again, in India I believe :) Would that be bull, or bear? Or just a whole lot of bull to bear? The government might, though!

Great great post, Salil. Finally am glad I actually put down some words here!

Anonymous said...

very good post, i was really searching for this topic as i wanted this topic to understand completely and it is also very rare in internet that is why it was very difficult to understand

thank you for sharing this.


Stock Market

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