Book SummaryHow to Make Profit in Share Market, by Mahesh Chaundra Kaushik

1-Page Summary1-Page Book Summary of How to Make Profit in Share Market

Creating a portfolio that reflects the attributes of a commercial entity.

Kaushik likens skillful stock market investment to the proficient management of a retail business. He advises diversifying your portfolio by investing in a broad selection of shares, akin to a shop stocking a variety of goods. Ensure your inventory encompasses a broad spectrum of products, rather than just a handful of well-known ones. Adopting the perspective of a shop owner aids in reducing monetary losses and ensures a consistent flow of income from various sources. Just like a store proprietor works to expand their clientele and enhance their selection of goods, an individual investing in the stock market should similarly focus on building a varied and significant collection of financial assets. Achieving steady profits depends on diversifying one's portfolio across different assets and possessing the patience to seize the opportune time.

Diversifying investments in different industry segments within the stock market is comparable to ensuring a retail store carries a diverse assortment of product types.

Kaushik emphasizes the importance of overseeing a stock portfolio with the same level of care that one would devote to an array of products in a retail establishment, with diversification being a central aspect of the approach. This contrasts with the approach of many solo investors who concentrate their portfolios on a limited array of well-known shares, thus subjecting themselves to significant risk of considerable financial setbacks if such shares do not perform as anticipated. He recommends spreading your investments across a variety of stocks by dedicating a small portion of your overall funds to different equities. Diversifying one's investments across multiple sectors and businesses offers a safeguard similar to a department store's strategy of stocking a wide range of items to attract various customer preferences.

Dividing investment capital into small portions rather than concentrating it all in a few stocks

Kaushik advises allocating your savings into smaller shares among a wider array of companies to diversify your portfolio, rather than focusing your financial resources on a select few stocks that seem promising. Spreading your investments across various stocks can soften the blow of any single stock's underperformance through the potential gains from the others. Mahesh Chaundra Kaushik recommends spreading your investment across shares in 500 different companies by investing $100 in each, instead of putting the entire $50,000 into a single company's stock. This approach advocates for risk distribution and replicating the varied assortment found in a comprehensively supplied commercial outlet.

Practical Tips

• Implement a 'seasonal shuffle' strategy for your portfolio. Every quarter, review a different sector of the market and select a new company to invest in, replacing or complementing existing investments. This approach keeps your portfolio dynamic and responsive to market changes, and ensures regular diversification as different industries tend to perform better in different seasons or economic cycles.
• You can diversify your investment portfolio by using a random stock picker app to select a variety of stocks from different sectors. By doing this, you're not relying on your own biases or limited knowledge. For example, if you're unfamiliar with the technology sector, the app might introduce you to tech stocks that you wouldn't have considered otherwise, thus spreading your risk.
• Use a dollar-cost averaging approach to gradually invest in the 500 companies by setting up automatic monthly purchases. This way, you can mitigate the risk of market volatility by spreading your investments over time. For example, instead of investing $100 all at once, you could invest $20 in each company every month for five months.
• Create a visual map of industries and sectors for investment consideration. Draw or use a digital tool to map out various industries, such as technology, healthcare, energy, etc., and then research one or two companies within each sector to consider for investment. This visual aid can help ensure you're thinking outside of a single company or industry when planning your investments.
• When planning your next vacation, instead of choosing a single destination, opt for a multi-stop trip that includes diverse experiences. This approach spreads the risk of any one part of the vacation not meeting expectations and ensures you have a range of memories to enjoy. For instance, if you're interested in Europe, plan a trip that includes cultural experiences in cities like Paris and Rome, relaxation on the beaches of Greece, and an adventurous hike in the Swiss Alps.

Purchasing shares which offer dividends during periods when their market value is depressed, while avoiding the imposition of excessively tight stop-loss orders, or alternatively, reducing the average cost by increasing the investment as the share price declines.

Kaushik emphasizes the significance of investing in firms with strong financial foundations that are recognized for their distribution of dividends to shareholders. However, he urges investors to be patient and wait for these stocks to trade at discounted prices before purchasing. He also cautions individual investors against the dangers of setting overly restrictive thresholds for accepting losses or buying additional shares of a stock in decline to lower the average cost of acquisition. Kaushik contends that establishing stringent safeguards to limit losses can result in the early closure of positions that could have been profitable, owing to temporary market volatilities. He also warns that lowering the average cost of underperforming stocks could magnify the dangers linked to an earlier suboptimal investment decision. He recommends waiting for the market to recognize the company's actual value after improvements in its...

How to Make Profit in Share Market Summary Numerous methods and approaches are utilized to maintain steady earnings in the stock market.

Kaushik details specific strategies for identifying shares valued lower than their worth and consistently achieving profits, transcending the approach of an ordinary retailer. He avoids traditional metrics like earnings multiples, instead presenting unique approaches to assess a company's true value.

Elevating a hundred-dollar investment into a growth model that becomes valued at seven million dollars by employing a strategy of compounding.

Kaushik illustrates how a modest initial investment of $100 can exponentially grow to $7,18,03,722 within twenty years through the power of compounding in the stock market. This scenario presumes that profits are continually reinvested into the investment every three months, leading to a yearly increase of 74%, encompassing a steady quarterly gain of 15% in addition to an extra annual dividend yield of 10%. The illustration demonstrates that a small starting capital, when paired with regular profit realization and reinvestment, has the potential to accumulate into substantial wealth over an extended period. Kaushik recognizes that to attain such steady gains, one must exercise discipline and meticulously choose the right stocks, yet this...

How to Make Profit in Share Market Summary Assessing the market for stocks that are undervalued by utilizing crucial financial metrics to determine their true potential.

Kaushik recommends analyzing individual shares to determine their worth and prospective profits before considering them for investment. Utilizing these principles in conjunction with proven methods to assess the underlying financial health of a company creates a solid framework for determining its potential.

Analyzing the basic price framework in conjunction with the overall earnings for each individual share.

Kaushik advises that to fully grasp the potential of a stock, one should consider both the capital initially invested and the earnings generated by each share. First, evaluate a company's shares by determining if the market price exceeds the fundamental value by 10-20%, which could indicate a promising investment opportunity. Assess the intrinsic value of the stock by calculating the net sale per share. The stocks appear to be undervalued, as indicated by their market price being lower than their typical value.

Calculating the optimal moments for purchasing or offloading stocks by considering the average intrinsic value of the shares across a period of three years.

When calculating the inherent worth of a share, it's important to consider the average closing...

How to Make Profit in Share Market Summary Steering clear of the typical blunders and traps that ensnare novice traders.

Kaushik allocates a considerable part of his work to instructing investors on typical errors that may result in financial setbacks. He warns private investors about the frequent habit of buying and selling shares within the same market sessions on a short-term basis. He also emphasizes the importance of a methodical, disciplined approach to investing, prioritizing patience and consistency over quick gains.

Engaging in the rapid buying and selling of stocks within the same trading day should be avoided.

Kaushik cautions that derivative instruments should be approached with caution, as they are high-risk endeavors best suited for seasoned investors supported by institutions and who possess deep insights into market dynamics. He counsels smaller-scale investors to avoid these instruments, which often lead to significant losses, particularly for those lacking the necessary expertise and risk tolerance.

The book emphasizes the importance of in-depth analysis of the financial stability of a corporation and the merit of maintaining patience over being preoccupied with transient market variations.

Kaushik believes that lasting success in stock trading is built on a...

How to Make Profit in Share Market Summary Supplementary topics

In addition to his core investment approaches, Kaushik delves into subjects such as distributing capital to pooled investment vehicles, examining market statistics and chart patterns, as well as the more abstract elements associated with securities exchange. He provides guidance on navigating these areas, offering unique perspectives that complement his overall investing philosophy.

Exploring the realm of investing in mutual funds.

Kaushik concedes that for individuals preferring a more passive strategy, investing through collective investment schemes could be suitable, despite his personal preference for directly allocating funds into specific stocks. He advocates for the regular allocation of funds into pooled investment vehicles, emphasizing the advantages of averaging expenses in the local currency over a period. He also advises keeping funds allocated to the most robust portfolios with a track record of success and oversight by experienced management teams.

Adopting a methodical approach to planning investments and choosing funds that have amassed the largest assets.

Kaushik believes that for those who do not have the time or expertise to handle their...