What I take into consideration, when I buy shares or make investment
1. Company: This is the most important factor. If everything goes wrong but company survives with credible strength, there is hope. First and foremost, I like to make my primary investment safe and secure. In the market, always there is risk, but risk calculation protects to a large extent. Hence, overall credibility of the company, its past history, it's standing in the industry and growth prospects are main factors I look into about a company.
2. Return: When I invest, I set some bench marks for return with timeline. My expectation of return use to be quite modest. Anything beyond is bonus. Example, my expectation from SCB was 10% bonus (this expectation I had shared in my previous posts before declaration of dividend) and cash as it generally provides 30-45%. Beyond this, used to be my additional bonus. SCB gave more or less and I am ok with that return. Hence, as an investor, always I try to be reasonable with the company. Even sometime, the company dos not meet my expectation. Example, SBL. With a higher EPS, my expectation was bonus shares 15% and cash 20%. The return SBL declared was too low, but still it was much higher than the bank interest rate on time deposit. I decided to hold. The same was true with NBB.
3. Investment vs. trading: Primarily, I invest for a longer period of time and put my 80% plus money buying shares of relatively safe and secure companies. And, I do trading occasionally with that 20% amount left. Trading has been dominating Nepali share market and wild speculation fueled by rumors makes market behaving strangely. Those who could go with trends whether it is fueled by strategy of certain big traders or just result of rumors, you could perhaps survive. But, for them who believe in a company and its fundamentals, it is not that easy to follow the trend. Hence, I have not been that much good to make decisions regarding trading. Hence, I am thinking to discontinue trading completely. Now, I have realized that these two are different professions and need different qualities.
4. Risk management: Even in good companies, there are factors that need making you active and informed. All of sudden Enron Empire disappeared. Therefore, this risk management is not a one time business but a continuous process. As long as you hold shares of a company, you have to keep watch on it. Updating risk level with new information makes investors different from the crowd holding certain IPO shares and disappearing in the wilderness. Hence, whether I stop trading or not, I will stay active in the market – studying, watching, learning and updating always. This is what I believe is a better risk management approach.
5. Use of technology: This is the age of information. Technology enables to make informed decisions. Hence, as part of my education program, I always try to get access to new technology and try to enhance technical skills. A laptop and a smart phone have become necessary gadgets for investors and traders. Language skills always keep us in advantageous position and learning language skills is not as difficult as it is thought.
6. Getting emancipation from rumors, tricks and VEJA fries: Many people, particularly the big speculators in our market sell rumors before they buy or sell shares. Hence, I have made a rule that "knowing a source and its credibility" before believing or acting on it. Though, we could not prevent rumors and tricks, but liberation from them as far as possible is absolutely necessary to survive and flourish in the market.
7. Being aware of being one sided: A company in a given situation could seem good but from long term perspective that may not be the case. Example, KBL's EPS was 18 and it gave bonus shares of 35% utilizing its reserve. It is great for now and could be great if we trade on. But for investment, we should look beyond. Therefore, I try to see the larger picture first before putting that one special factor to examine. My belief is that we should look at any object, issue or person keeping our perspective as wholesome as possible.
Note: This note is a compilation of my answers to friends sent through message box.
1. Company: This is the most important factor. If everything goes wrong but company survives with credible strength, there is hope. First and foremost, I like to make my primary investment safe and secure. In the market, always there is risk, but risk calculation protects to a large extent. Hence, overall credibility of the company, its past history, it's standing in the industry and growth prospects are main factors I look into about a company.
2. Return: When I invest, I set some bench marks for return with timeline. My expectation of return use to be quite modest. Anything beyond is bonus. Example, my expectation from SCB was 10% bonus (this expectation I had shared in my previous posts before declaration of dividend) and cash as it generally provides 30-45%. Beyond this, used to be my additional bonus. SCB gave more or less and I am ok with that return. Hence, as an investor, always I try to be reasonable with the company. Even sometime, the company dos not meet my expectation. Example, SBL. With a higher EPS, my expectation was bonus shares 15% and cash 20%. The return SBL declared was too low, but still it was much higher than the bank interest rate on time deposit. I decided to hold. The same was true with NBB.
3. Investment vs. trading: Primarily, I invest for a longer period of time and put my 80% plus money buying shares of relatively safe and secure companies. And, I do trading occasionally with that 20% amount left. Trading has been dominating Nepali share market and wild speculation fueled by rumors makes market behaving strangely. Those who could go with trends whether it is fueled by strategy of certain big traders or just result of rumors, you could perhaps survive. But, for them who believe in a company and its fundamentals, it is not that easy to follow the trend. Hence, I have not been that much good to make decisions regarding trading. Hence, I am thinking to discontinue trading completely. Now, I have realized that these two are different professions and need different qualities.
4. Risk management: Even in good companies, there are factors that need making you active and informed. All of sudden Enron Empire disappeared. Therefore, this risk management is not a one time business but a continuous process. As long as you hold shares of a company, you have to keep watch on it. Updating risk level with new information makes investors different from the crowd holding certain IPO shares and disappearing in the wilderness. Hence, whether I stop trading or not, I will stay active in the market – studying, watching, learning and updating always. This is what I believe is a better risk management approach.
5. Use of technology: This is the age of information. Technology enables to make informed decisions. Hence, as part of my education program, I always try to get access to new technology and try to enhance technical skills. A laptop and a smart phone have become necessary gadgets for investors and traders. Language skills always keep us in advantageous position and learning language skills is not as difficult as it is thought.
6. Getting emancipation from rumors, tricks and VEJA fries: Many people, particularly the big speculators in our market sell rumors before they buy or sell shares. Hence, I have made a rule that "knowing a source and its credibility" before believing or acting on it. Though, we could not prevent rumors and tricks, but liberation from them as far as possible is absolutely necessary to survive and flourish in the market.
7. Being aware of being one sided: A company in a given situation could seem good but from long term perspective that may not be the case. Example, KBL's EPS was 18 and it gave bonus shares of 35% utilizing its reserve. It is great for now and could be great if we trade on. But for investment, we should look beyond. Therefore, I try to see the larger picture first before putting that one special factor to examine. My belief is that we should look at any object, issue or person keeping our perspective as wholesome as possible.
Note: This note is a compilation of my answers to friends sent through message box.
