How to find and invest in blue-chip stocks for long-term?

The stocks that are of high quality, the companies which are established, big, renowned, and are in the market for decades are called blue chip stocks.  Blue chip stocks got their name from the poker game. In a poker game, there are three colored chips white chips (valued at $1), red chips (valued at $5), and blue chips (valued at $10). Blue chip is an analogy that is used for identifying the “most valued stock”.

blue-chip stocks

What factors make a stock/company “blue chip”?

There is a combination of factors that transform a stock into a blue-chip stock means the stocks

  • Which has the largest market share
  • Is highly valued.
  • Has strong financial standing.
  • Pays regular and high dividend.
  • The company is large and established one.
  • Strong and known brand name.
  • Which has high weight-age in main stock indices etc.

Blue chip companies have the largest market share

Every company operates in a specific sector or industry and there can be many companies operating in similar sector/industry. There are companies that operate in several sectors but each company has a core operating sector. When we say a large market share, it means a large market share within that sector or industry. Large market share can be identified by the sales turnover of the company within that sector. You can also look for market capitalization of the company.

Why one should invest in blue-chip stocks/companies?

It is noted that first choice people make for their long term investment is for the blue-chip company. It is because the returns generated by blue-chip shares/companies are more assured in the long term. The reason being they yield consistent dividends, their future growth is more certain and during difficult times their stock price is more or less stable.

Investors like blue-chip stocks because they are consistent and high dividend yielding stock. Since these blue chip companies have a dominant market position and strong fundamentals which gives them the pricing power. Even in the bad times, their stock value does fall with the indices, but the price falling is slower, and recovery is faster.

How to identify blue chip stocks?

Apart from largest market share and highly valued in the market, there are few other factors one should look into are a strong balance sheet, highly profitable, high dividend payouts, and good investment credit ratings. More or less they are monopoly players in their segment.

All businesses are risky and have up and down cycle. What is blue chip today may not continue for a lifetime, but the probability of risk (being non-blue chip) is less for a decade or so.  So it is better that once in a while keep on checking their credit risk, in case it is downgraded there will be a bad impact on its market price and so on your returns.

Companies that are blue chip today

Here is a list of few companies that are blue chip today (as on writing this article) taking into account few factors like high absolute returns since last three years, high market capitalization, high dividend yield, credit rating, and low beta. They are TCS, Hindustan Zinc, Reliance Industries, ONGC, SBI, Hindustan Unilever, Coal India, Infosys, and GAIL (India) etc.

In case you want to know blue chip stocks in particular industry/sector which you feel will be a future growing sector you can contact us and we will be glad to help you. You can also fill the free trial form available on our site and submit it.

Happy investing in blue chip companies . . . . . .

Why is research necessary while purchasing shares?

A stock market is a place where are a number of people who have made a lot of money, and also there are people who have lost all their money. The difference is that few researched and then entered the stock market and other few just jumped in because their neighbor, friend or relative had made a lot of money. At the end of the day, without proper research, you are bound to face the consequences.

Share trading tips

Why should one research before buying/selling stocks?

If you are an investor it helps you find details before you invest in any security. Fundamental research is to analyze the stock whereas technical research is to value the stock on different parameters.

By research only you can make some assumptions about the value of stock and get a rough idea of the future performance of the stock. Research helps you to ensure that you are making the right investment, at the right price and at the right time so as to get maximum returns. It is your hard earned money and so you must have a reasonable knowledge of where and what you are investing in.

  1. Fundamental research

Fundamental research involves analyzing the financial statements, unique position in the business, competitive advantage it has over its peers and quality of management etc. It is evaluating securities depending upon the future growth prospects and attractiveness of the business.

For fundamental research one should look for

  • Industry growth of the company you are about to invest in.
  • Competitive advantage the company enjoys and ability to gain more market share over its peers.
  • Revenue and earnings growth company attained over the last few years.
  • Quality and capabilities of management board members.
  • Financials and valuations ratios like P/E ratio, margins, return ratios, etc.

2. Technical research

It is the study of the past price movements to approximately predict the future price trends. It helps in identifying the beginning of a sharp rise or fall in the share prices.

There are various charts used by technical analyst to draw his conclusion. They are candlestick chart, bar chart, and line chart.

How is technical analysis advantageous?

  • It is not affected by any news or occurrence of events that take place regarding the company.
  • Many announcements like financial results, new technical discovery, high-rank executives exit or entry, change in government rules, etc. that affects the shares price of the company. An investor who is following technical analysis gets an early signal on price movements who many a time does not know the exact nature of information.
  • Technical analysis depends on mass psychology which changes and fluctuates sometimes.
  • Charts help to figure out trends that are in vogue. It helps to depict price patterns and share volume being traded.
  • Technical research helps to let us know the value at which stop loss can be applied to particular shares; this saves the investor from a bigger loss in the future.
  • It is more useful for short-term traders/investors.

We use both fundamental as well as technical analysis of different companies before providing share market tips to our clients. To know more please fill in the free trial form or contact us for the services that we provide.

Why should you start stock investing early?

Most of the people are confused between saving and investment. Saving is usually for a small duration and is for short-term goals. Investment is for long-term goals and is usually for more than five years with the future plan like education, home, retirement, etc.

investment

In savings, there is hardly any risk as you are insured by the government if something goes with the banks. While in investments you may lose some or all your money you invest. Better use surplus money that is with you.

You earn interest on your savings which are very limited, sometimes not even beating inflation. Investments, on the other hand, have the potential to give you returns which even you may not imagine, as your investments may go up in value (appreciation) over a period of time. This indirectly improves your net worth and change lifestyle.

Investing is growing money over period of time

Always remember greater the risk of your investment, higher potential return or loss of money. But by taking the calculated risk you tilt the balance in your favor. You have to maintain the fine balance and our tips are there to help you out.

The main idea behind investing is to grow your money over a period of time. You can invest in stocks, bonds, real estate, etc.

Creating corpus for the future

As you all know, India is one of the fastest growing economies of the world and every year there are thousands people who enter the workforce. As the population increases, this situation is bound to worsen. This will dramatically increase the cost of living, decreasing income sources, job competition, and you will need extra funds to cope up with the situation.

It is observed that today’s youth spend all their earnings without thinking of the future cost of living, family expenses, and medical expenses that they will have to bear. Even if they instill the habit of saving it will not be sufficient. They have to invest thereby making their money work. Most of these youth are holding a private job which is no guarantee for how many years or months they will be on rolls. There are corporate honchos who were relieved of their duty suddenly when the economy took a downturn.

A way out for costly future lifestyle

Investing in stocks is a way out from this situation. It is a myth that you should have a huge amount to invest in shares. You can start with a small amount too. Investing in stocks is virtually liquid, that is to say in the hour of need you can sell the required number of shares to tide over the tight financial situation.

Compounding your money

When you see the graph of stock indices in a long-term (in decades) it is gradually increasing. Naturally, there are up and down cycles in every business and stock market is no exception.

Investing regularly and at an early stage means there are fewer burdens on saving/investment each month for the required corpus for the ‘costly’ future.  Many youths are unaware of the power of compounding which is a simple concept of finance. Compounding of your investments in stocks will create an unimaginable return over a long period of time. Growth in stock is on two fronts, price change and reinvesting dividends that make compounding curve more exponential.

To know which will be the best stocks that will give you better returns with a reduced the risk factors contact us or fill the form for a free trial to make a beginning.

Happy investing . . . . . . .

How much money do you need to invest in stocks market?

The Indian stock market is basically divided into two stock exchanges. National Stock Exchange (around 2000 companies listed) and Bombay Stock Exchange (around 5000 companies listed).

The companies listed and traded on the stock exchange have a price range from low of Re. 1 to the high of Rs. 74000 per share. Now the question is how many numbers of shares you wish to purchase and of which company? Also, note the broker will charge you brokerage charges and certain mandatory government taxes.

indian rupees

Investors are often confused about how much minimum amount they can invest in the stock market. There is no rule as to what minimum and maximum amount one can invest in stocks. Though this question has been asked by those who wish to start investing in the stock market, it might have crossed others’ mind too who are sitting on the fence, and who have small regular savings.

Technically your bare minimum amount required depends upon the requirements of the brokerage firm to open an account and operating it. Operating or maintaining charges have to be paid on yearly basis. There are many online brokers where you can open an account free that is no requirement of minimum account balance. Even to purchase shares your invested capital should be a bit more than (Number of shares x share price plus brokerage charges plus taxes).

One should note that brokerage commission for buying and selling stocks increase significantly on a percentage basis.  In other words, a higher amount of transaction negligible amount, it will be per transaction. Usually, it is ‘economics of scale’ which counts in your realized returns.

Apart from the cost of buying/selling, you have to think about how many different companies’ share you will buy/sell. It is suggested that you buy minimum shares of 15 to 20 different companies representing different sectors/industries so that you build up a diversified portfolio. By diversifying your portfolio you are actually minimizing (spreading) the risk that you can take, as share market is volatile.

There is a number of shares that are priced below Rs. 10 each. You do not have to put in thousands and lakhs of rupees to start trading in India.

If you are new to the stock market and are in a learning phase it is recommended to start with low. Anything between Rs. 100 to Rs.1000 will be good. Provided your sole intention is of learning. Even if you lose it will not hurt your financial standing.

If your intention is to earn as for your ‘day to day pocket expenses’ you can start with Rs.50000.

Buy shares of those companies that are traded actively. Have a disciplined approach, that is, do not get carried away by rumors (they are very frequent in the stock market). Keep an eye on your trading expense. Purchase sufficient amount of shares as the purchase of stocks in small amounts leads to higher acquiring cost. See to it that brokerage charges are the minimum. Opening a trading account can be free but for the transaction, you will have to pay brokerage fee for each and every transaction. Check if the trading platform is seamless and has various advanced tools or not, as they help you to come to form your decision.

In case you need any tips on which stocks you should select and which to leave contact us or take a free trial by filling up the online form.

Number of hours extended for commodity derivative segment

SEBI, the capital and commodity market regulator has decided to increase the trading time in the commodity derivative segment only. The time is extended by an hour to spread the commodity derivatives market and also enhance the part-taking of stakeholders which includes foreign entities and farmer-producer organization.

SEBI

For agriculture and agri-processed commodities, the trading hours will be from 9 AM to 9 PM. And for non-agriculture commodities the trading hours will be from 9 AM to 11:55 PM.

SEBI cleared that it has decided to extend trade time and recognized stock exchanges are to adjust to set up their trading hours only for the commodity derivatives segment. It is on the condition that there shall be enough volume.

Increased hours are in line with the recommendations by Commodity Derivatives Advisory Committee. In the past for non-agriculture commodities SEBI had fixed time from 10:00 AM to 11:55 PM and for agriculture commodities, it was from 10:00 AM to 9:30 PM.

Furthermore, SEBI added that the extension of the trade time is subjected to clearing corporation and stock exchange. They will have to put in place adequate risk management system, enhance their surveillance system and provide an adequate infrastructure that will match the increased trading hours. The provisions of the issued circular will come into effect from 30 days of the circular publication. Exchanges and clearing corporation will have to make needed amendments to the rules and regulations. The stock exchanges are directed to bring this to the notice all the stock brokers.

According to few brokers, the move to increase time will, double the cost for broking firms as they will have to employ staff in two shifts.

Another point is permitting foreign entities directly to participate in the Indian physical commodity derivatives market. Even if they export or import available commodities to/from India.

It is observed that morning moves are usually between 1:00 PM to 1:55 PM and evening moves start from 5:30 PM to 6:30 PM. Between 6:30 to 7:00 PM there are sudden reversals. Profit booking time is 8:15 to 8:30 PM and by 8:55 PM is the final exit time.

Because of the high volume New York session is good for commodity trading activity. It matches with the IST of between 6:00 PM to 10:00 PM. According to IST London stock exchange timing is from 1:30 PM to 10:00 PM. Most of the important fundamental news and reports are released during this time.

Commodity trading is for people who have deep pockets and are experts in the field. It takes years of experience for new people to trade in commodities.

If you want any tip regarding which commodity to trade in do contact us and we will be glad to help you. You can grab our free trial offer too.