How to make a lot of money in the stock market - YouTube

Hi, everyone. Welcome to today's video.

I'm actually on a vacation.

Therefore, you see this scenic backdrop

after this video, I'm going to jump in the pool and become a Jal Pari.

But I wanted to quickly shoot a video for all of you outlining.

Some of the major investment rules

that that you need to follow absolutely need to follow right now in the stock

market when there are excellent buying opportunities available.

So please follow these five specific rules

that I'm going to outline very practical videos super important for you.

If you are a beginner or an intermediate

level user in the stock market, please watch this video till the very end.

I'll keep it simple. I'll just outline five specific rules

that you need to absolutely need to keep in mind.

Let me start.

Let me first and foremost, outline rule number one.

And the rule number one is that you should buy low, sell high.

What does that mean?

In simple terms, it means that you are trying to buy a stock when it is towards

the bottom and you are trying to sell the stock when it is towards it high.

I'm not saying that going time the market,

but there are certain specific strategies and rules that you can incorporate.

Here is a specific video that I made on that topic so you can go and watch it

and understand some of the techniques that I've talked about.

But you need to understand the psychology behind this rule.

So what happens is that if you take a look at any major investor, be it Cathy Wood,

be it Rakesh Jhunjhunwala, be it Ray Dalio.

What is one thing that is common amongst all of them?

The common thing is that they actually buy stocks when they are trading at their

lower end and they sell it when these become overvalued.

That is how money is made in the stock market.

On the flip side, the retail investors will do complete opposite.

For example, what they would do is

that they will buy things when they have given a run up.

For example, I made a video a few days

back about Tata Motors, where Tata Motors gave a run of approximately 750%.

I said that, hey, guys, please be careful about Tata Motors.

It has already given a massive run up.

Please don't buy high.

People started bashing me very.

Except you know what you have missed the rally!

this that you're bitter all that?

No, I was just simply trying to forewarn

you that please don't jump on things when they have already given massive run ups.

It's highly unlikely that you are going to make massive profits from it.

So always remember the first half of the equation that please don't buy high.

Now, the second part of the equation here

is that you must also consider buying things when they are low.

You must buy things when there is fear in the market.

For example, right now,

if you go on ticker tape, there is something called a market mood indicator.

Mmi index that ticker tape runs.

So this is what MMI looks like.

And also you can check the links in the description box.

You will see that there is a lot of fear in the market right now during covid.

This indicator was pointing towards extreme fear.

And now we clearly understand the point that people who would have purchased

stocks during cover, they would have made insane returns.

Right.

So the idea is to buy things when there is fear in the market because that is where

you get things at a discount or you get things at a lower value.

So you buy stuff when it is low and you sell it off when it becomes high.

That is the simple philosophy.

Now, one final point that I will talk about in terms of buying low and selling

high is that you must be able to see your portfolio going in red.

For example, there are certain stocks.

For example, there is Hdfc AMC HUL, HDFC bank.

These are all the stocks that have fallen a lot in the last few trading sessions.

Now, if you don't have the stomach to see

your portfolio going red and continue to buying it, then you will miss out

on buying all these good, fundamentally sound stock.

So unless you have the stomach to buy more

stuff when things are falling, you will not make money in the stock market.

So you must have conviction that hey, whatever I am purchasing whatever stocks

I'm taking my bets on, I truly fundamentally believe in these

stocks and I'm going to purchase it even more when it falls.

That is precisely what I have been doing

for years, and that is precisely what I'm even doing now that I know for a fact

that a stock can give an upgrade of 20% also in one single day.

So please keep that fact in mind and build

your own understanding of buying low and selling high.

Now the second key thing that you must

understand in terms of making money in the stock market is that you must trade less.

Now this might look super counterintuitive because I keep on getting a lot

of messages that accept I want to leave my College and become a full time trader.

So here are a few key points that you must

remember about such sentences and such philosophy.

One almost 90% of the traders lose money in the stock market.

Why do they lose money in the stock market?

Because they have no holding power?

For example, there are interdate readers

and they have to settle their position the same exact date.

So there is no holding power. Right.

If the entire market falls and you have taken opposite positions in the market,

you are 100% lose money on that following trade, no RSI, MACD indicators, etc.

So will help you there.

So number one, please don't try to become a trader in the market.

Making money consistently by doing trading

is very tough, especially now when there are algorithmic trading that can happen.

There are companies with supercomputers that can fight against you.

So you honestly cannot make a lot of money by trading in the market.

This is especially true for retail investors.

Okay, so how does this philosophy applies to normal retail investors like you and me

who have a day job and who are doing other different things.

You should try to become an investor

in the market where you're not sitting in front of your laptop all day long.

Tracking market. What is happening, all that stuff.

Why I'm saying this for two reasons.

Number one is the obvious that there is opportunity cost of your time.

For example, if you have put yourself in a position where you have to sit

in front of your laptop and keep track of the market all day long,

it's just a losing proposition because you're losing out a lot of time.

That time is valuable.

You can pick up that time and actually create an income stream for you.

So please don't lose out on that. That's point.

Number one.

The second key point that I would like to highlight by giving you a proper

example is around the commissions that you lose in terms of trading.

Now, this is something that I picked

from zerodha , which is one of the lowest cost brokers in the country right now.

And these are the trading charges that you pay.

So let me take you to my screen now.

First equation, you can take a look at the Intraday equity.

So Intraday means that you have taken

a position today and you have to settle it today.

For example,

if you buy ITC stock in the morning at let's say 11:30 A.m.,

then you have to settle your position by 3:20 in the afternoon.

That is when roughly the market closes around 3:30.

So if you have taken this Intraday position, you have to cut your position.

That is what Intraday means.

And delivery means that you have taken

the delivery of the stock, you purchased ITC and it goes into your DMAT account.

So delivery means that you have purchased ITC.

It goes into your trading account and now

you can hold it and you can decide whenever to sell it.

So this is the difference between Intraday and delivery equity.

So let us quickly take a look at the charges.

So let's say that if I'm an Intraday trader and if I buy 1000 units of some

stock which is trading at Rs1000, I sell it at 1100.

So per stock, I'm making a profit of RS100

and the total quantity I have created is RS100.

Right? So what is my total profit or what should

be my total profit if there are no taxes and other friction stuff.

So my total profit should be 10,000

because 100 units I have purchased and the profit per stock I have made is

RS100, so 10,000 should be my overall profit.

But I end up paying a lot of brokerage Rs40.

I'm paying STT securities transaction tax and I'm paying a bunch of other taxes.

And in return I end up making nine Rs9913 instead of my Rs10,000 profit.

And please remember, this is not taxed yet.

So you have to pay tax on this profit.

Now this is your net PNL, but you have to pay taxes on it.

So here you might have to pay short term capital gains tax.

Please check with your CA so there is additional tax on top of this.

So as a result, upfront itself,

you're losing a lot of commissions even when you're doing Intraday trades.

Now, delivery. What happens is that this calculation

remains the same, that you are buying 100 units.

You are buying it at Rs1000, you are selling it at one RS1100.

Then there are a bunch of different taxes

that you are paying and your total tax that you are paying is 2.

34%. Right.

So this is a big amount of tax that you

are paying if you are taking deliveries of your equity.

The point being that if you trade very

frequently, if you are trading super frequently, then you will keep on paying

this 2.34% tax over and over and over again.

So what should you be doing?

If you're a normal retail investor, you should try to minimize trading.

I'm giving you a very counterintuitive

point that buy good stocks, identify good stocks, buy it at a lower price, hold it.

You don't need to sell it.

You should sell it when they have given up massive run ups, massive massive run ups.

Or if you have lost conviction, a bunch of other different reasons could be there.

But in general, you should try to minimize your trading because you will end up

losing a lot of money in terms of Commission.

This is a key message that I want to deliver to all of you.

Now, the third point that you need to understand in order to make money

in the stock market is that before entering a stock or before selling

a stock, you must take multiple indications.

The best way for me to help you understand

this point is by using a real world example.

So let us take the example of Hindustan Unilever.

Now, a lot of technical traders will tell you that you know what when Reverse head

and shoulder is forming, buy that stock and sell it off.

When that reverse head and shoulder is

completed and you will make a massive gain in that entire process.

Correct. And I'm not denying it.

But the problem is that these type of patterns do not always work out.

And sometimes if you have taken a pure

technical trade, you will get stuck with that loss.

Let me show you an example of in the HUL.

So I'll take you to my screen.

So this is a river head and shoulder pattern that is forming.

This is the shoulder. This is the head.

This is the shoulder again, technically, the depth of this entire head.

You should stick it here. Right?

And this becomes your target selling level.

This is where you should exit.

And this is where the stock price should have risen.

Unfortunately, this is where the market broke down and the stocks came down.

Now you, as a retail investor, would have panicked.

You would have said that, you know what Riverside holder is forming.

So you would have gotten in at this blue point.

Right. And then you start seeing your stock fall

by a lot every single day and you will start panicking that you know what?

What is happening. Why have I taken entry into this stock?

This is such a horrible company.

This that and you will start panicking.

The important point is that you must understand multiple parameters.

Multiple indicators.

For example, Reverse head and Shoulder is a really good pattern.

Nothing against it. It works roughly 60% of the time.

In addition to this, you must be taking other indicators.

Also, stock trading, in my opinion,

for retail investors, is a combination of Macroeconomics.

It's a combination of technical.

It's a combination of fundamental.

It's a combination of business analysis.

All these things come together and only then you must make an entry into a stock.

If you do pure technical trading,

you will get stuck and you will lose your conviction right away.

You will see that RSI has become this or MACD has become this.

Let me enter into it because it always was.

No, it doesn't, right? It absolutely does not.

Please don't make that mistake.

Always take multiple confirmation from multiple angles.

Don't just purely depend on technical or just purely depend on business analysis.

From that perspective, four point.

In order to make money from the stock

market, retail investors should understand macroeconomic mix.

Understanding macroeconomy is really tough.

We do not have macroeconomic teachers

who relate stock market to Macroeconomics or economics from that sense.

But trust me, guys, Macroeconomics is probably the best bet

for you to make reasonable guesses in the stock market.

So let me give you a few examples here.

First and foremost, what is definitely happening in the macroeconomy right now.

One, the CPI inflation is increasing.

CPI inflation simply means

that the shampoo soap everyday products that you and I are getting.

The cost of those products are rising. Why is it rising?

Because the input costs that companies

have to bear that input cost itself is going up.

Prices of everything has skyrocketed by the governments all across the globe.

In addition to this,

this high CPI inflation is going to stay for a substantial future.

These are what the discussions are currently in the US now,

what does this mean to you as a stock market investor, it simply means that you

should be picking bets on companies that have pricing power.

Why? Think about it, right?

Just do a simple, logical thinking exercise here.

For example, if there is a local shampoo

manufacturing company and its prices of input products has gone up.

Now, of course it's profit margins are

going to come down, but it doesn't have the pricing power it

can't increase and pass on that increased prices to its consumers.

For example, if that local shampoo making

company used to sell a shampoo at RS100 and used to manufacture that shampoo

at Rs70 because of high CPI, that input manufacturing cost will become 90.

Now the profit margins are ten.

This increase in prices from 70 to 90.

It cannot be passed on to the consumers because this is a local company, right?

What can I do? It has no branding power.

On the flip side, if you compare this scenario to a branded company like HUL ,

if it is manufacturing shampoo, and if it can pass on that increased input

costs to the consumer, it can easily do it right.

And it can preserve its profit margin. And guess what?

Asian pins HUL, they are all increasing their prices.

This is something that I've been saying over and over again on this channel.

Now, what does this mean to you?

As an investor, it simply means no one.

In the short term there will be pain

with companies like HUL, Asian Payments, et cetera.

Because there is high input prices for these companies,

maybe for a quarter or maybe two quarters, their profit margins will shrink.

But they have started passing on these

increased prices to their consumers, so the profit margins will come back up.

It's simple, pure Macroeconomics.

There is nothing else going on here.

So same goes for commodity cycle.

So should you be holding steel right now?

Should you be holding gold right now?

Should you be holding silver or Bitcoin right now?

It's very complicated to understand it, and you must link this to Macroeconomics

technical business, fundamentals future outlook of the industry.

That does not matter here.

What matters more is what is the Macroeconomics telling us?

So please keep that in mind.

Understand debt cycle, understand commodity cycles.

All these are very important key points

and parameters that you must keep in place if you want.

I'll make a separate video on commodity cycles.

Let me know in the comment, but I will definitely try to do it.

But to cut the long story short without understanding the macros playing around

with RSI Reverse head and shoulder this that it's not going to help out at all.

All this is something that I can also teach very easily.

In fact, I have taught on part one

of my technical analysis, but honestly, these are not core cut indicators.

What is a core indicator?

Is the Macroeconomics part of it?

So please improve your macroeconomic skills.

Now let me talk about the fifth and final point.

The fifth and final point is that retail investors should trade with common sense.

This is such an important point.

And as retail investors.

We miss this critical argument.

Let me give you some examples here.

Number one, we always assume that the moment we buy

a stock from next day onward, it should start giving a 5% rise every single day.

It doesn't work that way.

Stock markets are extremely volatile

because there are immense returns associated.

Same goes for crypto markets.

Crypto markets are even more volatile

because there are even more returns associated with it.

So anything where money has to be made will have a lot of volatility.

Let me give you another example.

For example, it is generally said, it's not my perspective,

but it is generally said that government jobs are safe jobs.

Now, if you're not taking bribes, if you are doing your government job

really well, will you make a lot of money from government jobs?

The answer is no. Why?

Because it is safe.

There is very less volatility with government jobs.

But on the flip side, if you're working with a start up,

then the chances are that your salary will be very high.

But is the job security there? The answer is no.

So what I'm trying to say?

I'm trying to say that whenever money is made, volatility is going to be high.

If you are worried about the volatility

that someday I buy my stock moves by 20%, then it falls by 30%.

Whatever right?

If I buy a certain stock, it moves by 10%, then it falls by 15%.

What is happening? I am very worried about this.

If you can't stomach the volatility,

then probably stock market is not the right place for you.

Please do big deposits.

Please do mutual fund investments.

Please don't come into the stock market. That's point one.

Right. So you must sum up the volatility.

Number two. Please trade with common sense.

A lot of people start giving advice like that.

You know what Warren Buffett said this

that we must have a very highly concentrated portfolio.

I admire Warren Buffett, right?

I am one of the core followers of Warren Buffett.

But please be rational and please build strategies that work for you.

Mr.

Warren Buffett has a very concentrated portfolio in his portfolio.

He has 40% Apple.

Billions of dollars of portfolio is made up of Apple.

If he calls, Apple, CEO Tim Cook will pick

up his phone and he can have a conversation with him.

What is happening? What is not happening?

So for people like Mr.

Warren Buffett, it makes sense to have

a concentrated portfolio if we as retail investors are saying that, you know what?

I'm going to emulate his portfolio and I'm going to make my portfolio 40% Apple.

Guess what? Mr.

Warren Buffett will talk to Tim Cook

and he might be able to exit some of his stocks.

But we will not be by the time the news reaches us.

We are done right. So we will be in a very bad situation.

So understanding how to manage our risk.

This is the key central principle for retail investors.

So please keep this in mind.

Number 3, we always play around with companies that have a very high beta.

I had made a separate video on this.

So high beta means that compared to market returns, the stock moves a lot.

That is the beta of the stock.

For example, if the market moves by 10%, then a high beta stock will go up by 12%.

But if the market falls by 10%,

the beta stock or high beta stock will fall by -12% right.

That is the volatility compared to the market.

If you purchase the high beta stock than

even the Alpha, that is, the absolute return should also be high.

For example, if you have purchased a stock

like L&T where the beta is high, that it is more volatile than Nifty.

But if it's Alpha, that is the absolute return that L&t is giving is lower.

What's the point of buying such stocks?

It just doesn't make any sense.

So please do not go and buy such stocks.

If you want me to explain the concept

of Alpha bita, I have made a separate video on that.

I will make another video. Part two of that video.

Just let me know in the comment box.

But the bottom line is that please don't

go and buy highly volatile stocks that are performing badly consistently.

Please don't go and buy such stocks.

It just doesn't make any sense.

Similarly, don't buy very high rate companies.

I get messages that he has said I want to buy yes banks.

Why do you want to buy a yes bank?

What is the utility of buying a yes bank? Because you want to trade,

you want to unnecessarily lose so much of your money in Commission and you want

to speculate if you are fond of speculating.

I also speculate, but I keep a very small

budget for speculation because it's fun, right?

I'm not against speculation.

You must definitely speculate.

That's not a problem, but don't make it a core part of your investing strategy.

Make your budget different for speculation than investing.

So these are some of the thought processes and principles that I will leave you with.

In summary, I would like to tell you

that the stock market is a very rewarding game.

You, as a retail investor will need

to build your own philosophy and psychology of investing and trading

and whatever situation circumstances you are.

For example, if you have to be at office from 09:00 A.m. To 09:00 P.m.,

then you are left with very little time to invest first.

So you must automate build systems around it.

That is the core thing that you must focus on.

Don't chase unnecessary returns.

If you are making sensible, decent 15% to 20% returns in the stock

market every single year, you are doing fabulously.

Fabulously. Well, right.

Aim for decent returns.

Don't change like 100% to 100% returns

and don't go after with the intent that, you know, what?

I'm only going to invest in.

Multi baggers no one can pick multi baggers.

You can pick fundamentally wrong companies fundamentally good companies at good

prices, which happen to become multi baggers over time.

So I hope you enjoyed the video.

Gave it a thumbs up and I will see you the next time.