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Why This Is the Best Time to Trade Equities

Apr 9, 2016

In this issue:
» A subdued FY16 for the Indian auto sector
» Equitymaster's 20th Anniversary celebrations
» ...and more!
0:00
Radhika Pandit, Managing Editor of ValuePro

As most of you know, I am an ardent follower of Buffett's principles of value investing. So, I am always on the lookout for great quality stocks available at attractive prices during market volatility. That is why I am not too perturbed about the volatile swings we have been seeing in the markets of late.

But my views on stocks are only from a very long term perspective. I will be the last person to offer an opinion on whether such volatile markets offer any opportunities to trade.

Incidentally, my colleague Apurva Sheth, the editor of Swing Trader, told me that he is as busy as I am on the days of market volatility. In fact he has put down some of the compelling reasons on why this is the best time to trade as well.

So with his permission, we have reproduced his article below.

If you don't know where to start, or you don't have process in place, or you don't know the right way to trade, then I think reading Apurva's views can help you with all of that.

Best,
Radhika Pandit
Managing Editor, ValuePro
Equitymaster

**********************************************
  • 'I am new to trading. How should I start? Is this the right time to trade?'
  • 'Markets are so volatile these days. Would trading now be profitable?'
  • 'I am retired. Should I trade now?'

I hear these questions often, dear reader. The common thread is that many of our readers are new to trading, and they're sceptical. Some of them might have tried trading before and had a bitter experience. Once bitten twice shy, as they say. But if you're sitting among them on the fence, I strongly encourage you to go through rest of this letter. For today I will share four reasons, this is the best time to trade equities...

  1. Opportunities to learn

    One of the main reasons retail investors shy away and lose out is that they lack the knowledge required to win the game of trading. Let's say you are playing chess. To win the game, you need to know not only the rules but also strategies you can use to beat your opponent. The problem with retail traders is that they are neither completely aware of the rules of trading (risk management, position sizing) nor do they have proper knowledge of trading strategies (technical analysis, algorithms, futures, options).

    Over the last 20 years, Equitymaster has been empowering retail investors with its honest, credible, and reliable views on investing. Daily Profit Hunter (DPH), an independent research effort of Equitymaster, does the same in the field of trading. Through our newsletters, we educate our readers about the right way to trade. From trading psychology to risk management, our articles cover a wide range of topics. On our website, you can find articles on almost every topic that a new trader would require...and that too in a simple and easy to understand language. Learning has never been so fun and easy. Not to mention profitable!

  2. Tools to level the playing field

    Another reason retail traders have lost out is that they are trading against professionals who have access to the best trading tools and resources. Our aim at DPH is to empower you, the retail investor, with tools similar to what the professionals have at their disposal. Our mission is to level the playing field and give you an edge over the pros.

    Advanced Charts is a technical charting tool on our website that benefits lakhs of our readers. I believe it is one of the most user friendly tools available to traders. It has helped many of our readers take their trading to a whole new level.We know many of our readers are working professionals with limited time to keep a track of the markets. Our weekly market commentaries help them keep abreast to the latest happenings across the equity, currency, and commodity markets.

    Today more than ever, you have the tools to start trading equities.

  3. Plenty of opportunities to earn

    Most of the newcomers who write to me are interested in the current market situation. They want to know whether it's conducive for trading. Well, let me set this straight. If you wait for everything to be picture perfect before you trade, you will always be waiting. There will always be something of concern. And even when things look perfect, you can never be sure.

    Take the beginning of 2016 for example. Markets started the year on a terrible note. Indian markets dropped by more than 12% in the first two months of the year. It didn't look like an ideal time to trade. Yet, we had a positive performance for the period. I've shown you how I turned Swing Trader's performance around during one of the most difficult periods I have ever witnessed as a trade picker.

    The point is not about whether markets are conducive for trading but whether you are ready with a process that you are confident you can implement and stick to. If you have a solid process in place, any market environment is right for trading. If you don't have a proper process in place, then it isn't the right time for you to trade. Ever. (Quick update: Our performance in March has been even better than in January and February. Our best month ever, in fact.)

  4. The Sensex could rise 70% in the next two to three years

    If you are still on the fence, then I would like to share an interesting prediction from Rahul Shah, co-head of research at Equitymaster. Rahul believes that the Sensex could rise 70% in the next two to three years. Here's his rationale...

    If the profit margins of Sensex companies, which are currently at 12.2%, reverts to their ten-year mean of 13.5%, and if the EPS grows at its long-term rate of 15%, then we may see an upside of 70% in the next two to three years. You and I know very well that investing is a game of probabilities, not certainties. Nobody can guarantee this will happen. But it definitely helps to be in equities and trade in them when the long-term view is positive. Being in the right market at the right time increases your odds of success.

This could be the best time to trade equities. So if you don't know where to start, or you don't have process in place, or you don't know the right way to trade, then I have good news for you. I can help you with all of that in our premium short-term stock recommendation service, Swing Trader.

I have designed Swing Trader with the trading newcomers in mind. I won't just recommend stocks to you; I will teach you how and why I recommend a trade. The focus is to 'learn' and 'earn'. It doesn't matter whether you are a novice or seasoned trader; there's always something to learn. And don't worry - you do get all my stock recommendations along with your subscription.

If you've come this far, I know you are interested in making money from trading. And that's why I welcome you to consider trying my service for 30 days...

Happy trading!

Do you think this is the best time to trade equities? Share your views in the Club or share your comments here.

2:31 Chart of the day

FY16 turned out to be a tepid year for the Indian auto industry. The only segment that managed to grow in double digits was commercial vehicles (CVs). But this was largely led by medium & heavy CVs. Growth for light CVs remained sluggish as strict financing options remained an issue for this segment and hampered demand.

Two-wheelers struggled this year. The rural economy is a big market for two-wheelers. Thus, as poor monsoons wreaked havoc on crop production, farm incomes reduced and rural demand took a hit. And this impacted volume growth for two-wheeler players.

One interesting development that took place during the year was the launch of Bajaj Auto's quadricycle 'Qute'. The company exported a total of 334 units to 19 markets including Turkey, Russia, Indonesia and Peru. However, the product is still awaiting clearance for sale in India.

A Subdued FY16 for the Auto Sector

3:16

Come 22 April 2016, and we will be celebrating our 20th anniversary. It is a time of reflection and on this occasion we'd love to hear from you. In case you wish to share your experience with Equitymaster or read what some of our valued long time subscribers have to say about us, please do so here.

Here's what Anis Rahiman, an Equitymaster Reserve Member from Kerala, had to say about his experience with Equitymaster:

  • Congratulations on the occasion of celebrating the completion of 20 glorious years of success. You have always been on the top of the list for serving the investors with your unselfish and reliable services. Formations like yours with a brilliant team of dedicated analysts and with a clear process can only aim for high results. With your commitment and sincerity you have time to time proved your worth and have gained the much deserved recognition and fame. With your services, your subscribers have gained a lot. You have always kept investors as your priority and have never resorted to any wrong means. Keep it up and wish you all the success for many more years to come.
4:14

Asian markets ended the week on a negative note. The stock market in Japan was the worst hit with indices falling as much as 5.5% during the week. The negative interest rates as adopted by Bank of Japan (BOJ) have failed to convince the corporates that the inflation in the country will take off. Further, negative interest rate is leading to yen appreciating against dollar. This means the exports are likely to get impacted. All this data dragged the indices southwards.

Further, European markets ended the week on a mixed note. The stock markets in United Kingdom (UK) ended the week higher by 1%. However, stock markets in Germany ended the week lower by 1.8%. The European Central Bank (ECB) policymakers expect the euro area growth momentum to be slower than previously anticipated. As a result, the central bank lowered rates to fresh record low and increased the asset purchase program by 20 billion euro to 80 billion euro a month in March.

Back home, BSE Sensex ended the week lower by 2.4%. The markets were expecting a rate cut higher than 0.25%. However, Reserve Bank of India (RBI) in its monetary policy restricted the cut to 0.25%, which triggered the fall in the indices.

Performance During the Week Ended 9th April, 2016

4:55 Weekend investment mantra

"The best investment against inflation is to improve your own earning power, your own talent. Very few people maximise their talent. If you increase your talent, they can't tax it or they can't take it away from you." - Warren Buffett

This edition of The 5 Minute WrapUp is authored by Radhika Pandit (Research Analyst).

Today's Premium Edition.

Today being a Saturday, there is no Premium edition being published. But you can always read our most recent issue here...

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Equitymaster requests your view! Post a comment on "Why This Is the Best Time to Trade Equities". Click here!

2 Responses to "Why This Is the Best Time to Trade Equities"

shridhar joshi

Apr 15, 2016

Equity is for HNI small investor like me it is very tough call.As we can not buy everything you recommend.
Whenever we buy stock that gives -ve returns.

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Basanti Chattar

Apr 15, 2016

Sir.
You r giving latest hidden treasure report in your site . It is not easily accessible. download not possible. Please give the stock name clearly in mobile so that without time loss I can read.
Thanks.

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Equitymaster requests your view! Post a comment on "Why This Is the Best Time to Trade Equities". Click here!