Experienced Levels Coming Soon

Next Version of Stock Market Gamification App is Coming Soon.

It will complete the Experienced Level and mainly Covers :

  • How to do a basic evaluation of a Business
  • Institutional Money Managers and challenges they face
  • What it is to be an Individual Investor
  • Basic Investment Guidelines for Individual Investor
  • Efficient Market Theory (EMT)
    • Opinion about EMT in Academia & Real World
    • Fallacy of EMT
    • EMT to Behavioral Economics
  • Value Investing
    • Introduction to Value Investing
    • Concept of Mr. Market
    • Basic Tenets of Value Investing
    • Attributes of a Value Investor
    • How Value Investing behaves in
      • A Bull Market
      • A Bear Market
  • Concept of Moat
    • Things that constitutes Moat
    • Role of Moat in evaluating a Business
    • Dangers to the Moat
  • Health Check of a business through important numbers
  • Concepts of “Intrinsic Value” & “Margin of Safety”
  • Importance of the Management for a Business.

Overall this level will take you from Knowledge to Basic Strategy.

Stock Market Gamification Next Version Coming Soon

Next Version of Stock Market Gamification is Coming on 3-Feb-2017

It will complete the Intermediate Level and mainly Covers :

  • Aspects of a Business
  • Stocks versus Bonds
  • Types of Stocks
  • Dividend & its impact on Business
  • Stock Market Enablers
  • Investment Advisor versus Stockbroker
  • Events like Stock-Split,Bonus Issues & Buyback and their impact on stock.
  • Mutual Funds
  • Basics of Derivatives

Here is some preview :

*Images from Stock Market Gamification App

Keep sending your valuable feedback and suggestions.

IPO and Value Investing

An IPO or Initial Public Offering is the first time a company that is applying to be listed on the stock market sells it shares to general public at an initial price i.e. listing price.

It’s the process through which a privately held company transforms into a public company.

From the cursory appearance it seems that the initial price is the best bargain price anyone can get for a stock, making IPO a bargain for an investor.

But is that really so?

Let’s first succinctly explore the process of an IPO and the factors that decides the initial offering price and the price once it starts trading on the stock market.

The IPO Process

The company that is to go public is known as issuer.

Underwriters are the investment bank that helps in the process of IPO for a fee and these are the one that approaches investors with offers to sell those shares and provides information about the company in a document known as prospectus.

The prospectus contains description of the company’s business, financial statements, information about officers and directors of company and their compensation, any litigation that is taking place, a list of material properties etc.

Then the approximate price at which the shares should be issued is determined.

While deciding this price several things are taken into consideration like, it should be low enough to stimulate interest in the stock and at the same time high enough to raise an adequate amount of capital for the company.

If a stock is overpriced then the stock may fall in value on the first day of trading and if it is under-priced then the capital raised could be insufficient.evaluate.png

After the IPO, when shares trade freely in the open market the price will be decided as per demand and supply of the share.

Also, when a company becomes public they will have stringent reporting requirements and they will be under greater public scrutiny and their ability to focus on longer term growth is somewhat reduced.

All these factor will affect there working as a public company and future earnings.

Let’s try to apply some of the principles of value investing as a yardstick to effectively evaluate IPO as an investment :

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Is listing price a bargain price?

One of the basic thing to remember about IPO is that it is an expensive process and the initial offering price do cover these expenses and therefore most of the times the stock is overpriced at listing price.

Do we know about the company well before IPO?

For a value investor, what matters most about a company is its financial history.

In the case of a company that is still not listed on the Stock Market, this information is mostly private which means it is not easy to access and most of the time unreliable.

In case of an IPO, prospectus do cover some of the earning history and description about the business but this information was once private and not scrutinized to the level any value investor wants it to be.

Is the business predictable?

Another important point that we need to pay attention to, is the possible effects of stringent rules and scrutiny that will be applied to the business once it’s listed on Stock Market.

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Most of the businesses do not react well to these requirements and their stock price follows it.

But…it’s very popular!

Being very popular sometimes inflate the price of the stock after IPO, due to a feeling of missing out by many people.

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The feeling of missing out on the massive gains leads to an initial hysteria leading to spike in price just after IPO making it heavily overvalued.

But once the initial frenzy wear out, the business has to justify the price and that is often a very difficult thing.

Advice from Master

The following quotes from Warren Buffet summarized his opinion about IPOs.

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“You don’t have to really worry about what’s really going on in IPOs. People win lotteries every day but there’s no reason to let that affect [your investing strategy] at all,”

“You don’t want to get into a stupid game just because it’s available.”

Warren Buffet

Risks associated with IPOs are substantial and it does not fall under the purview of sound value investing principles.

So the verdict from the point of view of any value investor tends to be:

“Avoid IPOs however lucrative they seem”

*All Images from CC0 Public Domain

Stock Market Gamification Version 3.0.1

Stock Market Gamification Version 3.0.1 Available Now

What’s New in Version 3.0.1

More Enjoyable Learning: Now learning is more enjoyable through explanations in easy language with graphics.

• Visual improvements along with better performance.

• It’s lot easier now to send your Feedback and to Rate and Share the App.

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It has got explanations in 6 Levels now and work is in progress for next levels.

Keep sending your valuable feedback and do rate it in Play Store if you like it.

Stock Market Gamification – Android Apps on Google Play

Mistakes : The learning opportunities

One thing that is very essential to have success in any endeavor is Mistakes.

There is a saying that:

“The Person Who Never Makes a Mistake Will Never Make Anything”

Mistakes presents the best learning opportunities and they provide the essential feedback mechanism to improve any system or strategy.

When mistakes are incorporated in any strategy as a feedback mechanism they minimizes the chances of the same mistakes again.

The key is, to never hesitate to do anything because of the fear of mistakes and the rule is to never repeat the same mistake.

If we fail faster, we’ll succeed sooner.

–Tom Peters

All the Masters in their respective fields do make mistakes and in fact they make BIG and a diverse range of mistakes and they keep learning from those mistakes that helps them to be the master of their trade.

Mistakes are inevitable, be it the legendary athlete like Michael Jordan

“I’ve failed over and over and over again in my life and that is why I succeed.”

Michael Jordan

Or,

from the realm of investing “The Oracle of Omaha” the great Warren Buffet himself.

Buffet invested in early 1990′s in a shoe company called Dexter Shoes after analyzing the competitive advantage (“Moat” as Buffet calls it) of the company at that time.

But, as it turns out, the company lost its competitive advantage in subsequent years and eventually proved to be a bad investment amounting to the loss of whopping $3.5 Billion.

Was it disappointing for him ?

Certainly …. Yes

Did that deter him from his core value investing approach ?

Definitely …. No

Actually, it only helped him to strengthen his approach by learning from his mistakes and to apply more diligence in subsequent endeavors.

In his own words:

“Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future – you can bet on that.”

Like all the other masters, he is never shy of making more mistakes because he knows the importance of mistakes and the invaluable learning from them in the process of success.

In order to succeed, we too need to embrace mistakes as inevitable part of life and do the necessary course correction.

Skilled Level Available Now

In Skilled Level terms and concepts related to Brokerage firms and Investment Advisors are being introduced.
Main things covered are :
  • What are Brokerage Firms.
  • Difference between Discount Brokerage and Commission based brokerage.
  • Concept of Investment Advisors.
  • Stockbroker’s general characteristics and how they are different from Investment Advisors.
  • Concept of Margin and risks associated with it.

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