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.

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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.

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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Value Investing the ‘Model’

Human mind is amazing in its capability to create models and we can try to understand Value Investing through the concept of Models.

What is a Model?

A Model is defined as “A hypothetical description of a complex entity or process”.

In our context, the entity is Stock Market or the process is investing in Stocks.

Now don’t be alarmed by the term complex here. The nature of entity need not always define the nature of Model that can help us understand it.

Another important thing to note is that most of the times a Model cannot explain all the things about the entity and focus only on some aspects of it.

So we need to have a clear distinction between what a Model CAN do and more importantly what it CAN’T do.

Let’s try to understand “Value Investing” as a Model that we want to use to explain the investing in stocks.

Main thing to remember is that it’s just a Model like the numerous others.

Which brings us to another question:

Why we want to consider “Value Investing” Model instead of other Models?

The main USP of this Model is Simplicity.

Value Investing does not try to predict the timing of stock market prices. It only helps to buy at a bargain and then waits for the Market to inevitably move towards “Intrinsic Value”.

“Intrinsic Value” is nothing but the fair,optimum value for a business that is supported by some quantifiable aspects of the business.

The “Intrinsic Value.” is determined using methods that produce a fuzzy but very important benchmark.

Now, “Intrinsic Value” calculation is important…. But and that’s a BIG BUT…. The more important thing is to understand that ….It’s NOT the level of accuracy of “Intrinsic Value” that makes the core of Value Investing but the concept of having a “Value” as a benchmark. …..This distinction sometimes is very hard for people to grasp.

Simplicity is just a matter of taste. Some like it complex and some like it simple.

Though added complexity could make the model more accurate but that’s not always the case and most of the times it does not worth the efforts.

To accommodate this possibility of error in calculation another important concept in Value Investing Model is that of “Margin of Safety”….which just states that you only buy at the maximum distance possible from intrinsic value.

“Margin of Safety” is embodiment of the concept of giving up the accuracy for the sake of simplicity and at the same time maintaining the effectiveness of the Model.

A Value Investing Model just boils down to…”You just have to be good at only one thing… and that is identifying mispriced businesses.”

This involves understanding the fundamentals of the business and doing some relatively simple math related to the performance of the business.

We’ll explore more…Stay Tuned.

In the Beginning There Was Idea

Every business starts as an idea which is generally a new thing and in most of the cases adds some value in some existing thing and generates cash flow in the process.

To convert the abstract concept of idea into a concrete business it requires financing.

How an idea can be financed?

One option is to get money with a promise of giving extra as per the pertinent Interest Rate.
It’s pretty straightforward and simple to understand.

You have an idea and other person has money and he is willing to give you the money with a promise of some additional money after a fixed period of time…Simple.

Another form of financing comes through Stocks.

How this form of financing works?

Now, this one is quite interesting and one of the greatest invention after the concept of money itself.

Let’s have a look at this more closely…

You are willing to give money without a promise of anything in return.

No Interest Rates……No Security of Principal….just a faith in the business ….. Seriously….How it works then!!

This is an astonishing thing as well as something that baffled many and make it difficult for them to fathom.

Let’s take a further look at this….

A business is divided into many parts and those parts are called Stocks of the business and people can buy those parts in the initial public offering (IPO).

Over the time these stocks are traded at a place called Stock Market based on‘perception’ about their growth in future the price changes over time.

Why price changes so much if the value of underlying business is not changing?

It’s all about Greed and Fear and it’s discussed here Greed & Fear

How an investor with a right mindset should see it?

The analogy of Mr. Market by Benjamin Graham is very helpful in understanding the overall scenario.

According to that, you are partner in a business with a crazy person Mr. Market.

Mr. Market has wild mood swings.

Every day he offers you to Buy your shares at a particular price or Sell his shares at a particular price.

But leaves the decision up to you entirely.

Sometimes he’s in very Good mood and tend to name a price higher thantrue value of business and he will accept with joy your shares at that price.

At other times he is in such Bad mood that he tend to name a price very low than true value of business and you can take advantage of Mr. Market’s crazy offer to buy his shares.

And not to mention that you always have the choice of not doing anything.

That’s the real beauty no penalty for inaction….Which is the greatest edge for an investor with the right mindset.

We’ll explore more…Stay Tuned.

Nivesh Niti in Nutshell

   “Investing is simple, but not easy.”
                                   – Warren Buffett

Nivesh Niti (Nivesh Niti – Android Apps on Google Play ) is an attempt to impart the right investor mindset.

Most of the financial content on the internet is designed for short-term traders which gives the idea that it is very easy to make money in short term whereas the opposite is true.

It is difficult to predict any stock performance in short term and at the same time it is pretty easy say with greater chances of being right about the long term prospects of a company given that the company is doing something you understand and they have a earning model that you understand.

It is more likely for a company who is doing good for last 10 years to perform well in 11th as well as subsequent years and is actually relatively easy than predicting what it is going to do in next few days.

This process is an inherent part of what is famously known as “Value Investing” pioneered by Benjamin Graham and then by his disciple Warren Buffett.

Value investing is all about Paying the Right price for the company.


Core idea of Value Investing is trying to BUY something only at SALE (50% or more Discount)

Just like in SALE of any kind you need to know the MRP (Maximum Retail Price) to know it’s on how much Discount.

In Nivesh Niti every stock is assigned a value that reflect what should be its MRP (known as Optimum Price) by quantifying various aspects that matters as per Value Investing Principles.

For easier reference they are assigned with the Star Rating which is just an indication of their current level of Discount from Optimum Price.

So, the Current Price of a stock at any day place them to have one of the following levels of Discount from Optimum Price.

Level of Discount               Stars
50% or More                           5
40% to 50%                           4.5
30% to 40%                            4
20% to 30%                           3.5
10% to 20%                           2.5
0% to 10%                               2

And when,
Current Price >= Optimum Price (NOT at SALE)  i.e.  1 Star

Like in any SALE our aim is to get Maximum Value for our Paid Price.

“Price is what you pay for something, but value is what you get.”
–Warren Buffett

OUR AIM IS :
          “To Buy Great Businesses at Maximum Discount.”

A value of above Optimum Price just means that it’s NOT yet at SALE so just stay away from it till it’s on SALE (if ever).
That’s the only thing to focus and all the other things will automatically fall into place.

Currently, Nivesh Niti hides all the complexities and just present the most crucial things to impart the right investing mindset.

Nivesh Niti has a small (but growing) set of stocks selected according to Value Investing Principles and User can invest only among those.

The current takeaways from Nivesh Niti are:

  •   To stay focused on the value of the business and only look at the stock market when you want and too as its Master not as a Servant.
  • It helps user imbibe value investing principles which by nature is highly selective approach and isolate user from herd like mentality of the crowd.
  • It reinforces that investing is easy, not rigorous and painstaking.
  • It NOT necessary to have opinion about all the things in financial markets.
  • And above all Patience.

Use it according to the way it’s designed for some time and evaluate if you experience any difference in your outlook towards the investment in the Stock Market.

Finally,

It’s a Journey not a Destination…there are exciting things ahead……Stay Tuned

Disclaimer:
It’s for imparting the knowledge to help spread a right mindset to approach the investing and does not suggest any stocks and it should be used as an education tool only.