HOW ANYONE CAN MAKE MONEY TRADING SHARES
Author: Robbie Burns
Publisher: Unicorn Books
QUICK-READ TIP: Beginners should first go through the chapter, 'Is trading right for you?' to find out if they have the mindset to indulge in trading.
VISUALS: Graphs, tables
In this endeavour, he is assisted by the enticing cover and title of his latest book, How Anyone can make Money Trading Shares. Both these are effective lures for readers who are easily baffled by the stock markets.
Burns tried to help them earlier, when he published his first book, The Naked Trader, in 2005. Now, he wants to reveal his top 10 secrets, the 'sure-fire' ways to pick good stocks. Burns starts from scratch and takes the reader, simply and savvily, through the steps that are essential to become an investor or a day trader.
A journalist who left his job in 2001 to begin a career as a day trader, Burns claims to have made a profit every year, even during the market downturn. He puts this knowledge to good use and guides the reader through the intricacies of stock-picking in a witty manner.
Burns does not outline any new analytical tool and simply employs well-known concepts and tried-and-tested strategies of successful investors.
He points out how even a layman can utilise these to pick stocks that have the potential to earn profit. The book is brimming over with tips, from 'Things to Think about before Buying' to 'Top Ten Mistakes'.
Some of these, such as the 'Seven Sins', are provocative enough to catch the reader's attention instantly. Burns advises traders to avoid 'lust', that is, not to fall in love with their stocks. He says, "You're not dating shares-think of them as just acquaintances that can be dumped any time without worry."
However, some of the tips are repetitive. For instance, the first winning strategy is how to profit from a company's changing focus, while the fourth strategy is to focus on recovery plays, where the company restructures its products to adapt to the market demand. Aren't both, in a way, one and the same? In the second strategy, 'Find cheap shares', the author cites luck as a major factor in finding a cheap stock. However, relying on fate seems simplistic, especially as trading shares is a skill that needs to be honed. Such frivolous advice is hardly beneficial to readers.
At times, the author contradicts himself. For instance, while explaining the concept of price to earnings (PE) ratio, Burns says that he "does not take an awful lot of notice of them". However, throughout the book, he cites his 'rule of thumb'- the market cap to profit ratio should be about 15 times. This is nothing but PE, the ratio in question.
BE MONEY WISE: To trade in stocks, allot only the amount that you can afford to lose. Don't be tempted to gamble more.
CHECK THE COMPANY: Scrutinise the fundamentals of a company, including its order book and management.
DON'T CHASE THE SHARE PRICE: Analyse why the share price is high or low. Don't buy it because someone says it will double in price.
HAVE A PLAN: When you buy a share, decide when and at what profit you would want to sell it.
DON'T PANIC: The biggest mistake an investor makes is to buy or sell shares in a panic. If the market falls, it will rise again.
In the third section of the book, Burns states that he strongly believes in charts. However, on the same page, he makes an assertion: "It's simply crazy to buy and sell shares on the basis of looking at a chart and nothing else at all."
Also, he has illustrated numerous examples, all of which are backed by charts. Burns has also completely ignored the fact that the stock markets do not function in isolation and that any action in a major country has repercussions in other parts of the world. The emerging markets have also become financially influential.
This makes the entire process of stockpicking and winning rather complicated. The language is simple and the text is not inundated with jargon. The concepts are explained in an easy manner with the help of charts and graphs. If you're a newbie, Burns' advice will help you learn how to zoom in on profitable stocks. However, contrary to the author's claims, it's not a 'sure-fire' guide to success.
If you want to become an active day trader, you will need to read more about the craft of stock-picking. Despite the failings, the book is racy and has an entertaining style, which can help the trading tyros get a foothold in the complex arena of stock markets and ensure that they make a profitable start.
The author is VP, Research & Market Strategy, Khandwala Securities
Netting a Stock
EQUITY MASTER (equitymaster.com)
Equity Master is a comprehensive Website, teeming with research reports. You can access financial reports of more than 500 companies, each listing financial ratios, past quarterly results and the movement of share prices over a year. All these can assist traders in deciding the value of a stock.
The market monitor provides detailed graphs of the movements of all indices. If you are passionate about trading, you can also opt for the premium services. The membership fee is Rs 5,000 a year. One drawback is that you have to pay an annual fee of Rs 300 to access the portfolio tracker, a service that is offered free by other sites.
INVESTOR FIRST (investorfirst.in)
Investor First is an initiative of the National Institute of Securities Markets, a public trust established by market regulator Sebi to enhance financial literacy and investor protection. It does so with aplomb, with lots of videos and presentations that are fun to go through. The tips, such as 'How to read a contract note' and 'How to evaluate your financial adviser', are beneficial for beginners.
The only problem is that as the Website has been launched recently, there are a lot of beta versions in each segment. However, this can be useful as you won't be overloaded with information and can pace your financial learning. There is also a blog, which, if written regularly, can make the Website more interactive.