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7 Key Tips For A Day Trader

day-trading-tips

Disclaimer: Day trading is highly injurious to your financial health. This blog, therefore, strongly advocates AGAINST day trading. However, if someone simply can't resist the temptation, s/he must follow some important rules to minimze the damage.



Day trading is a thrilling yet challenging endeavor that requires a unique set of skills, discipline, and strategies. It involves buying and selling shares within the same trading day, aiming to profit from short-term price fluctuations.

While the allure of quick profits can be enticing, day trading can also be risky and demanding.

To navigate this fast-paced world successfully, day traders need a solid foundation of knowledge and a well-defined approach.

In this article, we will discuss seven key tips that can help day traders succeed in the dynamic world of day trading.

1. Education and Research
The first and most crucial step for any aspiring day trader is to invest in education and thorough research. Day trading is not a get-rich-quick scheme; it's a skill that must be honed over time. Start by understanding the basics of the financial markets, including stocks, forex, and commodities. Learn about trading strategies, technical analysis, and fundamental analysis.

Additionally, consider enrolling in trading courses or seminars led by experienced professionals. Many reputable online platforms offer comprehensive day trading courses that cover everything from market mechanics to risk management. Stay updated with financial news and market trends, as this knowledge will be instrumental in making informed trading decisions.

2. Develop a Trading Plan
Successful day traders do not approach the markets haphazardly; they have a well-thought-out trading plan. Your trading plan should outline your goals, risk tolerance, and strategies. It should also specify your entry and exit criteria, as well as the amount of capital you're willing to risk on each trade.

Establishing a trading plan helps you stay disciplined and avoid impulsive decisions, which can lead to significant losses. It's essential to stick to your plan, even in the face of emotional turbulence that often accompanies trading.

3. Risk Management
Day trading involves inherent risks, and protecting your capital should be a top priority. Risk management is the key to longevity in day trading. One commonly recommended rule is the "1% rule," which advises risking no more than 1% of your trading capital on a single trade. This rule helps protect your capital from substantial losses and ensures you have enough funds to continue trading.

Another aspect of risk management is setting stop-loss orders. These are predetermined points at which you will sell a position if the trade goes against you. Stop-loss orders are crucial for limiting potential losses and preventing a small setback from turning into a disaster.

4. Choose the Right Broker
Selecting the right brokerage platform is vital for day traders. Look for a broker that offers competitive commissions, a reliable trading platform, and excellent customer support. The trading platform should be user-friendly and equipped with essential tools like real-time market data, technical analysis charts, and order execution capabilities.

Additionally, consider the broker's access to various financial markets, as day traders often diversify their portfolios across different assets to spread risk. Ensure that the broker you choose aligns with your trading goals and strategies.

5. Practice with a Demo Account
Before risking real capital, practice your day trading strategies with a demo account. Most reputable brokers offer demo accounts that allow you to trade with virtual money, simulating real market conditions. This practice helps you familiarize yourself with the trading platform and test your strategies without incurring losses.

Start with a demo account to gain confidence and fine-tune your trading techniques. Keep in mind that success in a demo environment doesn't guarantee success in the live market, but it's a crucial step in your preparation.

6. Embrace Continuous Learning
The financial markets are dynamic, and what worked yesterday may not work tomorrow. Therefore, successful day traders must embrace continuous learning and adaptation. Stay open to new strategies and technologies that can improve your trading performance.

Attend webinars, read books, and follow experienced traders on social media or trading forums to stay informed about the latest developments in day trading. Consider keeping a trading journal to record your trades and analyze your performance regularly. This practice can help you identify patterns, strengths, and weaknesses in your strategy.

7. Manage Emotions
Emotions can be the downfall of many day traders. The volatility and pressure of day trading can lead to impulsive decisions driven by fear or greed. To be a successful day trader, you must learn to manage your emotions effectively.

One way to do this is by setting clear trading rules and sticking to them. Avoid chasing the market or trying to make up for losses with larger bets. Instead, take breaks when needed and practice relaxation techniques to stay focused and calm during trading hours.

Conclusion
Day trading offers the potential for significant financial rewards, but it comes with substantial risks. To succeed in this demanding field, day traders must prioritize education, discipline, and risk management. By developing a solid trading plan, continuously improving your skills, and staying emotionally resilient, you can increase your chances of thriving as a day trader.

Remember that success in day trading takes time, dedication, and a commitment to learning from both successes and failures.

How Many Funds Make an Ideal Portfolio?

 

ideal-mutual-fund-portfolio


Introduction
Building a well-diversified investment portfolio is crucial for long-term financial success.

One common question that investors often ask is how many funds they should include in their portfolio.

While there is no one-size-fits-all answer, this article aims to explore the factors to consider when determining the ideal number of funds for an investment portfolio.

Understanding Diversification
Diversification is a risk management strategy that involves spreading investments across different asset classes, sectors, and geographical regions. The primary goal is to reduce exposure to any single investment and minimize the potential impact of market volatility.

When constructing a diversified portfolio, investors should typically select funds that offer exposure to different types of assets, such as stocks, bonds, real estate, and commodities.

Factors to Consider
1. Investment Goals: The number of funds in a portfolio should align with your investment goals. For example, a long-term investor focused on wealth accumulation may choose a larger number of funds to capture diverse growth opportunities. On the other hand, a conservative investor with capital preservation as the main objective might opt for a smaller number of funds with lower risk profiles.

2. Risk Tolerance: Your tolerance for risk plays a significant role in determining the number of funds in your portfolio. Aggressive investors willing to take on higher risk may have a larger number of funds, including those with exposure to emerging markets or small-cap stocks. Conversely, conservative investors may prefer a more limited number of funds, with a focus on stable and established companies.

3. Time and Effort: Managing a portfolio can require time and effort. Consider how much time you can dedicate to researching, monitoring, and rebalancing your investments. If you have limited time or lack the necessary expertise, a smaller number of funds or index/exchange-traded funds (ETF) might be more suitable.

4. Fund Overlap: It is essential to evaluate the overlap between funds in your portfolio. Investing in multiple funds that hold similar securities may lead to overexposure and defeat the purpose of diversification. Analyze the underlying holdings and asset allocations of each fund to ensure they complement one another.

5. Cost Considerations: Each fund comes with expenses, including management fees and other administrative costs. As the number of funds increases, so does the overall cost of managing the portfolio. It is important to weigh the benefits of diversification against the associated expenses to ensure they align with your investment strategy.

Finding the Balance
Achieving the right balance in portfolio diversification is key. It is often recommended to strike a balance between the benefits of diversification and the complexity of managing multiple funds. Here are some approaches to consider:

a. Core-Satellite Approach: This strategy involves a core portfolio of broad-based funds that provide exposure to major asset classes, complemented by satellite funds that focus on specific sectors or investment themes. The core funds provide stability and long-term growth potential, while satellite funds offer additional diversification and the potential for higher returns.

b. Passive Funds: Investing in index funds and/or ETFs can simplify the process. These funds pool money from multiple investors and invest so as to mimic the underlying index e.g. Nifty 50, Sensex 30, Nifty Next 50 etc. Since they track the index they don't need active fund management, thereby saving you the time and effort of selecting and monitoring actively-managed funds.

c. Hybrid Funds: Another option is investing in asset allocation funds, also known as hybrid funds. These funds invest in a given mix of equity, debt and gold and automatically adjust their asset allocation from time to time based market performance. They provide a one-stop solution for diversification, as they invest in a mix of different asset classes.

Conclusion
While, there is no definitive answer to how many funds make an ideal portfolio, following the aforesaid approach, you can create an portfolio that is 'ideal' for you that can help you comfortably achieve your financial goals.

A Short n Quick Guide on Withdrawal of Rs.2000 Banknotes

rs-2000-currency-note

In a surprising move, the Reserve Bank of India (RBI) has recently announced the withdrawal of Rs.2000 banknotes from circulation.

This has left many people wondering about the appropriate course of action, if they possess these currency notes.

So here's a short and quick guide on what you should do if you currently hold Rs.2000 banknotes, to ensure a smooth transition and minimal inconvenience.

1. The banknotes of Rs.2000 denomination continue to be legal tender. So you can still use them for day-to-day transactions.

2. RBI has stipulated September 30, 2023 as the deadline, by which date you must deposit / exchange these banknotes. So there's no need urgency and hence you need not panic.

3. You can either deposit the Rs.2000 banknotes into your bank accounts and/or exchange them for banknotes of other denominations.

4. The process of deposit / exchange begins from May 23, 2023.

5. The facility to exchange is available at any bank branch, even if you don't have your account in that particular branch.

6. There is no limit on the amount of Rs.2000 banknotes that you can deposit in your account (in complaince with the KYC norms and other statutory requirements, if any).

7. However, if you wish to exchange them for other denominations, there is a limit of Rs.20,000 i.e. 10 notes at a time. But you can rejoin the queue, if have more than 10 notes to exchange. (For exchange through Banking Correspondents, the limit is 2 notes i.e. Rs.4000 per day.)

8. The exchange is free of cost and no fee is payable by you.

9. Nor do you have to fill up any slip, or provide any identification like Aadhaar etc. for exchanging the Rs.2000 banknotes.

10. The fate of undeposited or unexchanged Rs.2000 banknotes after Sept 30th is not yet known. So far RBI has not clarified this point.

7 Must-Read Books on Personal Finance and Investments

7-must-read-books-on-personal-finance

Personal finance and investments are universal topics that affect individuals worldwide, regardless of their geographical location.

By combining insights from different perspectives, we can gain a well-rounded understanding of managing our finances in an increasingly globalized world.

So, let's embark on this enlightening journey and discover valuable wisdom from both sides of the globe!

1. "The Intelligent Investor" by Benjamin Graham
No list on personal finance and investments would be complete without Benjamin Graham's timeless classic, "The Intelligent Investor." This book, revered by investors worldwide, emphasizes the importance of value investing and understanding market behavior. Graham's insights on stock selection, risk management, and the concept of a margin of safety remain as relevant today as they were when the book was first published in 1949.

2. "Rich Dad Poor Dad" by Robert T. Kiyosaki
Robert T. Kiyosaki's "Rich Dad Poor Dad" has captivated readers globally with its unique approach to financial education. Drawing from his own experiences, Kiyosaki shares valuable lessons about financial independence and building wealth. By highlighting the difference between his "rich dad" and "poor dad's" mindsets, Kiyosaki challenges conventional notions of money and encourages readers to embrace entrepreneurship and investment as paths to financial success.

3. "The Psychology of Money" by Morgan Housel
Moving beyond the technical aspects of finance, "The Psychology of Money" by Morgan Housel delves into the behavioral and psychological aspects that influence our financial decisions. With engaging anecdotes and thought-provoking insights, Housel explores the role of human emotions, biases, and social pressures in our relationship with money. This book offers a refreshing perspective on personal finance and helps readers develop a healthier mindset towards wealth and investments.

4. "The Little Book of Common Sense Investing" by John C. Bogle
John C. Bogle, the founder of Vanguard Group, presents a compelling case for passive investing in "The Little Book of Common Sense Investing." Bogle advocates for low-cost index funds as a reliable investment strategy for long-term wealth accumulation. By focusing on the simplicity of index investing and avoiding the pitfalls of active management, Bogle empowers readers to make informed decisions and achieve steady returns over time.

5. "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko
"The Millionaire Next Door" by Thomas J. Stanley and William D. Danko challenges preconceived notions of wealth and reveals surprising insights about self-made millionaires. The authors conducted extensive research to uncover common traits and habits among affluent individuals who quietly amassed wealth over time. This eye-opening book encourages readers to adopt a frugal lifestyle, prioritize savings, and make conscious decisions to build long-lasting financial security.

6. "Think and Grow Rich" by Napoleon Hill
Originally published in 1937, "Think and Grow Rich" by Napoleon Hill remains a classic in the realm of personal development and wealth creation. Hill interviewed numerous successful individuals of his time, including Andrew Carnegie and Thomas Edison, to distill their wisdom into a practical guide for achieving financial abundance. By emphasizing the power of positive thinking, goal setting, and persistence, Hill inspires readers to unleash their potential and attract prosperity.

7. "The Richest Engineer" by Abhishek Kumar
Bringing an Indian perspective to personal finance, "The Richest Engineer" by Abhishek Kumar provides valuable insights for individuals looking to optimize their financial journey. Kumar, an engineer-turned-entrepreneur, shares practical strategies and principles to create a robust financial foundation.

As Benjamin Franklin once quoted, “An investment in knowledge pays the best interest.

So, before you invest your hard-money in buying assets, spend a fraction of your money in buying the time-tested knowledge and wisdom.

With almost an infinte 'return on investment', it would be the best investment you would ever make.


Do Debt MFs Still Score Over Bank FDs? Check out.

debt-mf-vs-bank-fd

Interest on Bank Fixed Deposits is taxable as per one's income tax slab rate.

Vis-a-vis this, till Mar 31, 2023 the long term capital gains (holding period more than 3 years) on Debt Mutual Funds was taxed @20% with indexation benefit.

[Note: Like Banks FDs, the short term capital gains (holding period upto 3 years) on Debt MFs was taxable as per one's income tax slab rate.]

Therefore, there was massive tax advantage when a person in the higher tax brackets invested in Debt MFs as compared to the Bank FDs, and held it for more than 3 years.

Sadly, w.e.f. April 1, 2023, this huge tax benefit on Debt MFs is gone. Now, like Banks FDs, the capital gains (irrespective of the holding period) would be taxed as per one's income tax slab rate.

This is a big blow for the Debt Funds.

However, even if Bank FDs and Debt MFs are now at par as far as the taxation is concerned, Debt MFs continue to score over Banks FDs on many other counts.

Therefore, it would still be advantageous to invest in Debt MFs as compared to the Bank FDs.

Let's explore:

1. Deferred Tax Liability
In case of Bank FDs, the tax is payable every year on the interest accrued. So, assuming you do a 5-year fixed deposit with cumulative option, you will have to pay tax on the interest earned every year; even though you will get the interest only after 5 years at the time of maturity.

However, in case of Debt Funds, you have to pay tax only when you redeem your investment. So, assuming you opt for the Growth Option and don't make any withdrawals for say 10 years, you have to pay no tax for these 10 years; even though the value of your investment is going up every year.

2. No loss on early encashment
Suppose you do a 5-year FD. But for some reason you have to withdraw the money after only say 6 months. Then, your interest income will be calculated on the 6-monthly rate of interest and not the contracted 5-year rate of interest. Since short-tenure rates are typically 1-3% lower than long-tenure rates, you will end up earning much lower income on premature encashment of a Bank FD.

With Debt Funds, this is not the case. Whatever increase has happened in the NAV, you will get the same WITHOUT ANY REDUCTION. So, with Debt Funds, you have the flexibility to withdraw your money any time, without worrying about any loss in your interest earnings.

3. No penalty on early encashment
Normally, banks levy a 0.5-1% penalty — over and above the reduction in the applicable rate of interest discussed in point 2 above — in case you encash your Bank FD before maturity.

Most Debt Funds do not charge any such penalty (known as exit load in MF terminology) on early encashment. Some Debt Funds do have an exit load. But this too is applicable for a limited period only (ranging from 1 week to 6 months/1 year). So, typically, if you have chosen your funds judiciously, you can withdraw your money WITHOUT ANY DEDUCTION.

4. Ease of partial withdrawal
Bank FDs generally do not have the option of part withdrawal. So even if your requirement is less, you have break the entire FD. Consquently, you lose a lot with a Bank FD.

There is no such problem with the Debt MFs. You can redeem part no. of units (without any loss of interest or penalty) and the balance units continue to remain invested (and keep growing).

5. Opportunity to claim set-off
Interest earned on Bank FDs is treated as Income from Other Sources. It gets added to your total income and taxed accordingly.

Income from Debt MFs is treated as capital gains. This gives you an opportunity to claim a set-off in case you have made a capital loss elsewhere say in some equity share. Thus, with Debt MFs, you have the the option to bring down your tax liability to the extent you have any loss to set-off.


In short, despite the setback of losing the indexation benefit, many other advantages of investing in Debt MFs continue to give them an edge over the Bank FDs.

PO Small Savings Schemes Apr-Jun'23 Interest Rates

post-office-small-savings-schemes

The Department of Economic Affairs, Ministry of Finance has announced the revised interest rates on the Post Office Small Savings Schemes for the first quarter of the Financial Year 2023-24.

Thankfully, there is a sharp increase in the rates of most the schemes. The only disappointment is the PPF — a very popular investment among Indians — where the rate remains unchanged.

This will definitely bring smiles to the investors in Small Savings Schemes, They have been suffering a steep increase in their monthly household budgets on account of inflation; besides the massive jump in the home loan EMIs due to rising interest rates on loans.

The decision to raise the interest rates was notified vide Office Memorandum F.No.1/4/2019-NS dated March 31, 2023 on the subject 'Revision of interest rates for Small Savings Schemes'.

(By now you would surely be aware that, as per the present policy, interest rates on Small Savings Schemes are reset periodically on a quarterly basis.)

Accordingly, the interest rates on various Post Office Small Savings Schemes for the first quarter of the Financial Year 2023-24 — i.e. Apr 1st to Jun 30th, 2023 — are detailed below:

Public Provident Fund (PPF): Unchanged at 7.1% p.a. [compounded annually]

5-year National Saving Certificate (NSC): Up from 7.0% to 7.7% p.a. [compounded annually]


Monthly Income Scheme: Up from 7.1% to 7.4% p.a. [monthly compounding and paid out]

Senior Citizens Savings Scheme: Up from 8.0% to 8.2% p.a. [quarterly compounding and paid out]

Time Deposits
1-year Deposit: Up from 6.6% p.a. to 6.8% p.a.
2-year Deposit: Up from 6.8% p.a. to 6.9% p.a.
3-year Deposit: Up from 6.9% p.a. to 7.0% p.a.
5-year Deposit: Up from 7.0% p.a. to 7.5% p.a.
(All on quarterly compounding basis)

5-year Recurring Deposit: Up from 5.8% p.a. to 6.2% [compounded quarterly]

Kisan Vikas Patra: Up from 7.2% p.a. to 7.5% p.a. [compounded annually]
(The scheme will now double your money in 9 years 7 months, as against 10 years earlier)

Sukanya Samriddhi Scheme: Up from 7.6% p.a. to 8.0% [compounded annually]

Savings Deposit: No change at 4% p.a. [compounded annually]


Note:
1. The revised interest rates apply only to the "new accounts" opened during the respective period (except PPF and Sukanya Samriddhi Scheme, where the new rate is applied on the outstanding account balance).

2. For the existing accounts under all other schemes, the contracted interest rate remains unchanged until maturity.


How To Invest In The Indian Stock Market From The US

invest-in-indian-stock-market-from-us

This guest post is contributed by choiceindia.com

Stocks may be the most acceptable option for you if you're an NRI looking for the best investment opportunities in India. After the United States and Japan, India has the third-largest investor base worldwide. For NRIs who wish to engage in Indian stock markets under the Portfolio Investment Scheme (PIS), which is governed by the RBI, the Foreign Exchange Management Act (FEMA) has set forth several regulations.

Being a Person of Indian Origin (PIO) or an Indian citizen residing outside India qualifies you as an NRI. There should be a minimum of 60 days and 182 days throughout your stay in India during a given fiscal year. You will still be recognised as an NRI if you meet this requirement, even if you spent 365 days or more in India over the previous four fiscal years. You may also qualify for NRI status if you are sent abroad for a period longer than six months.

How to Make Stock Market Investments Using PIS?
You can only have one PIS Account (Portfolio Investment scheme) for stock market investment if you're an NRI and create a Non-Resident External (NRE) Account with a bank that has received approval from the RBI. You can deposit money in any currency and withdraw it in rupees by using this account since the money you deposit is converted to rupees when it is placed there. An NRE account can be opened in a variety of formats, including savings and current or recurring deposits that are also subject to exchange rate changes.

After creating an NRE account, these are the next steps to follow
The actions listed below must be followed to invest in Indian stock markets:

  • You must mention your SEBI-registered broker's name when registering a PIS Account.
  • A PIS approval letter will be issued by the bank and must be provided to the broker.
  • The broker now allows you to open a free Demat Account and Trading Account.

PIS Account: What it Means?
The Portfolio Investment scheme (PIS) Account, which is connected to the Trading Account and Demat Account and serves as residents of India's equivalent of a bank account, is where NRIs invest their money.

How to Open a Share Market Account?
If you are thinking how to open a share market account in India from the US? To open a share market account, the following important documents must be submitted by the NRI Demat account holder to set up a trading cum Demat account. Once these documents have been provided and validated, the broker can proceed with processing the application for trading and Demat account:
  • PINS letter (Portfolio Investment Scheme), FEMA declaration, and a copy of the PAN card are all attached. The FEMA Declaration is crucial for confirming the source of funding.
  • NRIs must produce copies of their foreign passports, Indian passports, PIO cards, OCI cards, and other documents. Officials from the embassy can notarize photocopies.
  • For the bank's records, the NRI must provide documentation of their international address and a bank cheque that has been cashed from their international account.
  • Before opening the trading and Demat account, the NRI will also need to sign and execute a FATCA (Foreign Account Tax Compliance Act) declaration as part of the PMLA (Prevention of Money Laundering Act, 2002).

Additional information that an NRI Demat account holder should be aware of
  • NRIs are only permitted to trade on a delivery basis in stock markets; they are not permitted to trade intraday.
  • An NRI may purchase convertible debentures and shares of Indian corporations through stock exchanges, but the total amount of investment is limited.
  • By a directive from the RBI, an NRI is also prohibited from investing in particular equities and industries.

The Bottom Line
With a steady increase in foreign investment over the years, India is one of the top emerging markets globally. Investing in the Indian stock market could be a wise choice if you're trying to diversify your investment portfolio by purchasing foreign stocks. As a result, using the PIS platform, which is under the control of the RBI, NRIs can participate in Indian stock markets.

It is crucial to open an NRI Demat account with a reputable financial partner before investing in the Indian stock market. You have access to various investment options, devoted relationship managers, and a simple online account setup process through Choice India NRI financial advising services.

An Investment In Knowledge Pays The Best Interest ~ Benjamin Franklin

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