Religare Project

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A SUMMER TRAINING PROJECT
On
“Myths And Realities in Indian Stock Market ”
UNDER
Under the guidance of:

Mr. Ravinder Singh
Area Head Religare
Finvest Limited Meerut
Submitted to:
Submitted By:
Mr.Nitin SHARMA Ranee Agarwal
Lecturer
M.B.A. III Sem.
(Deptt of Business Administration)
Roll.No.907570075
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ISTITUTE OF INFORMATIC & MANAGEMENT SCIENCES
MEERUT
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INSTITUE OF INFORMATIC &

MANAGEMENT SCIENCES,
MEERUT (2010-11)
Declaration
I Rani Agarwal a bonafied student of Institute of Informatics &
management sciences, Meerut, would like to declare that the project
entitled “Terminology in Equity Markrt ” submitted in partial fulfillment of
Master of Business Administration.
Ravindra Kumar Lodhi
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Preface
The project, as the title goes, “Terminology In Equity Market” deals all with the same.. a
complete understanding of the Recruitment process undertaken in the organization along
with the Selection process has been done. The process has been analysed after
considering prospects like manpower planning and the basis on which such planning and
the basis on which such planning is done which extends to job analysis and the basis of
the same. The study of the recruitment and of the company employees has been done by
studying the actual process and also the various tests that are conducted which includes
RPAT, Emotional Quotient tests and so on… A Questionnaire has also been made and a
survey conducted regarding the procedure of Selection in the organization… Questions
such as “How do you find the selection process in the organization and the same have
also been taken to know people’s reactions towards the same.
The project also deals briefly in the history of the company “Religare”.
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ACKNOWLEDGEMENT
With profound veneration, first of all I recline myself before ALMIGHTY

without whose blessings myself is cipher.
Indeed the words and my command are inadequate to convey my profound

gratitude and feeling of indebtedness to Mr. Ravinder Singh , Cluster Head,
and my project guide , Religare Finvest Ltd, for their valuable suggestions,
able guidance and ever-willing help that enhanced my ability to complete
this report.
Ravindra Kumar Lodhi
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Content
S.No. Topic Page No.
1 6
Executive summary
2 Introduction to religare 09
3 19
Investing In share Market
4 Terminology in Equity market 43
5 51
Research Objective
6 53
Research methodology
7 Data Analysis 59
8 67
Finding
9 Conclusion 89
10 Recommendation 92
11 Bibliography 106
12 Annexure 108
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EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
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This project intends to study the consumer buying behavior at local mom and the
degree of customer loyalty in Meerut. This project covers various aspects like
consumer buying behavior, their expectations, needs & requirements, present
satisfaction level, factors affecting their choices and the degree of consumer loyalty for
grocery in Meerut . The project is divided into two parts. The objectives for the first part
of the project are:
 To find out important factors that affect customer satisfaction.
 To find out the customer service satisfaction level at existing grocery at
religare.
 To find out the consumer’s perception about religare.
 To find out consumer’s perception about modern retail s.
 To find out existing competitors of Religare Retail.
The second part of the project explores the degree of customer loyalty for grocery
in Meerut. The main objectives of the study are:
 To determine the determinants of grocery loyalty of consumers in Meerut.
 To study the degree of customer loyalty for religare
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VISION:
The vision of Religare securities limited is:-
“Providing integrated financial care driven by the relationship of trust

and confidence”.
MISSION:
The mission of Religare securities is as under:-
“To be India's first Multinational providing complete financial services

solution across the globe”.
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Introduction to Relegare
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Introduction to Relegare
Religare is driven by ethical and dynamic process for wealth creation. Based on this, the
company started its Endeavour in the financial market.
Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare
Securities Limited, Religare Finvest Limited, Religare Commodities Limited and
Religare Insurance Advisory Services Limited provides integrated financial solutions to
its corporate, retail and wealth management clients. Today, It provides various financial
services which include Investment Banking, Corporate Finance, Portfolio Management
Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, there’s a lot
more to come your way.
Religare is proud of being a truly professional financial service provider managed by a
highly skilled team, who have proven track record in their respective domains. Religare
operations are managed by more than 2000 highly skilled professionals who subscribe to
Religare philosophy and are spread across its country wide branches.
Today, it has a growing network of more than 150 branches and more than 300 business
partners spread across more than 180 cities in India and a fully operational international
office at London. However, its target is to have 350 branches and 1000 business partners
in 300 cities of India and more than 7 International offices by the end of 2006.
Unlike a traditional broking firm, Religare group works on the philosophy of partnering
for wealth creation. It not only executes trades for its clients but also provide them
critical and timely investment advice. The growing list of financial institutions with
which Religare is empanelled as an approved broker is a reflection of the high level
service standard maintained by the company.
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Religare Enterprises Limited group comprises of Religare Securities Limited, Religare

Commodities Limited, Religare Finvest Limited and Religare Insurance Advisory
Limited which deal in equity, commodity and financial services business.
Religare
Religare Religare
Religare
Securities commodities Religare finvest
insurance
Limited limited
advisory limited
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♦ Religare Securities Limited : RSL is one of the leading broking houses of India
and are dealing into Equity Broking, Depository Services, Portfolio
Management Services, Institutional Equity Brokerage & Research, Investment
Banking and Corporate Finance.
♦ Religare commodities limited : Religare is a member of NCDEX and MCX and
provides platform for trading in commodities, which is an online facility also.
RCL provides platform to both agro and non-agro commodity traders to derive
the actual price of the commodity and also to trade and hedge actively in the
growing commodity trading market in India.
♦ Religare finvest: Religare Finvest Limited (RFL), a Non Banking Finance
Company (NBFC) is aggressively making a name in the financial services
arena in India. In a fast paced, constantly changing dynamic business
environment, RFL has delivered the most competitive products and services.
RFL is primarily engaged in the business of providing finance against
securities in the secondary market. It also provides finance for application in
Initial Public Offers to non-retail clients in the primary market. RFL is also
planning to initiate personal loan portfolio as fund based activity and mutual
fund distribution as fee based activities. RFL is also planning to initiate
personal loan portfolio as fund based activity and mutual fund distribution as
fee based activities.
♦ Religare insurance advisory limited: Religare has been taking care of financial
services for long but there was a missing link. Financial planning is incomplete
without protective measure i.e. structured products to take care of event of
things that may go wrong. consequently, Religare is soon coming up with
Religare Insurance Advisory Services Limited. As composite insurance broker,
we would deal in both insurance and reinsurance, providing our clients risk
transfer solutions on life and non-life sides. His service will take benefit of
Religare’s vast business empire spread throughout the country -- providing our
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valued clients insurance services across India. We aim to have a wide reach
with our services – literally! That’s why we are catering the insurance
requirements of both retail and corporate segments with products of all the
insurance companies on life and non-life side. Still, there is more in store. We
also cater individuals with a complete suite of insurance solutions, both life
and general to mitigate risks to life and assets through our existing network of
over 150 branches – expected to reach 250 by the end of this year!. For
corporate clients, we will be offering value based customized solutions to
cover all risks which their business is exposed to. Our clients will be supported
by an operations team equipped with the best of technology support.
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MANAGEMENT OF RELIGARE SECURITIES LIMITED:
A Religare security limited which was previously known as fortis securities limited is
from the Ranbaxy promoter’s group. So there is a good foundation of Religare securities
limited. The directors of Religare securities limited are as
Chairman
Mr. Harpal Singh
Managing Director
Mr. Sunil Godhwani
Director
Mr. Vinay Kumar Kaul
Director
Mr. Malvinder Mohan Singh
Director
Mr. Shivinder Mohan Singh
It was very pleasant working with Religare securities limited. I was given several tasks
and targets which I finished successfully. It was a good exposure. My work profile was to
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create new clients and develop their business in market when it was booming and
declining in the month of May and June respectively.
I had to go individually to every client and explain all the details of market and convince
them to enter in stock market by opening D-Mat and Trading account with the Religare.
Not only this, I had to sell Mutual funds also to them.
During my tenure I also got chance to survey what people think about the stock market.
What are their myths and what actually the stock market is? I also came to know about
other brokers and what clients perceive Religare against those brokers.
I had given them questionnaires to fill which comprise few general questions and few
questions regarding market, according to which I have analyzed the people’s myths on
stock market which is there in later part of this report.
ANALYSIS OF RELIGARE SECURITIES LIMITED
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STRENGTHS WEAKNESS
♦ Strong back up of promoter company ♦ Change of name gives bad
Ranbaxy. Impression to clients.
♦ Strategy of personal attention to every ♦ Service is good but not in
Client. Time.
♦ Good research and analysis team. ♦ Integration with IT not
♦ Transparency in cost and brokerage Satisfactory.
They charge. ♦ Late in launching of
♦ User friendly system. New Products.
♦ Minimum brokerage in the market.
OPPORTUNITY THREATS
♦ Stock market is the easiest way to earn ♦ Existing good players in the
Money which can be cashed among Market.
new investors. ♦ Frauds and scams in market
♦ Enough population is still untouched ♦ Fluctuations in the market.
Which might prove a good market. ♦ Strict regulation by SEBI.
♦ People are now attracted to share
Market.
Features Religare ICICI INDIA BULLS 5 paise.com

Securities Ltd. Direct
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Transaction In-house Outsourced Outsourced (FT) Outsourced
Engine (FT) (FT)
Quotes Push Push Push Push
update
technology
Registration Demat opening Rs. 750 1. Registration Rs.500
charge Rs. 250 Charges
2. Doc.Charges
Rs.170
3. DP AMC
Rs.250
4. DP Doc.
Rs.20
Total
Rs.940
Registration 1 Day 2-3 Days 10 Days 10 Days
A. Investment in A. Cash A. Investment in A. 3 times
Cash + 100% trading. No Cash + haircut on (cash) + 100%
security. security security. of shares. Min
Margin Rs.5000 to be
B. Trading 10 B. Trading 5 times in the trading
times cash & B. Margin cash & value of A/c. Negotiate
value of share Trading 3 share for upto 6 (cash)
Exposure for intraday. Times Cash intraday. for volumes 15
Limit C. Trading 5 times C. Trading 3 times lacs a day
cash & value of cash & value of B. Exposure
share for share for delivery. Margin only
delivery. for Selling in
delivery.
Exposure 780 scripts Limited Restricted Scripts. Yes
Against NSE+BSE Scrips
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Share
Carry
Forward Yes No No No
Facility
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Investing In Share Market
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Investing In Share Market
To do this effectively, it is necessary to ferret out the real reasons why we are investing in
the first place. While ‘to make money' is likely the obvious reason, in reality there are
myriad reasons why we try our hand at stocks. These range all the way from the money
objective, to wanting to feel good about ourselves, to garnering the respect of others.
These are at least as strong as the money factor, and when you think about it, money is
usually the means for achieving something else - like respect, etc. Only misers want
money alone. From a practical standpoint, we are all a mixture of these reasons and more.
Before you embark on any investment approach it is best to search yourself to see which
elements are present in yourself and attempt to root out the attributes of the ego-driven
investor and bolster the characteristics of the results-oriented investor.
The ego-driven Investor
The ego-driven investor sees investing as something exciting. He mostly does it as a way
to garner the admiration of others. He may also see it as entertainment. He is constantly
talking about this or that great deal, imagining that others will stand in awe of his
prowess and immense wisdom. In reality, he most likely does not really make too much
money in the stock market, a fact which he hides from the outside world by any means
possible.
Worst of all for the ego-driven type, he never gets any better at his investing. To admit he
has been doing something wrong, even to him, is more than his sensitive ego can take.
Since the aura of being an investment wizard is simply a way for him to gain affirmation
from others, he really doesn't care too much whether the results are there as long as he
can still stay in the game and keep talking about his smart deals at cocktail parties. Of
course, he conveniently forgets the bad ones and keeps turning over in his mind his best
deals and how smart he must be. He certainly never does a post-mortem on any of his
losing trades to figure out just why they were losers. He simply blames the loss on his
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broker, the company's management, or stock manipulators. He can't ask anyone what he
may have done wrong, since to admit he's made a mistake to someone else goes directly
against the grain of his objectives - to appear wise to others.
One way in which our friend Mr. Ego deals with losses is by stubbornly holding on to his
losing trades, no matter how bad they get. He reasons that until he sells, he hasn't really
lost anything, so why sell? Never mind that his broker sends him statements every month
telling him that his account value has dwindled - he really has lost money -whether or not
he admits it or not. In this way he assures himself that he can never really redeploy what's
left of his capital into something more promising.
The ego-driven investor doesn't enjoy buying a stock that has already doubled in value,
even if it could increase another 1,000% from there. The idea that someone else was
"smarter" than him and bought at a lower price is more than he can bear thinking about.
On the other hand, he dearly loves to buy stocks that are in a downtrend because there is
a chance that he will be the one who will buy the stock at its low for the year. Imagine
what bragging rights that would give him! Of course, most of the time he buys these
types of stocks and they just keep going down, down, down. But that's OK, as these deals
are unknown to anyone in his circle of friends. The prospect of that unlikely but alluring
"buying the bottom" scenario keeps him coming back for more - losses, that is.
Even when he does get lucky and happens to stumble into a winner, Mr. Ego is his own
worst enemy. He waits until the stock hits a new high for the year and then promptly sells
out to lock in his profit. Of course, this stock was in an uptrend and keeps right on sailing
far above where he exited. That's OK by Mr. Ego, though: he now has a profit that can be
exaggerated the next time he sees his friends. Will they ever be impressed!
Thus, the ego-driven investor's strategy is complete: he always holds onto his losing
stocks and when something starts to go right, he bails out faithfully. He has plenty to talk
about at parties, but there is no way he can ever make a decent profit. The real tragedy is
owed to the fact that since he blames others for all of his problems, he will never get any
better.
The results-oriented Investor

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The results-oriented investor seldom talks with others about his investment results.
Really, he is too busy trying to make his results better. He is never too proud to buy a
stock that is making new highs, realizing that those who are buying the stock most likely
know far more than he does - and a winning company is more likely to keep on winning
than a losing company is. The fact that someone else was smarter and bought at a lower
price does not worry him; it is against his nature even to have such a thought occur to
him. He is far too focused on trying to pick stocks that are performing well to entertain
these types of thoughts. He compares his performance against others' performance only
as a means of learning and getting better.
When the results-oriented investor finds himself with a stock that is zooming ahead, he
holds on, letting the stock continue to do well for him. Conversely, when a stock
stumbles badly enough that his predetermined plan says it is time to exit, he acts in an
unhesitating manner. He follows his plan for buying and selling whether that means
selling at a gain or at a loss. He also never sells a stock as it is making a new high, since
his concern is not in selling the top but rather in letting his winning positions run their
course. He does not mind selling a stock after it has retreated 50% in value, if being
patient through price corrections is what allows him to capture the occasional 1000%
gain.
One big difference between the results-oriented investor and the egoist is what he does
with losses.
While Mr. Ego blames others and learns nothing, the results-oriented chap studies in
great detail how his loss occurred, and eventually figures out the fallacies in his thinking
and/or system. Therefore he always gets better and better at what he is doing. He even
keeps a notebook on each loss and records what he could have done better.
Don't forget why one is investing: To make money. If one has any other reason for
investing, one should find another pastime.
Make A Financial Plan
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Figuring Out Your Finances
Sit down and take an honest look at your entire financial situation. You can never take a
journey without knowing where you’re starting from, and a journey to financial security
is no different.
You’ll need to figure out on paper your current situation— what you own and what you
owe. You’ll be creating a “net worth statement.” On one side of the page, list what you
own. These are your “assets.” And on the other side list what you owe other people, your
“liabilities” or debts.
Subtract your liabilities from your assets. If your assets are larger than your liabilities,
you have a “positive” net worth. If your liabilities are greater than your assets, you have a
“negative” net worth. You’ll want to update your “net worth statement” every year to
keep track of how you are doing. Don’t be discouraged if you have a negative net worth.
If you follow a plan to get into a positive position, you’re doing the right thing
KNOW YOUR INCOME AND EXPENSES
The next step is to keep track of your income and your expenses for every month. Write
down what you and others in your family earn, and then your monthly expenses. Include
a category for savings and investing. What are you paying yourself every month? Many
people get into the habit of saving and investing by following this advice: always pay
yourself or your family first. Many people find it easier to pay themselves first if they
allow their bank to automatically remove money from their paycheck and deposit it into a
savings or investment account. Likely even better, for tax purposes, is to participate in an
employer sponsored retirement plan such as a 401(k), 403(b), or 457(b). These plans will
typically not only automatically deduct money from your paycheck, but will immediately
reduce the taxes you are paying. Additionally, in many plans the employer matches some
or all of your contribution. When your employer does that, it’s offering “free money.”
Any time you have automatic deductions made from your paycheck or bank account,
you’ll increase the chances of being able to stick to your plan and to realize your goals.
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“But I Spend Everything I Make.”
If you are spending all your income, and never have money to save or invest, you’ll need
to look for ways to cut back on your expenses. When you watch where you spend your
money, you will be surprised how small everyday expenses that you can do without add
up over a year.
Small Savings Add Up to Big Money
How much does a cup of coffee cost you?
Would you believe Rs465.84? Or more?
If you buy a cup of coffee every day for Rs1.00 (an awfully good price for a decent cup
of coffee, nowadays), that adds up to Rs365.00 a year. If you saved that Rs365.00 for just
one year, and put it into a savings account or investment that earns 5% a year, it would
grow to Rs465.84 by the end of 5 years, and by the end of 30 years, to Rs1,577.50.
That’s the power of “compounding.” With compound interest, you earn interest on the
money you save and on the interest that money earns. Over time, even a small amount
saved can add up to big money.
If you are willing to watch what you spend and look for little ways to save on a regular
schedule, you can make money grow. You just did it with one cup of coffee.
If a small cup of coffee can make such a huge difference, start looking at how you could
make your money grow if you decided to spend less on other things and save those extra
rupees.
If you buy on impulse, make a rule that you’ll always wait 24 hours to buy anything. You
may lose your desire to buy it after a day. And try emptying your pockets and wallet of
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spare change at the end of each day. You’ll be surprised how quickly those nickels and
dimes add up!
Determine Your Risk Tolerance
Savings
Your "savings" are usually put into the safest places or products that allow you access to
your money at any time. Examples include savings accounts, checking accounts, and
certificates of deposit. But there's a tradeoff for security and ready availability. Your
money is paid a low wage as it works for you.
Most smart investors put enough money in a savings product to cover an emergency, like
sudden unemployment. Some make sure they have up to 6 months of their income in
savings so that they know it will absolutely be there for them when they need it.
But how "safe" is a savings account if you leave all your money there for a long time, and
the interest it earns doesn't keep up with inflation? Let’s say you save a rupee when it can
buy a loaf of bread. But years later when you withdraw that rupee plus the interest you
earned, it might only be able to buy half a loaf. That is why many people put some of
their money in savings, but look to investing so they can earn more over long periods of
time, say three years or longer.
Investing
When you "invest," you have a greater chance of losing your money than when you
"save." In mutual funds, and other similar investments are not federally insured. You
could lose your "principal," which is the amount you've invested. That’s true even if you
purchase your investments through a bank. But when you invest, you also have the
opportunity to earn more money than when you save.
But what about risk?
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All investments involve taking on risk. It’s important that you go into any investment in
stocks, bonds or mutual funds with a full understanding that you could lose some or all of
your money in any one investment. While over the long term the stock market has
historically provided around 10% annual returns (closer to 6% or 7% “real” returns when
you subtract for the effects of inflation), the long term does sometimes take a rather long,
long time to play out. Those who invested all of their money in the stock market at its
peak in 1929 (before the stock market crash) would wait over 20 years to see the stock
market return to the same level. However, those that kept adding money to the market
throughout that time would have done very well for themselves, as the lower cost of
stocks in the 1930s made for some hefty gains for those who bought and held over the
course of the next twenty years or more.
Diversification
It is true that the greater the risk, the greater the potential rewards in investing, but taking
on unnecessary risk is often avoidable. Investors best protect themselves against risk by
spreading their money among various investments, hoping that if one investment loses
money, the other investments will more than make up for those losses. This strategy,
called “diversification,” can be neatly summed up as, “Don’t put all your eggs in one
basket.” Investors also protect themselves from the risk of investing all their money at the
wrong time (think 1929) by following a consistent pattern of adding new money to their
investments over long periods of time.
Once you’ve saved money for investing, consider carefully all your options and think
about what diversification strategy makes sense for you. While the SEC cannot
recommend any particular investment product, you should know that a vast array of
investment products exists—including stocks and stock mutual funds, corporate and
municipal bonds, bond mutual funds, certificates of deposit, money market funds.
Diversification can’t guarantee that your investments won’t suffer if the market drops.
But it can improve the chances that you won’t lose money, or that if you do, it won’t be
as much as if you weren’t diversified.
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Risk Tolerance
What are the best saving and investing products for you? The answer depends on when
you will need the money, your goals, and if you will be able to sleep at night if you
purchase a risky investment where you could lose your principal.
For instance, if you are saving for retirement, and you have 35 years before you retire,
you may want to consider riskier investment products, knowing that if you stick to only
the "savings" products or to less risky investment products, your money will grow too
slowly—or given inflation or taxes, you may lose the purchasing power of your money.
A frequent mistake people make is putting money they will not need for a very long time
in investments that pay a low amount of interest.
On the other hand, if you are saving for a short-term goal, five years or less, you don't
want to choose risky investments, because when it's time to sell, you may have to take a
loss. Since investments often move up and down in value rapidly, you want to make sure
that you can wait and sell at the best possible time.
Investment Products:
Your Choices
• Mutual Funds
• Stock Market
Stocks and Bonds
Many companies offer investors the opportunity to buy either stocks or bonds. The
following example shows you how stocks and bonds differ.
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Let’s say you believe that a company that makes automobiles may be a good investment.
Everyone you know is buying one of its cars, and your friends report that the company’s
cars rarely break down and run well for years. You either have an investment
professional investigate the company and read as much as possible about it, or you do it
yourself.
After your research, you’re convinced it’s a solid company that will sell many more cars
in the years ahead. The automobile company offers both stocks and bonds. With the
bonds, the company agrees to pay you back your initial investment in ten years, plus pay
you interest twice a year at the rate of 8% a year.
If you buy the stock, you take on the risk of potentially losing a portion or all of your
initial investment if the company does poorly or the stock market drops in value. But you
also may see the stock increase in value beyond what you could earn from the bonds. If
you buy the stock, you become an “owner” of the company.
You wrestle with the decision. If you buy the bonds, you will get your money back plus
the 8% interest a year. And you think the company will be able to honor its promise to
you on the bonds because it has been in business for many years and doesn’t look like it
could go bankrupt. The company has a long history of making cars and you know that its
stock has gone up in price by an average of 9% a year, plus it has typically paid
stockholders a dividend of 3% from its profits each year.
You take your time and make a careful decision. Only time will tell if you made the right
choice. You’ll keep a close eye on the company and keep the stock as long as the
company keeps selling a quality car that consumers want to drive, and it can make an
acceptable profit from its sales.
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Mutual Funds
Because it is sometimes hard for investors to become experts on various businesses—for

example, what are the best steel, automobile, or telephone companies—investors often
depend on professionals who are trained to investigate companies and recommend
companies that are likely to succeed.
Since it takes work to pick the stocks or bonds of the companies that have the best chance
to do well in the future, many investors choose to invest in mutual funds.
What is a mutual fund?
A mutual fund is a pool of money run by a professional or group of professionals called

the “investment adviser.” In a managed mutual fund, after investigating the prospects of
many companies, the fund’s investment adviser will pick the stocks or bonds of
companies and put them into a fund. Investors can buy shares of the fund, and their
shares rise or fall in value as the values of the stocks and bonds in the fund rise and fall.
Investors may typically pay a fee when they buy or sell their shares in the fund, and those
fees in part pay the salaries and expenses of the professionals who manage the fund.
Even small fees can and do add up and eat into a significant chunk of the returns a mutual
fund is likely to produce, so you need to look carefully at how much a fund costs and
think about how much it will cost you over the amount of time you plan to own its
shares. If two funds are similar in every way except that one charges a higher fee than the
other, you’ll make more money by choosing the fund with the lower annual costs.
Mutual Funds without Active Management
One way that investors can obtain for themselves nearly the full returns of the market is
to invest in an “index fund.” This is a mutual fund that does not attempt to pick and
choose stocks of individual companies based upon the research of the mutual fund
managers or to try to time the market’s movements. An index fund seeks to equal the
returns of a major stock index, such as the Standard & Poor 500, the Wilshire 5000, or
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the Russell 3000. Through computer programmed buying and selling, an index fund
tracks the holdings of a chosen index, and so shows the same returns as an index minus,
of course, the annual fees involved in running the fund. The fees for index mutual funds
generally are much lower than the fees for managed mutual funds.
Historical data shows that index funds have, primarily because of their lower fees,
enjoyed higher returns than the average managed mutual fund. But, like any investment,
index funds involve risk.
Watch "Turnover" to Avoid Paying Excess Taxes
To maximize your mutual fund returns, or any investment returns, know the effect that
taxes can have on what actually ends up in your pocket. Mutual funds that trade quickly
in and out of stocks will have what is known as “high turnover.” While selling a stock
that has moved up in price does lock in a profit for the fund, this is a profit for which
taxes have to be paid. Turnover in a fund creates taxable capital gains, which are paid by
the mutual fund shareholders.
The SEC requires all mutual funds to show both their before- and after-tax returns. The
differences between what a fund is reportedly earning, and what a fund is earning after
taxes are paid on the dividends and capital gains, can be quite striking. If you plan to hold
mutual funds in a taxable account, be sure to check out these historical returns in the
mutual fund prospectus to see what kind of taxes you might be likely to incur.
How to Pick a Financial Professional
Are you the type of person who will read as much as possible about potential investments
and ask questions about them? If so, maybe you don’t need investment advice.
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But if you’re busy with your job, your children, or other responsibilities, or feel you don’t
know enough about investing on your own, then you may need professional investment
advice.
Investment professionals offer a variety of services at a variety of prices. It pays to

comparison shop.
You can get investment advice from most financial institutions that sell investments,
including brokerages, banks, mutual funds, and insurance companies. You can also hire a
broker, an investment adviser, an accountant, a financial planner, or other professional to
help you make investment decisions.
Investment Advisers and Financial Planners
Some financial planners and investment advisers offer a complete financial plan,
assessing every aspect of your financial life and developing a detailed strategy for
meeting your financial goals. They may charge you a fee for the plan, a percentage of
your assets that they manage, or receive commissions from the companies whose
products you buy, or a combination of these. You should know exactly what services you
are getting and how much they will cost.
People or firms that get paid to give advice about investing in securities generally must
register with either the SEC or the state securities agency where they have their principal
place of business. To find out about advisers and whether they are properly registered,
you can read their registration forms, called the "Form ADV." The Form ADV has two
parts. Part 1 has information about the adviser's business and whether they've had
problems with regulators or clients. Part 2 outlines the adviser's services, fees, and
strategies.
Remember, there is no such thing as a free lunch. Professional financial advisers do not
perform their services as an act of charity. If they are working for you, they are getting
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paid for their efforts. Some of their fees are easier to see immediately than are others.
But, in all cases, you should always feel free to ask questions about how and how much
your adviser is being paid. And if the fee is quoted to you as a percentage, make sure that
you understand what that translates to in rupees.
Brokers
Brokers make recommendations about specific investments like stocks, bonds, or mutual
funds. While taking into account your overall financial goals, brokers generally do not
give you a detailed financial plan. Brokers are generally paid commissions when you buy
or sell securities through them. If they sell you mutual funds make sure to ask questions
about what fees are included in the mutual fund purchase. Brokerages vary widely in the
quantity and quality of the services they provide for customers. Some have large research
staffs, large national operations, and are prepared to service almost any kind of financial
transaction you may need. Others are small and may specialize in promoting investments
in unproven and very risky companies. And there’s everything else in between.
A discount brokerage charges lower fees and commissions for its services than what
you’d pay at a full-service brokerage. But generally you have to research and choose
investments by yourself.
A full-service brokerage costs more, but the higher fees and commissions pay for a
broker’s investment advice based on that firm’s research. The best way to choose an
investment professional is to start by asking your friends and colleagues who they
recommend. Try to get several recommendations, and then meet with potential advisers
face-to-face. Make sure you get along. Make sure you understand each other. After all,
it’s your money.
You’ll want to find out if a broker is properly licensed in your state and if they have had
run-ins with regulators or received serious complaints from investors. You'll also want to
know about the brokers' educational backgrounds and where they've worked before their
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current jobs. To get this information, you can ask either your state securities regulator or
the NASD to provide you with information from the CRD, which is a computerized
database that contains information about most brokers, their representatives, and the
firms they work for. Your state securities regulator may provide more information from
the CRD than NASD, especially when it comes to investor complaints, so you may want
to check with them first.
Opening a Brokerage Account
When you open a brokerage account, whether in person or online, you will typically be
asked to sign a new account agreement. You should carefully review all the information
in this agreement because it determines your legal rights regarding your account.
Do not sign the new account agreement unless you thoroughly understand it and agree
with the terms and conditions it imposes on you. Do not rely on statements about your
account that are not in this agreement. Ask for a copy of any account documentation
prepared for you by your broker.
The broker should ask you about your investment goals and personal financial situation,
including your income, net worth, investment experience, and how much risk you are
willing to take on. Be honest. The broker relies on this information to determine which
investments will best meet your investment goals and tolerance for risk. If a broker tries
to sell you an investment before asking you these questions, that’s a very bad sign. It
signals that the broker has a greater interest in earning a commission than recommending
an investment to you that meets your needs. The new account agreement requires that
you make three critical decisions:
1. Who will make the final decisions about what you buy and sell in your
account?
You will have the final say on investment decisions unless you give
“discretionary authority” to your broker. Discretionary authority allows your
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broker to invest your money without consulting you about the price, the type of
security, the amount, and when to buy or sell. Do not give discretionary authority
to your broker without seriously considering the risks involved in turning control
over your money to another person.
2. How will you pay for your investments?
Most investors maintain a “cash” account that requires payment in full for each
security purchase. But if you open a “margin” account, you can buy securities by
borrowing money from your broker for a portion of the purchase price.
Be aware of the risks involved with buying stocks on margin. Beginning investors
generally should not get started with a margin account. Make sure you understand
how a margin account works, and what happens in the worst case scenario before
you agree to buy on margin.
Unlike other loans, like for a car or a home, that allow you to pay back a fixed
amount every month, when you buy stocks on margin you can be faced with
paying back the entire margin loan all at once if the price of the stock drops
suddenly and dramatically. The firm has the authority to immediately sell any
security in your account, without notice to you, to cover any shortfall resulting
from a decline in the value of your securities. You may owe a substantial amount
of money even after your securities are sold. The margin account agreement
generally provides that the securities in your margin account may be lent out by
the brokerage firm at any time without notice or compensation to you.
3. How much risk should you assume?
In a new account agreement, you must specify your overall investment objective
in terms of risk. Categories of risk may have labels such as “income,” “growth,”
or “aggressive growth.” Be certain that you fully understand the distinctions
among these terms, and be certain that the risk level you choose accurately
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reflects your age, experience and investment goals. Be sure that the investment
products recommended to you reflect the category of risk you have selected.
When opening a new account, the brokerage firm may ask you to sign a legally
binding contract to use the arbitration process to settle any future dispute between
you and the firm or your sales representative. Signing this agreement means that
you give up the right to sue your sales representative and firm in court.
Ask Questions
You can never ask a dumb question about your investments and the people who
help you choose them, especially when it comes to how much you will be paying
for any investment, both in upfront costs and ongoing management fees.
What training and experience do you have? How long have you been in business?
• What is your investment philosophy? Do you take a lot of risks or are you more
concerned about the safety of my money?
• Describe your typical client. Can you provide me with references, the names of
people who have invested with you for a long time?
• How do you get paid? By commission? Based on a percentage of assets you
manage? Another method? Do you get paid more for selling your own firm’s
products?
• How much will it cost me in total to do business with you?
Your investment professional should understand your investment goals, whether you’re
saving to buy a home, paying for your children’s education, or enjoying a comfortable
retirement.
Your investment professional should also understand your tolerance for risk. That is, how
much money can you afford to lose if the value of one of your investments declines?
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An investment professional has a duty to make sure that he or she only recommends
investments that are suitable for you. That is, that the investment makes sense for you
based on your other securities holdings, your financial situation, your means, and any
other information that your investment professional thinks is important.
The best investment professional is one who fully understands your objectives and
matches investment recommendations to your goals. You’ll want someone you can
understand, because your investment professional should teach you about investing and
the investment products.
How Should I Monitor My Investments?
Investing makes it possible for your money to work for you. In a sense, your money has
become your employee, and that makes you the boss. You’ll want to keep a close watch
on how your employee, your money, is doing.
Some people like to look at the stock quotations every day to see how their investments
have done. That’s probably too often. You may get too caught up in the ups and downs of
the “trading” value of your investment, and sell when its value goes down temporarily—
even though the performance of the company is still stellar. Remember, you’re in for the
long haul.
Some people prefer to see how they’re doing once a year. That’s probably not often
enough. What’s best for you will most likely be somewhere in between, based on your
goals and your investments.
But it’s not enough to simply check an investment’s performance. You should compare
that performance against an index of similar investments over the same period of time to
see if you are getting the proper returns for the amount of risk that you are assuming. You
should also compare the fees and commissions that you’re paying to what other
investment professionals charge.
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While you should monitor performance regularly, you should pay close attention every
time you send your money somewhere else to work.
Every time you buy or sell an investment you will receive a confirmation slip from your
broker. Make sure each trade was completed according to your instructions. Make sure
the buying or selling price was what your broker quoted. And make sure the commissions
or fees are what your broker said they would be.
Watch out for unauthorized trades in your account. If you get a confirmation slip for a
transaction that you didn’t approve beforehand, call your broker. It may have been a
mistake. If your broker refuses to correct it, put your complaint in writing and send it to
the firm’s compliance officer. Serious complaints should always be made in writing.
Remember, too, that if you rely on your investment professional for advice, he or she has
an obligation to recommend investments that match your investment goals and tolerance
for risk. Your investment professional should not be recommending trades simply to
generate commissions. That’s called "churning," and it’s illegal.
How to Avoid Problems

Choosing someone to help you with your investments is one of the most important
investment decisions you will ever make. While most investment professionals are honest
and hardworking, you must watch out for those few unscrupulous individuals. They can
make your life’s savings disappear in an instant.
Securities regulators and law enforcement officials can and do catch these criminals. But
putting them in jail doesn’t always get your money back. Too often, the money is gone.
The good news is you can avoid potential problems by protecting yourself.
Let’s say you’ve already met with several investment professionals based on
recommendations from friends and others you trust, and you’ve found someone who
clearly understands your investment objectives. Before you hire this person, you still
have more homework.
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Ask your investment professional for written materials and prospectuses, and read them
before you invest. If you have questions, now is the time to ask.
• How will the investment make money?

• How is this investment consistent with my investment goals?
• What must happen for the investment to increase in value?
• What are the risks?
• Where can I get more information?
Stock investing is something that has been made out to be far more complicated than it
needs to be. There are far more complicated approaches to stock-picking than those
presented in this chapter, but the guidelines presented here will result in 95% of the
results of those approaches with only 5% of the time, effort, and confusion. Since the
name of this book is Five Minute Investing, I have chosen to build these guidelines in
such a way as to minimize your time commitment while helping you avoid the investor
mistakes outlined in previous sections.
1) Look for positive price momentum
Most investors search diligently for companies where some good situation is developing -
and rightfully so. They do this by asking brokers, looking for stories in the press, etc., but
few stop to realize that the stock market itself gives them a list of such companies every
day in the form of the new 52-week highs list. Most likely it's because they have believed
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some of the misconceptions and wrongly felt that if something appeared on the new-
highs list, it's too late to buy. Actually, nothing could be further from the truth.
The simplest, best way to assemble a list of potential high performers is to refer to this
new 52-week highs list included in just about every financial newspaper. I highly
advocate that investors begin their stock picking expeditions by referring to this list.
Remember that companies on the new-highs list do not get there because a certain
financial reporter likes them, or because the government thinks they are good for society,
or because a brokerage firm will get a hefty commission if the stock appears there. Stock
market investors themselves who are knowledgeable about the company in question put
them on the list by voting with their own hard-earned rupees, bidding the price up to new
highs. Stocks do not appear on it unless there is something in fact really good and
tangible happening with the company's prospects. Furthermore, few good situations
develop in one day; they develop over many weeks, months, or years. So, many of the up
trends evidenced in the new highs list will most probably continue on for some time. Not
all will, but as long as our strategy allows for weeding out those stocks that do not
continue increasing in price we will probably be all right.
One should ask two questions:-
How often does a company make a new price high when something good isn't
happening?
How often does a company where something really good is happening fail to trade
close to or at a new high price?
Answer to both of these questions is seldom. All trends eventually come to an end and
stocks can go from making new highs to making new lows with breathtaking rapidity. If
something very good or bad starts to happen to a company's earnings trend, it will most
likely start to show up in the trend of the stock long before one will read about it in the
press - or hear about it from one’s broker. But the stocks that show positive momentum
by appearing on the new-highs list have a excellent chance of continuing their trends. In a
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nutshell, the new-highs list technique isn't infallible, but then neither is the stock-picking
advice of broker.
one is almost always better off picking one’s own investment ideas because one will
know why he picked them. It is investor money and the more personal attention he can
give to it, the better off he will be. Certainly, unless he is very wealthy, he can give more
attention to his portfolio than can a broker or advisor. However, it may be best to let his
advisor manage the majority of his money.
his performance can be further enhanced by not only choosing stocks making new 52-
week highs, but better yet pick stocks that are at all time new highs in price. This will
take a little more work for him because he will not find such a list in the newspaper. The
best way to distinguish between issues making new 52-week and those making new all
time highs is by looking at a long-term chart book. Obviously, any stock making a new
all-time high will also be on the new 52-week high list, so begin your search with the 52-
week high list.
2) Diversify between industry groups
Because stocks within an industry tend to move more or less in lockstep, make an attempt
to diversify your portfolio between at least three industry groups. This will help to reduce
some of the risk in your portfolio and having your money spread over several industries
will help even out more of the ups and downs in your account value than if you had
everything in one industry. Whether you are investing in stocks, fine art, certificates of
deposit, bonds, or whatever, the first rule of investing is: Diversify.
3) Beware of stodgy stocks
When selecting stocks, beware of picking those stocks that move very little whether the
market is good or bad. These are generally referred to as "defensive" stocks because they
are held by those wanting to defend themselves against the possibility of a bear market.
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These conservative picks tend to under perform the market over the long run, making
them a poor substitute for issues with real growth potential. Especially during market
downturns, defensive issues hold up well, giving the illusion that there are good things
happening to their underlying businesses. In reality, they hold up well mostly because
investors flock to them for safety. When the market turns better, these types of companies
tend to simply sit still while the rest of the market charges ahead.
So, it is best to avoid defensive stocks lest you get left behind when a bull market
appears. Issues considered to be defensive include utility companies, gold stocks, food
companies, oils, real estate investment trusts, and closed-end mutual funds. Closed-end
mutual funds are mutual funds which have a fixed number of shares outstanding and
trade just like a stock on an exchange. While they can sometimes post large increases in
price, for the most part they sputter along and do not often have the potential for large
increases in price.
While there have been times when each of these groups has done very well, for the most
part they are a waste of time for those who are willing to take a little more risk in order to
make a lot more money. So it is best to exclude defensive stocks, at least from the
aggressive portion of your portfolio.
4) Weed out takeover situations

They are generally a small minority of the stocks on the new-highs list, Takeovers and
buyouts are unnatural, all-at-once events which are highly speculative and thus do not
lend themselves to prudent investing. Once a firm is known to be a potential takeover
target the price is dominated not by the company's market position or products, but rather
by the development of the buyout offer. Also, most of the potential for further price
advances is gone once the initial "pop" from the buyout has occurred.
Buyouts, when they occur, are big news and are generally well-known. The easiest way I
have found to spot companies where a takeover has occurred is by looking at the price
chart. Takeovers are almost always evidenced by a one-day increase in the price of the
target company's stock of between 20% and 100%. If you see that type of pattern, dig
deeper. There is an excellent chance that this company is in a buyout situation and should
therefore be avoided.
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5) Check out the Chart
Before you buy a stock, take a look at its price chart for the past year or two. This will
give you a snapshot of the stock's personality from a volatility standpoint. I like to avoid
stocks which have high week-to-week volatility and instead prefer ones which have a
tendency for a cleaner trend. If a stock has a very volatile price pattern, then it generally
means the company has no clear advantage in the marketplace for its product, services,
etc., versus the competition. Since there are many companies out there which do have a
clear, sustainable advantage in their particular market?
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Terminology
In Equity
Market
Product & Services
• Equity Capital Markets

• Corporate Finance Advisory
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Equity Capital Markets

Religare Capital offers you extensive range of Investment Banking Services for equity
related products and instruments. Our team advises you on transactions like business
structuring and capital raising opportunities based on your corporate needs and state of
capital markets. Services we specialize in include Management of:
1. Initial Public Offering (IPOs)

2. Follow-on Offerings
3. Qualified Institutional Placements (QIPs)
4. Buyback , Delisting of Equities
5. Open Offers
6. ESOPs
We identify, analyze and respond instantly to your needs. Since inception, we have been
structuring and delivering financial solutions geared towards your needs. This is
implemented through an understanding of your business needs and investor preferences.
Our distribution reach and financial structuring capabilities of the team ensures a winning
combination for your company.
Our Investment Banking team works in conjunction with the retail and institutional
distribution network. The division is well organized to best serve the unique needs of our
clients and deliver the best in class solutions. We have a focused team of managers that
bring in market expertise and understanding of relevant issues along with structuring
skills and distribution linkages which allows us to maintain a high level of quality and
integrity in execution of mandates. Our team of experts advises you on structuring
transactions and adopting an appropriate resource route, based on your individual needs
and its acceptability in the financial markets. Our relationship with venture capital funds
and private equity funds ensures superior equity placements and effective delivery
platforms.
• Corporate Finance Advisory
o Debt Advisory & Syndication

o Private Equity Advisory
o Mergers & Acquistion Advisory
o
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Corporate Finance Advisory
Religare Capital focuses on all dynamic sectors in which rapid growth is changing
industry structures rapidly. To capitalize on a given sector's robust demand, external
capital often becomes a catalyst to achieving market leadership. Religare Capital’ focus
in this process is to assist companies in raising the necessary capital to meet their growth
objectives.
Debt Advisory & Syndication
.
Religare Capital has a dedicated team focused on associating with companies pan India
to understand their requirement of funds and syndicate them at the most competitive
rates.
We understand the company’s business model, the nature of requirement and the
requisite terms which would best serve their specific needs. This may entail customizing
structured products or syndicating funds for a project or expansion programme.
The array of products available to meet the specific end-use of our clients include
• Domestic Loan / Foreign Currency Loan

• Project Financing
• Equipment Financing
• Securitization
• Debt Swap & Loan Restructuring
• Short Term Corporate Loan
• Working Capital (Cash Credit, LCs & Bank Guarantee
• Inter Corporate Deposits (ICDs)
• Promoter funding/ Loan Against Shares
• Money-market Instruments –Commercial Papers, Mibor-linked
instruments
• Bonds & Debentures
Our Corporate Finance team works closely with the funding agencies to appraise them
with the proposal to enable optimal time utilization and smooth transaction. Our team of
professional managers brings in market expertise and structuring skills which enables us
to deliver the highest levels of execution capabilities.
Our endeavor to syndicate funds at the most competitive terms is complemented by our
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strong relations with Public and Private Sector Banks, Financial Development
Institutions and other Institutional Investors.
Transactions
Details
Sobha Developers
JSW Jaigarh Port Ltd. Biltube Core Boards Ltd.
Ltd.
Nov-2008 Jun-2008 Apr-2008

Corporate Loan Advisor & Syndication of
Loan (Against Shares) Syndication
Syndication Project Loan
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H K Finechem Ltd. Blue Bird India Ltd. Kalyani Forge Ltd
Mar-2008 Jul-2007 Jul-2007

Corporate Loan
FCNR (B) Loan Syndication ECB Loan Syndication
Syndication
Private Equity Advisory

We provide end-to-end advisory solutions to companies in high-growth markets on their
capitalization/re-capitalization strategies, which helps them to achieve their growth
targets. Typical private equity funding engagements have the following phases in which
Religare Capital works closely with the client’s team in consummating the transaction.
Phase 1: Collateral Preparation
In this phase, we start by engaging the client in a workshop where based on the
company’s existing business profile, growth prospects and Religare Capital’ knowledge
of the private equity market, we help the client decide on the most effective capitalization
strategy. We also prepare a complete packet of information which enables the transaction
to be presented in front of potential investors in a structured way. In this phase, Religare
Capital helps the client to decide the best way to position the transaction, to maximize
value for its shareholders and employees.
Phase 2: Investor Short listing
In this phase, Religare Capital helps the client decide on the kind of private equity funds
who will be the right investors for the client, holds initial discussions with the investors,
helps the client have meetings with potential investors and advises the client to prioritize
among the investors to create a shortlist. Religare Capital uses its network of
relationships with global private equity funds extensively in this phase to identify the
right investors.
Phase 3: Commercial Term Sheet
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In this phase, Religare Capital helps the client analyze various offers from potential
investors, drives deal negotiations with investors and ensures that the client enters into a
term sheet with the private equity fund which meets the client’s strategic objectives.
Religare Capital leverages its experience in closing transactions as well as its ability to
create various options for its client, to create the most effective transaction for the clients’
shareholders and employees.
Phase 4: Due Diligence and Closure
In this phase, Religare Capital helps the client in coordinating the overall due diligence
process, and helps negotiates on the final definitive agreements with the potential
investor. Religare Capital drives this process to reach closure on the transaction.
Mergers & Acquisition Advisory

Religare Capital Markets offers a wide range of services that enables its client to
accomplish its growth aspirations through Mergers, Acquisitions, Divestiture and other
inorganic growth opportunities. The wide variety of services are customized to the need
and profile of each client.
Spin Offs / Carve
Buy Side Sell Side JVs/Alliances
Outs
• Acquisition • Pitch • Portfolio
• Gap analysis
strategy Preparation assessment
• Target
• Target • Suitors • Strategy
mapping
Mapping profiling mapping
• Synergy
• Deal • Process • Deal
studying
structuring Management structuring
• Deal
• Negotiations • Due Diligence
structuring
• Agreement (s) • Negotiations
• Negotiations
• Transaction • Transaction
• Agreement (s)
closure Closure
Overview
Religare Capital is an investment bank based in India with Head Office at Mumbai and
branch offices at Ahmedabad, Delhi, Kolkata, Hyderabad and Chennai. We are
incorporated in 2006 as a 100% subsidiary of Religare Enterprises Ltd. which offers a
diverse bouquet of services ranging from equities, commodities and insurance broking to
wealth management, portfolio management services, personal financial services,
investment banking and institutional broking service. As part of its recent initiatives, the
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group has also started expanding globally and Religare Capital Markets Limited
(RCML), through its indirect wholly owned subsidiary Religare Capital Markets
International UK (RCMI UK) Limited, has acquired Hichens, Harrison & Co Plc.
Hichens is based at London and is about 205 years old brokerage and investment firm.
Following this acquisition Religare now proposes to operate out of 10 countries.
Religare Capital clientele ranges from small fast growing firms to large international
players. Besides a strong presence of network in India, Religare Capital now is now
moving forward to establish its presence in Europe and Asia to deliver financial solutions
partnering clients’ wealth creation.
Our Strengths
• Excellent relationships with a number of Companies, Private Equity investors,
Hedge Funds and other institutional investors
• End-to-End solution delivery capability and in-depth understanding of the
regulatory systems across emerging markets
• Dynamic team of professionals with proven track record in Investment Banking
• Wide network connecting 498* cities through over 1837* business locations in
India
• Over 450,000 retail clients and an extensive base of HNI clients
• Global presence with offices operating in nine countries besides India
• Research coverage for over 170 companies across the sectors
• Experienced & dedicated wealth management and international investment
advisory teams
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Research Objectives
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OBJECTIVES
Study of Different distribution houses of religare
Study of customer awareness towards religare
Study of working distribution of religare
To know the management of the company with other company
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RESEARCH
METHDOLOGY
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RESEARCH METHDOLOGY
There are several Research methods but in my project following methods.
Direct Approach:
Daily interaction with some new and energetic persons and tell them about companies
policy.
Tele calls on available Data:-
Collect contact numbers and job profile of some persons. Call them and Create awareness
about the company’s program.
Cold Calls:-
Call at any number. Ask about the person of other side. And tell them the policies.
Appointment based approaches:-
Take the appointments through tale calls or direct approach. Meet the person and share
your company’s views.
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Referential Approach:-
Take the references through friends, relatives or others. Fix the meeting and tell about the
policy.
Personal Approach:-
Meet the friends and relatives. Make them aware about your company’s policy and
collect their feedback.
Questionnaire:-
It is a set of questions. It helps to collect the information about the person who is totally
unknown for us. These data help to make them aware about company’s policy through
one of the above method.
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COLLECTION OF DATA
It is the first step of Life Advisory selection. In this step we collect name, telephone no.,
address and job profile of persons through any method mentioned in the Research
Methodology. Make the list of them.
Telecalling (suspecting):-
Telecalling is one of the most popular method which is applied by all insurance
company. In both terms comprehend about their policies/products and also in recruitment
of Life Advisory.
Prospecting:-
As we know that the insurance business is based on prospected customers. The same
thing is also in the recruitment of Life Advisor. We select the interested people and take
their interviews.
Initial Screening Interview:-
It sis the process to interact with the prospectus people and gain their details.
Initial Screening Interview:-
It is the process to select the best one the person who filtered in the round of Initial
Screening Interview, become eligible to meet the higher authority of the company. They
make them aware about company’s strategy, policy and formalities.
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Training:-
Its duration is of 100 hrs which is completed in 18 days. During this step we make aware
about all those things whatever they have required.
Examination:-
It is conducted by IRDA. For having an agency it is compulsory it is compulsory to

qualifying it.
Licensing:-
A Life Advisory qualifying this exam, he get his own agency authorized by IRDA. Now
is valid to sale the company’s product.
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Sampling:
• Sampling procedure:
The sample is selected in a random way, irrespective of them being investor or not or
availing the services or not. It was collected through mails and personal visits to the
known persons, by formal and informal talks and through filling up the questionnaire
prepared. The data has been analyzed by using the measures of central tendencies like
Mean, median, mode. The group has been selected and the analysis has been done on the
basis statistical tools available.
Sample size:
The sample size of my project is limited to 110 only.
Sample design:
Data has been presented with the help of bar graph, pie charts, line graphs etc.
Hypothesis:
H0: Targeting and Positioning Strategy based on investment in Mutual Fund and Life
Insurances is significant.
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DATA
ANALYSIS
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DATA ANALYSIS
According to the survey done by me among the investors with the help of number of
questions the following analysis is done with the help of graphical tool.
In the data collected during survey the following graphs are plotted. These
shows the responses of people with the questions
 When share market is low what you generally prefer to do?
70
60
50
40
nP
rc
te
30
20
10
0
Buy blue chip Buy just to average " Sell and go out of " Wait for right time
undervalued stocks out cost market to invest.
When Market is Low
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 Which are the present investments products in which you have invested or
currently investing?
70
60
50
40
nP
rc
te
30
20
10
0
"A single good stock at "Diversify your portfolio by "Invest gradually following
once investing in different wait watch and play
portfol strategy
You invest in
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 One should have exit plan before buying any stock ?
60
50
40
30
nP
rc
te
20
10
0
strongly agree agree can't say strongly disagree
should have exit plan before buying any stock
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 Sell a stock as soon as it starts giving profit
40
30
20
nP
rc
te
10
0
strongly agree agree can't say disagree strongly
disagree
Sell a stock as soon as it starts giving profit
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 According to you stock market is
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60
50
40
30
nP
rc
te
20
10
0
Investment gambling Manipulated game
Stock market is
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 . In what Proportion do you invest your funds amongst the investment

options?
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 The increase in income desired by the respondent was:
S.No. Options Percentage (%)

1 <Rs 10,000 40
2 <Rs 20,000 30
3 <Rs 30,000 10
4 <Rs 40,000 20
20%
40%
10%
30%
<Rs 10,000 <Rs 20,000

<Rs 30,000 <Rs 40,000
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Findings
Findings
COMMON MISTAKES COMMITED BY INVESTORS
Mistake #1: Not having an exit plan before buying

No matter how well or poorly founded, every stock selection strategy produces both
losers and winners. In the case of both losers and winners, the reason for selling a stock is
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always the same: To preserve capital and allow him to redeploy it to more profitable
investments. The relevant question is, "how to determine the right time to sell?"
The time when he can think most clearly about why he would eventually sell a stock is
before it is purchased. Before he buy anything, he has no emotional attachment to it,
which means he can make totally rational decisions. Once he own something, he tend to
get either greedy or scared. These emotions lead to a desire to preserve profits, leading to
prematurely cutting off an ascending price trend.
How not having an exit plan hurts his performance
Big losses are one thing which destroys most investor's performance, and these are
almost always a direct result of the investor failing to plan, before entering a trade, how
he will exit it. Since the potential gains from a stock are always higher than the potential
losses (100% loss potential versus unlimited upside potential), an even bigger source of
under-performance is selling too soon when he do find a great winner.
An exit plan is one thing that experienced investors/traders always have before initiating
a position. The reason is simple: he must have a plan and stick to it, or else every
decision he make will be emotional, not rational. Worse yet, the larger the position is, the
less rational his decision-making will be. Therefore it is vital to make all decisions up
front, before he are scared (if the position happens to go down), or greedy (if it soars).
Emotional decisions almost always are poor ones, leading to large losses and small gains.
The pitfalls of trying to manage a stock portfolio without a plan are many and varied. The
advice of friends, stockbrokers, market advisors, and the like are all likely to have a
magnifying effect on the natural elements of fear and greed that are present in every
investor. These influences can cause someone who does not have a well-thought-out plan
to abandon profitable positions and hang on to losing ones. This is exactly why the
majority of amateur investors under-perform the market: they do not have a plan. As the
saying goes, "when you fail to plan, you plan to fail." This saying is as true in the stock
market as it is in any other aspect of life.
With emotions running rampant from a loss or a large gain, it is virtually impossible to
make a good decision. This is precisely the point at which most investors fail: They have
no preconceived plan for exiting a stock before they buy it. As a result, when they hear a
tip or rumor on a stock they get so excited that they forget to ask themselves what they
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will do if it turns sour, or if it soars, what will be their plan for letting the profit ride? If
the investor who doesn't plan ahead also happens to believe some of the myths presented
in then his/her chances of making a good decision are almost nil. If he are a decision-
maker of any kind, he no doubt realize that making decisions based on wrong
assumptions renders his chances of success to be minuscule. For this reason, the need for
an exit plan based on sound theory before a stock purchase cannot be overemphasized.
Unfortunately, most investors don't want to think about planning ahead, (especially for
adverse possibilities) when they are buying a stock - they put the selling criteria decision
off until it is unavoidable, and usually too late.
An exit plan must be identified for every investment before the investment is made.
This plan should cover all possible outcomes of the trade, both profit and loss.
Mistake #2: Plunging too much into a stock all at once
Another common error committed by many investors is plunging. This means that the
investor makes two mistakes: First, they purchase entirely too large a position in a single
stock. Secondly, they do it all at once. The real problem with doing this is that the
investor puts themselves in a perfect position for their emotional decision-making to run
wild. Typically what happens is the following: First, the plunger takes a huge position.
Then, his stock either begins declining or increasing. In either outcome, the emotions of
plunging work against the poor investor. For if the stock declines, the plunger will either
get scared or sell out with a loss that is a sickening percentage of his capital, or hold on in
hopes of an increase in value (which may well never happen). If the stock increases in
value, the investor will often have a large rupee gain that is hard to resist cashing in. In
this latter case, the investor makes the mistake of cutting his winnings short. In short,
plunging leads to cutting his potential gains short and letting his losses keep
mounting...exactly the opposite of what he should be trying to accomplish.
Almost always, the plunger lacks an exit plan for the purchase before buying. If the
plunger had thought about an exit plan beforehand, he probably would have realized the
potential pitfalls and would have taken a more appropriately-sized position.
Plunging can work occasionally if one is fortunate enough to select a stock that
immediately increases in value and never looks back. However, in most cases the plunger
has such a large percentage of his capital riding on a single stock that the emotions of
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greed and fear work against him in a major way. The normal fluctuations of stock prices
have an exaggerated effect on the plunger's emotions by virtue of the huge amount of
capital represented by the position.
Taking too large of a position leads to emotional involvement which leads in turn to
poor decisions. It also exposes you to the potential for lots of damage from one bad
trade. Diversify - don't bet the farm.
Mistake 3: Failing to cut losses

A certain percentage of stocks he chooses will show themselves to be losers. Count on
this fact. These losers must be dealt with in some way in order to limit their impact on his
overall performance. Once a stock starts to decline it can become a vicious cycle, leading
to even more declines. As unbelievable as it seems to the novice investor, the more and
longer a stock declines the more it is apt to continue declining, or continue going
sideways.
Even if a stock does come back, it will likely take a long, long time to do so, and time is
money. For this reason, it is important to stop the bleeding once it becomes apparent that
he has chosen a loser. Here as elsewhere, the actions of most investors are opposite the
logical course of action. Most hold on to their losers, hoping against hope that the stock
will someday pull itself together. Some also hold on because they can't face up to the fact
that they made a mistake. They reason (poorly) that as long as they don't sell, then they
haven't really lost anything. This is a error because the value of their stock is the current
market price, not what they paid for it - but their rationalization helps them feel better
about themselves. The other compelling reason for selling losers is the concept of
opportunity cost, that is, the money he could have made by redeploying his capital to a
more promising investment. Often, the opportunity cost of holding a losing stock is far
greater than the loss on the stock itself. Let's say we have Rs10,000 invested in a
particular issue and it declines to where it is worth only Rs8,000. There are two reasons
to consider selling the stock in this example. First, the stock is clearly in a downtrend,
and like most trends, the decline is most likely to continue. If it does, the decision to sell
May save us as much as Rs8,000, the current market value of our stock.
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The second reason for considering cutting our loss short is that by redeploying the
Rs8,000 into a stock that is trending upward, we increase our chances of making up the
Rs2,000 loss more quickly than if we'd continued to hold the losing stock, waiting for it
to come back. The distinct possibility exists that we could make up the Rs2,000 loss and
makes an additional Rs8,000 profit by redeploying our capital from the declining stock to
the ascending one. All the while, the original purchase may still be languishing far below
where we dumped it. While there are no guarantees that the ascending stock will continue
ascending, it is a much better bet statistically than the declining one. In the stock market,
going with the long-term statistics is a key to long-term success.
Beware of the common compulsion to hold onto his losers. If he do succumb to this
temptation, his portfolio may still be profitable (as long as he also do not sell his
winners), but it will not be as profitable as it could be.
Mistake #4: Selling too soon

Another error that cuts seriously into many investors results is the error of selling a
winning stock too soon. Though it might seem that this is a relatively minor problem, it
actually is a very serious error because it robs he of his really big profits. I believe it is a
bigger mistake than failing to cut your losses, because in a properly diversified
portfolio the potential profit from any one stock is far more than the potential loss.
That's simply another way of saying that the most he can lose on a single stock is 100%
of what is invested, but the potential gain from every stock is unlimited. If your objective
is to make as much money as you can, then you must put yourself into a position to hold
onto really big winners when they come your way. If you have a strategy that emphasizes
taking the money and running every time you get a double or triple, then you are
seriously shortchanging yourself.
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Think big
I believe the reason most investors fail to hold onto winners long enough is that they
simply do not realize how big a move can sometimes be realized. They wrongly assume
that if a stock has doubled or tripled then that is about the best they can hope for.
However, investors who take the time to study the history of stock trends know better.
Sometimes a stock that has doubled will go on to make another tenfold increase from
there. It can (usually does) take years for this type of move to occur, but over a several
year time frame your chances of finding a huge upward trend is far better than you'd
think. Again, the best way to convince yourself of this is to get a long-term stock chart
publication and start studying it.
Price Objectives
Another insidious reason for investors selling too soon is the use of price objectives. This
is when you buy a stock and set a price that you will sell at if and when the stock makes
it to the target price. These target prices are usually arrived at as a certain percentage
above the entry price, or else are based on some analyst's assessment of the 'value' of the
stock.
However arrived at, I feel that the use of target selling prices is a seriously flawed
practice. One of the enigmas of the stock market is the tendency for what seems
overvalued to keep going higher still, and what seems reasonably valued or cheap to keep
on retreating. The reason is that when a company's earnings are (or are about to start)
growing rapidly, the price of the stock may be high relative to the current earnings, but
only a few times the next year's actual earnings, if next year's earnings could be known.
The stock may even be selling for many times the earnings estimate for next year,
because it takes time for good trends to be recognized and assimilated by stock analysts.
Thus, stock analysts' earnings estimates for coming years tend to lag when something
good is brewing, just as they often lag when bad things are in the works. The thing to
remember about this is that the aggregate consensus of all market participants (as
reflected in the stock's price trend) tends to be more accurate and more timely than
published earnings estimates.
If you study stock trends I believe you will come to the conclusion that the trend of a
stock is a more accurate indicator of when to sell than are calculated estimates of a
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stock's ‘value.' Why then are price objectives used? The reason they are so popular is
because of the need for retail brokerage houses and newsletter writers to give some sort
of selling advice to large numbers of retail clients. Through the use of price objectives,
the task of giving advice to large numbers of people is made manageable for the advice-
giver. However, it seldom results in the best possible outcome for the client. This is a
good reason to become your own investment advisor and portfolio manager. The use of
price selling targets mostly results in you capping your profits, as you cannot possibly
make more of a profit than that which is reflected in the target price. Finally, it should be
obvious to all that capping your profits is not a good thing. If you employ a strategy
which cuts your losses but also caps your gains, by definition you'll be worse off than if
you had bought your stocks and done nothing but sit on them forever.
Don't try to guess how far a stock can move up. If you do not give your stocks a lot
of room to move upward, you will guarantee that your stock market profits will be
below average.
Mistake #5: Choosing stocks that are in a downtrend

Buying stocks which are in a downward price spiral is the most common mistake among
novice investors. In order to profit from such a strategy, you need to be right about two
things at once: First that the stock's slide will end (a surprising number never do until
they become worthless), and secondly, the timing of when (and at what price) the stock's
slide will end. Your chances of being right about both things are slim.
The typical scenario for this particular mistake is an inexperienced investor scouring the
stock pages looking for stocks near their 52-week lows, since this information is readily
available. The novice wrongly assumes that if a stock is near its low for the year then it
must be "low" and therefore in an opportune position to be bought. As we have seen, the
hapless bottom-fisher finds out after it is too late just how easy it is for such a stock to
keep on making new (and even lower) 52-week lows.
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As an aside, it's interesting to note that it's fairly common that a stock which is today
making a new 52-week high has as its 52-week low a price that was a 52-week high< a
year ago. That might seem like a confusing statement but if you think about it, it will
make a lot of sense. If the stock has been in an uptrend for a year or more, that price
which was once a new high will now be listed as the lowest price for the past 52 weeks.
Beginning investors usually do not even consider the possibility that this could be true, so
they keep on buying dogs until their portfolio looks like a kennel.
Often, investors convince themselves that buying a stock from the 52-week lows list is
not a risky proposition because of that stock's low price relative to past earnings, book
value, or some other measure of "value." But in reality buying a down trending stock is
always risky, as you are betting against the entire market's assessment of the company's
earnings trend. If a stock is making a serious decline it is because market participants
know some facts about the company's future earnings potential - facts that you may not
be aware of no matter how well you research the company. Seldom is the entire market
wrong about these matters. Sometimes the market is wrong, of course, but your chances
of finding those exceptions are mighty slim because you are only one of thousands of
people who are looking for such leads. It is very hard for one person to correctly second-
guess the sum total wisdom of thousands of other investors. Try to keep in mind that your
objective is to maximize profits, not to outsmart the market. The two objectives are vastly
different.
Much of the problems associated with this strategy have already been dealt with, under
the section: Buy Low and Sell High. There is no need to rehash that section now.
However, the practice of buying down trending stocks is such a pervasive and major
error that the importance of eliminating it from your bag of tricks cannot be
overemphasized.
Listen to the signals of the market. If a stock is trending steadily downward, there is
a good reason for it. Find greener pastures elsewhere.
Mistake #6: Adding to a losing position
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Another strategic error commonly practiced by many amateur investors is adding more
money to a losing position. The reasoning in the mind of the investor who does this goes
something like this: "I bought the stock when it was Rs40. Now it is Rs20, so it's twice as
good a deal as it was at Rs40. Besides, my average cost per share will come way down
once I add to the position." Sometimes this is called rupee cost averaging - putting an
certain rupee amount into a stock at specified time intervals or at specified price intervals
when the stock drops in value.
When an investor adds to a position on equal time periods (i.e., Rs1,000 every quarter)
independent of the price of the stock, I call it Time-Based Rupee Cost Averaging.
When an investor invests an equal rupee amount each time a stock declines in price by a
certain level (i.e., Rs1,000 with each 20% decline in price), it is called Price-Based
Rupee Cost Averaging . What you need to remember is that while Time-Based DCA
can make sense if done in a controlled manner, Price-Based DCA makes no sense in any
circumstances and is sure to bankrupt you if practiced consistently. The rest of this
section I want to devote to explaining why you must never practice Price-Based DCA as
a strategy, because it is the most destructive of all investor mistakes and represents in the
extreme why you should never add to a losing position.
The fallacy of Price-Based DCA can best be illustrated by the following example. Let's
assume we have the ability to anonymously observe a certain naive investor, Investor,
who is going to pursue a Price-Based Rupee Cost Averaging strategy. Investor picks a
portfolio of ten stocks and puts Rs10,000 into each stock, for a total investment of
Rs100,000. Just for fun, let's also assume we know ahead of time that one of the stocks in
Investor's portfolio is going to go bankrupt (that is, decline until it becomes worthless)
sometime within the next year. (Of course Investor doesn't know this, and we aren't going
to tell him, either). But, since he is a devout Price-Based DCA advocate, his trading rule
is that whenever one of his stocks declines 50% in price from his purchase point, he will
sell Rs5,000 worth of one of his better-performing stocks and use the proceeds to buy
more shares in the declining stock. If the issue declines another 50% from his second
purchase point, he will sell another Rs5,000 of one of his other stocks and again add to
this declining stock. Can you guess what will happen to Investor over the next year as we
watch him trade? It should be an agonizing thing to watch because, as you may have
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figured out by now, Investor's strategy will over the course of the next year automatically
allocate all of his capital to the stock that is to go bankrupt. This is because there are an
infinite number of sequential 50% declines that can occur between his initial purchase
point and zero. He will lose his entire Rs100,000 unless he has the good sense at some
point to realize what a bloody poor strategy he has.
If you pursue a Price-Based DCA strategy consistently, eventually you will encounter a
Waterloo as Investor is about to. This is because inevitably you will someday get a stock
in your portfolio that is bound for the scrap heap. When you do, cut the loss and don't
even think about adding to the position! Otherwise, you may find yourself standing in
bankruptcy court with Investor.
When you have a losing position, it means something is starting to go wrong. Never
add to a losing position.
Mistake #7: Falling in love with a stock

It's a common mistake to have a good run with a stock and then decide that you will
never sell it. Some folks have a hard time parting with something that has done so well
for them, but again, what your emotions tell you to do and what you should do are two
different things. Save the ‘till death do us part' thing for your marriage, not for your
stocks. Even a noted long-term investor takes profits occasionally.
Every gardener knows that the fruit of even the best-growing plants eventually needs to
be picked before it turns overripe and finally, rotten. Likewise, even the stocks that grew
so well in their season eventually need to be sold. Some plants are annuals, lasting but a
single outstanding season and then dying. Others are like apple trees, bearing fruit year
after year, but eventually they decline in productivity and die or produce substandard
fruit. A stock can have a phenomenal rise that lasts many years, but most will eventually
start lagging and break down. In the most extreme case, they may go from star to
oblivion and bankruptcy. Therefore we must reap, but we need to make sure that our
reaping is not done prematurely but allows for long-term growth. The perfect system
would be one which tells us the exact top, but that is impossible in reality. We must
instead find a balance between selling too soon and selling too late. It must not be done
based on guesswork but instead on the actual performance of the stocks in your portfolio.
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There is no doubt that our chances of making really big money on a stock increases
commensurate with the length of time we hold it. As you will see later, the Reverse Scale
Strategy sets its parameters so that we do not engage in short-term trading.
Try to remain emotionally unattached to a stock so that you are not blinded to what
the market is telling you about it.
Mistake #8: Trying to "Get Even" with a Stock

One of the big investor mistakes I've observed is that some investors, once they've taken
a loss on a stock, keep looking for an opportunity to buy that same stock. Without
realizing it, they become enamored of the stock simply because it has "done them
wrong." Like an adolescent ratios been beaten up, they are looking to "get even." "I'll
show that stock," they say to themselves. By so doing they lose focus of what they are
trying to do: Make money, not save face. There are thousands of companies available for
them to invest in , so why do they keep coming back to a proven loser? The answer is, of
course, ego. Ego is one of the most destructive forces that you can unleash on your
investment performance, and we will take a close look at how it manifests itself in the
next chapter, so you can recognize it. It crops up in everyone now and then, but when it
does, you must resist it and think logically.
If you are fishing and a fish slips off your hook, do you refuse to pull in any fish other
than the one that got away, from then on? Of course not - you throw your line back into
the water in hopes of catching "a fish," not "the fish." It seems obvious when fishing, but
unfortunately, many people's common sense goes out the window when it comes to the
stock market. They keep gunning for that one particular stock, ignoring the other rich
targets which abound around them. Thus, one mistake begets another.
Sometimes, people also return to a stock because they had such a good experience with
it. They made some good money off this stock and so they have warm, fuzzy feelings for
it. Again, this is not logical thinking unless the stock has recovered and is showing itself
still to be one of the stronger stocks in the market.
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Brokers
Brokers make recommendations about specific investments like stocks, bonds, or mutual
funds. While taking into account your overall financial goals, brokers generally do not
give you a detailed financial plan. Brokers are generally paid commissions when you buy
or sell securities through them. If they sell you mutual funds make sure to ask questions
about what fees are included in the mutual fund purchase. Brokerages vary widely in the
quantity and quality of the services they provide for customers. Some have large research
staffs, large national operations, and are prepared to service almost any kind of financial
transaction you may need. Others are small and may specialize in promoting investments
in unproven and very risky companies. And there’s everything else in between.
A discount brokerage charges lower fees and commissions for its services than what
you’d pay at a full-service brokerage. But generally you have to research and choose
investments by yourself.
A full-service brokerage costs more, but the higher fees and commissions pay for a
broker’s investment advice based on that firm’s research. The best way to choose an
investment professional is to start by asking your friends and colleagues who they
recommend. Try to get several recommendations, and then meet with potential advisers
face-to-face. Make sure you get along. Make sure you understand each other. After all,
it’s your money.
You’ll want to find out if a broker is properly licensed in your state and if they have had
run-ins with regulators or received serious complaints from investors. You'll also want to
know about the brokers' educational backgrounds and where they've worked before their
current jobs. To get this information, you can ask either your state securities regulator or
the NASD to provide you with information from the CRD, which is a computerized
database that contains information about most brokers, their representatives, and the
firms they work for. Your state securities regulator may provide more information from
the CRD than NASD, especially when it comes to investor complaints, so you may want
to check with them first.
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Opening a Brokerage Account
When you open a brokerage account, whether in person or online, you will typically be
asked to sign a new account agreement. You should carefully review all the information
in this agreement because it determines your legal rights regarding your account.
Do not sign the new account agreement unless you thoroughly understand it and agree
with the terms and conditions it imposes on you. Do not rely on statements about your
account that are not in this agreement. Ask for a copy of any account documentation
prepared for you by your broker.
The broker should ask you about your investment goals and personal financial situation,
including your income, net worth, investment experience, and how much risk you are
willing to take on. Be honest. The broker relies on this information to determine which
investments will best meet your investment goals and tolerance for risk. If a broker tries
to sell you an investment before asking you these questions, that’s a very bad sign. It
signals that the broker has a greater interest in earning a commission than recommending
an investment to you that meets your needs. The new account agreement requires that
you make three critical decisions:
4. Who will make the final decisions about what you buy and sell in your
account?
You will have the final say on investment decisions unless you give
“discretionary authority” to your broker. Discretionary authority allows your
broker to invest your money without consulting you about the price, the type of
security, the amount, and when to buy or sell. Do not give discretionary authority
to your broker without seriously considering the risks involved in turning control
over your money to another person.
5. How will you pay for your investments?
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Most investors maintain a “cash” account that requires payment in full for each
security purchase. But if you open a “margin” account, you can buy securities by
borrowing money from your broker for a portion of the purchase price.
Be aware of the risks involved with buying stocks on margin. Beginning investors
generally should not get started with a margin account. Make sure you understand
how a margin account works, and what happens in the worst case scenario before
you agree to buy on margin.
Unlike other loans, like for a car or a home, that allow you to pay back a fixed
amount every month, when you buy stocks on margin you can be faced with
paying back the entire margin loan all at once if the price of the stock drops
suddenly and dramatically. The firm has the authority to immediately sell any
security in your account, without notice to you, to cover any shortfall resulting
from a decline in the value of your securities. You may owe a substantial amount
of money even after your securities are sold. The margin account agreement
generally provides that the securities in your margin account may be lent out by
the brokerage firm at any time without notice or compensation to you.
6. How much risk should you assume?
In a new account agreement, you must specify your overall investment objective
in terms of risk. Categories of risk may have labels such as “income,” “growth,”
or “aggressive growth.” Be certain that you fully understand the distinctions
among these terms, and be certain that the risk level you choose accurately
reflects your age, experience and investment goals. Be sure that the investment
products recommended to you reflect the category of risk you have selected.
When opening a new account, the brokerage firm may ask you to sign a legally
binding contract to use the arbitration process to settle any future dispute between
you and the firm or your sales representative. Signing this agreement means that
you give up the right to sue your sales representative and firm in court.
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Once you have sold a stock, forget it, whether it was sold for a profit or a loss.
The next step down our road to investment success involves briefly reviewing the worst
stock trading strategy investor can imagine, a simple strategy known as Scale Trading.
Why would we want to learn about the worst strategy? Because once we know the worst
possible strategy, one that is destined to maximize losses over the long run, then we can
reverse its ideas to craft a strategy which does just the opposite - it will be destined to
produce some tremendous long-term gains. T
Scale trading can be a viable strategy when applied to commodity futures, mostly
because commodities have inherent value meaning that they cannot decline to zero value.
But even then, it requires a lot of capital and advance planning to be successful.
Individual stocks can and do become worthless on occasion, which is one of the main
reasons why scale trading is such an unfit approach for stock investing. Scale Trading
Other than the fact that it is simple, this strategy has no redeeming value. It is the
manifestation of all the most devastating investor mistakes. While it can produce small
profits over short periods of time, eventually it always leads to the poorhouse when
applied to individual stocks. Scale trading is not a very popular or widespread strategy
except among extreme neophytes, as anyone using it will not last very long in the stock
market. I like to think of it as the financial equivalent of bungee-jumping: It's exciting,
risky, takes a lot of guts, and occasionally, the cord snaps! Nevertheless it is useful to
study this method because often much can be learned by studying a truly bad approach to
anything and then reversing its concepts.
Scale trading can be applied to a single stock, or a portfolio of stocks with equally
disastrous results.
It is accomplished by taking an initial position and then adding to it in predetermined

increments as the position declines in value, and selling those purchases as they increase
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in value. For instance, the investor might buy 20 shares of stock at Rs50/share (for
Rs1,000) and decide to buy another Rs1,000 worth of stock if the price declines by 20%.
If the price increases from Rs50 before declining to Rs40, he will sell his 20 shares
(purchased at Rs50) for Rs60/share, for a profit of Rs200 less commissions. So, another
25 shares are added at Rs40 with the idea of selling those acquired at Rs40 if the price
then increases to Rs50, and so on. The purchase and sale levels for this particular
situation are shown in the following table:
Scale Trade from 50, 20% declining purchase increments.
Price Amount Shares

Cumulative Cumulative
Level Invested bought Cumulative Cumulative Total Profit/
Shares Value of
This This Rs Invested Cost/Share (loss)
Owned Shares
Purchase Purchase
50 Rs1,000 20 Rs1,000 20 Rs1,000 Rs50.00 Rs0
40 Rs1,000 25 Rs2,000 45 Rs1,800 Rs44.44 (Rs200)
32 Rs992 31 Rs2,992 76 Rs2,432 Rs39.37 (Rs560)
25 5/8 Rs998 39 Rs3,990 115 Rs2,944 Rs34.70 (Rs1,046)
20 ½ Rs1,004 49 Rs4,994 164 Rs3,359 Rs30.45 (Rs1,635)
16 3/8 Rs999 61 Rs5,993 225 Rs3,686 Rs26.64 (Rs2,307)
13 1/8 Rs996 76 Rs6,989 301 Rs3,945 Rs23.22 (Rs3,044)
10 ½ Rs996 95 Rs7,986 396 Rs4,152 Rs20.17 (Rs3,833)
8 3/8 Rs998 119 Rs8,984 515 Rs4,320 Rs17.44 (Rs4,664)
6 3/4 Rs1,000 149 Rs9,984 664 Rs4,456 Rs15.04 (Rs5,528)
5 3/8 Rs999 186 Rs10,982 850 Rs4,563 Rs12.92 (Rs6,419)
4 1/4 Rs1,001 233 Rs11,983 1083 Rs4,651 Rs11.06 (Rs7,332)
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The scale trader is hoping to profit by, for example, selling any shares acquired at 32 on a
subsequent rise to 40, any shares purchased at 20 1/2 would be sold at 25 5/8, and so on
until the stock advances to 60, at which point the scale trader sells off the last of his
shares - those purchased at 50.
There is no limit to the amount of times that a stock can oscillate between any two or
more of the price levels. Each time this happens the trader pockets another Rs200 profit,
excluding the effect of commissions.
It seems like a foolproof approach to the neophyte trader, but let's trace what happens
with this trading method through a hypothetical situation. As indicated, our trader makes
up the chart as shown above, and takes his position of 20 shares purchased at a price of
Rs50/share. Let's say the price then slips to Rs40, and a subsequent 25 shares are
purchased at that price. From there, the price increases to Rs55, meaning that the 25
shares acquired at 40 are sold when the price reaches Rs50, netting a profit before
commissions of Rs200. At this point, 20 shares acquired at Rs50 are still in his inventory.
However, he doesn't get to sell those shares, as the price drops from Rs55 all the way
down to Rs30 - so 25 shares are purchased at Rs40, and another 31 shares at Rs32 before
increasing again to Rs40. The shares purchased at Rs32 are sold for Rs40 for another
Rs200 profit. Fantastic: He has so far generated a Rs400 realized profit and never had
more than Rs3,000 invested at any point. The only negative so far is that it took four
months to do this, but Rs400 profit on a Rs3,000 investment over four months is not bad.
So far, so good.
From Rs40, the price then takes another dive down to Rs15. Shares are purchased at
Rs32, Rs25 5/8, Rs20 1/2, and Rs16 3/8. Then the price runs up to Rs30 before retreating
back to 25 5/8. Quite a windfall for our trader as he sells the shares acquired at Rs16 3/8
for Rs20 1/2, and the ones scooped up at Rs20 1/2 for Rs25 5/8. From this, he nets out
another Rs400, bringing his total trading profits to Rs800. True, he has a Rs1,046
unrealized loss bringing his net profit to a negative Rs246, but he reasons that when the
price goes back up to Rs60 he will have completed his trade and sold out every single
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position for a profit. At this time, though, he narrowly misses selling his shares acquired
for Rs25 5/8 at 32, since the price topped out this time at Rs30.
Next, the unexpected happens. The company that our scale-trading friend is trading
reports that it is under Federal investigation concerning false financial reporting. The
next day, the stock opens a few points lower and just keeps on dropping until it hits Rs10
3/8, its closing price for the day. Though shaken by the news, our friend is disciplined
about his system and buys slugs of the stock right on schedule at Rs25 5/8, Rs20 1/2,
Rs16 3/8, Rs13 1/8, and Rs10 1/2. He is getting a little worried because he is eight
months into this trade and he has an Rs800 realized gain and a Rs3,833 unrealized loss so
far. He also is realizing that so far he has nothing to show for his nearly Rs8,000
investment except a net loss. He starts to wake up at night wondering what will happen to
his position, since although he realized that this could happen, he never thought that it
actually would happen.
Unfortunately for our friend, in the following months the investigation reveals that the
company does actually have some fraudulent practices. This requires that the balance
sheet and income statements for some previous years are revised to reflect the effects of
the management misstatement and cover-up. The experienced (though crooked)
management of the company is ousted for their sins and replaced. So the price of the
stock works its way lower and eventually levels out between Rs4 and Rs5 per share, and
it languishes in the low single digits for the next five years. Our scale trading friend has a
Rs6,000 to Rs7,000 unrealized loss in addition to his Rs800 trading gain, and ten or
eleven thousand rupees invested in the stock he still holds. Once in a while over the next
few years he may get a Rs200 trading gain as the stock bounces around, but these pale in
relation to what he has invested and what he could have earned even from a passbook
savings account. On top of this, he also has to live with the worry for the next five years
that the stock will further decline, causing him to either give up his strategy completely
or invest even more money. Now he realizes that so much time has passed that even if the
stock rises back up to Rs60 someday, his annual rate of return for the amount invested
will be minuscule.
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It is scary to realize what can happen when you get caught up into a flawed strategy such
as scale trading. This little story might sound extreme, but I assure you that every single
day someone gets the bright idea to do exactly what our poor friend in the story did.
Thinking they have discovered a money machine, they begin scale trading and the rest is
simply a matter of time. The trader in the story was disciplined - he held to his system
against all odds, but he still got mired into a terrible mess. The lesson to be learned is that
to be successful, you not only have to be disciplined, but the theory on which your
system or method is based must be correct as well. A bad theory well implemented still
results in a loss.
Of course, not every scale trade results in a disaster, in fact most of them probably result
in a profit sooner or later. But the potential for profit is small considering the time, worry,
and capital invested. The typical pattern with scale trades is a series of small profits
followed by one gigantic and inevitable loss.
Some folks even apply the scale trading technique to several different stocks at the same
time. This does nothing but compress the amount of time it takes to lock on to a stock
that just keeps declining and declining in value - it may even become totally worthless
and enter bankruptcy proceedings. Or, almost as bad, it may decline from Rs50 all the
way down to Rs10/share and sit there for a long time. Perhaps it will sit there for years or
even decades while the poor trader sits trapped in his losing position earning little or
nothing on his money. You can rest assured that anyone who uses this approach
consistently in the stock market will meet this demise fairly early-on in the process. The
fatal assumption made by the scale-trading theory is "what goes down must come up,"
and as we have discussed earlier, this simply is not the case with stocks.
In the example above, if the price of the stock declines to slightly above Rs1/share, the
hapless scale-trader will own stock with a market value of Rs4,900 in which he has
Rs17,900 invested - a loss of Rs13,000. If the company goes bankrupt, the numbers
would be worthless stock and at a sickening loss of at least Rs17,900 (if he had sense
enough to stop buying once the stock fell below Rs1/share). This is after starting with
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only Rs1,000, and the usual case is that the neophyte feels his strategy is so foolproof that
he starts with Rs5,000 or some other large amount. The only saving grace is that people
tend to pursue this strategy when they are young, foolish, and have little money to lose.
So if our novice scale trader started with a Rs10,000 initial position at Rs50/share instead
of the Rs1,000 position in the example, he likely won't lose the entire Rs170,900 we
might expect him to lose. This is because unless he inherited his money, he probably
won't have that much to lose.
The positives of scale trading are:
1. It is simple and not subjective.

2. It can generate lots of small gains in choppy market conditions.
The negatives of scale trading are:
1. When applied to a portfolio of stocks, the stocks which do worst suck up the most
capital as more and more purchases are made while it declines. All capital is
automatically allocated to the worst-performing stocks in the portfolio while the
best stocks are sold off. The result is at best a disastrous underperformance versus
the market or at the worst a total loss of capital. If a scale trader uses margin
(borrows money from the broker to buy even more stock), the trader may, under
the right conditions, creatively find a way to lose even more money than he has.
The biggest problem is that scale trading cuts the trader's gains and lets his losses
run, just the opposite of what you want to do.
2. It is impossible to plan how much capital it will take to execute the strategy since
you never know how far down a stock will go before it recovers - if it does
recover. There are an infinite number of 50% declines between any positive
number and zero, therefore an infinite number of purchases you would need to
make to fully execute the strategy. Few people I know have unlimited capital.
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3. Eventually, everyone who practices scale trading encounters a stock that declines
precipitously and then goes bankrupt. The losses from such an occurrence are
huge. There have been a plethora of seemingly rock-solid companies over the
years that have ended up in bankruptcy court.
4. The scale trader never gets the full benefit of a favorable trend since he is always
selling his winners and buying more of his losers.
5. Even when a scale trade is successful, the amount of profit to be had is very small
relative to the amount invested and especially relative to the risk of catastrophic
loss.
6. When a scale-trader finds himself locked into a large losing position, he can't
even get the tax benefit of a write-off, since his strategy makes no provision for
him to sell out his position. Of course, if a bankruptcy should occur, then he can
write off the entire amount!
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Conclusion
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Conclusion
When you make an investment, you are giving your money to a company or an
enterprise, hoping that it will be successful and pay you back with even more money.
Some investments make money, and some don’t. You can potentially make money in an
investment if:
• The company performs better than its competitors.

• Other investors recognize it’s a good company, so that when it comes time to sell
your investment, others want to buy it.
• The company makes profits, meaning they make enough money to pay you
interest for your bond, or maybe dividends on your stock.
You can lose money if:
• The company’s competitors are better than it is.

• Consumers don’t want to buy the company’s products or services.
• The company’s officers fail at managing the business well, they spend too much
money, and their expenses are larger than their profits.
• Other investors that you would need to sell to think the company’s stock is too
expensive given its performance and future outlook.
• The people running the company are dishonest. They use your money to buy
homes, clothes, and vacations, instead of using your money on the business.
• They lie about any aspect of the business: claim past or future profits that do not
exist, claim it has contracts to sell its products when it doesn’t, or make up fake
numbers on their finances to dupe investors.
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• The brokers who sell the company’s stock manipulate the price so that it doesn’t
reflect the true value of the company. After they pump up the price, these brokers
dump the stock, the price falls, and investors lose their money.
• For whatever reason, you have to sell your investment when the market is down.
Hence there are several myths still present in the mind of a investor who is going to
invest in stock market. So these myths are needed to be removed so that investor can
invest freely in the share market.
If the recommendations mentioned in chapter 5 are followed by any investor than he can
some how overcome these myths and can know the reality of stock market.
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Recommendation
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Recommendation
Characteristics to look for in any investing system
Obviously, there are many strategies that can be used in stock investing, but there are
certain characteristics to look for in any plan for investing. Before we can develop a
strategy for investing, we need to have a set of criteria by which to judge if it is a good
plan or not.
Building upon our previous discussions about common investor mistakes and stock-
market myths, The degree to which a strategy stacks up well against these criteria
determines its desirability. The very best strategies will satisfy the following eight
requirements:
1. Lets gains run their course, cuts losses short.

This is a necessary element for any good plan of investing, especially the part
about letting gains run to their full potential. As long as a portfolio is well-
diversified, you can probably afford to make the mistake of holding onto your
losers, but you absolutely must not make the error of prematurely cashing in your
winners. Since we expect our gains over long periods of time to exceed 100% of
our initial investment, the amount of damage that can be done by cutting our
winning stocks short far surpasses the damage we can do by failing to cut losses.
However, for optimal performance it is best to both cut losses and ride winners as
long as possible.
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2. Much has been written about what the ideal point is for cutting losses. Some say it
is 10%, that is, that you should never lose more than 10% on a stock trade. Others
say you should never lose more than 8%. I have found that cutting losses this
short leads to excessive trading and excessive losses, and does not allow a good
stock enough room for normal day-to-day fluctuations. When cutting losses to 8%
or 10%, it is extremely easy to get bumped out of a stock only to have it recover
and begin soaring again without your being on board.
For this reason I prefer to take a radically different view of loss-cutting. I aim
never to lose more than 3 % of my total account value on a single stock
trade. As an example, I might set my stop-loss point back 30% from my purchase
point and invest no more than 10% of my account's assets into a single stock.
Therefore, I will not sell the stock unless it gets into serious trouble and falls
30%. If the worst happens and the stock does lose 30% of its value, I will have
lost only 3% of my account's assets on the trade since I only invested 10% of my
accounts assets into the stock. So, 10% times 30% equals 3%. I believe that this
approach to loss-cutting is far superior to arbitrary rules which require cutting
losses too short. If you can aim to lose no more than 3% of your cash on any one
trade, it will take a long string of uninterrupted losers in order to seriously deplete
your trading capital. Of course, there is nothing magical about the 3% number,
but the point is to keep your possible losses from any one trade to a very small
amount. Even in a market dip, it is improbable that all of your positions will drop
to your sell point.
3. Gradual entry into major positions, as long as the position continues to be

profitable.
It is inevitable that any system which attempts to let gains run will eventually
build some large positions in a few stocks as the stocks grow in value. That is the
good way to develop a large position. Also, it is OK to build a position by adding
to the position as it advances in value; in fact, most professionals continually add
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to their stock holdings as the price moves in their favor. In this way, they
maximize the potential reward for holding a particular stock or basket of stocks.
However, some approaches cause an investor to plunge a large amount of his

capital into and out of the market all at one time. This is the type of approach
which must be avoided at all costs. It is risky to enter any market all at once
because it maximizes your ability to lose a lot of money in a hurry. One poor
timing decision can result in a loss of a large percentage of your capital, and these
drawdowns in capital really hurt you. A 33% loss of your capital requires a 50%
gain on the remaining capital just to get to the break-even point. It is also
unnecessary to take such daredevil risks because most trends last long enough that
there is plenty of time to get on board and a lot of money can still be made by
entering a trend in several installments as it is developing.
4. Minimal chance of a large loss from any one position.

This is an adjunct to #2, as the gradual entry into a position is a means for
minimizing the chance of loss from a single bad decision. Again, it cannot be
emphasized too much that massive drawdowns in your capital are to be avoided at
all costs. Any plan of attack should score well in the area of keeping our eggs in
many baskets as opposed to one; and we should not have a large percentage of
our assets in a single stock unless our average purchase price is far below the
current market price. If we do well at that, we can sustain a large one-day drop in
the price of a stock without losing much, if any, of our original investment.
5. Clear, predetermined criteria for initiating, adding to, or liquidating a position.
In the heat of battle when you are dealing with your hard-earned money, the
instructions from your system must be as clear as crystal. If not, you will find
yourself making judgment calls that relieve your short-term stress, and yet are
poor long-term decisions. Precise and unambiguous signals and marching orders
are the best way to head off the effects of euphoria and fear. You may still feel
these emotions, but as long as your system is sound and you adhere to it
fastidiously, everything will turn out well.
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6. Sells a stock once it begins to underperform.
While we want to make sure we have a means for riding a stock's trend for as
long as it can go, when it becomes clear that the trend is beginning to profoundly
weaken or even reverse, we need to have a system which allows for selling the
stock so we can redeploy capital to greener pastures.
7. Maximum rupees invested in biggest winners.
If a strategy allows us to build a large position in an issue that is lagging or even
losing money for us, there is something seriously wrong with that strategy. The
common complaint one hears from many stock market participants is that they
wish they hadn't invested so much in XYZ Company and they wish they had
invested more in ABC Co. This mis-allocation of assets is usually accomplished
via some of the common investor mistakes in, especially the mistakes of adding to
a losing position, or plunging. A successful system needs to ensure that our
biggest investments are in our best stocks, not in our worst.
8. Minimum rupees invested in losers/underperformers.
This is the converse of #7. It is interesting to note that the only ways you can
accomplish having too much invested in a loser is to either plunge into it all at
once and fail to cut your loss, or add to a losing position once it is established as a
loser. Both of these are deadly mistakes and any system we develop must
preclude us from committing these sins.
9. Not time consuming to maintain.
This is important because throughout this book I assume that the reader's time is
his most valuable asset, and probably in short supply as well.
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I want to emphasize that perhaps the best strategy of all, for most people, is to
simply apply the stock picking criteria, then buy and hold their selected stocks
without ever selling them. Of course, you will need to select a substantial number of
stocks to achieve an adequate level of diversification, but for results versus risk and time
expended, it is hard to beat a buy-and-hold strategy. I recommend the simple buy-and-
hold approach for the vast majority of people.
we studied the worst of all trading strategies. It systematically snowballs your losses and
jettisons your best stocks just as they start to become winners. Practiced consistently, the
scale-trading approach is a surefire ticket to the soup line. The Reverse Scale Strategy, on
the other hand, is developed by inverting the Scale Trading approach, and in the right
market conditions may deliver large profits over time. Before we get into the details of
the Reverse Scale Strategy, though, let's take a side trip to examine how all portfolios
inevitably act over time.
The one inevitable characteristic of all stock portfolios.
To begin with, let's think about a portfolio of ten stocks held over a period of time, say,
five years. For now, let's not worry about which stocks are in the portfolio. The only
thing we know about the portfolio is that it is composed of ten stocks. Now let me ask the
question, "what can we predict about the portfolio five years from now?" In other words,
what is certain to happen over the next five years?
First of all we can't predict what the total return on the portfolio will be, because that will
depend on market conditions over the next five years, and also will depend on how well
our ten companies individually perform over that period of time. Stocks have historically
returned on average about 9% per year, but over any five year period this can range from
a negative number to a very positive number of 20% per year or more. It also varies
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considerably from company to company. So obviously we can't accurately predict what
each individual stock in the portfolio will return, either.
It may be disheartening to you to realize how little we actually can foretell about the
future performance of our portfolio. However there is only one thing that we can fairly
confidently predict about any basket of stocks, and it is this:
At the end of the five year holding period, some stocks in the portfolio will have
performed vastly better than others.
For the sake of reference, call this the Variability Concept.
This is not exactly a revelation. We could expect that one or two of the stocks will have
tremendously outperformed the market averages, which might mean a move of two, four,
or maybe even ten or more times our entry price, depending on market conditions. Some
will have proven to be dogs, perhaps declining marginally, or in the extreme case, gone
out of business in the meantime. A large portion of the stocks will have performed pretty
much in line with the market. If you've chosen your stocks randomly, there's also a very
good chance that your ten-stock portfolio will have returned something close to what the
market averages returned over the five years. Since every portfolio of stocks contains
future winners and future losers, we are left with this: The challenge of investing is to
make sure that when you get to the end of your holding period, you find that most
of your money was invested in the stocks which performed the best, and relatively
little was invested in the stocks which did the worst.
To realize how this concept can be useful to us, we also have to add to it another fact
we've already discussed in great length about the stock market:
Stocks make large moves in continuous trends which almost always take months or
years to develop.
Let's call this the Trend Concept.
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Large price movements are gradual incremental events, not all-at-once step functions.
They are evolutionary, not revolutionary. Whether the move is up or down, a really big
move does not normally happen overnight unless there is a merger announcement,
bankruptcy filing, or something of that sort. Even then, the actual announcement has
often been preceded by an uptrend (in the case of a pending buyout) or a downtrend (in
the case of a pending bankruptcy filing). The reason for this is that there are always some
folks who know about these pending announcements before they happen, even if they are
not supposed to know. Their buying or selling leading up to the announcement moves the
stock while the public is still clueless as to why it is moving.
Putting the Trend and Variability concepts together, it becomes apparent that there will
most likely be a wide gap in the returns between the best-performing and worst-
performing stock in your ten-stock portfolio. It is equally apparent that this condition
will develop slowly, with the gap in total returns between the best and worst stock
growing steadily as the holding period lengthens. The union of these two inevitable
events should lead logically to this conclusion:
If only we could find a way to gradually allocate our investment rupees to the best-
performing stocks in our portfolio as they are becoming the best-performing stocks,
then we'd have a tremendous chance of greatly increasing our investment returns
above and beyond what would be achieved by simply choosing those same ten stocks
and holding them in equal rupee amounts.
Reversing the Scale Trading example
What we need, then, is to develop a system that will accomplish this allocation of capital
to our strongest and best-performing stocks. As it turns out, we can do this by simply
reversing the scale trading approach learned about in the last chapter. So in other words,
we add equal rupee amounts to our stock positions as they move up in price, instead of
when they move down in price. This is what call this Reverse Scale Strategy.
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. Like a snowball rolling downhill, the tendency for a declining stock to keep on
declining, in combination with the scale trader's foolish trading rules required the poor
trader to buy more and more while his position became worth less and less. Once you
have really grasped how foolish the scale trading strategy is, it becomes much easier to
see how wise it is to follow the Reverse Scale Strategy. To give you a flavor for the
advantages of adding to a position as it moves up in price, following is a brief contrast of
Scale Trading versus the Reverse Scale Strategy:
Scale Trading Reverse Scale Strategy
Positions added only if stock declines. Positions added only if stock increases.
Your average cost per share is always Your average cost per share is always below
above the current market price after second the current market price after second
purchase. purchase.
Sacrifices large long-term gains for small Sacrifices small short-term gains in order to
short-term gains. realize large long-term gains.
Unlimited potential for loss. Unlimited potential for gain.
Makes no attempt to cut losses. Adds to Cuts losses. Does not add to losing
losing positions. positions.
In a portfolio, automatically allocates In a portfolio, automatically allocates

majority of capital to worst-performing majority of capital to best-performing
issues. issues.
The Snowball Effect

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Let us assume that a person has made five snowballs, all equal in size, and he gives each
of them a equal push to start them rolling downhill. One of the snowballs starts out okay
but doesn't get very far, as it hits a rock that was hiding below the surface of the snow,
exploding the snowball into smithereens. Two others make it about halfway down the
hill, but then stall out because they became large and happened to be on a part of the hill
that was not as steep as some other areas. Still another makes it a bit further than those
two, but then hits a wet area and gets bogged down. One of the snowballs, however,
happens to have just the right type of snow and a nice steep incline, and its quick start,
momentum, and after a while, sheer size make it unstoppable. It goes several times the
distance of any of the other snowballs.
The analogy between snowball-rolling and a portfolio of stocks is a good one. Obviously,
the snowball that rolls the farthest gets the biggest and picks up more snow gradually as it
goes. The size of the snowball can represent either losses or gains, depending on whether
you are using the Scale Trading approach (snowballing losses) or the Reverse Scale
Strategy (snowballing gains). Really, both the Scale Trading approach and the Reverse
Scale Strategy cause a snowballing effect. You have to choose which strategy you would
prefer: One which snowballs losses or profits.
With snowballs, as in the stock market, there are things you can control and things you
cannot control about the stocks you are investing in. You can control how big you make
each snowball initially, and you can control how much of a shove you give each. From
then on, many of the factors are out of your control or unpredictable. Even though we
can't predict which snowball will roll the farthest, the hill still gives more snow to the one
that eventually does go the furthest, because it adds snow to it gradually as it progresses.
Hence, the beauty of the Reverse Scale Strategy is that just as the hill and gravity make
sure the snowball that goes the furthest gets the most snow, our strategy will make sure
that the stock which advances the furthest gets most of our capital.
Trading rules for the Reverse Scale Strategy: an example.

[56]
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To learn how to implement the Reverse Scale Strategy, let's run through an example for
one single stock. Although we will be using the Reverse Scale Strategy in a portfolio of
several or more stocks, it is much easier to illustrate the concept using just one stock.
First, we construct a chart similar to what the scale trader in the last chapter constructed,
only our chart begins at the initial purchase price and goes up, each succeeding decision
point being 50% higher than the previous one, (instead of 50% lower, as with scale
trading). The trading rule is:
We will invest an additional designated number of rupees at each price level as that
level is reached - and only if it is reached.
As you can see, we will be adding an equal rupee amount at each price level. This rupee
amount is the same as our initial position in rupees, but a reduced number of shares due
to the higher price paid for each successive purchase. For a stock where our initial
purchase was at Rs20 per share, our decision chart would look as follows (the initial
entry position is highlighted):
Reverse Scale Strategy, 50% purchase increments (Chart #1)
Decision Amount Shares Cumulative Cumulative Current Cumulative Total Rs

Point Invested bought Rs Invested Shares Value of Cost per Profit/(Loss)
[56]
MEERUT
- 102 -
Price this Owned Shares Share

Level Purchase
*
Loss- 13 1/4 N/A N/A N/A N/A N/A N/A N/A
cutting
point
Initial 20 Rs1,000 50 Rs1,000 50 Rs1,000 Rs20.00 Rs0
entry
point
Decision 30 Rs990 33 Rs1,990 83 Rs2,490 Rs23.98 Rs500
point 1
Decision 45 Rs990 22 Rs2,980 105 Rs4,725 Rs28.38 Rs1,745
point 2
Decision 67 1/2 Rs1,013 15 Rs3,993 120 Rs8,100 Rs33.27 Rs4,108
point 3
Decision 101 1/4 Rs1,013 10 Rs5,005 130 Rs13,163 Rs38.50 Rs8,158
point 4
* Since shares can only be bought in increments of one, this number does not always
equal Rs1,000 for each purchase, but the cost of the closest increment of one share that
can be purchased with Rs1,000.
Again, each successive Decision Point is arrived at by multiplying the previous one by
1.5. So the first decision point is calculated by multiplying the Rs20 initial entry price by
1.5, which yields Rs30; Rs30 times 1.5 results in Rs45, and so on for as far as you need
to go.
Our other trading rule is:
Whenever our stock increases to reach a decision point and then retreats all the way
back to a previous decision point, we will sell out our entire position in the stock.
[56]
MEERUT
- 103 -
Why do we have this trading rule? Simply because if a stock retreats enough to make it
all the way back to a previous decision point, then it's a good bet it's lost enough
momentum that it will have a hard time becoming a market leader once again. In other
words, its uptrend may be ending or about to go dormant for a long, long time. So, it's
best to trade it in and start over with another more promising issue. As we have discussed
in earlier chapters, we need to give a market-leading stock plenty of room for normal
retreats off its highs in order to be able to ride the long trends when they develop.
However, we have to draw the line at some point. Given that our decision points are 50%
apart
Summary of Purchases and Sale (Chart #2):
Shares Purchased Price per Share Total Cost Commission Net Cost
Purchase #1 50 Rs20 Rs1000 Rs25 Rs1025
Purchase #4 15 Rs67 1/2 Rs1013 Rs25 Rs1038
Purchase #5 10 Rs101 1/4 Rs1013 Rs25 Rs1038
Total cost of all the purchases: Rs5,131.
Total shares purchased: 130
Proceeds from 130 shares sold at Rs67 1/2 = Rs8,775. Minus Rs 25 commission =
Rs8,750.
Net Profit = Rs8,750 minus Rs5,131 or Rs3,619.
Just to illustrate the previously made point about the Reverse Scale Strategy making it
hard to get shaken out of a stock prematurely, please note what our sell decision point
would have been had the price topped out at only Rs100 instead of at 101 1/4 or higher.
In that case, the price would have had to retreat from Rs100 all the way down to
Rs45/share in order to trigger a sellout of the position, since it never reached the Rs101
[56]
MEERUT
- 104 -
1/4 level and therefore Rs67 1/2 never became our sellout point. Now, I know
emotionally it might seem disheartening to you to have to sit idly by while a stock sinks
from a peak of Rs100 down to Rs45. But believe me, there are plenty of times where this
discipline of being able to ride out the occasional temporary steep correction will be the
very thing that allows you to sometimes go on to make a huge gain of 1,000% or more.
Keep in mind that gains of 1,000% happen much more often than you'd think if you are
using the stock-picking criteria presented in Chapter 4. It is also much easier to ride a
stock down temporarily if it is only one of many stocks you own, so make sure you
diversify!
For the sake of covering all the bases in the last example, what would have happened if
our stock had turned out to be a loser instead of a winner? If after we took our initial
position at Rs20 per share, the stock declined to 13 1/4 or lower (Rs20 divided by 1.5),
we would have sold the initial position and started looking for a new stock to start over
with. We would have incurred a loss of Rs337.50 plus two Rs25.00 commissions, for a
total loss of Rs387.50. We then would go prospecting for a new stock to trade.
Remember, we do not want to keep gunning for the same stock once we've been bumped
out of it by our system.
[56]
MEERUT
- 105 -
Bibliography
Bibliography
Primary Data..
Through Questionnaire
Secondry Data
Books & Magazine
MAGAZINES;
[56]
MEERUT
- 106 -
1. Business World
2. Business Today
Books
Websites
Marketing
Kotler. Phillip, Keller. • www.nseindia.com
Kevin, Marketing
• www.relegaresecurities.com
management, Prentice
hall India, 12th edition, • www.moneycontrol.com
2006,
Chrsto. f. • www.religarefinmart.com
lovelock,Jachen wirtz,
Service marketing,
Pearson education, 5th
edition, 2004, Saxena
rajan, Marketing
management, Tata
McGraw hill, 2nd
edition, 2004,
G C Beri, Marketing
Research, , Tata
McGraw hill 4th edition,
2009,
Research Methodology
C.R.Kothari,
[56]
MEERUT
- 107 -
APPENDIX
APPENDIX
[56]
MEERUT
- 108 -
Questionnaire
Name: ______________________________
Age:
□ 20 – 30 □ 30 – 40
□ 40 – 50 □ 50 and More
Gender:
□ Male □ Female
Profession:
□ Government Employee □ Private Sector Employee
□ Self Employed □ Business
□ Others (Please Specify)
Contact No.:___________________________
Income (Tick Range)
□ 1,00,000 – 2,00,000 □ 2,00,000 – 3,00,000
□ 3,00,000 – 5,00,000 □ 5,00,000 and above
1. Which are the present investments products in which you have invested or currently
investing?
□ Mutual Funds □ Bank Fixed Deposit □ Post Office
□ ULIP □ Stock & Shares □ Others _____________
[56]
MEERUT
- 109 -
2. When share market is low what you generally prefer to do?
• Buy blue chip stocks which are under valued.

• Buy just to average out cost.
• Sell and go out of market.
• Wait for right time to invest.
3. One should have exit plan before buying any stock
• Strongly agree.
• Agree
• Can’t say
• Disagree
• Strongly disagree.
4. Sell a stock as soon as it starts giving profit
• Strongly agree
• Agree
• Can’t say
• Disagree
• Strongly disagree
5. According to you stock market is
• Investment
• Gambling
• Manipulated game.
6. In what Proportion do you invest your funds amongst the investment options?
• Shares _____ Insurance _____
•
• Gold _____ Mutual Funds _____
•
• Property _________________
•
7. The increase in income desired by the respondent was:
[56]
MEERUT
- 110 -
8. Are you satisfied with Religare if not then why?
______________________________________________________
______________________________________________________
______________________________________________________
[56]
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-1-

A SUMMER TRAINING PROJECT

“Myths And Realities in Indian Stock Market ”

Under the guidance of:

INSTITUE OF INFORMATIC &

I Rani Agarwal a bonafied student of Institute of Informatics &

management sciences, Meerut, would like to declare that the project

entitled “Terminology in Equity Markrt ” submitted in partial fulfillment of

Master of Business Administration.

Ravindra Kumar Lodhi

complete understanding of the Recruitment process undertaken in the organization along

survey conducted regarding the procedure of Selection in the organization… Questions

also been taken to know people’s reactions towards the same.

With profound veneration, first of all I recline myself before ALMIGHTY

Indeed the words and my command are inadequate to convey my profound

Ravindra Kumar Lodhi

S.No. Topic Page No.

4 Terminology in Equity market 43

consumer buying behavior, their expectations, needs & requirements, present

of the project are:

 To find out important factors that affect customer satisfaction.

 To find out the customer service satisfaction level at existing grocery at

 To find out the consumer’s perception about religare.

 To find out consumer’s perception about modern retail s.

 To find out existing competitors of Religare Retail.

in Meerut. The main objectives of the study are:

 To determine the determinants of grocery loyalty of consumers in Meerut.

 To study the degree of customer loyalty for religare

The vision of Religare securities limited is:-

“Providing integrated financial care driven by the relationship of trust

“To be India's first Multinational providing complete financial services

Religare Enterprises Limited group comprises of Religare Securities Limited, Religare

MANAGEMENT OF RELIGARE SECURITIES LIMITED:

ANALYSIS OF RELIGARE SECURITIES LIMITED

Features Religare ICICI INDIA BULLS 5 paise.com

Investing In Share Market

Investing In Share Market

The ego-driven Investor

The results-oriented Investor

Make A Financial Plan

KNOW YOUR INCOME AND EXPENSES

“But I Spend Everything I Make.”

Small Savings Add Up to Big Money

How much does a cup of coffee cost you?

Would you believe Rs465.84? Or more?

Determine Your Risk Tolerance

But what about risk?

Stocks and Bonds

Because it is sometimes hard for investors to become experts on various businesses—for

What is a mutual fund?

A mutual fund is a pool of money run by a professional or group of professionals called

Mutual Funds without Active Management

Watch "Turnover" to Avoid Paying Excess Taxes

How to Pick a Financial Professional

Investment professionals offer a variety of services at a variety of prices. It pays to

Investment Advisers and Financial Planners

Opening a Brokerage Account

2. How will you pay for your investments?

3. How much risk should you assume?

How Should I Monitor My Investments?

How to Avoid Problems

• How will the investment make money?

1) Look for positive price momentum