Rachana Ranade. Blog

Cryptocurrencies like Bitcoin, Ethereum, Dogecoin, etc. are becoming familiar and popular amongst the global masses, every passing day. Famous personnel like Bill Gates, Elon Musk, Serena Williams, Snoop Dogg, Mike Tyson, and many more, are believers in Cryptocurrencies.

So, what is Cryptocurrency? what are its advantages and disadvantages? Is it legal? what is Blockchain? and finally, what is a bitcoin?...

My Goodness! So many questions. But don’t worry. I have the most simplified answers to all such mind-boggling questions. Stay tuned till the end of this blog to find out.

What is Cryptocurrency?

Let us break down this concept into two parts. The first is Cryptography and another is Currency. Currency needs no explanation so, let’s begin by understanding Cryptography with an example. You might have heard about Morse Code. It is nothing but a standard sequence of dots and dashes which was used by the military to communicate secretly during WW2. This ensured that only the receiver could decode the messages meant for them and not the enemy.

Cryptography is somewhat similar to this practice. It uses complex mathematical codes to convert plain text into a coded series, which can only be decoded by the receiver of the message.

Putting it all together, Cryptocurrency is a form of digital currency secured by cryptography. This ensures secure online payments through a decentralized network of a large number of mega-computers spread across the world. They are intangible and independent of any underlying.

Special Features

Decentralized
In simple terms, here Decentralize means free from any central authority. Cryptos work on a peer-to-peer network of computers, with an internet connection, across the world. You can trade in Crypto through centralized exchanges like WazirX. But there is no such central regulatory body (like SEBI, SEC, etc.), government or organization controlling these Cryptos as an instrument. Thus, making it free from political interference and influence.
Secure
Since cryptos are backed by a technology called the blockchain, there are very few chances of the system getting hacked. This makes it secure. Blockchain records every transaction and these records are openly available to the public. This further ensures its transparency. Now, how does this Blockchain work? It is discussed in the latter part of this blog.

Advantages of Cryptocurrencies

No intermediary required
If we were to transact the traditional way, we would need an intermediary like a bank, payment gateway, etc. to conduct an online transaction. However, as cryptocurrencies are decentralized, it has eliminated all such intermediaries. We can directly send cryptos to anyone, without a third party like our banks.
No geographical barriers
Cryptos can be transferred to anyone & anywhere across the globe. It goes beyond your banks’ national and international networks.
Swift
The crypto transaction can happen in as low as 4-5 seconds to a maximum of 10 minutes, depending upon the underlying technology being used by the currency.

CLICK HERE TO EXPLORE CRYPTO WITH - WAZIRX PLATFORM

Disadvantages of Cryptocurrencies

Irreversible transaction
Just like we have a unique UPI ID for online transactions, cryptocurrencies have public and private keys. To transact, we need to input this key and the cryptos will be transferred to that key holder. However, if we make an error while entering this key, the cryptos will be transferred to the wrong key holder. Unfortunately, these transactions cannot be traced and you might lose your cryptocurrencies, as a refund is not an option.
Host of illegal activities
Cryptocurrencies are believed to be a host of illegal activities due to their anonymity feature. Some cryptocurrencies ensure anonymous transfers with no maximum amount limit which has encouraged money laundering and tax evasion activities in the world. In such cases, it becomes difficult for Governments to trace such fraudulent actions.

Is it Legal?

Yes & No! There is no law prohibiting Indians from buying/selling cryptocurrencies in India. It has now evolved as a recognized investment avenue because of the numerous successful investment stories being circulated in the world.

However, one must note that cryptos are not a “legal tender” in India as it is not regulated/guaranteed by the Central Government. Now you might ask, “Legal tender? what's that?...

Legal tender is the money issued, recognized, and accepted by the law of a country. Can you pay someone using Rs. 500 or Rs. 1000 notes? The answer is, NO! Because these notes stopped being legal tender since the demonetization announced by the Government.

Where does the Blockchain stand in this picture?

Well, Blockchain is the technology supporting the transfer of Cryptocurrencies. However, it also finds application in other industries like healthcare, logistics, e-commerce and many more. Blockchain is a global online database, which can be viewed by anyone, anywhere with a computer and an internet connection. In the case of Cryptos, it records the data of all the transactions taking place around the world. Due to this, it is also known to be a “Public Distributed ledger”. This database cannot be altered or hacked because it is visible and validated by the network users.

How does it work?
As and when the transactions happen, it is being recorded in something called a “Block”. This block contains the transaction details like who is sending the crypto to whom, where, and how much they are sending. Each block has a unique code called Hash. It is created using complex cryptography algorithms, every time a block is formed. Once a block of transactions is complete, it will be linked to a new block. Thus, forming a chain of blocks on the network, which cannot be tampered with due to heavy encryption. All of this was made possible with the help of Blockchain technology.

What is Bitcoin?

Bitcoin is the most popular type of Cryptocurrency. It was launched in 2009 by a group or an individual with the pseudonym Satoshi Nakamoto. It is intangible which means it does not have a physical presence. It does not disclose the names of the sender and the receiver of the bitcoins on the ledger.

The supply of bitcoin is limited to 21 million. As of March 2021, there were over 18.6 million bitcoins in circulation with a total market cap of around $927 billion. It holds more than 60% of the total value of all the cryptocurrencies of the world. As of April 17th, 2021, 1 bitcoin is worth Rs. 46,47,378.31!

People usually use the terms Bitcoin and Blockchain interchangeably. But, that’s not the case. Bitcoin is a cryptocurrency backed by blockchain technology. Let’s move on to a little more advanced level and understand how a bitcoin transaction takes place on the network.

Assume, Mr. A wants to send 1 bitcoin to Mr. B. Every network user has 2 keys- a Public key and a Private key. Think of the public key as your UPI ID which can be public, and the private key as your PIN which you do not share with anyone. Mr. A initiates the transfer of bitcoin by entering his and Mr. B’s public key. After that, Mr. A will digitally sign and encrypt this transaction by entering his private key. This transaction is now transmitted across the Blockchain network.

This transaction will become a part of a Block that needs to be validated before it is added to the Blockchain. This block will be validated by someone called Miners on the network. They solve a complex mathematical problem to validate a block and are in turn, rewarded with a few bitcoins. This process of validating a block is called ‘Proof of Work’ and the process of adding a block to the blockchain is called ‘mining’. On average, Bitcoin validation happens in 10 mins. Once validation is complete, all Mr. B gotta do is enter his private key to decrypt the transaction and receive his bitcoin.

Cryptocurrencies have evolved as a new option for portfolio diversification. There are so many options under the crypto umbrella to choose from. Some cryptocurrencies even offer fractional investment. Before investing in cryptos, one must note that it is not regulated and is technology-dependent. Even though few cryptos have proven themselves, if things go south, one might lose all of their crypto holdings.

I hope this blog has made understanding Cryptocurrencies a little easy for you. If you want to learn more about it stay tuned to my YouTube Channel, as I will be covering the “Basics of Cryptocurrency” in a series soon. Until next time!

MAKE SURE YOU ARE UNDERSTANDING ABOUT CRYPTOCURRENCIES BEFORE INVESTING

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What is Cryptocurrency?

Metamask is said to be a good crypto wallet option for a number of Crypto and Decentralized Finance (DeFi) applications. Metamask can be used in your Chrome browser as an extension, and it also has a mobile app.

In this blog, we will take you through the steps for creating a Metamask wallet:

Step 1:
Visit the MetaMask website https://metamask.io/

Step 2:
Click on ‘Download’ and then choose your browser. Then install the extension for your specified browser.

Step 3:
The next step will be to create an account. Click on the MetaMask icon in the top right corner of your browser. This will be available under the puzzle piece icon. Click on ‘Get Started’ and then ‘Create a Wallet’.

Step 4:
Your next step will be to create a new password. And after agreeing to the T&C, your MetaMask wallet will be created!

Step 5:
Once your wallet is created, you will be able to see your “seed phrase”. This is your secret seed phrase which should not be shared with anyone and stored safely. A good practice to safely store this is to write it down on a piece of paper and keep it in a safe location.

Step 6:

After this, you will have to correctly select the order of your seed phrase and click ‘Confirm’.

All done! Your MetaMask wallet is now active. Your wallet address is the number at top of your wallet starting from 0x. You can transfer Ether and other crypto tokens to this wallet address.

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How to open a MetaMask Wallet?

I know pretty well that one stock is not enough for Stockoholics like us. Therefore, in this blog, we will be discussing another gem from one of my Thursday Livestreams. The name of the company is Gufic BioSciences Limited. I found this gem along with the other shiny gem, Oriental Aromatics Ltd. whose video is already out on YouTube. If you have liked that video then keep reading this blog as I have covered the whole company analysis of Gufic BioSciences Ltd. here for you.

What does the company do?
The company manufactures pharmaceutical, herbal, consumer care, and API (Active Pharmaceutical Ingredients) products. Out of these four, the first three are very easy to understand but what is the fourth product? Well, APIs are chemical compounds that are the most important raw material to produce a finished medicine. For instance, Paracetamol is the API for Crocin. The company is also into contract manufacturing (Domestic & International). Contract manufacturing occurs when a small business hires another company to produce its products. It is a form of outsourcing.

About the Company:

Founded by Mr Shri Pannalal Choksi in the year 1970, the Choksi family has more than five decades of experience in the Pharma sector. The company has 3 Domestic Brands:

1. Gufic Super Speciality Business includes Critical care medicines and Infertility products.
2. Gufic Mass Speciality Business includes products like Nutraceuticals and Natural products, Pain /Arthritis, Immune Boosters, respiratory products, and mass Anti-infectives that are supplied in bulk to General Practitioners, Pediatricians, Gynaecologists, and Physicians.
3. Gufic Speciality Business includes Gufic Stellar (Range of Unique Ortho-Gynaec products) & Gufic Aesthaderm (Range of Derma-Cosmetics mainly licensed).

Interesting points about the company:

They are pioneers in Lyophilization and one of the largest manufacturers of Lyophilized injections in India. Lyophilization is a water removal process typically used to preserve perishable materials and to extend shelf life. This process is done to avoid degradation, and it improves the stability and solubility of the medicine. Not only this, but they are also the pioneers in antibiotics like Amoxicillin and Dispersible Kid Tab.

Sector Analysis:
a. Globally, India ranks 3rd in terms of pharmaceutical production by volume and 14th by value. The domestic pharmaceutical industry includes a network of 3,000 drug companies & ~10,500 manufacturing units.

b. According to the Indian Economic Survey 2021, the domestic pharmaceutical market is expected to grow 3x in the next decade. It is estimated at US$ 42 billion in 2021 and is expected to reach US$ 65 billion by 2024 and further expand to reach ~US$ 120-130 billion by 2030.

c. Indian Active Pharmaceutical Ingredient (API) industry is ranked 3rd largest in the world. The majority of APIs for generic drug manufacturing across the globe are sourced from India, which also supplies approximately 30% of the generic APIs used in the US.
(Source: IBEF & Annual Report)

Annual Financial Analysis:(Figures in Rs. Crores)

Quarterly Analysis:

Financial Metrics:

I hope you enjoyed reading about this small-cap company which must have fulfilled your excitement. If you have not yet watched the video on Oriental Aromatics Ltd, click on the image below. Until next time.

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GuFic Biosciences Limited Fundamental Analysis

Ye Dil mange more! So welcome back to this special blog where we discuss one more fundamentally strong stock under Rs. 1000. I am sure many of you might have felt at some point in life that investing in good stocks comes at a cost and I wanted to debunk this myth. That is when I started my research on fundamentally strong stocks under Rs. 1000 and this stock is one of those 3 which I shortlisted. I am sure you already know the other 2 from today’s YouTube video. So, without prolonging your excitement let me disclose the third stock - KEI Industries Ltd. Stay tuned till the end of this blog to understand everything about this company. Let’s dive in!

What does the company do?

KEI is one of the leading manufacturers of cables and wires (C&W). But what is the difference between cables and wires? A wire is a single or a group of conductor strands of copper or aluminium whereas a cable is two or more insulated wires wrapped in one jacket. The company supplies a broad range of C&W products and plays an integral role in the development of core sectors of the country, such as Real Estate, Infrastructure, Power, Steel, Fertilizer, Refinery, Transportation, Energy, and Building Materials among many others.

Product Portfolio
Let’s have a look at the product portfolio of the company.

I hope that cables and house wires need no further explanation. Coming to Winding wires, these wires are used for winding submersible pump motors of all sizes. They are used for both Domestic & Industrial applications. Stainless Steel Wires are used in Engineering, Chemical, Construction, and many other industries besides the various type of applications in the manufacturing of kitchenwares, ornaments, utensils. Talking about EPC, the company has forward integrated into Engineering, Procurement and Construction (EPC) services for utility projects having significant cabling requirements. They offer end-to-end turnkey solutions including engineering, consultancy, and project management for Extra high voltage substations, transmission lines, underground cabling, overhead lines, etc. These services are being delivered across core sectors like power, renewables, railways, refineries, petrochemicals, cement, steel among others.

Business Segments

Have a look at the company’s business segmentation and its revenue contributions.

If you observe well under revenue by product segments, revenue for cables and turnkey projects have gone down. Why is that? While reading the conference call transcripts, I found out that the company is reducing its stake in the EPC business due to the elongated working capital cycle, slow recovery of payments, and low margin profile. Due to this, they will limit its contribution to overall sales at 10-15%. This is a strategic decision where they plan to redirect the freed-up resources to the retail segment with an aim to generate 40-50% of overall sales from this segment in the medium term.

Industry Analysis
1. Global W&C Industry
The global wires and cables market size was estimated at USD 183.14 billion in 2020, as per a report published by Grand View Research. It is expected to expand at a CAGR of 4.4% over 2021-28, to reach USD 260.16 billion by the end of 2028. This growth is attributable to the increasing use of cables and wires across the world for transmission and distribution of power, for incremental application in the telecom sector and data centers. Increasing urbanization and commercialization are expected to further bolster investments in the real estate industry, thereby, driving the demand for low voltage insulated wires and cables.

2. Indian W&C Industry
The Indian cables and wires market is projected to grow at a CAGR of 4% between 2021 and 2025, to reach USD 1.65 billion in 2025. Out of a total capital expenditure planned by the government, segments such as energy, roads and highways, urban infrastructure, and railways cumulatively account for ~71% of the total investments, with the energy sector commanding the highest share at 24%. This underscores substantial and sustainable demand for the C&W industry in the coming years.

About the company
KEI Industries Ltd was established in 1968 as a partnership firm under the name Krishna Electrical Industries. Their products are sold in 50+ countries with offices in 5 countries. They enjoy a 7% market share in India’s organized W&C industry and 12% in the institutional segment. They have a network of 1,655 distribution partners across India. The company was able to backwards integrate services by setting up in-house manufacturing of PVC. They continued to be co-sponsors of IPL for the fifth year. KEI was the principal partner to the Rajasthan Royals Team.

1. CAPEX Plans
As stated by the management in the investor’s conference call, the company will continue to invest in increasing the capacity. In the previous years, they had increased housing wires capacity with the setting of a new facility. They are now looking at investing around Rs. 600-700 Crore from internal accruals for growing their capacities for LT, HT, and EHV cables to maintain a CAGR of 17% to 18% against a CAGR of 15% achieved during the last 15 years. The CAPEX will be undertaken over five years. Meanwhile, the company has sufficient capacity to cater to the market demand over the next years by when new production lines will also be available.

Financial Analysis
The 5-year CAGR for Revenue, EBITDA, and PAT are well above average. If we look at quarterly numbers for the same parameters, we can see degrowth on a QoQ basis but YoY growth looks good. The QoQ degrowth happened due to the non-clearance of some orders of EHV cables and the second lockdown in this quarter however, the management is confident that the order will be reflected in Q2.

Apart from this, the company has good ROE and ROCE with low DE. The Current ratio looks good as well. There is no pledging of shares. Currently, the stock appears undervalued when compared to industry P/E.

Technical Analysis
The stock has been in an uptrend. Recently, an ascending triangle was observed, however, the price has been consolidating after it gave a breakout. As per Pivot levels, the next resistance is around 788.64 and 810.20 and support is around 714.80 and 694.70. RSI has been stable at around 60. MACD is bullish but the histogram is showing weakening bullishness due to the recent consolidation.

I hope you enjoyed learning about this company and it added value to your knowledge basket. If you haven’t watched the video on the other 2 interesting yet pocket-friendly stocks which I discussed on my YouTube channel today, click on the image below. Make sure to drop your views in the comments section if you would love more of such videos and blogs. Until next time!

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KEI Industries Fundamental Analysis

As you might be aware, the normal heart rate for humans ranges from 60 to 100 beats per minute. A beat per minute (bpm) rate below or above this normal range may indicate an unhealthy heart and suggests medical attention. Now you might be like, why are we discussing this bpm here & what it has to do with the stock market? Okay, Let, me tell you that this has nothing to do with that open F&O position of yours, which sometimes gets your heart rushing.

We are Today going to talk about the VIX i.e. Volatility Index. The volatility index is like the heartbeat of the stock exchange. Similar to our heartbeat, when VIX is out of its normal range, it suggests lower or higher than normal volatility in the market. Let’s understand this VIX in a bit more detail.

What is VIX?

Being a measure of volatility, VIX is often called the “Fear Index” or “Fear Guage”. The Chicago Board of Options Exchange (CBOE) first launched the Volatility Index (VIX) for the US markets in the year 1993. VIX was launched in India in the year 2008 by the National Stock Exchange (NSE).

The Volatility Index is widely used to measure the expected market movement in the coming 30 days. Though VIX is an annualized rate, we first divide it by the square root of 12 (12 stands for 12 months). E.g.: - At the time of writing this blog, the India VIX is 13.4775 which means that the NIFTY Index is expected to move 13.4775% in the coming year. Thus, 3.89% (13.4775 / √12) gives us the expected monthly movement.

Though, VIX tells us the expected movement in the index, it does not indicate the direction of the movement. Therefore, though we can say that the expected movement is 3.89%, this movement can be 3.89% up or 3.89% down.

I am sure that you are wondering how is this VIX value calculated. Well, there is a mathematical formula behind the calculation of VIX, but honestly, there is no need to understand this formula as VIX is readily available on google or any other trading platforms. The interpretation of VIX is more important rather than its calculation. We will understand it in the next part of the blog, till then do visit my YouTube channel CA Rachana Phadke Ranade and for all the Marathi folks out there also visit my Marathi YouTube channel CA Rachana Ranade (Marathi).

Interpretation of VIX

As we said, the VIX indicates the expected movement in the market. It helps us know the expected performance in the market for a definite period say 1 month, 1 year, etc. Volatility implies the tendency to change. Hence, when the markets are highly volatile (high VIX), they tend to move steeply up or down. But, what do we exactly mean when we say that the VIX is high? Generally, the following categorizations are followed:

VIX below 11: - Very Low.

VIX within the range of 11-20: - Stable.

VIX above 20: - Very High.

VIX in the “Very Low” category and “Very High” category indicates unusual volatility in the market. But again, we cannot predict the direction. Hence, if say the VIX is high, the market can be very bullish or very bearish in this phase. On the other hand, a VIX in the “Stable” category indicates a stable or gradual movement in the market.

The VIX is a very good indicator of the mood of the market. But it is not a sole indicator and hence needs to be used in combination with other indicators like the open interest, put-call ratio, etc. But what are the other indicators and how to calculate them? Don’t worry! I have covered all these indicators and many more interesting concepts in my course on Futures and Options. Until next time!

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What is Volatility Index?

We all have witnessed what happened in the past few days in the market. Hindenburg Research LLC an investment research firm with a focus on activist short-selling published a report on Adani Group stocks on 24^th January 2023 accusing the group of various allegations. This caused the Adani group stocks to jump down the aircraft without parachutes. This is not the first time someone is making allegations about the Adani group, so there was a minimal impact on the market. The report slowly spread like wildfire and it was reflected in the stock prices on 27^th January when almost all the group stocks declined by 15%-20%. This increased the overall volatility of the market.

What is Stock Market Volatility?

Stock market volatility refers to the fluctuation of stock prices in a short period of time. This can be caused by a variety of factors, including economic news, geopolitical events, changes in interest rates, market sentiment, etc. Volatility can have a significant impact on investors, as it can lead to both large gains and losses in a short period of time. This volatility is measured by Volatility Index also called India VIX. Let us see what the VIX looked like on 27^th January.

The VIX spiked by 18.18% on 27^th January. This volatility can be seen as both a positive and negative aspect of the stock market. On one hand, high volatility can lead to large gains for investors who are able to correctly anticipate market movements. On the other hand, it can also lead to significant losses for those who are caught off guard by sudden market changes.

Another factor that can contribute to stock market volatility is the actions of market participants, such as institutional investors and hedge funds. These large players have the ability to move the market with their buying and selling decisions, which can lead to rapid price changes. They usually buy or sell stocks in bulk. The problem here is not all bulk deals are known beforehand. You can see these bulk deals on the website of the Stock Exchange a day after these deals take place.

How to protect your investments from volatility?

One way to mitigate the negative effects of volatility is to adopt a long-term investment strategy. This means avoiding making knee-jerk reactions to short-term market movements and instead focusing on building a diversified portfolio that is well-suited to your risk tolerance and investment goals. Additionally, investors can also consider using tools such as stop-loss orders, which automatically sell a stock if it falls below a certain price, in order to limit potential losses.

Can we avoid volatility?

It is also important to keep in mind that stock market volatility is a natural part of the market cycle. In general, the stock market tends to be more volatile during times of economic uncertainty, such as recessions or economic downturns. However, over the long term, the stock market has historically produced positive returns, making it an attractive investment option for those who are willing to tolerate short-term volatility.

In conclusion, stock market volatility is a part of investing, and understanding its causes and effects is essential for making informed investment decisions. By adopting a long-term investment strategy, using tools to limit potential losses, and staying informed about market movements, investors can minimize the negative impact of volatility and maximize their chances of success in the stock market. How to learn and use those tools is a topic for another discussion, until then…

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What is Stock Market Volatility?

Investing can be a great way to build wealth and achieve financial freedom. However, it can also be risky if you don't know what you're doing. To become a successful investor, you need to have an understanding of the markets and a strategy that works for you. Here are 10 tips to help you get started:

1. Set clear goals: Before you start investing, it's important to know what you want to achieve. Are you saving for retirement, a down payment on a house, or a child's education? Set specific goals and create a plan to achieve them. When you are planning for the goals make sure they are S.M.A.R.T. If you don’t know what are SMART Goals, I have made a separate video you can check out on YouTube.

2. Diversify your portfolio: Don't put all your eggs in one basket. Spread your investments across different asset classes, sectors, and geographic regions. This can help reduce risk and increase returns over time. Understand that all the assets move in cycles, if one asset is in a negative cycle the other asset that has a lower correlation will set off the returns to avoid or minimize any possible underperformance.

3. Invest for the long-term: Investing is a marathon, not a sprint. Don't try to time the market or make short-term bets. Focus on your long-term goals and stick to your plan, even during market downturns. Have you seen a seed grow into a tree in a few days? No, it takes time. Similar is the case with investments.

4. Control your emotions: Investing can be emotional, but it's important to stay rational and avoid making impulsive decisions. Don't let fear or greed drive your investment decisions. Have you seen the image on our merchandise? It say’s “I Buy… Asa Kasa Kaay?”. Just after you buy, the stock falls and just after you sell the stock, the prices rally.

5. Do your research: Before you invest in a stock, bond, or mutual fund, do your due diligence. Research the company or fund's financials, management team, and industry trends. Make sure you understand the risks and potential rewards. If you need any help in the research of any stock, you can go through our YouTube channel and explore the knowledge bank.

6. Keep an eye on fees: Investing fees can eat into your returns over time. Look for low-cost index funds and ETFs, and be wary of high management fees and transaction costs.

7. Rebalance your portfolio regularly: Over time, your portfolio may become unbalanced as some investments outperform while others lag behind. Rebalancing can help keep your portfolio aligned with your goals and risk tolerance. Let me repeat the example of sowing a seed. It needs care and nourishment at regular intervals. You change the soil and add manure regularly to support the healthy growth of a plant. Similar is the case with investments.

8. Stay informed: Stay up-to-date on market news, economic indicators, and political events that could impact your investments. But don't let the news cycle distract you from your long-term goals.

9. Work with a professional: If you're new to investing or need help managing a large portfolio, consider working with a financial advisor. A good advisor can help you create a personalized plan, manage risk, and achieve your goals.

10. Learn from your mistakes: Investing involves trial and error. Don't be too afraid or be too hard on yourself when you make mistakes. I remember a quote by Theodore Roosevelt, 'The only person who never makes mistakes is the person who never does anything.' So, I will say just go out there, take risks, and learn from your experiences only then you will succeed. It's all part of the journey, accept and enjoy every bit of it!

In conclusion, investing can be a great way to build wealth over time, but it requires discipline, patience, and a solid strategy. By following these ten tips, you can become a successful investor and achieve your financial goals. Until next time!

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10 Investing tips to become a successful investor

1. A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.
2. The primary motive is to make shares more affordable for retail investors even though the underlying value of the company has not changed.
3. Since many retail investors think that the stock is now more affordable, they buy the stock and end up boosting demand which drives up prices. So, it results in an increase in share price following a decrease immediately after the split.

We can see this market reaction reflecting in the example of the Apple Stock split in June 2014. Apple Inc. split its shares 7-for-1 to make them more accessible to a larger number of investors. Right before the split, each share's opening price was approximately $649.88. After the split, the price per share at market open was $92.70, which is 648.90 ÷ 7.

The day after the stock split, the price had increased to a high of $95.05 to reflect the increased demand from the lower stock price.

The scenario of Stock Split in Indian Markets

On 22/05/2019, HDFC Bank announced a stock split of 1:1 (Old Face Value- 2, New Face Value- 1)Following were the key dates:

1.Record Date: 20/09/2019- determines which shareholders are entitled to receive additional shares due to the split.

2.Ex-Split Date: 19/09/2019- ex-date is usually set one business day prior to the record date since India follows a T+2 rolling settlement for delivery of shares.

To be eligible for a stock split, investors need to buy the stock at least on or before 18/09/2019 because the stock price will be split-adjusted on 19/09/2019. So, the record date is very important for shareholders to be eligible for a stock split because of the T+2 settlement.

The scenario of Stock Split in USA Market

Apple Stock Split Timeline 2020:There are several key dates.

1.The Record Date – August 24, 2020 - determines which shareholders are entitled to receive additional shares due to the split.
2.The Split Date – August 28, 2020 - shareholders are due to split shares after the close of business on this date.
3.Ex-Date – August 31, 2020 - the date determined by Nasdaq when Apple common shares will trade at the new split-adjusted price.

If you notice, Ex-Date in the USA stock market is after the record date! In USA markets Ex-Date is the most important date. This means that even if you buy the stock on 28th August 2020, you will be eligible for a stock split because the stock price will be split-adjusted after market hours on 28th August 2020. There is no significance of record date left in the USA stock market. Please note that 29th August and 30th August are holidays for the stock market.

This is clarified by FAQ on Apple’s website:
What happens if I buy or sell shares on or after the Record Date and before the Ex-Date? If you sell shares on or after the Record Date (August 24, 2020) but before the Ex-Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split. If you buy shares on or after the Record Date but before the Ex-Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.

Source: https://investor.apple.com/faq/default.aspxIf you are still not clear about the difference between a stock split concept in India and the USA, you can watch a detailed video on our Youtube Channel.

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Stock Split Concept

Many people find it difficult to buy insurance online directly, and hence they take the help of an insurance agent and end up paying high insurance commissions.

Insurance companies commission rates range from 7% to as high as 40%,

Do you know that depending on insurance plans and tenure of the plan the commission varies and hence we have tried here to decode the jargon terms related to insurance so that an individual can buy insurance plans online without the help of an agent and thus save on the commissions? Also buying online plans has become more beneficial because nowadays some insurance companies provide discounts on the premium amount if you buy it online, or if the amount is paid via credit card.

1. Sum Assured:

The sum assured is the guaranteed amount that the policy-holder will receive in case of death/permanent disability.

2. Rider:

Riders are additional features to enhance the scope and benefits of a life insurance policy.

For instance, in addition to life coverage, a subscriber can avail of riders like accidental death benefit rider and accidental permanent disability benefit rider which might help the policyholder get a claim in case of death in an accident.

Riders are beneficial for policyholders because there is no need to again purchase a separate policy for particular purposes.

3. Bonus:

To be eligible for bonuses, the policy should be participating in nature. It enables the policyholder to share the profits of the insurance company. It is also known as a “with-profit policy”.

Bonuses declared every year depends on the profitability of the insurance company, it is not fixed in nature.

4. Life Insured & Nominee:

Life insured is the person whose life is covered by the insurance company

The nominee is the legal heir of policyholder, who is entitled to receive the proceeds from the insurance company

5. Free–look period:

The Free-look period is a time period during which you can return the policy if you are not satisfied with what you wanted.

The Freelook period is generally 30 days from the date of receipt of the policy.

But there is a caveat attached by insurance companies while returning the premium paid (including taxes),

Proportionate risk premium (including taxes) and

Expenses incurred during medical examination (if any) and stamp duty

are deducted and all rights and benefits will now be extinguished

6. Surrender charges:

If a policy-holder for some reason does not want to continue its policy, it can be surrendered by paying a surrender charge.

7. Claim Settlement Ratio:

The claim settlement ratio (CSR) is the percentage of claims the insurer has paid out during a financial year.

For instance, if the death claim settlement ratio of an insurer is 95 percent, it means that the insurer has settled 95 death insurance claims out of every 100 insurance claims received.

"Higher the claim settlement ratio, better it is for policy-holders because it indicates the insurer's commitment to its policy-holders. Hence, a higher claim ratio is one of the parameters for a policy-holder to consider buying a policy from a particular company.

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1. Sum Assured:

2. Rider:

5. Free–look period:

6. Surrender charges:

7. Claim Settlement Ratio:

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