In this edition of Tweet Buster, we come up with not just stock ideas but also strategies for traders and investors to help you navigate a volatile market.
Active vs Passive Investing
Radhika Gupta of Edelweiss Mutual Fund says one should buy passive funds because they are simple solutions to investment problems and not because they may beat active funds.
Buy passive funds because they are simple solutions to investment problems. Not because of them beating or not beating active funds. https://t.co/BUyLNaESBe
— Radhika Gupta (@iRadhikaGupta) July 8, 2021
Recipe for disaster
Zerodha CEO Nithin Kamath said most buy option positions are in losses because they are of intraday trade. “Exit with small profits but held overnight when in losses (also triggered from fear due to high exposure). This is a sure-shot way to lose money,” he said.
Why look at notional contract value when buying options?
Yes, when you buy options the max you can lose is the premium you have paid. But to get a sense of risk and how fast or easily you can lose, you should look at the exposure or contract value, not the premium. 1/3 https://t.co/bg0QBQmKWU
— Nithin Kamath (@Nithin0dha) July 8, 2021
For eg, you have Rs 1L & you use it to buy 20 lots of Nifty calls = Rs 1.6 Crore contract value.
While the idea might be to exit fast with profits, a Rs 1.6Cr risk can cause losses to the Rs 1L much faster. A tiny <1% change in contract value is enough to wipe out Rs 1L.
2/3— Nithin Kamath (@Nithin0dha) July 8, 2021
Btw the reason why most end of the day buy option positions are in losses is because they are mostly entered as intraday trade. Exit with small profits but held overnight when in losses( also triggered from fear due to high exposure). This is a sure-shot way to lose money. 3/3
— Nithin Kamath (@Nithin0dha) July 8, 2021
SIP by Sip
Sanjiv Bhasin of IIFL Securities says recommended SIP in 3 stocks to ride the volatility – Reliance Industries, HDFC Bank and Maruti Suzuki.
Global volatility seeing weakness due to falling bond yields & Japanese Olympic games restrictions, ignore look at Amazon & Tesla hit new highs with strong guidance, strongly recommend SIP in these 3 stocks to ride the volatility- Reliance, HDFC bank & Maruti 😎
— sanjiv (@sanjiv_bhasin) July 9, 2021
IPO Mania
Dalal Street veteran Ravi Dharmashi said the demand for IPOs does not mean anything for the market as that money was never meant to be deployed in the market. “It is the lending book of NBFCs which is temporarily deployed in an IPO (7 days) and then will rotate into another IPO,” he said. IPO allotment is inversely proportional to the demand. As institutions and HNIs realise that NBFCs lending books are getting full, they put a bigger application just to get some meaningful allocation, he said.
Allotment is inversely proportional to the demand and hence as Inst and HNI’s realise that NBFC’s lending book are getting full they put a bigger app just to get some meaningful allocation. Lot of IPOs are still loss making for funded applications even after 30-40-50% listing pop https://t.co/hTRBzPxjTE
— Ravi Dharamshi (@ravidharamshi77) July 9, 2021
Nifty vs Nifty
Kalpen Parekh of DSP Mutual Fund explained how to beat Nifty using Nifty Equal Weight index. “A smart investor benefits by rebalancing between the two and invests in what is going through medium-term under performance,” he said.
Nifty & Equal Weight Nifty
Outperformance to each other mean reverts every few years
A smart investor benefits by rebalancing between the two & invest in what is going through medium term under performance
Rolling returns : = weight has higher Odds of eventual outperformance pic.twitter.com/m1jjtpbJ07
— Kalpen Parekh (@KalpenParekh) July 9, 2021
Beating nifty – not easy
Beating nifty using nifty? pic.twitter.com/nc0vZkPIBl
— Kalpen Parekh (@KalpenParekh) July 8, 2021
Loss is the real Guru
Microcap investor Ian Cassel said investing’s greatest lessons can’t be taught in a book or in a classroom. “The lessons have to be experienced and often times the best teacher is loss.”
Investing’s greatest lessons can’t be taught in a book or in a classroom. The lessons have to be experienced and often times the best teacher is loss.
— Ian Cassel (@iancassel) July 11, 2021
