Starting To Invest.

How To get started with Investing?

If you cannot explain it simply, you dont understand itbwell enough- Einstein

Nowadays, investing has been made very easy. A hell lot of apps are available which are very safe and easy to use even for people who are just beginning their investment journeys.

Apps like Zerodha, Groww, etc. are commonly used apps that have revolutionized the investment stories of India. Unlike earlier times, when you had to open an account with a broker and had to handle all the paperwork and also had to pay money, these apps hardly need any paperwork, and a very small amount of money as fees is charged which is negligible.

As I use Zerodha for my investments, I will provide a guide for this app. This app is very simple to use and currently has the largest market share of all authorized investment-related apps in India. It is very trustworthy, very easy to use and very cheap.

But before we move towards using the apps, let us understand a few terms:

1. Demat Account: It is the account in which your shares are saved online. Just like you have a bank account, where your money is kept, this Demat account is where your shares, mutual funds, and other investments-related funds are saved. Just like you open your bank account in any bank to keep money and open FD etc., similarly, you open your Demat account in one of these investment platforms to keep your investment-related funds in it. When you go to a bank to keep some money, the first thing that you do is open your account. Similarly, the first thing to do before the investment begins is to open a Demat account in one of these apps. We will understand the process to open a Demat account in Zerodha. It is generally a 16-digit number.
2. Portfolio: Just like you have a bank account balance for money, similarly your investment-related balance or value is called a portfolio. For example, Just like we say we have 1 lakh rs in our bank account, similarly, we say we have 10 stocks in my portfolio. A Portfolio means your total investment-related balance, value, and amount.
3. Watchlists: The list of stocks that you want to keep a look at. It is generally an option in every app and you can add or remove any stock from this list. It is a list of stocks that you keep an eye on.
4. Orders: When you buy or sell any stock, it is shown in orders when the process of selling or buying is going on. It is like your order that is being serviced and processed.
5. Holding: The name and number of stocks that you are currently holding.
6. Long-term and Intraday: Long-term means long-term investing and Intraday means short-term day-to-day trading. We will only choose Long-term, not intraday.
7. Stop-loss, Target, Limit, SL, SL-M: These terms are related to trading and we do not need them.
8. NAV: current price of a mutual fund.
9. AUM: Asset Under Management- The total amount of money being handled by the fund.

These are the main basic terms that we will come across in the app.

Let us now see what thing you need before you start your investment in Zerodha:

You will need:

1. Bank account details with a passbook and a chequebook. Even if you do not have a chequebook, a passbook with all details will be fine. The bank account should be the one that you will use to add money for investing in Zerodha. The bank account details cannot be changed later, so use the bank account which you are sure about.
2. 300 Rs. should be there in the same bank account that is to be paid as 1-time fees
3. PAN card (very easy to get it made online, see youtube videos for guidance)
4. It is good to have a google pay account or any UPI account connected to the same bank account as it will make the process easier.
5. Aadhaar card number that is linked to your mobile number (very easy process if not already linked, see youtube videos).
6. Your signature on white paper.
7. Email id.

Go to play store and download the app called “ZERODHA KITE”. When you download it, it will require you to fill in the details and upload photos of your bank account details, aadhaar, passbook, and canceled cheque with your name(if you do not have a chequebook or your name is not present in the cheque pages, your passbook page with your name and other details will also be fine). It will also charge you one-time fees of 300 rs that you pay while filling in your details. After all, the details are filled in, you will get a large document open and you will have to sign it online. It is also easy, just follow the instructions and it will be done. You can also contact Zerodha helpline if you have any issues.

Once you fill in all these details, it will take 24-48 hours for Zerodha to verify all details and then send you your login credentials (password and pin and login id) to your email id.

Please save these Login details and you can also change the login pin afterward. But keep them noted and saved properly.

Once all these processes are done, you will enter into Zerodha using your id and pin and you will see a page with Watchlists written on top and Orders, Portfolio, Tools, and Your id written at the bottom. This is the first page. You can use the watchlist search box to search for any stock name and its price. When you search for any stock, write its name properly, and then you will see options of NSE and BSE. The price will almost be the same in both. You can buy from anyone you want.

Click on your profile id at the bottom of the first page and then click on funds. This is the first step to adding money to your Zerodha account. Click on add funds, enter the amount and use any UPI or other process to add the amount from the same bank account that you entered while registering with Zerodha. No other bank account can be used other than the one whose details you entered.

After adding money, it will take some time to reflect in the available margin option, just above Add funds option. Once the amount is visible, you can buy stocks up to that amount.

To buy any stock, let us go to the watchlist page and search for any stock. For example, ICICI bank. So when you search for ICICI bank, you will see a page opens which says ICICI bank, NSE/BSE price. (write the full name, like for ICICI bank, do not write just ICICI, Write ICICI bank. If you do not write the full name, some other stock with a similar name will open and you might end up buying other stock. So, if you are not sure about the full name, search online for the name. Generally, the names are the same only, just to be sure, check the name before buying.

After you enter the name and click on NSE, you will see the option of BUY (in blue) and SELL (in red) will come. Its price will also be visible. Click on BUY. A new page will open. You might see a lot of data but these are very easy to understand. Do not get scared. Just the first time, you might get confused, but do not worry. It is very simple and we do not have to focus on all these things. After you click on BUY, on the next page, just edit the number of quantity of stocks you want to buy from this company. Then below, click on Long-term/CNC in the product option, then click on Market in Type option, Variety will be RGLR (Regular), and Validity will be Day. Do not change anything else. Then, Swipe To Buy. If you see terms like intraday or stop-loss, I have already explained their meaning above, they are part of trading and we do not have to think about them.

Once you swipe to buy, your order will be placed and within 2-3 days, it will start showing in your portfolio. Click on Portfolio and it will be visible to you.

Similarly, for mutual funds and Index funds, there is a different app from Zerodha. It is called ZERODHA COIN.

Now, to use Zerodha coin, you first need to have the kite account and all bank details, etc filled. No need to do it again if you already have Zerodha kite process done, as explained earlier. Download Zerodha coin app from play store, enter your Zerodha kite login details and you are ready to start with mutual funds investing. All log-in details of kite and coin are the same. And even if you want to invest only in mutual funds through coin, you need to have kite as you can add money through kite and then use it for coin.

Once you enter coin after entering your login details, click on discover in the below options and you will see options like equity, debt, hybrid, etc. These are the types of mutual funds. Index funds, large-cap, mid-small cap funds, etc are part of equity funds. Debt fund consists of liquid fund, treasury funds, bonds, etc. Click on whichever fund you want to start, as I have already explained the details in another blog article-“Understanding Mutual Funds”. 

Suppose you have to invest in ICICI index fund, search for it and then click on it. You will see 2 options-IDCW Payout and Growth. You have to choose the Growth option fund. For any other mutual fund also, always choose the GROWTH option fund. When you click on the fund, a new page will open saying, the current NAV of the fund.

Below that, you will see CAGR. That shows the % returns that fund has given. The minimum investment is the minimum amount that is required to invest in that fund for the first time. Exit load is the fees that you will pay if you sell the fund before 1 year. The expense ratio is the fees of the fund manager that you will pay for his expertise. AUM is already explained above. You might see the risk involved saying very high even in index funds although index fund is generally considered safe. The risk shown is high as compared to debt funds like liquid funds or government bonds, so do not panic when you see very high risk. You can check the debt fund and you will see it shows moderate or low risk.

Below, it will show sectors and fund holding. It means the sector and companies in which this fund has investments.

Then you will see BUY and SIP options. We will go for SIP. Click on SIP and a new page will open.

The installment amount is the amount that will be deducted every month for that fund. Change Frequency to monthly. Put a date on which you want to deduct money every month. It is good to keep it on the 1st of every month. Automatic step up means your monthly SIP amount will increase 10% every year. So, if you started 100 rs SIP in July 2022, then next year in July, it will increase to 110 rs (an increase of 10%). You can click or unclick on Automatic step up.

Click on create SIP and within 2-3 days, your SIP in that fund will be created.

Similarly, you can open SIP in other funds too. All of your funds and their amount and SIP dates etc will be visible on the investment option below.

Points to remember:

1. This article explains details of how to buy stocks and create mutual funds SIP. Do not sell any purchased stocks or mutual funds without consulting someone. Even if you buy any stock by mistake, consult someone before selling as it will have tax-related issues.
2. This article only tells you an idea about starting to invest and buy. Do the process 2-3 times and you will gradually learn.
3. Multiple youtube videos are available to understand the process. After you read this article, search for videos on youtube to have a better understanding.
4. DO NOT GET SCARED IF, AT ANY POINT, THE PROCESS GETS COMPLICATED OR CONFUSING. YOU ARE DOING IT FOR THE FIRST TIME, SO YOU MAY FIND IT CONFUSING, BUT TRUST ME, IT IS VERY VERY EASY. DO NOT GIVE UP, IT WILL TAKE HARDLY 3-5 DAYS TO START AND UNDERSTAND AND COMPLETE THE PROCESS COMPLETELY. As the investment goes on for many many years, you must give 3-5 days to practice and understand the process.

 

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JAPAN-INDIA relations (between 1945 to 2000.)

We have heard a lot about the ever-improving relations in the last decade between India and Japan. 

Both these countries consider each other very close allies and have a lot of deals and investments going on between them. But the history of relations between these two nations was not always like this. Let us see in detail how far both nations have come together.

India and Japan started their new journey at almost the same time. India got independent in 1947 and Japan moved out of war and atomic bombing in 1945. Although for India and Japan, the timing of their new journey was the same, the circumstances and situation were completely different, in fact, the polar opposite. India had emerged victorious from its colonial past, defeating colonialism. Japan was a former colonizer who had suffered a humiliating defeat in the war. So, their approach to their new journey was also completely different. India took the high ground, proudly thumping its chest on world matters, trying to represent all weak nations and trying to lead the voices of the countries which were recently independent or were still a colony. India thought that since it has defeated colonialism, it is its responsibility as a huge nation to help other weaker nations in their fight for justice and development. It believed that ignoring other weaker nations of the entire world would be selfish and thus, India tried hard to try to voice the weaker nations in whatever ways it can.

 

On the other hand, Japan was defeated in the 2nd world war in the most disastrous way. It suffered defeat and Atomic bombing during the war apart from huge economic loss and deaths. It also failed as a colonizer and had to give up a large part of its colonies and the occupied lands. So Japan took a completely different approach afterward. It tried to maintain a low profile in global affairs, focused more on self-development, and only followed policies as directed by the US.

Apart from this, India was inclined towards USSR, although India maintained a nonaligned status officially. India started by taking the socialist approach in its economic affairs and thus was more friendly with USSR. Japan on the other hand was completely a US ally and took a strong capitalist approach in its policies.

The 3rd reason was that India and Japan were very far from each other. India was a part of Asia but Japan focused on its immediate neighbors and countries of the pacific like the US, China, Korea, Vietnam, etc. Because of keeping a low profile in global affairs, Japan maintained close relations with neighboring countries only. Apart from this, Japan had ongoing issues going on with Korea and China since the world wars, so Japan was more focused on resolving those closer issues.

The 4th reason was the USA had kept Japan in tight control till 1951 to stop its military rise again in the future. But after the US realized that it needs Japan in the far east as an ally against USSR, under the San Francisco treaty of 1951, it gave Japan a lot of freedom and economic help and in return, Japan had to provide full logistical and political support to the US in global affairs. This policy is also known as the Yoshida doctrine. After this, Japan started developing very rapidly.

All these reasons were behind the weak relationship between India and Japan in the initial years after 1945.

Japan had improved its relations with its neighbors like Korea and China even though Japan earlier had a very long history of sour relations with them. On the contrary, India was unable to improve its relations with its neighbors like China and Pak and continuously fought wars with its neighbors. This gave Japan an idea that India is not mature enough and impractical to even improve relations with its neighbors neither can India improve its economic condition but dreams of leading weaker nations globally. India on the other hand considered Japan a puppet and an unwritten colony of the US and a coward lapdog of the US. India used to comment and take a stand on major issues of the world but Japan never commented anything on India- China or India- Pak wars despite being Asians. These also led Indians to believe that Japan is not at all interested in improving relations with India. So India also never considered taking steps toward Japan.

After 1991, when USSR disintegrated, India lost a very powerful friend, a partner, and a market. This led to India redesigning its economic policies that would move away from socialist policies towards a mix of capitalist and socialist policies. Apart from US and European countries for products and markets, India also started 'Look East' policy to focus on the East Asian countries and started working on improving relations with them. Same time, as the USSR had disintegrated, Japan had already achieved economic abundance as its stock market had recently touched the all-time high of 40,000 Japan also wanted to grow itself as a global power not only in economy but in other aspects of global politics like meditating between fighting nations, UN, World Bank, and IMF, etc. So Japan also started finding new friends and India was a near home great option to befriend.

India also improved its relations with China, and Japan had a new market for its products as India had changed its economic policies and was open to foreign companies. Thus, Japan increased its ODA (financial support) in India for providing infrastructural development and other joint ventures increased too. Things were going smoothly, but then..

But then..

India tested its nuclear bomb in 1998. And Japan was a victim of nuclear bombing in the past. THIS INFURIATED JAPAN. Although it was India’s internal matter and it was necessary for India to develop a nuclear bomb due to the threat of China and Pakistan but Japan ignored all this reasoning. Japan started putting a lot of sanctions on India, stopped all investments and loans, and even advocated strict punishments for India on all global platforms. Japan also tried to internationalize the Kashmir issue globally but was rejected by India-friendly nations like Russia and France. Another reason for these harsh steps was that during that time, Japan’s PM was considered a weak figure in Japanese politics. Also, the US govt. had recently taken a successful Chinese trip on various issues. So Japan’s harsh steps on India were based on 4 reasons:

1. Japan was strictly against the development of further nuclear bombs especially amongst near Asian nations due to its experience.
2. The Japanese PM wanted to look tough due to his weak image, so he ordered strict steps.
3. Japan was afraid of growing US-China relations and wanted to show the US that Japan is a true US ally and would go even a step further to propagate the US propaganda of no more nuclear bomb developments.
4. Japan also realized that Japan itself was not allowed to develop nuclear arms due to its peace treaties and its Constitution prohibiting the development of military but if other nations keep developing nuclear weapons, the nuclear-powered nations will have a stronger say and power in the global affairs and Japan will be left behind.

In response, India called out Japan’s hypocrisy. India pointed out that Japan itself sits in the lap of US nuclear-powered submarines and ships that visit Japan’s coastal areas frequently but Japan never raised any question on that. Japan was also soft on China’s possession of nuclear bombs and Japan itself sits under the nuclear safety umbrella of the USA.

Gradually, the world including the US realized that they cannot force India to give up its nuclear goals as India was surrounded by nuclear nations and Japan too had to accept this fact, So, gradually Japan also removed its sanctions from India and since then, India Japan relations have been improving strongly and always in a positive manner.

References: Japan's Asian policy book, Wikipedia, google articles and youtube various videos.

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The Pleasure Of Walking Tall.

This article has been taken from the internet from the First Federal Savings and Loan Association Of St. Petersburg.

Your savings, believe it or not, affect the way you stand, the tone of your voice, and your physical self-confidence. A man without savings is always running. He must. He must take the first Job offered, or nearly so. He sits nervously on life's chairs because any small emergency throws him into the hands of others.

Without savings, a man must be too grateful. Gratitude is a fine thing in its place. But a constant state of gratitude is a horrible place in which to live.

A man with savings can walk tall. He may appraise opportunities in a relaxed way, have time for judicious estimates, and not be rushed by economic necessity.

A man with savings can afford to resign from his job if his principles so dictate. And for this reason, he will never need to do so. A man who can afford to quit is much more useful to his company, and therefore more promotable. He can afford to give his company the benefits of his most candid judgments.

A man always concerned about necessities, such as food and rent, can't afford to think in long-range career terms. He must dart to the most immediate opportunity for ready cash. Without savings, he will spend a lifetime of darting and dodging.

A man with savings can afford the wonderful privilege of being generous in family or neighborhood emergencies. He can take a level stare into the eyes of any man... friend, stranger, or enemy. It shapes his personality and character.

The ability to save has nothing to do with the size of income. Many high-income people, who spend it all are on a treadmill, darting through life like minnows.

The dean of American bankers. J.P. Morgan, once advised a broker, "Take waste out of your spending; you will drive the haste out of your life."

Will Rogers put it this way: I would rather have the Company of a janitor, living on what he earned last year than an actor spending what he'll earn next year."

If you don't need money for college, a home, or retirement then save for self-confidence. The state of your savings does have a lot to do with how tall you walk.

Understanding Credit Cards, EMI and loans.

Let us understand the usage of credit cards in a country like India.

 

A lot of people use credit cards for buying things even if the thing is not affordable to them. A lot of people say that credit cards are good if you use them intelligently and judiciously. You get cash back, rewards points, free tickets, and other offers. Great to hear and think that I will use credit cards only when needed and extremely cautiously. 

But the reality is DO NOT USE CREDIT CARDS.

I REPEAT, DO NOT USE CREDIT CARDS.

You do not need it, no matter what anyone says or how many benefits of credit cards you read or come to know about.

Let us understand a few basic points about Credit Cards:

It's a type of card you can purchase whatever you want through that credit card (upto a certain limit), without having money in your bank account.

The bank pays for you.

But, you'll have to pay the sum you used to the bank after a specific time.

Imagine, Amit purchases a credit card from HDFC Bank on 1st January.

The credit card limit is upto 50,000.

Now, Amit spends 40,000 on 1st January itself. His credit card bill of 40,000 rs. will come on 30th of January.

And he will have 20 days after his bill came, to pay this bill.

So, he has to pay 40,000 by 20th February as his bill came on 30th January.

Bill comes for the entire month. So, whether he used entire 40,000 on 1st January or 25th January, the bill of January month will come on 30th January and he will get 20 days to pay the bill.

If, Amit pays entire 40,000 rs before 20th February then he doesn't have to pay any interest, just 40,000.

Yes, that's right!

But Why do you think bank gives you money without interest? Why do they force people to have a credit card? Why are banks distributing their money free of cost?

It's a trap.

That's because :

Banks give you credit card so that you use it blindly. Bank wants you to use 50,000 even if you have 30,000 salary, so that you will be unable to return that money within 50 days. Then, they will charge interest (25%, 35%,etc) from day 1 (ie January 1 for Amit case.)

Money paid within 50 days - No Interest. Money paid after 50 days - Interest from day 1 that is interest from January 1st. Even if you pay the amount on 51st day (1 day late), you will be charged interest for 51 days and not 1 day.

This is the reason a credit card is dangerous as you lose lots of money even if you get late by 1 day for any reason. And then this debt cycle continues. Your ratings fall down and if you are frequently late in paying credit cards bill, you will have very difficulty in getting loans during any kind of emergency as your credit card linked CIBIL SCORE will fall and all loan-giving companies check CIBIL score before giving loans.

Also, you can use your credit card as bank atm card and take money out from credit card. The money will not come out of YOUR OWN bank account but your bank will give you cash even if you do not have any money in your account. But you will have to return this money to the bank and you will be charged interest even if you pay after 1 day because 50 days no interest period doesn't apply to cash withdrawals using credit card. You don't get 50 days to pay the bill. You'll be charged Interest even if you pay before 50 days. SO, DO NOT TAKE MONEY OUT USING CREDIT CARD.

I understand that some of you might disagree with me. Credit cards are good products if used in proper ways. It gives benefits too, I agree. Access to great lounges and services, cashback, tickets for free, points are the main benefits. But keeping in mind the unchecked spending habits of most Indians and the lack of financial knowledge, I strongly recommend you avoid using credit cards. The only person who should keep a credit card is if you have a very good understanding of finance or you have spent at least 3-4 years in the stock market or in management of money properly. But still,  if you want to keep a credit card or use it, first of all, try to study basics of finance and money management. You do not have to become expert but basic idea of money management is important. Also, learn to increase your earnings and savings, and decrease your un-necessary expenses. The most important thing is to increase your earning by learning new skills, acquiring knowledge etc. Only then consider yourself qualified to keep a credit card. 

And if you are already trapped in credit card debt, just take a personal loan from a bank or from friend or relative and pay the credit card company Aand then surrender your credit card to the company. Credit cards have the highest interest rate, much higher than personal loans from banks. Suppose you have debt of 50,000 rs in credit card and you will have to pay 36% interest rate. Just take a personal loan of 50,000 from bank at 15% and pay the money. This way, instead of 35% interest on credit card, you will have to pay 15% interest to bank. Remember, this will not work everytime if you already have a bad record of payment to credit card as your CIBIL score will be low and bank will not give you loan. 

Credit card is the product that banks and finance companies advertise the most. They try to sell credit cards more than anything. It is because it gives them maximum profit. And this profit is made by ROBBING you of your money.

Never buy anything, small or big, on EMI or credit card. NEVER.

 

Always pay the full amount in cash or debit card or UPI.

The only reasonable exceptions for EMI are house loans, education loans, health and car loans (if car is necessary) because these 4 are important expenses.

 

Apart from these 4 things, you do not have to use the EMI payment option on anything. No mobile, no clothes, no gifts nothing should be purchased on EMI. And forget about keeping a credit card at all unless you are a millionaire.

That's it. I will keep it short and simple.

Remember, NO CREDIT CARD. NO EMI. NO LOAN (other than house loan, education loan, health, and car loan if needed). 

And if you take any loan, whether house or education or you have already taken any loan or any EMI is going on, stop all other investments and unnecessary expenses and pay the loan first. Loan interests, Credit card interests, and EMI interests are very high and they keep compounding and growing very fast.

Credit cards, EMI, and loans can ruin families. Don't take them and if taken, pay them as soon as possible.

Buy items only you can make full payment while purchasing. If you cannot pay for something, do not buy it. 

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