Simple statistics suggests Indian stock investors had more than 60% chance of making profit in the last five years. This was based on the assumption that they chose their stocks randomly. In a survey we found that more than 90% retail investors have lost their money during the same period. Most of these investors had taken tips or professional help from one or multiple sources.
For investors with random pick strategy, the winning percentage was 60% while contrary to that 90% investors in sample group had made loss. Hence, we can conclude tips were working against the investors in disguise of favour.
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Top observations in our study:
61% of investors have made profit even by investing for a short period of one year. A sample period of 5 years was taken for testing the concept.
As the number of years of investment increased, chances of profits have improved. More stability can be seen in the table (above).
Increasing number of stocks in your portfolio will decrease chances of overall loss exponentially.
Your chance to make profit in the stock market improves drastically if you just avoid tips from unaccountable sources. Do not believe in insider tips stories. Do not trust analysis which has no statistical evidence to support their claim. Read our other article ‘The Mythical P/E Ratio’ (http://safetrade.in/
Average profit made by stocks is always higher than average loss made by them. Hence, dividing the money across multiple stocks will increase the chance of overall profit.
Restricting your investment within Top500 stocks improves chances of making profit as well as improving the rate of return. If you do not like to review your stocks periodically then it is better to restrict yourself to NIFTY50.
Net return improves significantly if we reduce the size of loss. Exit from the stocks which have confirmed downward trend (Read Rule-X (http://safetrade.in/
A random year may give very bad return in the stock market. Always enter the market with a long term perspective. Do not expose your money which you may need in near future (say 3 years).
Active Portfolio Service (APS) and Tips(y)
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