What is Profit&Loss (P&L) Statement ?

Definition : Also known as Income statement, is a financial statement which shows expenses and revenue of a company during a particular period, usually a fiscal quarter or year.
Read : What Is Balance Sheet ?
Income Statement helps to convey the status of a company i.e. Company is making profit or suffering losses. It is very important to read Income Statement of a company before investing, both of recent and past years.
Note : Revenue : Total amount received from sales of goods and services. Expenses : Total amount spend in producing final product or service.
Structure of P&L Statement  Income Statement is divided into Five main section - Net sales, Cost of Goods Sold, Gross Margin, Operating Expenses and Net Profit Before & After Income Tax (Or Net Loss in case of Loss).
Net Sales : It is the sum of Gross sales excluding its returns, allowances and discounts.Cost Of Goods Sold : Amount of money used to produce the final product. For example cost of inventory, merchandise purchased…

What kind of Investor are you ? - refined

Before choosing to invest in stock market you will need to ask yourself this question. Profit making in stock market does not depend on how much money you are investing in but on your skills and your mindset. What type of person your are and how you think do the all work.
Wall Street where people can make billions and also can lose millions. Everyone enters Wall Street thinking of becoming the next Warren Buffet but only few can, and there are various reason behind this. Investing in stocks market requires various skills and determination and most important patience and obviously money.

So lets start, here we will learn about the two basic type of investing or investor.

1. Day Trader : the act of buying and selling within the same day is called Day Trading, the one who does this is called a day trader. The small price movement within a day can be a beneficial game if played correctly, but can also be dangerous for those who are new to it i.e without proper knowledge and planning.
Day trading is not that easy, if you are a begineer its better to stay away and invest your time in gaining knowledge about companies shares, financial terms, ratios, etc.

Some Basic tips for day trading :-

  1. Knowledge is power - read as much as you can, know about the broker you are trading with , gain knowledge about the company you are investing in like debt , gross profit , assets and liabilities, p/e ratio, etc
  2. Do not go for Penny Stocks - penny stocks show very less price movement that is why it is only beneficial for long terms holding. You can make only some penny with penny stocks so it is not worthy in the huge risk of day trading.
  3. Do not risk too much capital on one trade-  try to invest in two or three Stocks it reduces the chances of losing more money.
  4. Only invest some part of your money in Day trading - do not put all of your money in day trading, always go with some part of your money (25-30%) as day trading is too risky.
  5. Be a patient trader - patience is the key of trading in Wall Street, because of Ups and Downs. So you must be patient while trading.
Some most recommended Books on Day Trading :
How to Day Trade, by Ross Cameron
Trade Mindfully, by gary Dayton PSY.D

Some other things to keep in mind are, when you start out don’t try to learn everything about trading, take your time, you don’t need to know it all. As a day trader, you actually only need some strategy that you implement over again and again. And also choose you broker wisely, it is better to trade with discount brokers like Zerodha and RKSV Security if you are a beginner as they offer real-time, valuable market research platform for a lower fee.
Some well known stocks for Intraday trading are TCS, SBIN, TATA MOTORS, RELIANCE, ICICI BANK, etc . Now, Lets move to the Second type of investing or investor.

2. Deliver and Hold trading : simply we can say delivery based trading where trader buys and hold stock for long term. It is One of the most offered advice of investment and it has gained a lot of supporters over the year as such trading contains low risks. By buying shares and just forgetting about them for a long time, you’re free to let compound interest get on with its work and build you a tidy sum. You don’t need to worry about share prices and their daily Ups and Downs.

Some Basic tips for delivery based trading :-

  1. Invest in Midcap or Bluechip - Such stocks are well established and shows less liquidity which ultimately reduces the risk factor.
  2. Invest in different Stocks - it is always better to trade in different stocks as it is a safer way of investing.
  3. Do not track status regularly - investing for long time causes both loss and gain, sometimes losses for more time. So checking regularly will lose your patience if you are in continuous loss. But this could be a mistake if you take out your money, just be patient if the share goes down it will surely comes up.
  4. Patience (as we already discussed).
Lets discuss about some Pro and Cons of Delivery based trading.

PROs :

  • You can always take your time to take a decision and reduce the risk of losses.
  • Delivery based trading can also benefits from other things like dividends, split of stocks, bonus shares and so on. These are benefits that are companies offer to their share holders from time to time and you can make significant profit from these offers if you are holding the stocks for long periods.

CONs : 

  • You can never benefit from short selling i.e you have to hold the shares before you actually sell them.
  • Higher brokerage rate.
Choose wisely Where and How will you invest your money. If you know about top gainers you must know about top losers also. Read as much as you can, try to clear out basics and take guide from people who are already in this Business. Do not rush, take your time. Read, Think, Plan, Research, Revise and then Invest. If you are a beginner then its better to choose discount brokers like Zerodha and RKVS Securities who charges very less brokerage charges.

This is my first Blog on Investing, i will come up with more terms and details in my next blogs.


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