Blog categorized as Stock Market

Investors often sell their mutual funds in a panic when market conditions become unfavorable or there is a significant drop in the value of their investments. This usually happens when fear and emotions take over, leading investors to make impulsive decisions rather than following a long-t...

In a market downturn, many investors panic-sell their mutual funds out of fear of losing money. The sharp drop in the value of their investments can trigger a sense of urgency, causing them to sell off their holdings quickly to avoid further losses. This behavior is often driven by emotion...

Dividend-paying mutual funds provide regular payouts, which appeal to investors looking for a steady income stream. While growth funds focus on reinvesting earnings to grow your investment, dividend funds distribute profits to investors. This regular income from dividends can be especially...

Investors often prefer high-NAV mutual funds thinking they are better or more successful. However, NAV (Net Asset Value) simply shows the price per unit and does not indicate performance. Two funds with similar returns can have different NAVs, but the percentage return remains the same. Ch...

Investors often under-diversify their mutual fund portfolios because they invest in similar types of funds, focus too much on one sector, or follow trends blindly. This increases risk and reduces the benefit of having a balanced portfolio. Diversification spreads your money across differen...

Investors underperform despite investing in top-rated mutual funds mainly because they make emotional decisions, enter or exit at the wrong time, and don’t stay invested for the long term. Even if a fund performs well overall, the returns an investor gets depend on when they invest and how...

Stock prices fluctuate due to various factors, such as company performance, market trends, investor sentiment, economic conditions, and news events. These factors cause changes in the demand and supply of stocks, which affects their price. Predicting stock prices is challenging, but you ca...

Chasing past performance is a bad strategy because past returns don’t guarantee future results. A mutual fund that performed well in the past may not continue to perform well due to changes in market conditions, economic factors, or the fund manager’s decisions. Relying solely on past perf...

NAV (Net Asset Value) is an important factor, but it shouldn’t be the only one when choosing a mutual fund. NAV only represents the price per unit of the fund and doesn’t give a complete picture of the fund’s performance or suitability for your goals. You should also consider factors like ...

Reviewing your mutual fund investments periodically is important because it helps ensure your investments still match your financial goals. The market changes over time, and so do your personal goals. If you don’t review your funds, you might miss opportunities or continue holding investme...

Rolling return analysis is a better way to measure investment performance over time compared to point-to-point returns. It provides a more accurate picture by smoothing out the short-term fluctuations that can occur with point-to-point analysis. This helps investors understand how an inves...

Dividends can affect stock prices in different ways. When a company announces a dividend, its stock price often drops by the same amount as the dividend. This happens because the company is giving away some of its value to shareholders. However, dividends can also show that a company is fi...

The main difference between value stocks and growth stocks lies in their investment strategies. Value stocks are those that are considered undervalued compared to their intrinsic value, meaning they are trading for less than their true worth. These stocks often belong to companies with sta...

Compounding in investing is the process where the returns you earn on your investment start earning their own returns. This happens when your investment generates income (like interest, dividends, or capital gains) and instead of taking that income out, you reinvest it. Over time, this lea...

To assess a stock's dividend sustainability, look at its payout ratio, which is the proportion of earnings paid as dividends. A lower payout ratio usually indicates that the company has room to maintain or even increase its dividend in the future. It's also important to consider the compan...

To assess a stock's ability to weather market downturns, you need to look at several factors such as its financial stability, the strength of its balance sheet, and its historical performance during previous market declines. Stocks of companies with strong fundamentals, low debt, consisten...

To assess a stock's ability to generate free cash flow, you should focus on understanding the company’s cash flow statement, particularly the "cash from operations" section. Free cash flow is calculated by subtracting capital expenditures from operating cash flow. A company that ...

To assess a stock's risk-adjusted return, you need to consider both its return and the level of risk taken to achieve that return. The most common method for calculating risk-adjusted return is using the Sharpe Ratio, which measures the excess return (the return above the risk-free rate) p...

To assess a stock's potential using its debt-to-equity ratio, you need to evaluate how much debt the company is using compared to its equity. A high debt-to-equity ratio means the company relies more on debt to finance its operations, which could be risky if it cannot manage that debt. On ...

To assess a stock's potential in the context of global economic growth, you need to consider how global trends like economic expansion, technological advancements, and international trade impact the company. Look for companies that are positioned to benefit from these trends. For example, ...