Common Mistakes New Investors Make and How to Avoid Them.

In our Dussehra exclusive, we bring together an assorted list of exclusive Top 10 picks from our research analysts.

Central Depository Services Ltd (CDSL): CMP – 460 TGT 625

• Central Depository Services (India) Ltd (CDSL) is the first listed Indian securities depository based in Mumbai.
• The main function of CDSL is to facilitate holding of dematerialized securities enables securities transactions to be processed by book entry.
• CDSL facilitates holding and transacting in securities in the electronic form and facilitates settlement of trades on stock exchanges.
• Only 3% of the people have Demat account in India therefore big opportunity lies for depository companies.
• Duopoly market where CDSL holds 52% market share and growing rapidly as compared to NSDL because it is focusing more on retail investors/traders.
• We may be at the cusp of a long-term trend, similar to what played out through the 1980-2000 era in the US capital markets. During that period, retail participation, which was around 5-6% in the early 80s, ramped up to 45.7% by early 2000.
• There is huge scope for growth in other investment instruments like the bond market which will be a trigger for growth in CDSL.
• Its subsidiary CDSL venture ltd is a key player in eKYC.
• Its subsidiary CDSL Insurance Repository Ltd which helps policyholders to keep an insurance policy in electronic form will help CDSL to create another avenue for growth.
• Asset light business with no debt.
• It trades with 55-60% EBIDTA margin with more than 15% ROE which is expected to rise further.
• Risk: A brutal fall in the Equity market and any change in technology may disrupt the business.

HDFC Life Limited (HDFC LIFE): CMP – 564 TGT 675

• HDFC Life Limited is a long-term life insurance provider with its headquarters in Mumbai, offering individual and group insurance services.
• HDFC Life's products include Protection, Pension, Savings, Investment, Health along with Children and Women plans. The company also provides an option of customizing the plans, by adding optional benefits called riders, at an additional price.
• As compared to other developed economies, India remains vastly under-insured, both in terms of penetration and density. The ‘protection gap’ in India is amongst the highest in the world at 92.2% as of 2014.
• Despite the recent COVID-19 outbreak dampening growth projections for economies across the globe, the structural story for insurance remains intact. Insurance remains a multi-decade opportunity in the Indian context and insurers are well poised to maximize the long-term growth potential of the industry.
• The proportion of the insurable population (people between the ages of 20 and 64) is expected to touch almost 1 billion by 2035, thus outlining the need for long-term savings and protection plans.
• The number of people above the age of 60 years is expected to triple by 2050 as compared to 2015, thus providing insurers with an opportunity to tap the retirement space by way of offering long-term income and annuity products.
• Within the private sector, the top 7 insurers account for 78% of the market (in terms of individual WRP) in FY 2020. (Weighted Received Premium).
• Life insurance penetration in India, which is measured as a ratio of premium to GDP rose marginally from 2.74 in 2018 to 2.82 in 2019 while density which is measured as the ratio of premium to total population also increased marginally from 54.0 in 2018 to 58.0 in 2019.
• The share of the working population is expected to reach 40% in 2030. With the rise in the working population, the sale of pure protection products as well as ULIPs is on the rise.
• With rising per capita incomes and growing nuclear families, there is a need for increased coverage.

Bajaj Finserv Ltd. (BAJAJFINSRV): CMP – 5831 TGT 7500

• Bajaj Finserv Limited, a part of Bajaj Holdings & Investments Limited, is an Indian financial services company focused on lending, asset management, wealth management and insurance.
• It has an umbrella of financial services including loan, life insurance, general insurance, mutual fund, stock broking, credit card, etc which all are going to witness decent growth.
• We can expect value unlocking in the future when the company may plan to list some of its subsidiaries.
• It is a holding company of Bajaj Finance which is a leader in retail finance and has a low cost of funding.
• It is likely to bring disruption in the stock broking industry because of its low brokerage plan.
• During the year, the Company incorporated a wholly-owned subsidiary called Bajaj Finserv Health Ltd. Over time, this entity is expected to create a digital ecosystem in the healthcare segment connecting customers with service providers in the healthcare space such as doctors, hospitals, nursing homes, pharmacies, diagnostic centres, and the like by offering a complete range of products including financial solutions.
• The company is continuously working on innovative products to cater to the needs of retail consumers.
• It is maintaining ROE of more than 15% consistently.

Divis Laboratories Ltd. (DIVISLAB): CMP – 3068 TGT 4200

• Divis Laboratories Ltd. is an Indian pharmaceutical company. It produces active pharmaceutical ingredients (APIs) and intermediates for the manufacture of generic drugs.
• One of the leading Active Pharma ingredient (API) players in the world which has six multi-purpose manufacturing facilities from two sites with all support infrastructure like utilities, environment management and safety systems.
• Covid19 has disrupted the global supply chain mainly for the Pharma industry where the world is looking for an alternative option other than China for their API need where India is going to play a major role in the World Pharma Industry.
• The Indian government has set aside Rs . 10,000 crore ($1.2bn) for the pharmaceutical industry to shift the country away from its reliance on active pharmaceutical ingredients (APIs) produced in China.
• In an attempt to prevent a similar occurrence in the future, the Indian government plans to finance the construction of three bulk drug parks, through an investment of Rs. 3,000 crore over the next five years.
• The government will create a production-linked incentive scheme for the promotion of domestic manufacturing of critical drug intermediates and APIs in the country.
• Indian Pharma companies are expected to do well due to their scale, cost advantage, and a preference for increased sourcing from India. Most of the investors, therefore, are interested in API manufacturers, domestic formulations businesses and drug makers that specialize in acute chronic diseases
• Divis Lab has well experienced and has quality management.
• Stock is trading at PE of 53 but ROE of 25% which is likely to rise further justifies premium valuations.
• It is generating around 40% of the operating profit margin.

PNC Infratech Limited (PNCINFRA): CMP – 172 TGT 225

• PNC Infratech Ltd (PNC) is an Infrastructure construction, development and management company; expertise in the execution of projects including highways, bridges, flyovers, airport runways, industrial areas and transmission lines
• The infrastructure sector is going to play a key role in recovery in the economy and similar to capital goods sectors, the Infra sector didn’t perform post-2007.
• One of the quality company which stands strongly against sector headwinds.
• PNC Infra has delivered good profit growth of 43.39% CAGR over the last 5 years
• The executable order book stood healthy at Rs15,525cr which is 3.2x FY20 revenue, provides revenue visibility.
• PNC remains our preferred pick in the EPC space given its robust order book, comfortable working capital cycle, healthy return ratios and lean balance sheet. Notwithstanding near term hiccups on account of Covid-19, PNC is likely to tide over with resilient fundamentals.

SRF Limited (SRF): CMP – 4422 TGT 5550

• SRF Limited is a chemical-based multi-business conglomerate engaged in the manufacturing of industrial and specialty intermediates. The company has operations in three countries namely India, Thailand and South Africa and an upcoming facility in Hungary and has commercial interests in more than seventy-five countries.
• Chemical is another space where India is likely to gain a major share of the world chemical industry as the world is looking for alternatives to China whereas China itself is shutting many chemical plants due to pollution control measures.
• Over the last 5 years, SRF has incurred CAPEX of INR 53b – constituting 63% of the CAPEX incurred over the last decade. Thus, CAPEX intensity has increased in the last 5 years. SRF plans to spend INR12-13b on CAPEX in FY21 across geographies and segments.
• Lower refrigerant prices, weak demand in end-user industries due to a slowdown in the auto sector, and tepid demand from the white goods segment due to COVID-19 impacted this segment. However, exports continued to improve. Going forward, the management expects better demand from the replacement market and faster utilization (from 3 years expected earlier) in the recently commissioned hydrofluorocarbon (HFC) capacity.
• SRF's Chemical Business saw robust growth during Q4 on strong demand from agrochemical and pharmaceutical customers. In FY20, growth was well over the previously guided 40-50% growth rate. The segment clocked revenue over INR 1,650 crore, an over-60%-growth-rate during the fiscal, due to strong demand and improving capacity utilization. The management guided at a 20-25% growth rate in FY21, led by a strong order book. Trends from the Pharma segment and Latin American markets continue to improve. This segment will be a major growth driver for SRF as its contribution to the revenue mix improves (~23% in FY20 from ~15% in FY19).
• The company was successful in achieving its guided growth rate of 40-50% for FY20 in the Specialty Chemicals business and registered revenues of ~16.5bn for the full year.
• Specialty Chemicals contributed ~Rs 16.5bn out of the total Chemical business revenues for FY20. Speciality business delivered a healthy performance due to strong export demand especially coming from its Agro and Pharma customers and improved utilization levels on its enhanced capacities.

Siemens India Ltd (SIEMENS): CMP – 1280 TGT 1550

• One of the world’s biggest producers of energy-efficient, resource-saving technologies, Siemens is a pioneer in infrastructure and energy solutions, automation and software for industry and is a leader in medical diagnosis. Siemens also provides business-to-business financial solutions, rail automation and wind power solutions.
• It is said that tough times act as an opportunity where Governments across the world need to take major steps to bring the economy on the track where Capex will play a major role, therefore, we are bullish on capital good space which didn’t give any return since 2007.
• Valuations are attractive and the cycle is likely to turn upside for this sector.
• Make in India and make for the world theme is likely to act as a catalyst for the company.
• The company remains focused on Digitization and localization, creating smart infrastructure.
• It is a virtually a debt-free company with ROCE of around 19%.

Larsen And Toubro Infotech Ltd (LTI): CMP – 3061 TGT 4100

• LTI is a global technology consulting and digital solutions company helping more than 420 clients succeeds in a converging world, with operations in 32 countries. LTI helps clients in digital transformation with LTI’s Mosaic platform enabling clients mobile, Analytics, IoT and cloud journeys.
• The technology sector may continue to outperform due to major disruption in word post Covid19 where stock picking will remain a key factor.
• L&T Infotech (LTI) is one of the fastest-growing midcaps IT companies in India. It is part of the L&T group and provides services like ADM, Enterprise solutions, Infrastructure management services, etc.
• LTI has been growing significantly faster than both mid and large-cap peers have over the past few years on the back of strong deal wins.
• Promoters held 74.53% stake in the company as of March 31, 2020, while FIIs held 9.46%, DIIs 7.19% and public and others 8.81%.
• LTI is maintaining ROE of more than 30% for the last 3 years.
• LTI Management is optimistic & confident about the future growth potential capitalizing its core strategy (Digitizing the core, Data-driven organization, Experience transformation, and Operate to transform) with customer centricity as the key engagement tool.

Bajaj Auto Ltd (BAJAJ-AUTO): CMP – 3082 TGT 3700

• Bajaj Auto is the world’s sixth-largest manufacturer of motorcycles and the second-largest in India. It is also the world’s largest three-wheeler manufacturer. The company is based in Pune, Mumbai with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttarakhand. Bajaj Auto is India’s largest exporter of motorcycles and three-wheelers.
• The only company to witness revenue growth at the time of slowdown in the auto sector.
• Social distancing and lockdown are acting as the key driver for the growth in the two-wheeler industry.
• We expect the Company to fare well in the current environment on the back of its diversified portfolio mix and dual focus on entry and premium segment.
• Bajaj Auto is also coming up with new models in the premium segment and already has a strong market share in the 2-wheeler export market. We believe that going forward; the premium segment along with exports will drive the next leg of growth in 2 wheeler industry over the long term.
• Bajaj Auto is working towards its goal of achieving a market share of ~24% in the domestic 2W market. Its current market share stands at ~19% in the motorcycle segment as of Q1FY21. Management expects the market share gains to be driven by innovative product launches.
• Bajaj Auto brought its historic brand back to life with the launch of the next-generation Chetak in an electric avatar
• We remain positive on the long term growth prospects of the Company owing to 1) strong financial profile of the company, 2) Diversified portfolio mix (domestic 2W, 3W, EV and exports) 3) Innovation in products with a dual focus on entry and premium segment 4) Its ability to sustain profitability despite weak volumes/ exports 4) Partnerships with global MNCs and new product launches.

Dixon Technologies Ltd (DIXON): CMP – 9800 TGT 13000

• Dixon Technologies (India) Limited is the largest home-grown design-focused and solutions company engaged in manufacturing products in the consumer durables lighting and mobile phones markets in India.
• Its diversified product portfolio includes (i) consumer electronics like LED TVs; (ii) home appliances like washing machines; (iii) lighting products like LED bulbs and tubelights downlighters and CFL bulbs; (iv) mobile phones and (v) CCTV & Digital Video Recorders (DVRs).
• Contract manufacturing is going to be the next big theme India as the world is looking for an alternative option for China and the Indian government is continuously focusing on the electronic segment for “Make in India” boost where tag line of Dixon technologies “Brand behind brands” itself tells a lot about the company.
• Rising manufacturing costs in other economies, growing labour costs in China & tendency by bigger original equipment manufacturer (OEMs) to outsource manufacturing instead of building their infrastructure is driving the growth of the EMS market in India. More & more brands are going to focus on branding & distribution & manufacturing as part of the value chain will be outsourced
• Market leader in the industry who does contract manufacturing for big brands like Samsung, Panasonic India Pvt. Ltd, Philips Lighting India Ltd, Haier Appliance (I) Pvt. Ltd, Gionee, Surya Roshni Ltd.
• Dixon Ltd has entered into an agreement with the Chinese big brand Xiaomi for the manufacturing of Smart LED TV.
• The increasing penetration of the internet has led to a surge in mobile phone demand, leading to a significant rise in production. Dixon currently manufactures feature phones, smartphones, PCBA for mobiles with a backward integration framework.
• It has also entered into medical device equipment manufacturing and management is very optimistic about it.
• It has entered into a new line of business to manufacture set-top boxes where Jio is its key client.
• Valuations are overstretched but we believe that it has the potential to see multifold growth in the next decade by looking sector outlook, management commitments and its product portfolio.

Investing in dividend-paying stocks can be an excellent way to generate passive income while also benefiting from potential capital appreciation. In India, several companies consistently pay dividends to their shareholders, making them attractive options for investors seeking regular income. In this blog, we will explore what dividend stocks are, why they are important, and highlight some of the best dividend-paying stocks in India.

What are Dividend-Paying Stocks?

Dividend-paying stocks are shares in companies that return a portion of their profits to shareholders in the form of dividends. Dividends are usually paid out quarterly, semi-annually, or annually. Companies that pay dividends are typically more established and stable, providing investors with a way to earn regular income in addition to potential stock price appreciation.

Why Invest in Dividend Stocks?

1. Steady Income: Dividends provide a reliable income stream, especially for retirees or those looking for regular cash flow.
2. Reduced Risk: Dividend-paying companies are often well-established, which can mean lower volatility and risk compared to growth stocks.
3. Reinvestment Opportunities: Many investors choose to reinvest dividends to buy more shares, potentially leading to compound growth over time.
4. Inflation Hedge: As companies grow, they often increase their dividends, helping to protect against inflation.

Best Dividend Paying Stocks in India

Here’s a list of some of the best dividend-paying stocks in India, known for their consistent dividend payouts and reliable financial performance:

1. ITC Limited

• Industry: FMCG (Fast-Moving Consumer Goods)
• Dividend Yield: Around 5-6%

ITC is one of India’s largest FMCG companies, known for its diversified portfolio that includes cigarettes, food products, and personal care items. It has a strong track record of paying dividends consistently over the years. ITC’s robust financials and strong brand presence make it a popular choice among dividend investors.

2. Hindustan Unilever Limited (HUL)

• Industry: FMCG
• Dividend Yield: Around 1.5-2%

HUL is a leading player in the FMCG sector with a wide range of products, from soaps to detergents and beverages. The company has a history of paying regular dividends and increasing its payouts over time, reflecting its strong market position and profitability.

3. Coal India Limited

• Industry: Energy
• Dividend Yield: Around 6-7%

Coal India is the largest coal producer in the world and plays a vital role in meeting India’s energy needs. The company has a solid dividend payout policy and has consistently rewarded its shareholders with high dividends, making it a favorite among income-seeking investors.

4. Tata Consultancy Services (TCS)

• Industry: IT Services
• Dividend Yield: Around 1.5-2%

TCS is one of the leading IT services companies in India, known for its strong financial performance and global reach. The company has a policy of paying out a significant portion of its profits as dividends and has a history of consistent dividend growth.

5. Infosys

• Industry: IT Services
• Dividend Yield: Around 2-2.5%

Infosys is another major player in the IT sector and has been consistently paying dividends since its inception. The company has a solid track record of increasing its dividends, making it attractive for long-term investors.

6. Procter & Gamble Hygiene and Health Care

• Industry: FMCG
• Dividend Yield: Around 2-3%

This company is known for its health and hygiene products and has a strong presence in the Indian market. Procter & Gamble has a history of paying regular dividends and has been recognized for its consistent growth and profitability.

7. Nestlé India

• Industry: FMCG
• Dividend Yield: Around 1.5-2%

Nestlé is a well-known brand in India, especially for its food and beverage products. The company has a reputation for steady dividend payments and has consistently increased its dividends over the years.

8. Bharti Airtel

• Industry: Telecommunications
• Dividend Yield: Around 2-3%

Bharti Airtel is one of the leading telecom providers in India. While its dividend yield is lower compared to some others on this list, the company has been increasing its dividends in line with its growing revenues, making it a promising option for dividend investors.

How to Choose the Right Dividend Stocks

When selecting dividend-paying stocks, consider the following factors:

1. Dividend Yield: Look for companies with a higher dividend yield, but ensure that the yield is sustainable and not a result of a falling stock price.
2. Payout Ratio: Check the company's payout ratio (the percentage of earnings paid as dividends). A payout ratio of 40-60% is generally considered healthy.
3. Dividend History: Analyze the company's history of dividend payments and whether they have consistently increased their dividends over time.
4. Financial Health: Ensure that the company has a strong balance sheet, stable cash flow, and good profitability, which indicates its ability to continue paying dividends.
5. Market Conditions: Stay informed about market conditions and how they might affect the company’s ability to pay dividends.

Conclusion

Investing in dividend-paying stocks can be an excellent way to generate passive income while building wealth over time. In India, companies like ITC, HUL, Coal India, and TCS are known for their consistent dividend payments, making them attractive options for investors.

Before investing, always conduct thorough research and consider your financial goals, risk tolerance, and investment horizon. By focusing on reliable dividend stocks, you can create a portfolio that provides both regular income and potential for capital appreciation.

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Many traders seek short term goals while trading in the stock market as they want to make quick money in a short period. Such things usually work but sometimes, traders may suffer heavy losses. Buying and selling of shares within a single day is a short-term strategy to produce high returns. This method is known as Intraday trading.

How Intraday Trading is Different from Regular Trading

Although day trading and regular trading are similar, the main difference between them is delivery. Intraday trading gives you a facility to square off your position on the same day. In case you do not square off your positions at the end of the day, your holdings can automatically sell at the day’s closing price under certain brokerage plans.

Whereas regular trading or delivery trading allows you to buy stocks and hold them in your Demat account. There is no such concept of square off positions in delivery trading. The stocks will remain in your Demat account until you sell them off. The duration can be days, weeks, months and even years.

Who should participate in Intraday Trading?

Intraday trading gives you promising returns and hence they may sound attractive. However, there are certain risks associated with it. In intraday trading, you have to square off your position before the session ending time. This requires your full attention until the market closes. Also, you need to have a good experience in intraday trading, only then you can achieve positive returns.

Currency Trading

Currency trading has been gaining a lot of popularity in India. Also, it becomes one of the greatest emerging trading platforms in India. The reason behind this huge popularity is the inclination of investors towards trading in currencies. In forex trading, investors trade over a pair of currencies and earn profits from it. They actually keep monitoring price movements on currencies and generate a high income from it.

In India, currency trading is done on apex stock exchanges such as NSE (National Stock Exchange), BSE (Bombay Stock Exchange) and Multi Commodity Stock Exchange. The timings of currency trading are available from 9 am to 5 pm. To trade in currency, investors don't need to have cash or equity.

Commodity Trading

Commodity trading refers to the trading of precious metals, oil & gas, energy, spices and so on. Several metals such as gold, silver are traded in several ways like physical holdings, ETFs, futures contracts and more. As there are many options available to trade, commodity trading allows investors to trade that suits their temperament.

How to Invest in Commodity Trading

Among all of the ways, a futures contract is the best way to invest in commodities. Futures contracts are an agreement to buy and sell shares of commodities at a fixed price at a later date. The best thing about futures contracts is the futures contracts are available for every commodity type.

Takeaway

It is extremely important to gain proper knowledge in stock trading as having adequate knowledge of fundamentals of trading may give you certain ideas about trading such which trading type is better for you? Intraday trading, currency trading or commodity trading.

सोने और चाँदी के भाव मे ऊपरी स्तरों पर दबाव लगातार बना हुआ है और अगस्त महीने के बाद से ही कीमती धातुओं के भाव मे गिरावट जारी है। सोने के भाव मे अत्यधिक तेज़ी होने के कारण हाज़िर की मांग कमजोर रही और दिसंबर वायदा की एक्सपायरी करीब है जिससे क़रीबारिओ के सौदे की कटान ज्यादा हुई है। अमेरिकी चुनाव के दौरान डॉलर इंडेक्स मे बने बिकवाली का दबाव कम हुआ है जिससे कीमती धातुओं से निवेशकों ने दुरी बना रखी है।

दुनिया की केंद्रीय बैंको द्वारा लगातार सोने मे की जा रही ख़रीददारी अब दस साल के निचले स्तरों पर आ चुकी है। कीमती धातुओं की खुदरा मांग, भाव अधिक होने से कम है। वैश्विक आर्थिक आकड़ों मे लगातार सुधार जारी है और डॉलर सुचकांक दो साल के निचले स्तरों पर होने से, इसकी मांग मजबूत होने के आसार है। स्विट्ज़रलैंड से एशिया के सोने का आयात गिर गया है और मई 2019 के बाद के महीने में भारत को अधिक निर्यात किया गया जबकि चीन को स्विट्ज़रलैंड सोने का निर्यात निचले स्तरों पर रहा  है।

कोरोनोवायरस लॉकडाउन से मांग कम हो गई और स्विट्ज़रलैंड एशिया से सोना आयात करने के बजाय, अमेरिका और ब्रिटेन को निर्यात करने लगा है। वैक्सीन विकास पर प्रगति से आर्थिक सुधार में तेजी आएगी इस कारण बुलियन की सुरक्षित-हेवन अपील खत्म होती दिखाई दी है। मजबूत डॉलर और अमेरिकी आर्थिक प्रोत्साहन मे अनिश्चितता, सोने के भाव मे दबाव बना रही है और अमेरिकी ट्रेज़री सचिव मुचिन द्वारा कोवीड -19 राहत पैकेज के विपरीत जाते हुए फ़ेडरल रिज़र्व से महामारी मे इस्तेमाल कर्ज को लौटने के लिए कहा है। घरेलु वायदा सोना सप्ताह मे 2 प्रतिशत और चाँदी के भाव 4 प्रतिशत तक टूट गए है। घरेलु वायदा सोना 49800 रुपय प्रति दस ग्राम और कॉमेक्स वायदा सोना 1850 डॉलर प्रति औंस के निचले स्तरों को पिछले सप्ताह छू चुके है।

Failing to plan is planning to fail. The global pandemic has taught us all a valuable lesson of the ages, that there can be unforeseen circumstances that can’t just be a rainy day, but the rainy season of unfortunate events that can be capable of derailing or breaking your life. At such times, just having an annual financial plan just doesn’t work; you need to have an Ideal Financial Plan.

An Ideal Financial Planner is the immunity booster to your financial health. Not only does it help you manage your short-term and long-term financial situation, but also helps you make sound financial decisions on your goals, and determine the methods to achieve them.

Creating an ideal financial plan includes taking into consideration all your assets (how much you get paid, what's in your savings and checking accounts, how much is in your retirement fund), as well as your liabilities, including loans, credit cards, and other personal debts.

Now that your resolve to make a debt plan is strong, here are some key highlights that you need to include as part of your financial inventory:

1. A list of assets, including items like your emergency fund, retirement accounts, other investment and savings accounts, real estate equity, education savings, etc. (any valuable jewellery, such as an engagement ring, belongs here, too).
2. A list of debts, including your mortgage, student loans, credit cards, and other loans.
3. A calculation of your credit utilization ratio, which is the amount of debt you have versus your total credit limit.
4. Your credit report and score.
5. Tax Assessment Information

Review Your Investments

It’s important for investors to take stock of where their investments are during the annual financial planning process. This is especially true when the economy undergoes a shift, as is happening now.

• Check your asset allocation. If stocks are taking a dive, for example, you may consider adding real estate investments into your portfolio mix to offset some of the volatility.
• Then identify your risk tolerance based on your risk appetite, mark the investment opportunities that suit your risk profile, set them towards a calculated goal and direct your asset allocation goals towards it. If in case your current investment does not do justice to your risk profile, it will be time for you to rethink.

Increase Your Contribution to Ongoing Investments

Proportionally increase your contribution towards your long-term investments so that the inflation rate doesn’t catch up with you and your money starts making money for you. For instance, if currently, you are contributing 20% of your income towards investments, consider making it 25% to 30% depending on your family's requirements. Let your increments become your investment in due course.

Pay off your Credit Card Debt

If you have any outstanding credit card debt, make it your first priority to pay that off. Interest rates charged by credit cards are exorbitant and can go up to 40-50% per annum (compared to 15% for a personal loan). It is even worth borrowing some amount from your friend or parents and pay off your credit card debt immediately and then slowly return them the money from your savings

Max out your tax-saving investments

Every year you can invest up to Rs 1.5 lakh in certain tax savings instruments like PPF, Tax Saver FDs, Tax Saver Mutual Funds, etc which are tax-exempt under section 80C. Make sure you are maxing out on these. Consult your financial advisor on which 80C investments to make as per your risk profile.

1. How much of your portfolio should be in stocks?

There is no set-in-stone rule, but generally speaking, as you get older and closer to retirement, you should reduce your exposure to stocks in order to preserve your capital. As a rule of thumb, take your age and subtract it from 110 to find the percentage of your portfolio that should be invested in stocks, and adjust this up or down based on your particular appetite for risk.

2. Index funds vs. individual stocks

An index fund allows you to invest in many stocks by purchasing one investment. For example, an index fund gives you exposure to all 500 stocks in that index.

Index funds can be an excellent tool to diversify your portfolio and reduce your risk. After all, if your money is spread across hundreds of stocks and one crashes, the impact on your overall portfolio is minimal.

3. How many different stocks should you buy?

If you only want to buy individual stocks, I suggest buying at least 15 different stocks across several different industries in order to properly diversify your portfolio. However, this may not be practical when you're just starting out.

An alternative to buying lots of individual stocks is to invest the bulk of your money in index funds and buy one or two stocks with the rest. This takes most of the guesswork out of investing, while still allowing you to get some experience with evaluating stocks.

4. Dividends or no dividends?

Many stocks choose to distribute their profits to shareholders in the form of dividends, while others choose to use their profits to reinvest in the growth of the company. In general (but not always), dividend stocks tend to be less volatile and more defensive than non-dividend stocks. It's important to note that just because a company pays a high dividend doesn't necessarily mean that it's a better investment.

Over the past 80 years, dividends have been responsible for 44% of the total return of the S&P 500 index, and dividend reinvestment can be an extremely powerful tool for creating long-term wealth.

5. How much profit can you expect?

I'd advise new investors to take a long-term view of the markets. In any given year, the market could gain or lose a substantial portion of its value. However, over long periods of time, the markets are surprisingly consistent. Over any recent 25-year period, the S&P 500 produced average annual total returns of at least 9.28%, so it's fair to expect this level of performance over the long run -- even though over any shorter stretch it can vary significantly.

6. Only buy What you Know

One investment rule I never break is that if I can't clearly explain what a company does in a sentence or two, I won't invest in it. For example, I really don't understand most biotech companies (nor have I really tried to), so I'm not going to invest in their stocks. On the other hand, the business models of my largest stock holdings such as Realty Income, FedEx, and Google are rather straightforward. It's important to only invest in businesses that are easy for you to understand, especially while you're just starting out. Watch out for red flags.

There are several red flags to watch for when choosing stocks. Just to name a few, beginners should avoid the following types of stocks:

• Companies that don't earn any profits
• Stocks whose share prices seem to always drop (look at the three- or five-year chart)
• Companies that are under investigation
• Companies with lots of debt
• Stocks with recent dividend cuts, or an unstable dividend history

8. Know how volatile your stocks are

Before you buy a stock, it helps to know how volatile you can expect it to be, which you can determine by looking at its beta (included in virtually any stock quote). A stock's beta essentially compares its volatility to that of the overall S&P 500 index. If the beta is less than one, the stock can be expected to react less to market swings, and if it's greater than one it is more reactive. For example, if a stock's beta is 2.0 and the S&P 500 drops by 5%, its share price could be expected to drop 10%.

9. History tends to repeat itself

Although past performance doesn't guarantee future results, there are some historical patterns that tend to continue. Specifically, stocks with a history of profitability and consistent earnings growth tend to keep up. And stocks with a strong history of dividend increases are extremely likely to increase their dividends in the future. Do a little research and compare the historical behavior of the stocks you're considering.

10. Rookie mistakes to avoid

Finally, there are some dangerous traps rookie investors should avoid. This is not an exhaustive list, but these are among the costliest:

• Buying penny stocks: Avoid "penny stocks," which I define as any stock that doesn't trade on BSE, NSE, MCX, or any other regulated market. Of course, there are exceptions, but it's probably a good idea for beginners to steer clear of these.
• Buying stocks on "rumours": Never buy a stock because it's "about to" do anything. Always do thorough research and make a well-informed decision with the long-term mind.
• Using margin: There are some valid reasons to use margin (borrowed money), but beginners shouldn't touch it. Investing on margin can amplify your returns, but it can also increase your losses.