Executive Summary

This is an investment simulation, where we have invested tk10,00,000 in the DSE by valuing

different stocks and then we measured the portfolio performance using our theoretical knowledge

of investment. We managed our portfolio by dividing the time horizon into 3 phases. At first we

have analyzed the market situation and allocated our investment assets using the analysis. Next 2

phases were prepared using investment knowledge and theories. We have gained a good amount

of profit, tk 2,95,615 by investing in the DSE from 28th October to 2nd December. Then we have

measured our portfolio performance and discussed about it. We also have observed the market

factors and tried to figure out how our portfolio has been affected by those factors.

Introduction

Being relevant in today’s business world without knowledge is not possible. As part of our

course fin435- “investment analysis and portfolio management” requirement, we got a fictitious

portfolio of TK 1,000,000 in our disposal to invest in the stocks of DSE (Dhaka Stock Exchange)

for our investment simulation project on September 30, 2010 to enrich our practical knowledge.

Our investment time horizon started at September, 2010 and ended at December 02, 2010.

During this time horizon we got the three phases to change our investment. In first phase with the

amount of TK 1,000,000 we invest in 14 different companies’ stock which is mainly based on

P/E ratio, EPS. In the first phase we make some mistakes because of our lacking knowledge in

stock investment. And in the second and third phase of our simulation project we able to judge

firm specific risk, systematic risk, return, sharp ratio, trey nor ratio which helps us to chose better

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stock for investment. And by learning from our investment course, we are able to invest in more

stable stocks in Dhaka Stock Exchange.

OBJECTIVE

Our objective of this project is to build our knowledge and ability to make our own investment

decision in the stock market and maximize our after tax wealth in the portfolio through trading of

our selected stocks. We know that the market return is uncertain but to some extent it is

predictable. The gap between forecasted values and actual values always exists. Our objective is

to make predictions and choose stocks so that we get a minimum risky portfolio with healthy

returns.

Asset allocation

As per our course instructor advised us, we tried to spread our investment over different industry.

Also we cannot invest too much in one stock. Keeping this into mind and with constrains of

market lot each stock, we tried to weight our stocks according to utility value in the 2nd phase

and we weighted the stocks according to treynor ratio. Sometimes it was not possible to weight

the stocks exactly according to the utility value or the treynor value, for example, while we

calculated utility value during the second portfolio, we found that Dhaka insurance has the

highest utility value(6.25) and it has a market lot of 50, 1577tk each stock. If we had bought 2 lot

of Dhaka insurance, then too much weight would have been given, which is not a good

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diversification strategy. So we had to give less weight to this stock. Also we tried to weight the

portfolio in such a way so that the portfolio beta is less than 1.

During the 3rd phase stock weight selection, treynor ratio was our main tool. Also we chose

stocks with very low beta, such as Padma oil, to keep portfolio beta less than 1. So while

allocating our asset, our target was to allocate assets in such a way so that our portfolio is

diversified and gives a fair return for taking some risks.

Macroeconomic and industry scene

Top down investing tends to lead to good diversification. We have used this strategy which

begins with a look at the overall economic picture and then narrows it down to sectors, industries

and companies that are expected to perform well. So at the beginning, we need to consider the

fact like macroeconomic factors of our country.

Macroeconomic factors showed significant impacts on the share market-Dhaka stock exchange.

Because of this, our portfolio has also faced the impact of it. They had a significant influence

over the share market directly and indirectly both. Various macroeconomic factors as well as

political factors caused fluctuations and disturbances also in the market.

Macro economic variables such as the country’s economy and country statistics such as national

GDP (Gross Domestic Product) growth, inflation, interest rates, trends, trade balances, currency

movements, export and import, remittances receipts are used to determine where to invest and in

what types of assets. Recession- the economic meltdown throughout the world may be also a

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considerable factor here .Our portfolio was influenced by these trends and they affected on our

investment strategies.

Market index is sharply increasing day by day as liquidity in DSE is increasing and there is a low

supply but high demand in the market; they are controlling the low profile stocks when it is

increasing unexpectedly. So SEC (Security Exchange Commission) is taking various steps to

control it or to stop it. Like, they recommending decreasing the amount of loan to invest in a

stock. They are imposing restrictions for it and want investment on cash basis. DSE is also

halting some of the stocks trading due to it. For example, on 23rd November, DSE halted trading

of 13 shares to control the unusual price hike. The shares were- Sonali Ansh, Tallu Spinning,

Miracle industry, United airways etc.DSE revolution has also increased as some IPOs and new

stocks are entering at the market.

Our country’s capital market showed a robust performance in 2010. Stock prices showed

significant upturn during the year. Different monthly average price indexes at Dhaka stock

exchange (DSE) was increasing as well as the daily average turnover improved showing some

fluctuations in 2010. Our country has been identified to be least affected one although economic

meltdown occurs around the world. It’s because our banking sector is not that much affected by

the global situation and the share market is not related with the international market.

However, the economy is facing some major challenges that require identification and remedy

through policy measures. Underinvestment over the years has resulted in acute deficiencies,

especially in power and gas sector.

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Remittances receipts during july-october,2010, decreased by 0.90 percent from the previous year

which means decrease of foreign currency reserve. It indirectly may affect the share market.

Due to power crisis and gas crisis, industrialization became slow, that’s why, people are looking

for alternative investment in real estate and share trading. So in share market, the prices are

increasing as the demand is getting higher than the supply.

Bangladesh bank also has increased the reserve ratio recently to squeeze the money supply from

market.

Although there is no statistical measure of political stability, it is just as important a factor in

determining the risks involved in a country. For example when the opposing party called the

strike, DSE index went down on 28th and 29th November, influencing more or less all the stocks.

Market sentiment is also another variable.

During the year, a good number of mutual funds and companies were listed in DSE and investing

in mutual funds is less risky.

The annual average rate of inflation also increased resulting in increase of the price of food

grains. Inflation increase made the money circulation high.

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Trading strategies

Our investment horizon started from September,30, 2010 and ended at December, 2, 2010.

During this period we have seen the market situation, analyzed different company stocks and

selected our optimum portfolio using different theories. We looked at not only the profitability

but also at the reliability and stability of stocks. Our investment period was divided into three

time phases and we had to select different portfolios at different phases.

“Top down” investment approach looks at the big picture. The idea in a top down approach is to

weigh broad macro variables and then shift investments accordingly i.e. to make money by

shifting assets rather than by analyzing companies. Picking individual securities is the last step in

this strategy. We have focused on company’s financial situation as well as forecasting of future

financial price movements and trends based on market various activity.

Stock selection(phase 1):

At the first phase we had very little knowledge on theoretical stock selection process, still we

selected the stocks based on the industry stability, low P/E ratio and previous company dividend

payout trend of different stocks.

Square Pharmaceuticals Ltd.: We have selected it based on its performance and expected

future growth. It’s not making profit also but its P/E ratio is somewhat lower among the

pharmaceutical and chemical industry so we have taken this.

Bangas and British American Tobacco Bangladesh Company(BATBC): The percentage of

dividend of Bangas is very high and its percentage of dividends is almost constant over the years

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and dividend yield is good over the years which made us take this share. Its earnings per share

(EPS) have increased compared to the last quarters. BATBC has been maintaining consistency

on prices over the years. Its basic EPS has increased greatly over the years and in the previous

quarters if this years as well.

Padma Oil and Titas Gas: Fuel and power sector is a very strong sector. It’s a necessary

commodity in our country so we have chosen it for our portfolio. Though the prices for Padma

oil share have been decreased over the previous days but we guessed that in future, the prices of

it will again go up highly. On the other hand, though market price of Titas gas throughout the

recent days is not satisfactory but it has earned a good margin of profit in last year. Its EPS has

increased moreover its P/E ratio is very lower compared to the industry which was the reason for

us to take it.

Beximco: Their bonus issue is increasing year after year. Their earning per share (EPS) is

increasing compared to the previous years. The P/E ratio is very low. The net profit after tax has

also increased greatly in the last two quarters.

Dhaka Insurance Limited: Its profit has been increased in the recent years and its EPS is also

increasing throughout the year which is satisfactory. We have taken only one insurance company

from the insurance sector to bring diversity in our portfolio. And we also know that nowadays,

insurance companies are have high price increase. It is relatively a new stock and has a good

growth factor in near future.

Prime Bank, Export Import (EXIM) Bank of Bangladesh, AB Bank Limited and Dutch-

Bangla Bank : Banking sector is considered to be the safest sector for investment as their market

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risk is lower and we will get a return though the return may be low but their dividend growth rate

is always satisfactory and their profitability growth is always visible and stable.

For Prime bank, the market price has suddenly fallen greatly but we can say that it will be

increased quickly in the market as per our analysis. EXIM bank is going to provide right shares

to its stock holders, which will bring large profit for our portfolio. AB Bank has a good

reputation in the market and their P/E (price/earnings ratio) ratio is low among the banking

industry. The net profit after tax is increasing also. Dutch-Bangla bank is a more risky stock but

we are buying the stock because its basic EPS, based on continuing operations in the last quarters

is also highly increasing.

Heidelberg Cement Bd.: In the cement industry, Heidelberg cement’s price/earnings ratio or

P/E ratio is lower compared to the other cement companies. We also know that the demand for

cement is good in our country as the construction sector is booming.

ICB AMCL Second Mutual Fund: We have chosen one mutual funds for our portfolio to

diversify our business. As the prices of it have fallen in the recent days; in the coming days, it

will go higher as per our market trend analysis.

Industry Development Leasing Company Bangladesh LTD. : The most important thing for

which we have selected it is that, we have viewed its last one month’s market trend and have

seen that the market price is increasing rapidly. The price is just going higher and higher. So we

have taken this stock.

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2 nd phase:

In this phase, we sold off 9 of the stocks and bought up 8 new stocks after viewing favorable

reasons. We have chosen 13 stocks from 9 different industry sectors.

Asset pairs with negative correlation always give excellent diversification benefit. We managed

to combine assets which were negatively correlated with each. Such as- BEXTEX vs. DSE, AB

Bank vs. BATBC, Dhaka insurance vs. Heidelberg, Bank Asia, summit power. This strategy

helps to minimize risk while maximizing returns; so that, if one asset comes out as risky, then the

other will be regarded as less risky than that. Or, if the price of a particular stock of a particular

industry falls down on a day, then the price of the opposite type of stock of an industry will go

up. Also we have used utility value to select stocks. Our risk aversion= 3, which means we are

moderate risk taker.

Berger paints (utility- 1.6) signed a Memorandum of Understanding (MOU) with BASF

Bangladesh Limited on June 21, 2010. Under this MOU, BASF will provide technical support to

Berger Paints for development of construction chemicals. We hoped that it will result in a

tremendous scope as well as better performance for Berger which may increase the profit of its

share business so we bought it.

Board of Directors of the Bextex( utility- 1.3) has purchased 35,00,000 shares of Tk. 100.00 each

for an aggregate amount of Tk. 35.00 crore of Northern Power Solution Ltd. (NPSL) which

represents 50% of the total shares of NPSL. NPSL has been awarded a 50 MW rental power

plant project in Katakhali, Rajshahi by the Government of Bangladesh. So we purchased the

stock thinking of the future prospects for the company. (August 26,2010, BEXTEX)

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The Board of Directors of Keya cosmetics (utility- 2.03) has recommended cash dividend @

15% for the year ended on June 30, 2010. We bought the shares of this company to take

advantage of this decision.

Our next choice was engineering sector as the stable growth in this sector was taking place. To

bring diversification, we added stocks of Goldenson(utility- 1.98) and summit power(utility- .51)

after calculating utility and examining its relative performance.

Construction works are increasing day by day in Bangladesh so the demand for cement will

never diminish. Therefore we expected a higher return from the cement industry- (Heidelberg

cement- utility .6) in future and we hold the stock.

As we know that bank sector is the most stable and reliable sector of all, so we decided to keep

the stocks of banks (Dutch bangla and AB bank) in our portfolio. We sold off the Prime bank’s

share as it was not that much satisfactory according to our analysis calculation.

We sold out the shares of Squarepharma(Utility: -.55), Titas gas(-.86), EXIM bank(.62) and

ICB(-1.4)AMCL Second Mutual Fund mainly because of the negative or low utility value. We

sold EXIM bank as it has given the right share; we predict that its price will go down now.

3 rd phase:

In this phase, we sold off 9 stocks after evaluating the portfolio performance and bought up 7

new stocks. For the second portfolio’s stock selection, we have looked for the beta values. Also,

we have calculated the treynor ratio for each stock which was our significant criteria in this

phase. After obtaining the treynor ratio values, we have given higher weights to that stock which

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contains higher value treynor value, but we had constrain of market lot and tried to keep the

investment in each stock within 10,00,000tk.

We sold off the BATBC’s stock because, according to a news release on ‘The Daily Star’

newspaper, we came to know that Anti-tobacco law is going to be toughened. The government is

moving to amend the tobacco control act and introduce powerful pictorial warnings on cigarette

packets and other tobacco items in a bid to reduce tobacco consumption drastically. The fine for

smoking in public place will also be increased to 300tk from 50tk. So there are possibilities that

smokers will cut off the daily consumption of cigarette packets. And hence, there is a chance that

BATBC’s stock will not go well as the act will affect its share market as well.

Bextex has provided a lower return which was a reason to sell it. Berger pbl gave us a negative

expected return so we eliminated this stock. Though there was a remaining demand for the

engineering sector, Summit power’s performance was that much satisfactory; so we sold it off.

We observed very high increase in the Dhaka insurance stock price and we also got very good

treynor ratio of this stock. Still, we decided to sell the stock as the stock price has increased so

high and there was no relevant news available in tha market which supports the high rise in the

price. Also DSE continued to give warning against the unexpected increase in the stock. So we

are now pessimistic about its future growth and found this is the best time to sell it.

Bata shoe has declared interim dividend @ 145% (Tk. 14.50 per share of Tk. 10.00 each) for the

year ending on December 31, 2010 after reviewing the company's half yearly profit from 1st

January to 30th June 2010 and retained earnings up to 31st December 2009. (November 11,2010

BATASHOE). By observing its dividend policy and better performance, we decided to purchase

stocks of it as it may provide us with higher return.

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When we calculated the treynor ratio of SquareTex, we found negative value- -5. Still we

selected the stock because it has negative Beta= -.22. Bangas performed well also, we got higher

treynor ratio value= 3098.93 for it and we purchased it again for our portfolio. We also know

that food and allied sector has always a demand and it rarely decreases, so keep this industry to

diversify our portfolio.

We partially sold off the stock of bank asia in order to invest in other stocks promising higher

returns such as, Prime bank (trynor= 1. 28) . Though we previously sold these stocks in the

previous phase, but as we know that investing in a banking sector is not risky, we observed its

performance and took these again.

We considered the tannery industries, textile industries and leasing companies to our portfolio

after dissecting its performance. We replaced BOC by Padma oil after analyzing the calculations

as we expected it to provide us with a higher return and seeing a very low beta(0.0000925).

Moreover, Government is currently investing highly in the power sector.

Overall, our aim throughout the trading period was to increase diversification and minimize the

volatility of the portfolio. We found negative beta of Exim bank, Prime bank, Squaretex, Bata

shoe. Which means their price trend will be negative to the DSE index. So we selected these

stocks to diversify portfolio. Gradually our abilities and strategies improved and we made profit

from increased diversification.

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Diversification

Diversification has been a great importance for our stock selection. From our 1st phase we

focused on diversifying the stocks. Initially we did not know about any diversification tool. Still

we tried to diversify by investing in 9 different industry sectors. Next in second phase we

selected stocks that are negatively correlated into the stock exchange. Such as- BEXTEX vs.

DSE, AB Bank vs. BATBC, Dhaka insurance vs. Heidelberg, Bank Asia, Summit power etc.

also we bought stocks from 9 different sectors in 2nd phase. At the 3rd phase we had shares from 7

different industry sectors. Here we selected some stocks that has negative beta. Such as- Exim

bank (beta= -1,8,)Prime bank( beta=-.33), Squaretex( beta= -.22), Bata shoe( beta= -.35). Which

means the return of the stocks will move in opposite direction to the DSE to some extent.

Economic rationale for picking or selling stocks

We choose stocks based on some calculation and market available news. During 1st phase we

completely based our decision on market news and the basic information such as P/E ratio.

During 2nd phase, we had calculated utility value of stocks, taking risk aversion=3. and selected

stocks with high utility value and sold stocks with low or negative utility value. Also we kept

some of stocks of our first portfolio to minimize a great loss. At 3rd phase we used Treynor ratio

to get help in selected stocks. Trynor ratio shows us the market excess return to volatility ratio.

We selected stocks with good trynor ratio to get healthy return for taking systematic risks.

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Portfolio performance

As we give importance in overall portfolio rather than individual stock, portfolio performance is

vital for the project. Our main objective is not only the capital gain maximization but also

implement the theoretical knowledge on the portfolio selection. We had three phases where we

got opportunity to change the stocks in the portfolio. We mainly tried to diversify our portfolio to

minimize the risk.

In the first phase we did not have enough knowledge about investment theory. So we have used

our little learning from the course and previous course. We mainly used Top to bottom system in

security selection and financial ratios. As the after tax profit from the portfolio was 95,894, these

phase the portfolio performance was successful enough. We give preference on banking and

investment industry for stable positive return. The stock return was positive and less volatile

from these sectors compare to other stock in our portfolio. In addition to banking industry we

also look for other promising industry like fuel and energy, pharmaceuticals, foods and alliance

which volatility is high. We get higher return from this industry and also have negative return.

The fluctuation of Bangas, Square textile and Padma oil etc were high. We also use the price

earnings ratio in security selection. We find that stocks with low price earnings ratio gives higher

return. Our 1st phase gained such a high profit mostly because of the high investment in the

Dhaka insurance stock(23%). Our calculated expected rate of return was 2.1 % and the actual

holding period return was 5%. The portfolio beta was .725 which is less than the market beta 1

which indicates that this portfolio fluctuation is moderately related with the market fluctuation.

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1st phase portfolio sharpe ratio=13.56, which is the reward to volatility. And we also calculate

treyner ratio=1.02 which refers to the excess return per unit of systematic risk. And the Jensen

alpha of this phase = 2.41, so average return was above CAPM.

In second phase we calculated the expected return of the individual stocks and overall portfolio

and compared it to the index expected return. The after tax profit was tk.38, 999 which is low

compared to first phase profit. Our calculated expected rate of return was 2.1 % and the actual

holding period return was 5%. The portfolio beta was .725 which is less than the market beta 1

which indicates that this portfolio fluctuation is moderately related with the market fluctuation.

In this phase we calculated sharpe ratio 5.6 ,which is the reward for taking one unit of

unsystematic risk. And we also calculate treyner ratio 0.03 which refers to the excess return per

unit of systematic risk. And the Jensen alpha of this phase 0.013, so average return was above

CAPM.

In the third phase of our project, we are able to select more stable stocks from the Dhaka Stock

Exchange. Our portfolio expected return of this phase was 1.989 but our portfolio holding period

return 13%. In this time DSI Index rise in point7325.907 from point 6792.2 which indicates that

market was boosting. Because of this our portfolio was also able to increase it’s after tax wealth.

We gain the highest after tax profit of TK102486 among three phases of simulation project. The

sharp ratio of this phase was 10.97, which is the reward to volatility. The treynor ratio was 0.14

that refers to the excess return per unit of risk. Jensen alpha of this phase is 0.09, so average

return was above CAPM.

Over the portfolio horizon, when we look at daily market excess return, we can see similar trend

between our portfolio and the DSE(appendix-I). This trend is more similar during 1st phase and

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3rd phase, this is because of some stock which we had selected both in the 1st portfolio and 3rd

portfolio, such as- IDLC, Dutch-Bangla bank, Prime bank, Padma oil etc(appendix-M).

On 10th October, we can see a large decrease in the DSE and portfolio return. On that say,

Security Stock and Exchange commission had given the decision to control the marginal loan on

low profile stocks. This news led to a decrease in the market and our portfolio as well. This was

the highest decrease in our daily portfolio return(-2.33).

Another high decrease in our daily portfolio return was on 29th October. On 30th October, the

opposing political party had called a strike and that political tension led to decrease in DSE

index. Our portfolio return was -1.48 on that day.

Return and risk of portfolio

Return: During last 2-3 months, Dhaka stock exchange index has broken high records for

several times. People are investing more into the DSE and most of the share prices have been

increasing more or less during this time. This is a very good time to make profit out of the

market. We also experienced very high profit by investing in the DSE. All the 3 phases we got

positive return, which is good sign. Our expected portfolio return, average portfolio excess return

and holding period return is given below:

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Expected

portfolio return

Average portfolio

return

Required rate

of return

Holding period

return

Phase 1 1.682% 2.486% 6.86% 15%

Phase 2 2.102% 1.913% 3.37% 5%

Phase 3 1.989% 2.880% 3.70% 13%

Over the 3 phase, our average portfolio excess return was less than the required rate of return,

this is why all portfolio jenson value is negative.

Risk: Portfolio risk is measured by calculating Standard deviation of all the stocks and using

those values, we calculated portfolio risk. Standard deviation shows how much the expected

return can deviate from its average expected return. Our portfolio standard deviation during 1st,

2nd and 3rd phase was 0.009, 0.004 and 0.009. So our portfolio Standard deviation was

within .04%-.09%.

We can also measure the risk of the portfolio by using the Beta value. Beta is the slope of the

portfolio with the market return. It determines how much the market return will affect the

portfolio return. If beta is more close to 1 then it will move more similarly with the market trend.

We tried to keep our beta lower than 1, as we were moderate risk averse. Portfolio beta during

1st, 2nd and 3rd phase was 2.52, 0.72 and 0.74. During 1st phase we had no idea about the beta, so

that time our portfolio beat was really high. This high beta is mainly caused by the high beta of

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Dhaka Insurance stock (Beta= 1.8), where we invested a large portion of our portfolio. During

2nd portfolio and 3rd portfolio we tried to reduce the risk, as the result our portfolio beta also

decreased.

Regression: We had run the regression analysis, taking the daily return during the investment

horizon, for each phase of portfolio and we have found following results.

1st Phase: The correlation of the portfolio with DSE index is .82, which is a high correlation,

which means the DSE index return has high effect on the portfolio. The R-square is 68%,

meaning the DSE excess return explains about 68% of the portfolio excess return. We can see

the relationship of the portfolio excess return and DSE excess return in the excess return graph.

The SS or sum of square is the variance of the portfolio, which is 0.0015 or .15%. MS for

residual value tells us the variance of the unexplained portion of portfolio return, which is

0.00003.

2nd Phase: 2nd phase portfolio has correlation with DSE index of 0.49. So during second

portfolio, the correlation is less than the 1st phase. The R-square is .24, meaning the DSE excess

return explains about 24% of the portfolio excess return. We can see the relationship of the

portfolio excess return and DSE excess return in the excess return graph. The SS or sum of

square is the variance of the portfolio, which is 0.0001 or .01%. MS for residual value tells us the

variance of the unexplained portion of portfolio return, which is 0.000046.

3rd Phase: 3rd phase portfolio has correlation with DSE index of 0.88. So during second

portfolio, the correlation is again higher than 2nd portfolio. The R-square is .78, meaning the DSE

excess return explains about 78% of the portfolio excess return. We can see the relationship of

the portfolio excess return and DSE excess return in the excess return graph. The SS or sum of

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square is the variance of the portfolio, which is 0.0011 or .11%. MS for residual value tells us the

variance of the unexplained portion of portfolio return, which is 0.000032.

Over the portfolio horizon, when we look at daily market excess return, we can see similar trend

between our portfolio and the DSE. This trend is more similar during 1st phase and 3rd phase, this

is because of some stock which we had selected both in the 1st portfolio and 3rd portfolio, such as-

IDLC, Dutch-Bangla bank, Prime bank, Padma oil etc.

Lessons learned from trading

From the trading, we have gained practical knowledge on stock investment. This knowledge has

given us confidence to trade in real life as well. We have learned few other points from the

trading:

Portfolio return is influenced by the market news and trend. We can use our forecasting ability to

know how an event will affect the market and portfolio return. For example if DSE now declares

a new policy to restrict investment on risky stocks, we can predict, using specified tools, that

how the market will react to the news.

During our 1st phase of the portfolio, we gained a huge profit from investing in Dhaka stock

exchange. We bought the stock at tk1,187 and sold after 22nd phase at tk2,373. Dhaka insurance

stock is actually a new stock. It entered into the stock exchange on 18th February, 2010. Then it is

having a high growth. So we have learned that newly issued stocks provide high growth

opportunities. But this growth also depends on the company type, performance, future

expectations etc.

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Most of the banks declare their net profits and dividends of the respective year at the end of the

year. So lot of expectation arises during the last quarter of the year. These expectations also

influence the bank sector stock prices. Our investment was highly involved in the banking sector

stocks, i.e.- EXIM banks, Dutch- Bangla bank, Prime bank, Bank Asia, AB Bank etc. These

banks had very high return during this time period.

One should not always hear for the rumors which randomly spread. Most of the people do this

but one should follow the market trend rather than go by the rumors. We must keep an eye on

what’s happening and what fluctuations and news are coming out during the trading day; what

are the turning points out there.

Only investing in the share business is very risky and should be avoided. One should diversify

his investment in share market, bank investments, fixed deposits, government bonds etc. so that,

if he loses the money in the market then he has at least some saving amount in his hand. We

diversified our portfolio to reduce the risk. When entering the share business, we should look for

the risks and profit as well. We have learned how the market works.

Conclusion

Initially we started with very little knowledge about investment and gradually we applied

theoretical knowledge. We saw that we can earn profits while investing in a secured way by

analyzing the stocks properly. It is also possible to maximize the profit using wise judgmental

decisions with stock analysis. We hope that in future we will be able to use our knowledge from

this report and become successful investors in the stock market.

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