How to become rich: Investing in stocks is like investing in a business. According to ace American investor Charlie Munger, money is not in buying and selling stocks, but in waiting. The Vice President of Berkshire Hathaway believes in holding a stock as long as possible, as this stock market strategy enables an investor to create wealth instead of incurring losses. By suggesting stock investment for the long-term, the American businessman also conveyed that wealth creation is in the cash segment, not in F&O trading. However, if a cash market investor uses an F&O trick when choosing short-term stock in the cash segment, market experts believe one can make double-digit monthly gains.
According to stock market experts, looking at the fundamentals is essential, and one must scan the company’s balance sheet before buying its equity. However, while selecting a value pick, one may get confused with many stocks with strong fundamentals. For such investors, market experts have a suggestion. They advised cash market investors to check the long and short build-up position of the stocks after the monthly F&O expiry. They also said that stocks trading in F&O at a handsome premium against the current stock market price in the cash segment signal upside movement in the stock in the near-term. So, if a stock has strong fundamentals and it is trading at a premium in the F&O segment, then chances are high for an investor to get higher returns.
F&O trick for cash market investors
Highlighting the F&O trick that a cash market investor can apply while selecting a value pick for the short-term, Mahesh M Ojha, a fundamental market expert, said, “A cash market investor generally chooses a stock with strong fundamentals. However, finding more than the required stocks with strong fundamentals is obvious. In that case, one can apply an F&O trick by looking at the long and short build-up of the stocks. If the stocks you have zeroed in on have a substantial long-term build-up, then it can be preferred for buying. However, if the stock has a short build-up despite strong fundamentals, one should wait as the stock may witness some correction.”
On when this F&O trick can be applied, Anuj Gupta, Director at Ya Wealth, said, “One can apply this F&O trick at the monthly expiry. The idea is to look at the speculative price of the stocks with strong fundamentals. However, this should be done immediately after the monthly expiry and one should look at the future price of the stocks for the next two to three months. If the trend suggests an uptrend, then one can assume that the chances of incurring higher returns are high.”
Double-digit monthly growth
When asked about the kind of returns one can expect by applying this F&O trick in the cash market, Anuj Gupta of Ya Wealth said, “One can expect around 5% monthly returns from this F&O trick.” However, he advised investors to keep on accumulating on marginal falls and maintain strict stop losses while taking any position in the cash segment.
However, there is a catch. Mahesh M Ojha said that one’s monthly income may double if the investor is not a marginal investor in the stock market.
“While buying a stock in the cash market, which has a strong long build-up in the F&O segment after the monthly expiry, my suggestion for big investors with a big portfolio is to shorten in the future and buy in cash. In that case, one will be able to make a profit both ways and expect at least 10% returns in a month,” said Mahesh M Ojha.
Stocks that have an intense long-term build-up
When asked about the stocks that have had substantial long-term gains in the stock market today, Mahesh M Ojha listed these stocks: Eternal, BSE, M&M, and Eicher Motors.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
