What Is MRP?
MRP is the maximum price we should pay for a stock to get our expected rate of return. At MoneyWorks4me we use Cost of Equity of a particular stock as a proxy for required rate of return for the stock. When we buy a product we check the Maximum Retail Price (MRP) printed on it and do not pay more than that. In stock investing, MRP is a measure of the real worth of the share. This is the price above which we should consider selling the share.
What Is Discount Price?
Discount price is derived by deducting the Margin of Safety from the MRP.
The Value Investing Guru Benjamin Graham insisted on a 50% margin of safety. When we calculate the Margin of Safety, we take various factors into consideration, such as exchange rate fluctuations, management credibility etc. which affect the company. When these risks are higher, we would like to buy shares at a heftier discount on the MRP. The Stock Market does provide opportunities to buy at heavy discounts; however we need to patiently wait for the right moment.
Expected Rate of Return
This is the compounded annual rate of return you want from your stock investment in the next 5 years. We calculate the expected rate of return based on the inherent risk in investing in the company. When you invest in a company where the risk is high, the returns you expect are also high and vice-versa. Hence the expected rate of return varies with the inherent risk in investing a company.
To get the MRP and Discount Price, MoneyWorks4me has a unique Price Calculator:
Price Calculator - a unique tool designed by MoneyWorks4me - provides you the sensible buy and sell price for a selected company.
It provides you the MRP and DISCOUNT PRICE for a stock after thorough quantitative as well as qualitative fundamental analysis by a team of expert analysts.
In the short term stock prices are affected by market sentiments and availability of money. So we suggest you to take a sensible discount on the MRP and buy the stock at the Discount Price or anything below that.
To sum up, DISCOUNT PRICE is the sensible BUY price and MRP is the sensible SELL price of a stock.
To understand how MoneyWorks4me arrives at the MRP and Discount Price of the stock of a company click on the links below-
4.2.1. Valuation for a company
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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