Skip to main content

Time to go for value picks

Though the stock market is on a slide, disciplined investors need not worry if they go for value picks

The US bailout package was expected to cheer the market. Many investors were hoping that it may give a fillip to the market sentiments world-over. However, no such luck for investors on Dalal Street. Most market participants believe that foreign investors are likely to withdraw more money from the market. They also believe that the credit crisis in the US is far from over and it may soon lead to a global recession.

The bailout package is not the end of our woes It is still not clear what will happen next. Investors have to be patient for some time

So, are we really looking at the end of capitalism as some doomsday experts predict? Will the US financial crisis lead to a prolonged global recession? The economic slowdown in the US and Europe is a reality But to think that the stock market is never going to recover is illogical. The market will definitely rebound, but when that will happen is anybody's guess. The market may perk up for a day or two, but it is likely to see further lows as most people would try to sell their holdings at every upturn.

What do the experts think of the domestic markets? Do they believe the fundamentals are still strong to bet on? Of course, the valuations are compelling now, compared to what they were when the market was at its peak nobody is going to look at the ratios when there is uncertainty all over the world. However, there will be pleasant surprises in the next quarterly results. There is already good news on the inflation front. The drop in global crude prices and metals would drag inflation further down. Last week's data showed that inflation has fallen below 12 percent for the first time in two months.

What should be the strategy for individual investors? Experts are unanimous that you should book profits if you have invested in stocks directly and made some money on them. 'Sitting on cash' seems to be the way for many prominent market players. And they are waiting for a clear trend to emerge before returning to the markets. They say individual investors can also employ the same strategy. But there is one small hitch. These are for people who are confident of timing the market, which most know is a very difficult game.

That was for people who made some money on their investments. What about people who have made losses. Should they cut losses now? Most investment experts advise against cutting losses. If you have invested in quality stocks, cutting losses at this juncture would be a bad idea. The market is already down by over 40 percent since the last one year. It would be worth it to wait for a while. The same rule applies to mutual fund investors too. He bases his advice on the fact that the domestic economy still has potential and once the global financial woes settle down, we may see the market revival once again.

The same applies to investors who are investing in mutual fund schemes via the systematic investment plan (SIP). Stopping a SIP because the market is down defeats the whole purpose behind the idea of investing regularly. You are investing regularly because you don't want to time or take a call on the market.

Now, what about people who like to fish for attractive picks in a falling market? Investors should slowly accumulate large-cap stocks with attractive valuations. Foreign investors are selling large cap stocks due to the liquidity crunch. The trend is likely to continue. Investors should make use of the opportunity and pick stocks purely on attractive valuations. This strategy is for you if you have the patience to wait for at least one year, as the market is likely to be volatile in the next three to six months. What about people who are sitting on cash and would like to earn some money on it before investing in the stock markets on a regular basis?

Investors can park their money in liquid funds or floating rate funds and opt for a systematic transfer plan (STP) to invest in a well-diversified equity fund. They should look at the performance of the scheme in the last three to five-year period to choose a scheme.

Strategies for individual investors

• Book profits if you have made money on your investments
• Sit on cash and wait for a clear trend before re-entering the market
• Don't panic and cut losses if you have invested in quality stocks
• Don't stop your systematic investment plan
• Don't invest a lump sum amount as the market is likely to go down further
• Try to accumulate large cap stocks with attractive valuations gradually
• If you have large amounts to invest, park them in liquid or floating rate schemes and use the systematic transfer plan to get into the market
• Lastly, don't enter the market if you can't wait for at least a year

Popular posts from this blog

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...

Reliance Health Total

  Reliance Life Insurance has launched Reliance Health Total, a non-linked, non-participating and non-variable health insurance plan . It provides a fixed benefit cover for hospitalisation, critical illnesses and surgeries. The customer can also make a claim for over-the-counter health-related expenses. This is a regular-pay, five-year plan that can be renewed till the age of 99. The plan comes with two options: customers can choose a higher medical reimbursement benefit or a higher sum insured. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - I...

Right Size your SIPs in terms of tenure and amount

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)    Systematic investment plans ( SIPs ) are here to stay. Going by the growing number of SIPs, it does look like investors have taken to them in a big way. Today as much as . 1,000 crore flow into SIPs every month. A SIP, as the name denotes, is a method to invest a fixed amount in a mutual fund at regular intervals --generally monthly or quarterly. It is easy to do and the minimum amount with most mutual funds is a mere . 1,000 per month. You can write post-dated cheques for your investment, or give an auto-debit facility from your bank account. In fact, most investors today prefer setting up an auto debit for their SIPs, since writing cheques is cumbersome. Also, you can choose any tenure that you want for your SIP — six months, one year, five years, 10 years or even opt for a perpetual SIP which will continue forever till you stop it....

SBI Small Cap Fund

SBI Small Cap Fund scheme seeks to provide investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme by investing predominantly in a well diversified basket of equity stocks of small cap companies. SBI Small Cap Fund has widened its margin of outperformance relative to its category and benchmark in the last one year, earning itself a five-star rating. The fund shows a hefty 18 percentage-point outperformance relative to its peers in the last one year, 5 percentage points over three years and 4 percentage points over five years. Needless to say, it has also outpaced its benchmark to deliver convincing five-year annualised returns of 37 per cent. A believer in the credo that a small market cap does not reflect business quality, the fund looks for five attributes in the stocks it buys: competitive advantage, return on capital, growth, management and valuation. SBI Small Cap Fund is among the few in this space to remain at quite a man...

What are the factors affect the changes in Interest Rate of Fixed Deposits?

  What are the factors affect the changes in rate of Fixed Deposits? Fixed Deposits are now considered to be a very old fashioned method of saving, but still attract many investors since they have guaranteed returns at the end of the tenure of the investment at a decent interest rate. There are various factors that affect the rates of interest for a Fixed Deposit. Policies of the Reserve Bank of India   - The several norms and restrictions posed by the Reserve Bank of India , in order to gain optimum control over credit and inflow and outflow of fund throughout the country. The repo rate changes, cash reserve ration tends to change and these changes affect the banking products like Fixed Deposits, loans etc. Recession   - When unemployment in a country crosses the benchmark set Recession hits, and slowly the country faces an economic slow movement, affecting the purchasing power of the people in the country, forcing the Reserve Bank of India to release more funds in the financial marke...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now