Skip to main content

What should you do rising Stock Market?

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

 

Here are the six things you should keep in mind if you want to build and secure long-term wealth


If it were not for the market crash and the prolonged bearish phase, asset allocation would have remained in textbooks. In the past six years, investors have learnt that they can make money in gold, and short and long-term debt too. They also toned their equity return expectations from an unrealistic 30% to a conservative 12%. Just as they were beginning to see the merits of diversification, the current euphoria has taken over. This is the reason I feel the need to strike a cautionary note.


Long-term wealth is built by being strategically focused. Some timely tactics may add a few percentage points of gain, but the fundamental principles are the same. Let us go through the top six dangers for common investors in a market driven by euphoria.


First, IPOs will make a comeback. Remember, these are issues that are sold amidst media and marketing hype by companies that are keen to get a good pricing from their merchant bankers. Do not assume that IPOs are intended to make the small investor rich. They are opportunistic capital raising programmes in which good, bad and ugly issuers participate. One may not be able to tell the difference. If you must, invest a small amount. Better still, limit the capital allocated and book it out on listing and rotate it. Long-term wealth is too precious to be built on the basis of speculative bets about unknown companies.


Two, derivative strategies will be hawked afresh, especially if you are an HNI and are always asking your broker or private banker for something new. In a market flush with enthusiasm, smart strategies that promise a bigger bang for the buck will be popular. It may seem that derivatives are a faster route to making money. If you are a veteran in derivative trade, you have reasons to feel gleeful, but if you cannot tell the straddle from the strangle, keep away. The rule that you should not invest in something that you do not understand, always holds true.


Third, leverage will make a big comeback. Your broker will encourage you to use margin money to trade. Your private banker will be willing to lend money against your shares, funds, bonds and deposits. Your neighbourhood NBFC will offer you loans to subscribe to the next IPO. Your bank will tell you that you can unlock the money in your assets by taking a loan. While borrowing seems like a great route to building assets, it is also ruinous if you do not earn enough to repay. Taking a risky bet with borrowed funds is a double-edged sword, except when the asset that is being funded with the borrowing can only rise in value. Since there is no such asset, borrowing should be determined by your ability to repay, not by your bet on the asset.


Fourth, you will hear that it is different this time. There will be new theories floating about, telling you why an improvised insurance product is better; or how a multi-thematic fund is the newest thing on the block; or how the companies to buy are the ones that are likely to be taken over. The media will fuel these ideas based on a few instances and present to you the case for a new India, where it is now easy to make money based on this new insight. When it comes to investing, most rules are as old as the Bible. There really is nothing new and you will understand this truth much after you have suffered for your ignorance. A business that is run with an eye on deploying capital sensibly in growing assets, steered by a competent management, will come out at the top. This simple idea will be camouflaged by newer theories about successful businesses. Do not mistake the rising stock price for the fundamental strength of the business.


Fifth, do not make investment decisions as if you will miss the opportunity if you do not act. Anything presented to you as an investment proposition that you have to decide on immediately, and sign off as fast as possible, has to be bad. Long-term investing is about considered decisions that evaluate merits and risk, and these are never taken in haste. Steer clear of 'exclusive' or 'privilege' tags for investment propositions. Also recognise aggressive selling tactics as a sign of desperation. Recognise that full-page ads for property that has been fully sold out has to be a misleading tactic. Why spend if there was nothing to sell? Deals will be repackaged and discounts disguised only when there is inventory to be cleared.


Sixth, recognise the huge gaps in the institutional structure of the financial markets. Many promoters have a web of companies. Corporate governance is weak as boards are mostly filled with friends of promoters. Audited accounts conceal more than they reveal. Information can leak into the markets even before price-sensitive events happen. Cosy deals may be struck on debt, takeovers and restructuring that are not always in the interest of shareholders. Advisers may push products without taking any responsibility for their performance. Many players do not adhere to rules, processes or ethics. Investing requires careful navigation of these landmines, so do not trust too much, too soon.


Do not shirk the responsibility for your investment decisions and hope that someone else will deliver your long-term wealth. Take all the time to plan and allocate your money to good quality choices in a diversified portfolio. This approach almost never goes out of fashion.

 

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund

2.Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...
Read more

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...
Read more

Health for Wealth - How to buy Health Insurance ?

Tax Saving Mutual Funds Online Current open Infra Bond Application form   HEALTH insurance is a relatively new phenomenon in India. Hence, it is not on the top of the mind for most people to make a conscious commitment towards health insurance. However, it is imperative for each one of us to plan for better health for our families and ourselves. There's no better way than to start with making health your top priority this year. So, your health insurance resolution charter would look something like: ■ Invest in health for wealth: Timely investment in health insurance can help build a security net and hedge sudden dilution of another financial asset class in the event of a health emergency, making it imperative to opt for a comprehensive health insurance plan. ■ Buy a comprehensive health cover that fu lfills your health needs for life: Buy a personal health insurance cover even if you have an employee cover because 'employer provided' health insuranc...
Read more
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