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Average your cost by buying stocks in small lots

IS this the right time to buy? Shall I start averaging my portfolio? These are the questions uppermost in the mind of most retail investors. The not-so-savvy investors, who entered the market near the peak, are too stunned to react even as their portfolios continue to shrivel by the day.

But the million dollar question is: Will averaging help small retail investors?

Retail investors have very little choice, experts opine. It seems, they can only hold on to their investments. If they have money and there is no immediate cash requirement, investors can start buying stocks in small lots. They should buy large-cap stocks that have been showing growth over the past few years. Companies caught in the market rumours should be avoided.

The fall in the market has triggered big losses in the portfolio of majority of investors, barring a few lucky ones who managed to make a timely exit. Market-cap of stocks in the BSE 500 have seen a reduction to over 75% of what they stood at the beginning of the year. Stocks across the broad have declined, irrespective of fundamentals — strong or weak.

A look at the shareholding pattern reveals that ownership by retail investors in most companies has been rising in the past four quarters. For instance, retail shareholding pattern of the 1,300 BSE listing companies that have disclosed their latest shareholding pattern suggests that their holding has gone up from 9.5-10.3% whereas in the case of the foreign institutional investors, it has come down from 11.2-10.2% during the same period.

Retail investors have lost heavily in the market. There are instances where young professionals have invested on stock tips and now lost large part of their savings in the past few years.

Experts, however, say that any fresh buying should be in large-cap frontline stocks, as they would be the first one to go up in case of any positive changes in the market conditions

Others also suggest that the investors should have a re-look at the beaten down stocks in their portfolio. As the earning season is close by, investors can take their investment call on the basis of their performance. Even if they are losing 50% on a stock and it has posted bad results, they need to exit those counters. Investors can keep their ego aside.

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