Skip to main content

Some tips for individual investors for investment planning

These days, the stock markets are quite volatile in nature with a bearish bias. Rallies do not last long in the markets and peaks of market rallies are reducing. The markets are hitting fresh lows in every fall. Many blue chip stocks are trading 50 percent lower than their high levels. Many stocks are currently trading at their year's low prices or all-time low prices. Many investors have lost their hard-earned money and many others are stuck with stocks that have corrected heavily in the last few weeks.

Here are some tips for investors already invested in the stock markets:

1) Hold fundamentally strong options

The domestic macroeconomic fundamentals are strong. The GDP growth rate is expected to slow down slightly from the nine percent last year to around 7 - 7.5 percent this year. This is still quite good and encouraging in comparison to other developed countries. The current market crash can be attributed largely to foreign institutional investors' (FIIs) outflows but FIIs will come back once the global financial turmoil settles down. Therefore, investors who are invested in blue chip or fundamentally strong mid-caps should hold on to their positions.

2) Go for value picks

The current market fall is quite steep and many investors (especially small investors) did not have the time to exit from their positions. Market sentiments are quite bearish at the moment and a further fall from current levels cannot be ruled out. Market traders and analysts are expecting more negative news coming from the global as well as local macroeconomic front. Investors with a high risk appetite can look at accumulating fundamentally-strong stocks at current levels.

3) Switch sectors

Currently, the markets are looking oversold after the recent corrections. There could be some bounce back in the days to come. Investors stuck in fundamentally-weak stocks should look at switching their positions to fundamentally strong stocks and sectors.


Here are some tips for investors looking at making fresh investments in the stock markets:

  • Study stock and price

First of all, it is important to identify the stocks that have fundamental value at current prices. Investing in a stock at right price differentiates between a bad investment, good investment and a great investment.

  • Research stocks

The stock market requires constant study and investigation. Finding a good stock at the right price is not a onetime exercise. It is a continuous process. Active investors in stock markets should always monitor their invested stocks and other stocks with potential to invest in.

  • Systematic investing

Currently, the markets are going through a bearish phase. Investors should be extra careful while making investments in a bearish phase. It is advisable to accumulate stocks by investing your funds in small lots. In a bearish market phase, even fundamentally-good stocks correct heavily at times. Therefore, it is very important to have patience and not panic in these conditions.

  • Liquidity

Liquidity and having a cash position is the key to success in a bearish market phase. Investors should start investing in identified strong stocks and continue to accumulate them on further corrections.

  • Analyse risk appetite

Investors should only invest their risk capital in the stock markets. Also, investors should always have a long-term horizon while investing in the stock markets (more than one year at least). Investors should never borrow to invest in the markets.

  • Avoid penny stocks


Investors should stay away from investing in penny stocks. Usually, there is very little information available and also these stocks do not have enough liquidity in the market. As a result, investors get trapped in these penny stocks and lose their capital, and any further opportunity during a correction phase.

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
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