The domestic markets remained in a bear grip over the last one year due to the slowdown in the US and major European countries. The key market indices here lost over 50 percent during the last one year. Stocks in real estate, infrastructure and automobile sectors were among the worst hit during the last one year as they lost around 70 to 90 percent from their peaks 12 months ago. The market outlook for the short term still remains negative and investors are advised to exercise caution while investing in equities.
According to the current market situation, it looks like the first half of 2009 will remain bad for the markets and things will start improving in the later part of this year. The markets have already factored in much of the bad news and stocks in many sectors are available at attractive valuations. The possibility of further market corrections (10 to 15 percent) from the current levels still exists as more bad news comes from global markets. But analysts rule out a sharp decline in the markets from the current levels.
Experts believe that next few months will be a good time for long-term value investors to invest in carefully selected stocks and build a long term equity portfolio.
Here are some points an investor should keep in mind while building an investment portfolio:
Planning
This is one of the most important parts of investing. It deals with playing around with your hard earned money and fulfilment of your future objectives. Investors should keep in mind that they need to achieve a future objective from their investments by taking a calculated risk. It could be as simple as earning decent returns on investment.
It is important to set realistic expectations from your investment instruments. Expecting too much will force you to invest in high risk instruments without understanding them. Then the chances of losing money are much higher.
Stock picking
Identification of stocks for the equity portfolio is the next step. Investors should look at the trends and outlook of various sectors as the outlook of stocks and sectors keep changing based on the market conditions and company performance.
Some tips to help you identify stocks and sectors:
• Have a good understanding of your risk profile. This helps in isolating the aggressive and defensive stocks/sectors in your portfolio. Risk profile assessment includes your age, disposable income, financial background, family structure and number of earning members in the family.
• You should remain in constant touch with the market developments. You can get some investment tips from your stockbroker.
• Small-cap and mid-cap companies sometime give returns in multiples but it's more risky to invest in them. Small investors should always stick to well-known blue-chip companies, which have good liquidity in the market. Avoid investing in unknown small-cap companies.
• Accumulating stocks is another important step in building the portfolio. Although it is not possible to time the market, investing in a stock at the right price differentiates between a good and bad investment.
Patience is the key
Currently, the market is going through a bearish phase as negative news is flowing in from various quarters. Therefore, it is very important to have patience and not panic. It is advisable to accumulate stocks in smaller lots whenever the market corrects. In a bearish market phase, sometimes even fundamentally good stocks correct heavily due to a panic wave in the markets. Investors should make use of these opportunities to build their equity portfolio.
According to the current market situation, it looks like the first half of 2009 will remain bad for the markets and things will start improving in the later part of this year. The markets have already factored in much of the bad news and stocks in many sectors are available at attractive valuations. The possibility of further market corrections (10 to 15 percent) from the current levels still exists as more bad news comes from global markets. But analysts rule out a sharp decline in the markets from the current levels.
Experts believe that next few months will be a good time for long-term value investors to invest in carefully selected stocks and build a long term equity portfolio.
Here are some points an investor should keep in mind while building an investment portfolio:
Planning
This is one of the most important parts of investing. It deals with playing around with your hard earned money and fulfilment of your future objectives. Investors should keep in mind that they need to achieve a future objective from their investments by taking a calculated risk. It could be as simple as earning decent returns on investment.
It is important to set realistic expectations from your investment instruments. Expecting too much will force you to invest in high risk instruments without understanding them. Then the chances of losing money are much higher.
Stock picking
Identification of stocks for the equity portfolio is the next step. Investors should look at the trends and outlook of various sectors as the outlook of stocks and sectors keep changing based on the market conditions and company performance.
Some tips to help you identify stocks and sectors:
• Have a good understanding of your risk profile. This helps in isolating the aggressive and defensive stocks/sectors in your portfolio. Risk profile assessment includes your age, disposable income, financial background, family structure and number of earning members in the family.
• You should remain in constant touch with the market developments. You can get some investment tips from your stockbroker.
• Small-cap and mid-cap companies sometime give returns in multiples but it's more risky to invest in them. Small investors should always stick to well-known blue-chip companies, which have good liquidity in the market. Avoid investing in unknown small-cap companies.
• Accumulating stocks is another important step in building the portfolio. Although it is not possible to time the market, investing in a stock at the right price differentiates between a good and bad investment.
Patience is the key
Currently, the market is going through a bearish phase as negative news is flowing in from various quarters. Therefore, it is very important to have patience and not panic. It is advisable to accumulate stocks in smaller lots whenever the market corrects. In a bearish market phase, sometimes even fundamentally good stocks correct heavily due to a panic wave in the markets. Investors should make use of these opportunities to build their equity portfolio.
