Don't be spooked by the churns in the market. A disciplined approach and a sound financial plan will help you ride the storm
THE performance of markets last week would have given investors the feeling of being part of a Greek Tragedy. The uncertainty is unlikely to end this week, but investors should be reassured that the long-term prospects for Indian equities is only positive.
RBI and other agencies estimate the Indian GDP to grow at a minimum of 8-9% for the next couple of years. Prime Minister Manmohan Singh, who is known to be conservative, said at a recent seminar in Washington that Indian economy was poised to achieve 9-10% growth.
This definitely spells good news for equity investors. "The next few years belong to India and I see a sustained long-term bull market," said Sumeet Vaid, founder and MD, Freedom Financial Planners. He expects equities to deliver a 15% growth year-on-year for the next 10 years. Clearly, India is in a growth phase.
While markets will continue to witness volatility, in the long-term, equities follow fundamentals and are expected to do well. Here is what investors could do to ensure that they benefit from the wave:
Be Disciplined
If you are in a bull market, it makes better sense to buy and hold. If you sell waiting for a correction to buy, that may never happen and you may miss out on the rally. Discipline always pays in the long term. Discipline could entail buying a stock only at your target price or could also mean using the SIP route for regular investment. Stick to your asset allocation. If you have decided in conjunction with your financial planner that your profile merits a 60% investment in equities, ensure that it remains so. Also rebalance your portfolio at least once a year, to ensure that it is in the pink of health.
Choose A Good Advisor
It is impossible for any single individual to track all asset classes on his own. Hence it makes sense to get independent advice on your portfolio. Choose an advisor who you are comfortable with, can meet your needs and can devote time for the size of portfolio you have.
Make A Financial Plan
The starting point of your financial journey is to make a financial plan for yourself. This is a clear road map for the future. It is a lengthy exercise but putting all your assets together is a must to know where exactly you stand. Hence it is important that you take this exercise seriously. Once your assets are put together, combine them with your age, risk profile, your goals and life stage decisions to build a long term financial plan for yourself.
Avoid Penny Stocks Or Stocks That You Don't Understand
When the stock prices of blue chip rise, you will find people talking about second-rung and third rung companies. Typically in bull markets, unknown companies and their promoters suddenly start making tall claims, and look at raising money through the capital markets. Stocks will be touted as the next multibaggers. Suddenly you find penny stocks buzzing. However, history has shown that chances of losing by investing in such stocks is far higher. Hence it would be in your interest to avoid such penny stocks, where the management has no past track record.
Avoid Big Moves
If you buy or sell heavily on a particular day, you are taking a higher risk. Similarly, there is no sense in timing the market since it is nearly impossible for anyone to catch the bottom or the top. Hence it is advisable to buy in stages over a period of time.
Profut Tips
some things to remember while investing
WHILE INVESTING in equities, invest for the long term. Have a time horizon of at least 3-5 years
AVOID USING borrowed money for investing. Because if markets turn volatile you may face a lot of stress
BE INVOLVED and do your own homework before committing your money.
IN BULL markets there are lots of investment tips going around. Don't fall for them
EQUITY INVESTMENT is a game of patience, so invest only that much money, so that you don't lose sleep if equities fall
IF YOU have realised you have gone wrong, cut your losses rather than holding onto your ego
