Skip to main content

Takeaways from 2010 for equity investors

2010 was a significant year for equity investors given the market movements.


   When you look back at the equity market's performance in December 2010, you are bound to smile at the performance of your portfolio. The average returns of most equity funds have been in the range of 20-30 percent, with some clocking even a return of 40 percent. In the case of individual stocks, the performance has been staggering with many stocks clocking over 50 percent returns. Many from the technology space have been impressive and despite the recent correction, a number of mid-cap stocks have turned multi-baggers.


   While every year in recent times has been dominated by foreign institutional investor (FII) flows, the year 2010 truly belonged to this aggressive bunch who took the inflows into a different level in the months of September and October. For the first time in many years, the domestic stock market was on the radars of a number of global funds and the noise in support of allocation for domestic stocks got louder during the year. Even as sceptics are crying hoarse that this money supply could end soon in the light of pricing, the time seems to have come for the world to have a bigger pie of India. This in itself should be comforting for the domestic investor but you need to get the timing right.


   A popular joke about investing in equity is that it is easier to spend time in the market than timing it. The repeated bounce-backs witnessed in the markets after sharp corrections have only reiterated this well known principle. However, the performances of a number of sectors did not hold water in 2010 as many didn't show signs of bounce-back even after sharp cuts.


   The classic examples were real estate and construction stocks that came under severe pressure due to negative news flow. The pain was more in the case of many small and mid-sized companies which shed as much as 30-40 percent in a matter of a few trading sessions. As a result, a number of investors are bound to feel left-out of the year's rally despite the market in general adding close to 35-50 percent to its previous level. The best way to tackle the issue is to put the past behind and take the right step forward. The task would be a lot easier if one makes it a point to learn some lesions from previous experience.


Why not list out the takeaways from the year gone by and avoid committing those errors in the New Year?


Here are some takeaways from 2010:

A stock that sheds liberally need not be good to invest in    

Often, an investor rushes to buy a stock which is on a downward trend, but one needs to know the reason behind the falling spree. As the recent scams have exposed, stocks which rose on manipulation and on poor fundamentals can never regain their past glory as their prices were never fair.

Past performance is no cushion for future show    

It probably holds good for sectors which hog the limelight at regular intervals. Ironically, every year has thrown up new winners at regular intervals and investors always seem to catch on at the wrong time. If it was auto in 2008-09, it was real estate in 2010 as both sectors came up with stellar performances prior to their poor shows.


   While betting on a sector, one needs to analyse the macro environment and price points first. If auto was an underperformer in 2009 it was because of the interest environment and so was the case with property in 2010. Hence, rather than using the contrarian approach, an investor would be betterplaced if he picks stocks which are not challenged by the macro environment.

Buying it right and getting out smart    

Equity markets in general can be better performers when compared with other assets. They can churn out winners when an investor gets his timing right both with buys and sells. In a volatile market, both need to be managed well as they ensure optimisation of returns.

 

Popular posts from this blog

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...

Choose gold ETF over Physical Gold

Investing in gold is overall a good portfolio hedging strategy as long as gold does not account for more than 5-10 per cent of your investment portfolio. Between physical gold and gold ETF, investing in gold ETF is a better proposition because these funds invest in physical gold making them the closest to investing in physical gold at no risk of holding physical gold.   You will need to have a demat account to invest in gold ETFs and there is little to choose between any of the gold ETFs, you can pick any fund that you wish to as long as you pick the fund with the lowest expense ratio.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Reliance Mutual Funds: http://prajnacapital....

Commercial Paper (CP)

Invest Mutual Funds Online Download Mutual Fund Application Forms Commercial Paper (CP): These are issued by corporate entities in denominations of Rs.2.5mn and usually have a maturity of 90 days. CPs can also be issued for maturity periods of 180 and one year but the most active market is for 90 day CPs.   Two key regulations govern the issuance of CPs-firstly, CPs have to be compulsorily rated by a recognized credit rating agency and only those companies can issue CPs which have a short term rating of at least P1. Secondly, funds raised through CPs do not represent fresh borrowings for the corporate issuer but merely substitute a part of the banking limits available to it. Hence, a company issues CPs almost always to save on interest costs ie it will issue CPs only when the environment is such that CP issuance will be at rates lower than the rate at which it borrows money from its banking consortium. ----------------------...

JM Financial Mutual Fund - Its Schemes

  JM Financial Mutual Fund is a part of JM Financial Group which is one of the first mutual fund companies in India which started its operation in 1993-1994. JM Financial Asset Management Limited is sponsored by JM Financial group. The mission of the group company is to generate good returns in all the product categories. JM Financial Mutual Fund has launched a variety of schemes in the following categories. ·                            Equity ·                            Debt ·                            Arbitrage ·                            Liquid Equity Schemes: The schemes that are launched in the equity category are: ·                            JM Midcap Fund ·                            JM Balanced Fund ·                            JM Agri and Infra Fund ·                            JM Basic Fund ·                            JM Contra Fund ·                            JM Contra Fund ·                            JM Emerging Leaders Fund ·             ...
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