Skip to main content

Bottom Fishing In Stocks

Idle Cash Must Be Used For Bottom Fishing In Stocks & Investing In Good Quality Govt Paper

 

WITH the current phase the stock market has entered into, it is the right time to search carefully and meticulously for those 'value picks'. The picture becomes clearer when one looks at the stocks that have participated in the rally and ones that have not. India is moving towards a 9 percent GDP growth and consumption levels are on the higher side which would help support higher valuations. As far as stock market investments and returns are concerned, it is difficult to time the market and decisions need to be made with longer time horizons, unless one is a trader.


   One thing is clear—in the long run, stock market returns (as evidenced by Sensex or Nifty) would generally beat inflation and other modes of investment. Investing through a systematic investment plan (SIP) is a good idea too. If an investor is looking at a direct equity portfolio, one can create a basket of five or six stocks of one's choice and go on investing in them every month or at some fixed interval. Ultimately, with the concept of averaging, the returns will show up. The SIP route works very well for mutual funds too and takes away the timing element.


   Equity as an asset class has delivered returns in excess of 15 percent average annual compounded returns over the last 20 years. Barring a few small recessionary years, equities have returned above average returns compared with any asset class. Investors have to allocate certain percentage to equities at any given point as long as India is growing at the current pace of growth. Whatever may happen in the short term because of global volatility, one thing is sure that a market expected to grow between 8 and 9.5 percent for the next few years and with a strong domestic consumption story, the country would be a destination for FII and FDI money for a long time. This allocation may be controlled with asset allocation models. Financial services companies with quality research services could help investors in getting right asset allocation strategies. Investors may look at new sectors such as educational services and mobile content providers which are emerging sectors with a promising future in the long term. It is possible to build a good portfolio of direct stocks (would recommend large and mid-caps) if one has access to research from brokerages or by studying the holdings of mutual funds.


   On the debt side, there will be opportunities as interest rates move upwards from the low levels of 2008 and 2009. Initially, it makes sense to put money into funds with investments in short duration paper and later on shift to longer-term maturity paper.


   The other class that comes to my mind is gold. Even though gold has been making new highs in the recent past of over $1400 an ounce, the 'yellow metal' will continue to fetch support as long as there is uncertainty in the global markets. The ongoing sovereign crisis has kept the metal on a real high and there is no reason to suspect as to why gold should not tread upwards as long as countries in the Euro Zone falter. Another factor that would support gold is the dwindling faith in the USD (central banks buying lapping up gold is a testimony to this fact) and the run-away inflation in most of the Asian economies. However, since volatility is also at an all-time high, I would suggest working with strict stop losses unless one is again investing with a longer term view.


   The flurry of infrastructure bonds offered by Indian companies with added tax breaks also make for a decent investment.


   Having cash is also necessary. A slight shake up on the global and/or local platform can lead to an upheaval in stock markets. If such an eventuality does occur, one who has cash will be smiling all the way to the bank. Such idle cash should be utilized for bottom fishing in stocks and investing in good quality government paper lined up.


   Crude oil is also an investment that is worth taking a look. The 'black gold' touched a high of $89.76 a barrel on December 6, 2010 on NYMEX, a level not seen since October 2008. Highly correlated to economic growth, the fate of crude oil hinges on the global economic growth. If the threat of double-dip is taken out of equation, the fast expanding Asian economies and even a modest growth in European and the US economies will take crude oil to the three-digit mark and beyond.


   From an overseas perspective, it's a matter of diversification in investors' portfolio and for that matter some allocation could be given to products, which are, supposed to deploy money outside India. There are some MFs in India, which invest outside the country and mostly in developed markets' Fund of Funds. In the longer run, commodities & natural resources are always going to perform well with shortage and demand-supply mechanics of ever changing world. There are some funds available in this segment which are investing outside India.


   There are also alternate asset classes like commodity access funds available to Indian investors through the LERMS route. However, these make sense for sophisticated investors, who have access to advice as well as large surpluses. However, one needs to take into account currency appreciation or depreciation. In the long run, as the INR is expected to appreciate, any overseas investments have to ensure returns that would cover the currency risk as well.


   In short, there are a lot of opportunities available in the market. It is critical to remember to invest as per the investment allocation warranted by one's situation and investment horizon.

 

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Financial Planner - Do Integrity & Dependability Check

How does one can find value proposition when it comes to financial planning, which is a new area? There is nothing to benchmark it with. So, how does one figure what is the right fee to pay? Look at what you want. You probably want to hire a financial planner to get a blueprint for your life ahead and want to know how to achieve your goals. For creating a tailor-made financial plan, our experience is that it takes 25-30 man-hours in all. Taking an average of Rs 500 per hour for hiring the services of a qualified financial planner like one who has a CFP(CM) certificate, the fee would come to Rs 12,500 to Rs 15,000. But the per-hour rate can be higher or lower depending on the process adopted, the experience and expertise of the planner, etc. That's how planners arrive at their fee. Now, is that value for money? For that you need to find out what benefits you would derive by engaging them. The financial plan will give you clarity, direction and pathway to achieve your goals. Th...

About CRISIL IPO Grading

CRISIL IPO (Initial Public Offering) Grading is an opinion on the fundamentals of the graded issue that reflects CRISIL's independence and expertise. This opinion is expressed as a relative assessment in relation to other listed equity securities in India. The assessment is based on a grading exercise carried out by industry specialists from CRISIL Research. A CRISIL IPO Grade 5/5 indicates strong fundamentals and a CRISIL IPO Grade 1/5 indicates poor fundamentals. CRISIL IPO Grading reflects its assessment of the graded company's equity fundamentals as distinct from an assessment of debt fundamentals. A CRISIL IPO Grade should not be construed to mean a comment on the price of the graded security nor is it a recommendation to invest or not to invest in the graded security. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, or a comm...

Mutual Fund Review: ING Dividend Yield

  ING Dividend Yield's small assets enable the fund manager to churn in impressive returns… Strategy The aim of the fund is to invest in stocks which offer a high dividend yield. This fund deploys a value based strategy which aims to gain from investing in fundamentally strong and free cash flow generating businesses. The scheme focuses not only on growth but also on the cash generated by the business, which mostly leads to stable returns even in volatile markets. This fund has a low volatility because of its investment in high yielding stocks. The scheme tries to include stocks that yield dividend above the dividend yield of the Nifty and stocks with liquidity, which throws up a universe of 150 stocks.   Our View Launched in October 2005, this fund invests at least 65 per cent of its assets in high dividend yield stocks. The fund has consistently maintained a mix of stocks across varying market capitalisation, with a higher tilt to mid caps compared to small caps. Howev...

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...
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