Skip to main content

What should you do rising Stock Market?

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

 

Here are the six things you should keep in mind if you want to build and secure long-term wealth


If it were not for the market crash and the prolonged bearish phase, asset allocation would have remained in textbooks. In the past six years, investors have learnt that they can make money in gold, and short and long-term debt too. They also toned their equity return expectations from an unrealistic 30% to a conservative 12%. Just as they were beginning to see the merits of diversification, the current euphoria has taken over. This is the reason I feel the need to strike a cautionary note.


Long-term wealth is built by being strategically focused. Some timely tactics may add a few percentage points of gain, but the fundamental principles are the same. Let us go through the top six dangers for common investors in a market driven by euphoria.


First, IPOs will make a comeback. Remember, these are issues that are sold amidst media and marketing hype by companies that are keen to get a good pricing from their merchant bankers. Do not assume that IPOs are intended to make the small investor rich. They are opportunistic capital raising programmes in which good, bad and ugly issuers participate. One may not be able to tell the difference. If you must, invest a small amount. Better still, limit the capital allocated and book it out on listing and rotate it. Long-term wealth is too precious to be built on the basis of speculative bets about unknown companies.


Two, derivative strategies will be hawked afresh, especially if you are an HNI and are always asking your broker or private banker for something new. In a market flush with enthusiasm, smart strategies that promise a bigger bang for the buck will be popular. It may seem that derivatives are a faster route to making money. If you are a veteran in derivative trade, you have reasons to feel gleeful, but if you cannot tell the straddle from the strangle, keep away. The rule that you should not invest in something that you do not understand, always holds true.


Third, leverage will make a big comeback. Your broker will encourage you to use margin money to trade. Your private banker will be willing to lend money against your shares, funds, bonds and deposits. Your neighbourhood NBFC will offer you loans to subscribe to the next IPO. Your bank will tell you that you can unlock the money in your assets by taking a loan. While borrowing seems like a great route to building assets, it is also ruinous if you do not earn enough to repay. Taking a risky bet with borrowed funds is a double-edged sword, except when the asset that is being funded with the borrowing can only rise in value. Since there is no such asset, borrowing should be determined by your ability to repay, not by your bet on the asset.


Fourth, you will hear that it is different this time. There will be new theories floating about, telling you why an improvised insurance product is better; or how a multi-thematic fund is the newest thing on the block; or how the companies to buy are the ones that are likely to be taken over. The media will fuel these ideas based on a few instances and present to you the case for a new India, where it is now easy to make money based on this new insight. When it comes to investing, most rules are as old as the Bible. There really is nothing new and you will understand this truth much after you have suffered for your ignorance. A business that is run with an eye on deploying capital sensibly in growing assets, steered by a competent management, will come out at the top. This simple idea will be camouflaged by newer theories about successful businesses. Do not mistake the rising stock price for the fundamental strength of the business.


Fifth, do not make investment decisions as if you will miss the opportunity if you do not act. Anything presented to you as an investment proposition that you have to decide on immediately, and sign off as fast as possible, has to be bad. Long-term investing is about considered decisions that evaluate merits and risk, and these are never taken in haste. Steer clear of 'exclusive' or 'privilege' tags for investment propositions. Also recognise aggressive selling tactics as a sign of desperation. Recognise that full-page ads for property that has been fully sold out has to be a misleading tactic. Why spend if there was nothing to sell? Deals will be repackaged and discounts disguised only when there is inventory to be cleared.


Sixth, recognise the huge gaps in the institutional structure of the financial markets. Many promoters have a web of companies. Corporate governance is weak as boards are mostly filled with friends of promoters. Audited accounts conceal more than they reveal. Information can leak into the markets even before price-sensitive events happen. Cosy deals may be struck on debt, takeovers and restructuring that are not always in the interest of shareholders. Advisers may push products without taking any responsibility for their performance. Many players do not adhere to rules, processes or ethics. Investing requires careful navigation of these landmines, so do not trust too much, too soon.


Do not shirk the responsibility for your investment decisions and hope that someone else will deliver your long-term wealth. Take all the time to plan and allocate your money to good quality choices in a diversified portfolio. This approach almost never goes out of fashion.

 

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 answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund

2.Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...
Read more

NRIs and direct taxes code (DTC)

DTC Proposes To Do Away With Special Provision That Allows NRIs Liberalised Duration Of Stay In Country      THE new direct taxes code could bring a large number of global Indians under the tax net, as it does away with a provision that allowed individuals to escape tax in any country citing double tax avoidance.    The new legislation, introduced in Parliament on Monday, says an individual shall be a resident of India in any financial year if he is in the country for more than 59 days in that year, and has been has been India for more 365 days in four preceding financial years. A number of Indian industrialists including Vedanta's Anil Agarwal and Essar's Ravi Ruia have acquired non-resident status over the years.    The DTC has only attempted to clean up the provision in line with the laws globally. A phrase "being outside India" in the existing income tax law exempted individuals who stay outside the country for six months from paying taxes. This was prone ...
Read more

Stick to Good Fund Manager who Can Multiply Your Investment

A manager may be the difference between the best and worst funds. Here's how you can find the right one    Does a mutual fund manager make a difference to your investment? The answer may not be as easy as you think, since most best-performing mutual funds have moved away from individualistic fund management to process-driven methods, limiting the scope of an individual's role in investment decisions. In fact, many fund managers would speak at length about how the "system" their fund house has in place makes their task of picking stocks easy even though it restricts their freedom. Still, the question is important, especially after recent reports that the Securities and Exchange Board of India ( Sebi ) may ask fund managers to disclose to investors their track record of managing money. Let us take a look at the universe of large-cap funds over the past five years. According to Value Research, an independent mutual fund tracking firm, the topper in the category is DSP...
Read more

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...
Read more

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
Read more
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