Investment Tips

A few practical investment tips for the experienced as well as the uninitiated from a non-expert. Apply at your own risk because I am by no means a certified financial guru.

• Investing is not rocket science. You can do it as long as you are willing to invest some time in learning the basics and prepared to spend atleast 15 min a day to understand what is happening in the stock market. Also you need to have a reasonable dosage of common sense.
• Do listen to what analysts have to say but DO NOT believe them. They claim to have based their forecasts on macro-economic trends. But who the hell knows what macro-economic trends. Do not get blown off by jargon. Nobody can know for sure how the stock market will behave. The stock market works on this very element of uncertainty.
• Do not leave everything to money managers assuming that they are financial wizards who would know much better than you could ever know about money. Just remember that they are doing their job and they get paid to do it. Even you do a job and even you are paid to do it. But do you always do the right things? Are you 100% sincere in all your endeavours? To add to that,  the money managers have an added leeway as they are always safely protected by a disclaimer that says investment entails risk and that past performance is not any indication of future performance.
• Abstain from herd mentality irrespective of the composition of the herd, be it your CEO or be it your Dad. If the herd could always get it right, wouldn't this world be full of millionaries. A classic example is oversubscribed IPOs which fizzle out when listed. So when too many people seem interested in something which is the talk of the town, just stay out of it.
• Do not stay away from the markets because of its volatility. This is the time to make short time gains. Just look at what keeps going up and down without understanding the sector or the fundamentals or the history. Capitalize on dips and spikes and try to make a quick buck.
• When the market goes really really down, put all the money you can afford into NiftyBEES.
• Do not invest blindly via SIPs to benefit from the much publicized principle of averaging. Sipping is definitely good but I would recommend that you sip manually. Pick a few good stocks or MFs and invest a chunk in these maybe once in a month. Unlike a SIP that is configured, for example, to execute on the first of every month, which will go ahead and execute irrespective of the blazing price of the MF on that particular day, take the reins in your hands and invest on dips.
• Contrary to the advice that an investor should never attempt to time the market, it makes sense to precisely do that under certain conditions. Even when the Sensex was at 20k+, I read in several places that you should not attempt to time the market and should keep investing if the fundamentals of a company are sound. But the thing to realize is that in a bullish market, most companies, irrespective of whether they are sound or out of their mind, will tend to be overpriced. When the market corrects, even a company with strong fundamentals will get corrected which will transalate into a loss at your end. There can always be exceptions but dont attempt to identify those exceptions.

So the question that you may want to ask is that what should be your investment strategy considering current market conditions. Considering that the Sensex is at 15k+, I think we are very much in the vicinity of another peak thou lesser than the 20k+ peak that we experienced in the beginning of 2008. Will it become 22k in 1 year from now as predicted by some analysts. It may, but to bank on that would be greed. Beyond 15k, I definitely do see a risk in pumping in money from a long term perspective, unless there is a company with sound fundamentals listing at a low price for some thoroughly justified reason. Otherwise, now is the ideal time to book your profits. If you did manage to catch the bottom at 8k, wait no more, just exit. At the same time, keep playing the short term game by capitalizing on the dips and spikes. If you think you dont have the time for that, make a call as to what is more important to you - time or money. Well, thats like a chicken-or-egg, but I will leave that to you to figure out.

Disclaimer: Please bear in mind that I will not be responsible for any losses that you may incur as a result of reading my blog and applying my tips to your investment routine.That said, please feel free to pay your respects if you do manage to make a buck.