I completely agree with Raamdevji that the market conditions are such that the investment shall find a through research on equities.
The equity markets rise across board on very few occations where the "new investor flock-SCAPE GOAT TEAM" join the stream at the fag end of the rise to grab quick bucks, get trapped and sell only when 10 or 20% value is left. The fact that the effordability of retail investor in a bull market last stage is at the mercy of the " fly by night" operator scrips which get 20% upper ceilings for consequent days. These stocks are widely talked or make the head lines. Then the common man/retail investor rise loans and invest for higher returns or take PF loans for investment get themselves burn to the gread. this rule is no exception to any investor who carry the emotional jumps to grab the opportunity despite the fact that he doesn't deserve the basic right to invest.
Now the basic right is nothing to do with other righths but hte capacity to hold for at least 5-7 years and having same surplus amount in the next year also.
Unless one undestands the basic principles of equity investment, people tend to loose and blame the market. The market is wise and balanced to every investor.
While investing in stocks, as a matter fact EMOTIONS RULE our decisions rather than a study. So persons ruled by emotions get drowned in the whirl wind stroms of market gyrations and book loss irrespective of the holding size, whether it be in day trading or in regular longterm investment.
Any way the rule is sipmle: BUY LOW AND SELL HIGH, rest is you judgement.
-------------------Very Good article
Bet on equity, but pick the right ones
EmailPrint..Our Special Correspondent, On Monday 19 September 2011, 2:52 AM
Mumbai, Sept. 18: Equities are in the doghouse right now ' and that's the best time to go stock picking, reckons Raamdeo Agrawal, managing director of Motilal Oswal Securities Ltd, which is one of the largest broking firms in the country.
Agrawal has an abiding faith in Indian equities, which he firmly believes will be one of the best-performing asset classes over the next 10-15 years.
But investors need to make the right bets when they go bottom fishing. Agrawal believes that investors should focus on specific companies rather than sectors even though several verticals have looked very attractive in the current meltdown in the markets.
"The current market is safe for investing. But the real pay-off will come from your ability to pick the right bunch of mispriced bets. Even though several sectors look interesting, it's all about picking the stocks of the right companies. The retail investor must bring his own competency to figure out how much a company will make in the next five or seven years and whether he is paying a price higher than that or significantly lower than that. That's the way I look at it," says Agrawal who along with his other colleagues have identified a checklist of 47 parameters on the basis of which Motilal Oswal picks its best bets.
Agrawal's comments come at a time the stock markets have shown volatility with key indices rising or buckling in response to a blizzard of local and international cues.
Since the start of this calendar year, the BSE Sensex has plummeted nearly 18 per cent from 20500 levels.
According to Agrawal, one outcome of this fall and the recent volatility is that the character of market and investing has changed with investors now more focused on index movements even as they have withdrawn from the equity markets.
"Earlier, it was more of an investing market where investors did not bother much about index movements. But now the whole talk is about where global markets or local markets are headed. Investing is not about markets, but finding businesses or companies who can make a lot of money and buying a small piece of it," he said, thereby indicating that investors should think long-term.
Agrawal adds that Indian equities will remain one of the best-performing asset classes over the next decade, and the arguments are far more compelling now that the markets have corrected sharply from their highs. "The lower the market goes, the better for investors," he avers.
This comes even as price-wise the markets have entered an "under-valuation zone". The price to earnings ratio (P/E) for the Sensex has eased from a multiple of 26 to 27 to a multiple of under 14 at present.
"The long-term average PE (for Sensex) has been 14.5. So, we have now entered a historical under-valuation zone and we have breached the average PE multiple. But are we close to the bottom? I cannot say that. However, if it tumbles to a PE multiple 10, we will have reached an absolute bottom," he said.
Investors have been spooked by the slump and are clinging to the sidelines, waiting for the storm to blow over. They are afraid to make a mistake and suffer big losses. But Agrawal believes that it is okay for an investor to make an occasional mistake in stock picking.
"In investing, you have to learn to pardon yourself for committing mistakes. Please do commit mistakes; an individual who commits more mistakes eventually becomes a sane investor," he said.
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