Wednesday, October 15, 2008


Karthik Rajaram, Los Angles based Indian, considered a financial wizard, found dead with his wife, sons and mother in law in his posh house in September. He killed himself & family members as his fortune was wiped out by the melt down in the US. Forty-five years old Raja ram once made over 1.2 million dollar in a single deal in London. An MBA of UCLA was named by The Telegraphs of London as the most astute investor. LA land records revealed that he even profited three times from the sale of his house before collapse of real estate market. Then, what had gone wrong? He over traded in the months of September. His entire money perished. So, my advice to my readers is never over invests. The safety of your money is First. Invest only a small part of your money in share market instruments, and avoid private sector’s FD at present.

The festive season has rarely been so full of turmoil. Indian Prime Minister Dr Man Mohan Singh recently explained that Indian market is now open to the world. So, it is not possible to insulate absolutely the country’s economy from the influence of other economies of the world. This apprehension of Indian prime minister have started showing up in the minds of some of the investors of the country, as gloom is spreading from trading floor to factories. Even Mutual funds are getting strong redemption pressures. Even hitherto stable liquid funds may not be as safe now. RBI’s promised funds of twenty thousand crore may not be enough to stablise mutual funds.

Ranjan Das, one of our esteemed readers called me to convey that he was in the midst of a dilemma. He confided that he had not been able to decide whether he should buy individual shares of the companies or Index based investment at this moment, when country is reeling under fiscal crisis.

I assured him that he was not a loner facing that dilemma. Many investors have burnt their finger during the month of January when they bought very good shares like SBI, L&T & Reliance Industry yet lost money heavily. I can only assure my readers that those shares are golden shares& none would be looser in the long term. But do not expect a miracle. It would take time. The World Bank has predicted that India will survive the fiscal storm. In share market patience is the greatest virtue. Invest systematically for very longer horizon only. Now let us discuss whether buying Nifty index is better or buying individual stock is a better move?

To answer this question it would be necessary for us to address two important questions. The first one is whether individual stock is the flavour of the day or buying index is more prudent. The second question is should anyone time the market? The answers to those questions are complex. It cannot be explained in one liner. It deserves a detailed explanation. If an investor has time and energy to do research and methodically study of share market it would be really nice to take a good look at individual stock. The index based investment is the sum total of all the index based shares. Only those investors who did not have time or interest for a detailed study need to buy NIFTY BASED INDEX FUND. When market goes up investors would be really making money. But when the market pushes itself down they would be loser surely! So the second question arises should we invest in nifty index now? For me timing the market is absolutely taboo. YET INVESTOR CAN INVEST NOW provided he is capable of withstanding the risk should market goes down further. It is essential to note that the market might go down even now. Yet it is expected come up only sometime in the year 2010-11 or later. At present share market is not meant for new investors. So my sincere advice would be that only veterans risk taking investors, capable of withstanding long term risk of the investment, may enter the market. The safety of investment must be the top priority always. Greed must not be allowed to take over the needs. Please consult your financial advisor before investment!


No comments: