Sunday, August 30, 2009


During the month of March when I recommended my readers to enter the share market and buy large cap Mutual funds under SIP a few old friend of mine called me up and told me that they did not want to invest in such a dull and depressed market. I told advised them that the basic principal of investment is that when market was depressed get in so that you would be the first person to reap the benefit when market turns around. My friends were not convinced. They laughed at me and hung up.

However a few young readers thought what I did say was sensible and they mustered enough courage to enter the market when the Sensex was around 10,500 only. Today with in 120 days market has turn around and those who laughed at me called me up and again asked whether they can enter the market now. The sensex at present is flat at 15,500 . My old friends lost the opportunity but young readers gain handsomely.This has happened always. I replied to them to hold on to their money. There would be correction after some time It would be prudent to enter the market then. They asked me when the correction would start? I replied that it is impossible to pin point a date but it would be soon.

The most important trait is that investor must have patience accompanied by his risk taking capacity. Those investors who entered the market in the Month of March made 30% profit already. My advice to them was if you are chicken hearted then book the profit. If you are bold and brave then hold on. There would be correction soon but that would be followed by a gradual upturn and Sensex may go up to 17000 points by April 2010. At this point of time I would like to remind my readers that by 2010 June the Sensex would see a new high. So on every dip in the share market try to buy some share or the units of large cap mutual funds. Younger persons can buy 60% equity whereas Mid aged person should by 40% if they have risk taking capcity for longer years (atleast for five years)

One thing must be kept in mind that these are only calculated guess work. Nobody in the world , not even Warren Buffet , can predict exactly the behavior of Share market and consequently of the Mutual funds. The advisors and experts can hopefully wish but cannot predict. No science have been perfectly developed so far which can forecast the behavior of the share market. If such predications could have been possible there would not have been great depression in the world. During 2008 world was engulfed with recession despite the fact that this world have got highest number noble laureates in Economics and very large numbers of financial honchos who are rich and proud..

The Reserve Bank Governor conceded recently that Indian economy will revive faster than other countries of the world but it was not possible to predict a date. It is a fact that India would be the growth engine of the world economy sooner or later. So we need to keep patience and move ahead and invest in a determined manner. We need to ensure safety but agree to take a little calculated risk should money be made for future .However safety and prudence should be the watchword for economy would take time to revive.

It is absolutely necessary to switch investment in order to earn better returns. Some Mutual funds provides better return for a year or so and later fails to earn better returns. Once Magnum Global Fund and Prima Fund were darling of investors’ .Today, these are tired funds. Switching of fund provided better earning scope always. The investor must try to protect his investment all the time. Investor must reshuffle his investment from time to time periodically, in case he wants to maximize his return. Investing money is only first step in financial planning. The second step is the most important step and that is protection of invested money.

Investor must redeem his units in mutual fund as soon as he makes 30% return. The Golden rule of investment is that do not invest all your money in Share market or in Mutual fund. Any person desirous of investing money (other than in saving bank account) should invest adhering to the formula of “100 minus his age = % in equity.” So what should be done by small investors? The small investor must buy mutual fund only through Systematic investment plan for long term.. No investment should be done in lump sum. Another important thing before investment is done investors should consult a qualified investment advisor. Thirdly, investor should set an investment goal for himself and put in place an asset allocation strategy depending on the risk bearing capacity. You must invest in equity or equity link instrument if you are young. The older persons should be more cautious while investing in equity. No investment needs to be done in equity after seventy five.

Is this the time for investment? This is a million dollar question. I feel that there could be correction soon and our investors should not miss the opportunity to enter the market then. If some of the investors are seating now they can enter the market but through systematic investment plan in diversified mutual fund in the opportunity and infrastructure sectors. Do consult your advisor but decision needs to be taken by individually always.


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