2 things to avoid when markets are down
In this issue:
» 'BIMARU' Bihar no longer 'Bimaar'
» Bangalore tops the list of India's booming cities
» UPA govt. starts clean up- scraps the space agency deal
» High cotton prices killing textiles?
» ...and more!
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The first one is to "not start bottom fishing". Most investors who think of themselves as rational, start calling the bottom for different stocks. They start looking at all available data to identify when the stock will bottom out. They prefer to stand on the side of the road before picking up any investment. More often than not, these investors end up not investing at all. They miss all good opportunities. The truth is it is almost impossible to call the "bottom" for any stock. It is better to have a valuation band in mind rather than having a bottomed out stock price in mind. Invest when valuations are low so as to not miss out an opportunity.
The second thing is to "not sell in panic". This is something most investors tend to do. When they see prices of stocks hitting new lows, they tend to panic and sell their investments. But at such times they should actually question as to why are they selling? If there is nothing wrong in the company's fundamentals then just selling for the sake of it, just doesn't make sense. Instead such falls should be viewed as an opportunity to buy more of the good stocks.
Markets are driven partly by fundamentals and partly by emotions. When emotions run at a tangent to fundamentals, and the markets fall, it just indicates a good buying opportunity. It would do well for investors to treat market falls as an opportunity to pick up their favorite fundamentally sound stocks.
Have you managed to overcome the above mentioned emotions? Share your comments with us or post your views on our facebook page.
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Over the next couple of decades, India is expected to see an enormous urban transformation. Many Indian cities would become larger than many countries, in terms of population size and GDP. However, India's spending on infrastructure lags way behind that of China. While we spend a mere US $17 per capita on urban infrastructure, China spends a whopping US $116. If not for the poor infrastructure, our economy would be growing higher by 2%.
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In terms of a cost differential, there is not much of a change, as an Indian employee working in the US would be paid the same salary. Onsite employees are also billed higher to clients. But, there are many challenges on the campus recruitment front. In Indian engineering colleges, these IT majors get to pick the cream of the crowd. Plus, India produces 600,000 engineering graduates every year. However, the pool of students in the US is much smaller. And these IT firms do not really have much brand value on US campuses. While, the Indian Big 3 are making efforts on this front, we believe it will still take a lot more time and money to pay off.
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04:55 | Today's investing mantra |
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14 Responses to "2 things to avoid when markets are down"
leonard king
Feb 19, 2011It is easy to theorize, but difficult not to get caught in the mass hysteria-that is stock mkt whether bull or bear
g s chadha
Feb 19, 2011one always learns from his own lessons.it is always better when you sell when the market is heating up and you buy when the market is going down,
g s chadha
Feb 19, 2011one always learns from his own lessons.it is always better when you sell when the market is heating up and you buy when the market is going down,
Shome suvra chakraborty
Feb 18, 2011As per Warren Buffet identify businesses:
* With strong fundamentals: Simple and understandable businesses, having consistent operating history and favourable long-term prospects.
* With strong management teams at the helm: Rational, candid with shareholders, resisting the compulsion to act just to prove a point.
* With stable financial history: Stability in high profit margins and return on equity, sustained growth in earnings, less capital requirements on an incremental basis, low or nil debt on the books.
* Selling at attractive valuations: Keeping a strong margin of safety, available at a significant discount to their intrinsic values.
SHREERAMYADAV
Feb 18, 2011it is better to invest in blue chip share when market is down becaue you will get them in low price which will book proffit in market up
Murali
Feb 18, 2011
Infosys and TCS don't do high end work that they need the
cream in US.And with their attitude they will never be
able to compete with the best companies in US.Even in
India in the elite institutions their standing is nothing
to write home about..
S.G.BHABHE
Feb 18, 2011BSE sensex closed 295 below as compared to 17 feb 2011 Your report should take into account the day's closing position for a more realistic and meaningful comments or guidance.There is no need to rush the review for the hake of it.
AJAY
Feb 18, 2011In the last market fall I sold many stocks just to see them recover handsomely. I am using this experience now. Buying blue chips and selected midcaps in every market fall as also investing through Mutual funds. I analysed that the fall in funds value is less then the direct equity themselves.
leonard king
Feb 19, 2011The classic example is L&T, by Jove,it tanked and tanked the past month; it is smart to set an investment target and cash in the chips ,once it is achieved, rather than be a sitting duck. case like Larsen, if you get caught in the greed, better to put a trailing stop loss and get out. much smarter would be to learn the basics of charts and tech analysis, there will be sufficient warnings to shut the doors of the stable before the horse bolts. it is stupid to average.buying at lows is good but how low is a low?the best tactic I feel is book profit and make an entry at lower levels after a good knowledge of tech+ fundamental analysis and dont get caught in pull back rallies