|»5 Minute Wrap Up by Equitymaster|
On This Day - 31 AUGUST 2012
Are you waiting for the perfect time to invest?
In this issue:
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In short, are you waiting for the perfect time to make your investments? If your answer is yes, then you are probably making one of the most common investing mistakes.
Let us explain. Every investor hopes to buy stocks close to the bottom and sell them around the top. Yet, why is it that a majority investors end up buying high and selling low? The problem is that when you're trying to outwit other investors, you are most likely doing what they are doing too. In other words, you become a part of the herd that's trying to guess the market direction. The history of the financial markets is replete with instances of how following the herd can be disastrous to your investments.
The other problem with timing the market is that you are only looking at the price movement of the stocks and not their intrinsic value. It is no coincidence that the world's most successful investors have always focussed on the later. So, instead of the assuming the tedious task of predicting macroeconomic events and market movements, take the bottom-up approach and focus on individuals stocks. If you find a stock with robust fundamentals, solid past track record and sufficient future growth visibility at a price that offers sufficient margin of safety, then simply invest in it.
We are alluding to none other than the recent coal-gate scam. Now, it is obvious that for a country to get full value out of any natural resource, it should be sold at the maximum possible price. But did this happen with the allocation of coal blocks in the country? Certainly not! Instead, the blocks were sold off for virtually a pittance. And the parties that came out winners were a handful of private firms at the expense of the citizens of this country. Even scarier is the fact that this is not an isolated incident. There are examples galore where corruption and back room dealings have led to massive squandering of our precious and limited natural resource. And in the process deprive us of money that may have well gone towards nation building. Little wonder we are a country with such extreme contradictions where abject poverty goes hand in hand with ostentatious display of wealth.
China, which is one of the largest destinations for contract electronics manufacturing, will not be invited to set up shop in India. It is a known fact that most of the Chinese electronics manufacturers face regulatory issues in India. A big reason for this is the huge price differential that exists between Chinese goods and those manufactured within India. Therefore, one school of thought suggests that the reason behind not including China is that it would hurt the domestic industry. Another school of thought states that China itself would not be interested in the proposal because the cost of manufacturing electronics in India is higher than that in China. In either which ways the bottom line remains the same. While other countries would hopefully set up their hubs in India soon, the absence of China is for certain.
The ETF will not only raise the much-needed funds to bridge national deficits, it will also help several listed PSU companies to reduce promoter shareholding. Oil & gas producer Oil and Natural Gas Corporation Ltd (ONGC), mining major Coal India, power generator National Thermal Power Corporation (NTPC) and power equipment maker Bharat Heavy Electricals Ltd (BHEL) could be among the state-run companies that are expected to constitute the much-awaited 'disinvestment ETF'.
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