|»5 Minute Wrap Up by Equitymaster|
On This Day - 23 OCTOBER 2010
Are you using your biggest advantage as an investor?
In this issue:
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You might have been one of them too! If that is the case, you need to understand that you have a big advantage with you when it comes to getting rich with your stocks. The expert on the television show doesn't have this advantage. And that advantage is nothing but 'time'.
Yes, you read that right! You have 'time' on your side in which you can earn good returns from your stock market investments. And that can range from 5 years to 10 years, and sometimes even 15-20 years. This is the time in which you need to save and invest and grow your money to meet your financial obligations - child's education and marriage, and even your own retirement. The experts on the television channels do not have much time on their hands. After all, their salaries and bonuses are dependent on how quickly, and not how sensibly, they make money for their clients.
With time on your hands, you just need to identify good stocks and buy them at low valuations. But start saving and investing early, and let time help you in growing your wealth through the thick and thin of the stock markets and business cycles. Time (and not timing) in the stock markets can make you really wealthy. But first you need to believe in it.
Source: Company reports
Instances of harassment and suicide have in fact forced the Andhra Pradesh government to ban micro-finance institutions (MFIs) from recovering loans from their borrowers. If this continues for long, it could mean high NPAs for the lenders that have so far boasted of superior asset quality. The profitability of the MFIs is for sure headed southwards with the RBI expressing displeasure over their lending rates.
Data Source: Yahoo Finance, Kitco, CNNfn
Exchange rates that keep rising without a change in trade fundamentals lead to a very unsustainable situation. This can crack as soon as interest rates rise overseas. Faced with this issue, India has asked G-20 leaders to devise a policy to manage foreign flows in a 'co-operative framework'. Our finance minister has also asked advanced economies to repair their financial markets at a quick pace. Without these measures in place, we are setting ourselves up for another bout of financial crisis.
The MSCI BRIC Index surged 164% from its 2008 lows, beating the S&P 500's rise more than 4 times. Developed countries are seeing slow domestic growth. But, they benefit from having low interest rates and monetary stimulus packages. Investing in fast growing emerging markets is a great option for them to make high double-digit returns. Even with their rapid rise, emerging market stock valuations are still below 2008 highs, while bond valuations have already reached those levels. Stock markets in the biggest developing nations may even double at this rate, before their valuations become really stretched. Looks like there is still some time before this bubble bursts!
Now, the attack is on another Nobel Laureate in economics - Paul Krugman. And the accuser is none other than commodities guru Jim Rogers. In a recent interview, Rogers went on to ask Krugman to resign from his post as professor at Princeton University. Rogers believes that Krugman's Keynesian economic theories have been responsible for the mess that the US economy is in. With the US finding it difficult to wriggle itself out of the economic crisis, this kind of blame game may continue for some time.
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