Jun 30, 2008|
Death of equities?
There is bad news everywhere. Inflation is on a rise on the back of sharp spike in crude oil and food prices. Interest rates rising as well thus adding to pressure on household expenses and corporate profitability. The domestic economy is said to be entering a 'cyclical' slowdown phase. The global economy is 'actually' facing an acute banking and financial crisis.
And the stock prices are going down the drain, literally! The BSE-Sensex is lower by 35% from its all time high achieved just five months back. Now, this is just the benchmark index. There are innumerable other stocks that are down almost 80% and 90% from their highs.
Also read - Hidden Treasure or Tragedy?
Ice age for stocks?
So, have we entered a stage of 'ice age' for the stock markets, where investors go numb and stocks stop rising at all (and continue to fall)? Have we just seen the 'death of equities'?
We are of the belief that these times are providing you with investment opportunities of a lifetime. The global offshoring opportunity, India's US$ 500 bn infrastructure spending over the next few years and rising household consumption on discretionary items (like communication, transportation and entertainment) are just a few that you can look out for as evolving wonderful investment themes for the next 5, 10 or even 15 years.
So, what should you do?
The need of the hour for you, as an investor, is to get ahead of the trends, both existing and those that are yet to unfold. You need not let the current environment fool you. Hold on to the quality stocks that you own. In fact, buy more of those, if they've fallen a lot. However do not borrow to buy stocks, at whatever attractive levels they are trading. Do not indulge into trading in derivatives. They are 'financial weapons of mass destruction' as Warren Buffett once famously said...and rightly so!
Have faith in your portfolio of quality stocks and your decision-making capabilities. Be convinced that in the long term, the market is always going up. It always has. Sometimes, it can be difficult to see beyond current circumstances. Your investing success lies in getting over this very difficulty.
As Buffett says, "A great IQ is not needed to do well as an investor, just the ability to detach yourself from the crowd."
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