Time to start pikcing equity again

Well again I am sticking my nose out. While not sure whether market will go to 15K or even lower, I think it is about time to start picking up good stocks. There is no doom gloom situation in the world. India is doing well, though FIIs are pulling money to put back into their own markets which are picking up. This has helped remove the mania that existed since Aug/Sep. The valuations for long term investing (3-5) years look attractive. Go for large caps which could give you at least a 15% return in this period. If you can spot midcaps, returns could be much higher.

Happy investing!

Infrastructure bonds - are they for me?

Well, again lot of people asking about this. Here are some facts. These are safe investments with fixed returns. They are NCD (non-convertible debentures). The interest rate offered is around 7.5 - 8 % depending on options. It saves tax by way of section 80C, where up to (and only up to) 20K INR gets deducted from your taxable income. So your effective interest rate is slightly better (but just for the year).

Are they worth investing? It is a good bet, if saving tax of about 3-4K matters to you. You could potentially see better FD rates in the future, which can easily cover for the extra 3-4 K you are saving in year 1. My recommendation, if you are tired of FDs then do this. Else wait for FD rates to rise further, ask the branch manager to provide you 10 year rates which will be half a percent lower than your 390 day rate, and put money into that. It provides flexibility of withdrawal and potentially better rates.

Happy investing!

Time to churn your portfolio

Have a lot of stocks sitting in your portfolio for years and not growing? Have an eye on a good growing trend stock? Have a stock that is a huge part of your portfolio, but did not get around to sell and churn it?

Time to make the changes. The markets though are trading at all time high, it is a period where you can look at changing your portfolio. You will get excellent returns on your old stocks (at least from last year). They may still go up. But you can also expect deep corrections while we scale to a Nifty 7K goal in the next 2 years. Use some of these to switch. Sell when you get some good prices on a given day for your stock (up 10% in a week/10 days). Then wait for corrections on the way to buy your list of stocks you wanted to.

For me, I am selling IT (watch currency trend), investing in Infra, Oil and Banks. You can take your calls...Happy investing!

What to do with the markets now?

A lot of you have been asking me on this. My view has drastically changed over the last 4 months or so. While I used to be a guy on "valuations", "PE", I have come to realize that there are phases of the market when we talk different things. The phase of the market when we talk valuations is usually during the steady phase. Market valuations determine what is a relatively inexpensive buy and what is a good long term prospect (3-5 years). The phase of the market we are currently in is the "mania" phase. In this phase "valuations" are thrown out of the window and the market gets into true "animal spirits". Here we need to rely on trends and charts (see Ashu Dutt on ET Now in the mornings). And trends will help you decide two things - stocks to buy for a short term (less than 6 months) and more importantly when to "sell". The FII inflows in the market is huge primarily because of low interest rates in the West and Japan. And this is hedging it in India for a growth. The flows have entered "mania" proportions.

The current mania is concentrated on Financial Services, so the rise is there. Look out for stocks which have a low float and a lot of dormant investors - like LIC or Government. If there is a demand for these stocks, which there will be in a mania, then they will shoot up drastically. PSU bank stocks, PSU insurance, PSU Non Banking companies are good stocks...watch IDBI, IDFC, State bank siblings, Vijaya Bank, etc. So as Ashu says, enjoy the party; but make sure you get out by 2 am, else you will get a bad hangover...happy investing!!

Stocks - Some rules

Before we begin into details around stocks, ratios, etc. here are some rules I follow. Thought worthwhile sharing them upfront.

• Even if you get a stock tip from the most reliable resource, do your own research
• If all analyst recommend buying the stock – IGNORE IT!
• If there is a buzz about the stock then STAY AWAY!
• When your mom, dad, MIL, FIL, uncles, cousins, friends, friends of friends talk about stock market – STAY AWAY FROM THE MARKET!
• When no one talks stocks, people advice you it is a dangerous thing, put into it!
• EXTREMELY important - Remember TO SELL!! Selling at the right price is as important as buying
• Be aware of taxation and brokerage costs
• Have a portfolio of not more than 20 stocks and then stick to them for 3 years
• Diversify and keep churning portfolio every 2 months
• Don't track stocks every day (if you are not a trader)
  
• RESEARCH, RESEARCH, RESEARCH

We will discuss some more fundamentals starting the next post. Happy investing!

Equities (Stocks)

Sorry about the break in between. Let us focus on stocks and the stock market for the next few days. First of all let me explain the different approaches that people take towards stocks and stock markets. There are primarily 2 types of people (like us) who invest in the stock markets. I am not here talking of institutions that invest in the stock market. There are people who invest in stocks as something that will help build their wealth. These are typically termed as "investors". A typical horizon is about 3 years. Then there are "traders". People who play on the daily/weekly movement of the stock market to make money. What we are going to talk about is primarily the "investor". I am not really a trader so don't have a lot of comments; i would only comment "stock trading" is a near-full-time profession with lot of attention the market movements. From a financial planning perspective one of the investment areas is stocks for an individual and I assume the person has a day job.

Stock markets when taken with a 3 year horizon provide excellent returns as well as reasonably good stability. While the financial crisis of 2008 has done a lot of harm in terms of confidence in this statement, I still believe in it. Let us start with some basics.

A stock is an investment into a company. You are technically an owner of the company for the percentage of stocks (or shares) that you own. This means that you are part of the company's profits and losses both. A stock (unlike a bond or debenture) is not a loan. It is an ownership of a part of the company. The stocks are traded on stock exchanges and a price mechanism or supply/demand determines the value of the stock. (We will talk in detail about valuation). Stocks can be bought in two ways, primary market - when a company floats an Initial Public offering (IPO) or from the secondary market when the stocks are already listed and different people want to buy/sell the stock. The price fluctuation once listed is caused by demand/supply of the stock (remember this!).

As an exercise I recommend going through one of the stocks listed on the stock exchange and find out these things
- Stock price - high, low, close for a day
- Market Cap
- Face value
- EPS
- P/E

I will explain these in the coming posts...till then keep trying to see for these values for as many stocks as you can...and keep noting them down. Have a good one!

Build your portfolio - Plan the investments 2 (template)

here it the template for planning