Archive for the ‘Investment’ Category

Investing in Equities – Basics

Monday, July 30th, 2007

As a practice, making the right investments requires the nack of picking the right options that the market has to offer. In one of my my earlier posts, I have spoken about the various options one can look at cialis price for investments in India.

When it comes to equity investments, I have seen people with various lines of thoughts. Many have lost a lot to the stock market while others have gained from it. Some call it a big gamble while others feel it’s the place to build long term capital. It is important to draw a line on how much you want to invest in equities and with what purpose.

Few prefer short term investments based on their research about the market.

Others go for long term capital appreciation and are willing to hold on to their investments for years together. And then there are people who go for intraday trading (typically are the one who loose as they often fail to time the market). There are few who would follow the ‘Hybrid’ approach by putting majority of the stock in the long term investments bucket and few in the short term profit making bucket. It all comes down to how much money you have at your disposal to invest and how much risk you want to take with it. Risk again needs to be defined. Investing in a poor performing company based on tips and hoping to give good return is a bad decision and not risk appetite.

Here are a few points that have helped me in my journey in the stock market in the past few months

    • Telecom – biggest players are Reliance Communication and Bharati Airtel with established track record and are growing.
    • Infrastructure – GMR, IVRCL, L&T, Nagarjuna Constructions are a few good names in this arena.
    • Banking – The biggest players are ICICI Bank and SBI. However many other players are also doing good like Yes Bank, HDFC Bank, Centurion Bank of Punjab and many more.
    • IT / Software – Infosys and TCS are bigger players. The recent rise in rupee and fall in dollar have given a test to many companies including Satyam, Wipro and many more.
  • Identify the sectors that you want to focus on and then identify the winning player. Now, this is easier said than done. You can get sector-wise reports in sites like myiris.com and indiaearnings.com. Next, we need to pick the growing and proven companies in each sector and then invest. Some of the sectors and top stocks are mentioned below:

 

  • Pick the performing companies with proven track record: This requires some time to do research. Some of the sites that I found useful are Indiaearnings.com, poweryourtrade.com, moneycontrol.com, myiris.com and kotaksecurities.com

  • Broker advice / market tips are good to know but not to be followed blindly. If you have a tip on a company, check its performance and see if it is convincing. No one in the world can tell you the price of a stock one month in advance. Whoever is doing so, is also taking a calculated or random guess based on his/her research and may not be correct. I typically avoid tips as they always point to short term / intraday trading.
  • Number of shares / amount invested paradox: Lot of people say that a given share is expensive as it is priced high (say Rs 1500). It is a myth, it does not matter how many shares you hold (numbers), what would matter is how much you have invested and what return you have received. Buying 1000 shares of Rs 10 versus buying 20 shares of Rs. 500 should not make a difference in your decision making. End of the day you would invest Rs.10,000 and would look forward to good returns.

  • While there are many other points to be considered, I have tried to keep this short and simple. Do share your comments and views.

Personal Investments

Wednesday, March 21st, 2007

Have been thinking aloud and practicing buy generic cialis 20mg investment habits but have limited myself to the following options 

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1.       Post Office instruments like NSC, KVP…
2.       Bank FD
3.       Insurance Plans (non ULIP)
4.       ULIP 
5.       RBI bonds
6.       Public Provident Fund(PPF)
7.       Equity – Shares
8.       Mutual Funds
9.       Gold
10.    Real Estate
 

I have experienced that most of the debt oriented options (FD, post office, Insurance, RBI bonds) does not give good returns and erodes as the inflation rises.

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Although PPF can be a good investment if you are planning for a term of 10 to 15 years also it is a tax free investment. 

Gold is an accepted investment in India but I did not find it to be providing good returns, it surly is a secure investment but not a very good investment and does not offer great returns. 

Equity comes with its own share of risks of the market and time commitments for identifying the stocks. People also get into misleading habit of timing the market and doing daily trading. My philosophy here is that we should get into the market with a long term vision and invest is strong proven companies or companies with a potential to grow. However, you need to invest a lot of time in identifying such companies and then of course stock-picking is not your profession hence how much justice can you do remains an open question! 

Mutual funds are safer than direct equity and does not require too much research. My thought is one should go for proven funds for 75% of the total investment to be made and for 25% take some risk of new funds/NFO. It is an investment where one can expect 20 to 25 % return per annum (equity diversified funds). 

Real estate seems to be a viable option however demands money to be invested in a large sum (between 40 to 80 lacs at least). Many fear the amount that needs to be put in and the future of the same in next 15 years horizon. I feel it is better to invest in land than a flat on the 8 floor in some society; however, it comes with the headache of maintaining and providing security to the premises. Also we need to the math on living on rent versus buying a house. 

Insurance as an investment is a confusing concept to me with so many agents and insurance companies promising 1000 things. However once you buy insurance you get to know the fine prints on mortality rate, admin charges and Terms of insurance. My thought is that one should buy pure insurance products with no returns / investment promise attached to it for 80% life coverage and for 20% can go for ULIP or other insurance products. 

Overall I am still doing research and trying to see if we have better/other options available. . .