Thread: How to invest smart?

I am not giving any "gyan" here. I am no wizard at the Stock Market. In fact, I know nothing about Stocks. But I am just penning down some of my own experiences:

Daily trading is not for the commoners:
This is too much of a headache. You will need to keep a constant watch on the stock markets. And the worst thing is the stock prices' movement does not follow any logic. Besides, those who work, will know that most companies implement website blocking and trading sites fall in that category.

Small investers should opt for Mutual Funds
Mutual Funds invest their capital in a variery of stocks in diversified segments. For example, a MF will invest in Banking, Retail, Infrastructure, Technology, Core Manufacturing, etc. and other such segments. This way, your (small) investment is spread in all the segments. For example, if you had Rs. 10,000 to invest today, you will be hardpressed to invest 1 Reliance share @ Rs. 2500, 2 Infosys share @ Rs. 1250, and so on. MFs will do this automatically for you. And if you invest the entire amount in one scrip, then you are not spreading the risk.

Invest via Systematic Investment Plans (SIP)
SIPs have turned to a win-win situation for small investers and MFs. You can invest as little as Rs. 1000 (sometimes Rs. 100 also) at one time. Choose good MFs that are showing consistent good returns. But take stock of current performance also. It is no use if the MF was giving over 100% returns over three years but this year is in negative. But while taking current situation into account, consider the current market behaviour also.

Choose more than one MF
Don't invest into a single MF or various schemes of the same MF. Invest in different funds. Again, diversification is the key. Only when you diversify, you are reducing your risks.

Keep investing regardless of the bull/bear run
Small investers generally enter the market during bull run and exit during the bear run, when this should be exactly the opposite. But the problem is - how do you know that this is a bull/bear run? Will the markets strengthen or weaken tomorrow. The best is to keep investing in small amounts every month.

Invest in SIP in quantums rather than lumpsum
Suppose that you have decided to invest in an SIP for Rs. 5000 per month. Then instead of investing everything on a single day of the month, spread the investments in four weekly installments of Rs. 1250/- each. This way you will average out your investment and the gains and losses during the month will cancel out each other.

Keep a track of your investments
You can easily keep track of your investments via many sites such as rediff.com, moneycontrol.com, sharekhan.com, icicidirect.com, etc. You do not have to enter the investment manually every time the SIP amount is invested. You can set this in the above mentioned websites and the website will automatically create the record for you, what amount was invested, what was the NAV at the time of purchase, how many units were purchased, etc.

Set targets and book profits
This is very important. Many people start investing but do not exit anytime. It is important to book profits from time to time. An MF may yield over 80% in a 3-year life span. But do not aim at such ridiculous heights. Aim at something good (better than Fixed deposits), yet conservative, say 20~25%. So once your older units have reached the profit limit, sell them. Otherwise, your proift remains on paper and the next stock market crash may cause you sleepless nights and a shinier scalp.

Use a help of a Portfolio Planner
There are some companies that provide you the complete guidance. They work on brokerage. It is wise to go through them. I recommend PersonalFN as I have found them very professional and methodical. But I am NOT endorsing any one please. You make your own choice.

Please add more thoughts on this article and repo me () if you like my ideas.

p/s. I kept investing in markets throughout the last year. The current bull run has completely wiped of my losses. In March, 09, I was at -34%, in April the position improved to -23%, and now in May,09 I am at +9%. All this happened because my SIP's fetched high quatinties during the bear phase of Sep, 08 to Mar, 09.

:thumbup: Thanks J4k. Very Good Info. Repped you twice recently. So cant give it now. Repo Pending for this Post.

It was tough for me to grab all the terminologies. But very simply put. I will do some search and try to know more about the things you mentioned here and will post my doubts/queries here later.

Kix those are great advices, even after having you say that you dont know anything about it ?
My only question is what is left in market ?

Very good :clap:

Originally Posted by kirankumargb

Kix those are great advices, even after having you say that you dont know anything about it ?
My only question is what is left in market ?

Very good :clap:

. What I said is very common knowledge, posted on many websites and found them to be true with personal experience also.

I had tried equity trading in 2002/3, and although I did not make any loss, I did not profit either. I wish I had started with SIP at that time but I purchased a property (flat) instead; not that it turned out to be a bad investment (flat is worth quite a lot now, appreciated 3 times; will write something on the "Real Estate" section).

As to your question, "what is left?", the answer is quite a lot. Some of my colleages trade in commodities also.

So any more suggestions?

I was always uncertain with the Terms Bulls and Bears. After reading your post I understand that Bulls means when the market is gaining points rapidly, while Bear comes when the markets movement are either slow or negative. I hope I am right, If not please clarify.

P.S: Repo +

Originally Posted by Manish

I was always uncertain with the Terms Bulls and Bears. After reading your post I understand that Bulls means when the market is gaining points rapidly, while Bear comes when the markets movement are either slow or negative. I hope I am right, If not please clarify.

P.S: Repo +

Your understanding is absolutely correct.

Thanks for the rep.

That's nicely compiled J4K...Although i haven't started investing in stocks, but surely do it soon(After appraisal)...

Rep+

Plz Rate such good threads guys. Rated 5/5

Originally Posted by kirankumargb

My only question is what is left in market ?

practically the major part where money is made by the large traders like Futures, Options, Commodity Market including Commodity spot and Commodity futures, ETF, currency market including Currency futures, Hedging including cross country and cross currency hedging etc.


but for the small investor with limited knowledge of the market, there is only one thing to add the the list from J4K, and that is ETF.
ETF is a more like a mutual fund linked to gold. The advantage is that, unlike gold, you can invest even small amounts in ETF and can also easily liquidate your holding. I would advice any small investor to include ETF also in their diversified holding. Generally the Stock market and the Gold market follow a divergent path. So a portfolio with ETF helps in minimisation of risk.

Also keep some funds handy and identify some good blue chip scrips. When ever the markets crash heavily (say 3000 to 3500 points) it takes the blue chips also down with it. Try buying them at that point. They would bounce back much faster than the overall market. (e.g. Powergrid traded around 55 in Oct and is now around 120 i.e. a jump of 118% as against 75% jump in sensex)

And finally, never invest in stock market with borrowed funds. You should be ready to forget your money for at least 12-18 months if the need arises.

Great pachabhut. Expecting a brand new article from you. Will rep you for sure.