Be fearful when others are greedy and be Greedy when others are fearful
-Warren Buffet.
All of us have read this but what does it really mean. And if u know it means that one should start accumulating stocks when others are afraid to invest, how will you go about it ? I will tell you how. Read On...
Past two weeks stock markets have fallen a lot. Everyone is saying this is the right time for investment. But in such a scenario one might be thinking, what if it falls more ? If i buy now and it falls more I would be a fool. So let me wait. And this is how people start bottom fishing. Bottom fishing means trying t find the real bottom, trying to find the exact downside level where the falling would stop. But no one can say where it will reverse from. Might also consolidate on lower levels for some time. These uncertanities are peculiar characterstics of a bear market. Recent studies have shown that we have faced bear markets every 8 years. 1992 was the Harsghad Mehta scam, 2000 was the blowout of the dot com bubble and Ketan Parekh scan. And now in 2008 there is this global meltdown. Typically bear markets occur every 8 years and last from 2
months to 28 months on an average.
We choose to benefit myself by this information this time. We choose to start investing in a few select companies in such times. Yes ! We start investing, but with a definitive plan. We start accumulating shares slowly and steadily. First step is to decide what amount you want to and you can afford to put in equity markets. This is a personal subject matter and one has to do his/her own risk assessment.
Now once decided, we divide our capital into 2 parts first, for example 70% and 30%. Out of the 70% we start accumulating shares using only 20 % capital of it. Means you will be using 15% of your original capital, and then ADD ON DIPS strategy. Now the original 30% you have kept aside is for the times when there is an expected fall either in the stock market or in the stock
you are accumulating. Remember very well that averaging always works in the favour of the investor and works against a trader.
Now with all this information we are ready to make investments with a proper plan. Still one question remains by and large which company to select out of those thousands. Well, I would suggest that also -
1. Larsen And Toubro
2. Future Capital holdings
3. Relaince Capital
4. ABAN offshore
5. TATA Steel
7. BHARTI Airtel
8. PRAJ Industries
9. NTPC
10. CAIRN India
11. GMR Infrastructure
12. GOLD ETF's
The list can continue and go to more than 75 stocks. Just a small homework before investing would help. After all its our hard earned money we are putting. One can safely start investing* in these companies with an Investment horizon of 3 years.
*
Read disclaimer.
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