Tuesday, February 08, 2011

Financial Wilderness



As we are progressing into the Month of February uncertainty creeping into the Economy & Stock Markets. Euphoric and exuberant voices on idiot boxes I mean television sets , were shut from some time . One will say we are in bull market , other will say bear and some other will say , We are already Doomed .
Wilderness is a state where people have to spent time in Forest without any basic facilities , life will be full of uncertainty in despondency without any aim. Wilderness is the period where children of Israel spent 40 years before entering into the promise land of God , after they depart from Egypt. During the same time nevertheless of Wilderness God comforted them .
Because of their Disobedience & Indiscipline ,they got delayed 40 years to pursue the promise land that flow with milk & Honey ,which normally takes 40 days to reach . If we observe the current trend in stock market, we are entering into the wilderness where our patience will be tested . With High inflation Environment ! Hedge funds & Emerging market dedicated ETFs (Exchange Traded Funds) started withdrawing their investments from Indian markets. Markets have taken a U turn from 20K to 18K levels . Retail & HNI investors are confused on to what is going to happen in market thinking that are we going hit all time low again ! Investors just started investing from past 6 months were not able to see their portfolio fizzling . I am not here to time the market which every Investor tend to do every time and I am not going to discuss how many days we will spend in wilderness. But what are the principals one should follow , and discipline to habituate during the course of Wilderness. There is immense exuberance in the Economy , people are not deferring their spending plans , Every asset class in the world is going up except stocks in India .I am not sure how many vegetables you can buy for thousand Rupees ( 22 Dollars) at vegetables stores . But For beginners in Stock Market I am very much confident and sure you can start constructing portfolio of stocks with all recipe of sectors with just one lac ( Two thousand Dollars) ! If you want to build a successful portfolio.
First & Foremost thing one should learn ,avoid timing the market I.e looking for bottoms levels of the market so one can buy stocks at much more cheaper rates . Time is stupendous and key essence of your investments , there is no good or bad times for market , market runs on its own trade cycles and time , where majority of of the people fail predict these Bottoms & Ups. According to one study of the American stock market over a 30-year period between the mid-1960s and mid-1990s, 95% of the significant market gains over this period came in just 90 trading days. That's 90 days out of a total 7,500 trading days – just around 1%. Investors who had missed even one of those days would have lost heavily. In India too, often large gains have come on a single day. The most memorable such day was May 19, 2009, when the Sensex rose 17% on the back of the re-election of the Congress -led United Progressive Alliance government. So, unless you can predict which days will be the big market gain days, the only way to capture them is to hang on for the ride even in the downturn. No stock pundit in the world predict those days .If they predict correct also its just their pure luck.
Its futile exercise spending time to catch the bottoms & Ups in the stock market and always stay invested .
There is always some thing to worry in stock market !! Show me a single day where we had a clear picture in stock market . In 2009 February deflation was the problem , today it turned as inflation .There is no single rule that works always in stock markets . IF one want to be successful in the journey of wilderness they have to be disciplined in investing .
The qualities an Investor ought to have include self reliance , common sense , open mindedness, flexibility , willingness to do independent research , A equal willingness to admit mistakes and ability to ignore general panic and most important PATIENCE. These are the few qualities one should habituate to become a successful investor in all times including Wilderness. The biggest enemy in stock is not your stock broker or company management Its your Emotions .Policy makers should recognise present inflation is not on Demand side But more on Supply side . Tightening interest rates is not a cure for inflation , Its just a first Aid. This is the time bank's lending should go up to priority sector at cheaper rates to control raising prices in long term. Since change of Growth Corridors to west in short term , Markets will be expected to be volatile . Even though some hot money may flow out . India will attract investors interest over longterm because of its intrinsic growth .For My readers in United states Don't worry Our Printing Machine Bernake will come up with one more recipe QUANTITATIVE EASING if Dow falls to 10000 levels.
If analyst says we are going to to touch lows? JUST Rejoice , you can buy chips at much more cheaper levels , use this Panic period as stock sowing time and get ready for harvesting soon . Historically Feb month was a volatile month with renewed anticipation from Union Budget. When Inflation at high levels then Equity market is the best avenue to tide against the inflation , As a growing nation and kind of bureaucratic & political mismanagement inflation and disinflation will be a problem Always in the days to come .Indian Markets will prove its resurgence and resilience at some point of time .
If anyone want to pursue their promise land successfully , then they have to learn and practice the principals to spend time in Wilderness.

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