The year 2013 has ended. And today being the first Sunday of 2014, I have luckily got some free time to sip a cup of hot coffee and to think about what might happen in 2014, and how it would affect stocks, investments and my portfolio.
First Sunday Coffee || 2014
Indian Markets Are Not Cheap
With large cap indices like Sensex and Nifty50 trading at 18-19 times earnings, it is quite clear that as of now, Indian markets are not (very) cheap. [Read more about how to know whether Indian markets are trading cheap or not here]. Experts might tell you that current PE ratios are 14 and 15. But that is because they are considering earnings in 2015 and 2016. Not 2013 and 2014. So, don’t believe too much of what experts have to say. And if you like watching business channels like CNBC, then do it for just one reason. 😉
Keep Cash At Hand
If the markets are not cheap, then it’s a good idea to stay out of markets for the time being and start hoarding cash. Because it is only a matter of time, when markets would once again regress towards the mean and correct (valuation wise) and give some tremendous buying opportunities. And you don’t want to run out of cash when there is a distress-share sale. Isn’t it?
Invest In Business, Not In Politics
With Aam Aadmi Party’s surprising win in Delhi, it seems that everybody has become an expert in politics. And with BJP and Congress ready to fight it out in the coming elections, it is inevitable that someone, somewhere would recommend you to buy shares of companies which might benefit from either party’s coming to power. Though it may seem like a good idea to buy stocks of companies which are friends with possible election winners. But this can be risky. You can never be sure of who is going to win these elections. Did any one of us had even a slight idea that within 6 months of active politics, Mr Kejriwal would become Delhi’s CM? So the point which I am trying to make is that almost anything can happen in politics. It is better to buy shares of a company because its business is good and its shares are available at a good price. And not because its owners are friends of Prime Ministers-To-Be. Period.
Beware Of New Banks
With only a few months remaining before the new banking license are awarded, its obvious that one would become quite excited about this episode and try to guess the names of new banks before RBI does it. Though it seems and is highly possible that prices of applicants who get the new banking licenses would soar, the fact remains that banking as a business is not easy. And though India is under-banked, it is also true that the existing banks are pretty strong and would not allow new players to take their turf easily. So, I am not saying that don’t buy stocks of new applicants. I am just saying that it’s a bad idea to become over excited about the whole issue. Just be fearful when others are greedy. Remember Reliance Power and you will understand what I mean. 🙂
I Am Not Investing To Beat The Index
This thought is something which has always been one of my key decision makers. I have always believed that money should be available when one needs it to be. And that should be the whole purpose of investing. So, it does not matter whether I am beating the index or not, as long as I am able to fund my needs, desires and at times, greed(s) 😉 So beating the index would be great, but I am not WarrenBuffet, and I am not going to loose even one night’s sleep over it.
So that’s it. These were some of my early-morning-first-sunday-of-new-year-thoughts :-).
I would be happy to hear your thoughts as well as your arguments against my thoughts. It’s always better to debate the initial (raw) thoughts rather than older (established) ones. So do let me know…
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