The times are good. Isn’t it?
Markets are making new highs almost every day now.
Rising Sensex (25K+) is inches away from falling Gold prices (27K+).
Your portfolio is up and it seems it will continue to do so for next couple of years.
The biggest bull run of our lifetimes has already started.
The last sentence is picked from many expert comments floating around. It makes me sit back and think. Didn’t we have the greatest bull run of our generation from 2003 to 2008?
Why is it that everytime markets move up and there is a general feeling of All-Will-Be-Well, experts start making statements about mothers & fathers of bull runs? If they are so smart, why aren’t they putting all there money in stock markets? For that matter, if they are so sure, why aren’t they borrowing money and putting in the stocks they feel will become multibaggers in next 2-3 years??
I don’t think any expert will be able to answer these questions.
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| Good Times | Have They Just Started? |
I was reading this postby Vishal and as always, he has rightly highlighted the fact that just because prices of stocks we hold has gone up, does not mean that we are right. You might argue that the mere fact that you bought a stock was because you felt that it would rise. Fair enough. But my question is, that did you know how much or how fast will it rise? If your answer is a Yes, then I would say that there are atleast few people who do understand market dynamics. 😉
If you have followed Stable Investor, you would see that few of the stocks I discussed in recent past like ONGC, IOC, SAIL, Clariant, etc have rallied like anything. But just like you, I liked these stocks at prices back then. And I did invest in them because I felt that they were undervalued at those prices. As of now, these stocks offer mouth watering dividend yields (on purchase prices) and have quite a substantial capital appreciation part. So am I the next Warren Buffett?? 😉
No. I am not. And I cannot be. Period.
And to be honest, the sudden rise in share prices of these stocks came as a big surprise to me as well. I personally prefer slow growing, dull and boring businesses.
And one must always remember. A thing that is rising cannot continue to rise forever. And markets have this uncanny knack of surprising us. Both on the upside and more importantly on the downside.
It is at this time that quotes like the one below offer some seriously sagely advise.
“Remember God in good times and Equities in bad times.”
This quote was given few years back by Prashant Jain of HDFC Mutual Fund. And according to me, its one of the best quotes that we can use as a decision making tool while deciding whether to invest or not.
Not sure if an explanation (for quote) is required here but I would still give it for the benefit of new investors:
The Good Times here make reference to markets that have already rallied up a lot. If you buy at such high levels, chances of earning acceptable returns (more than safe fixed deposits) from your investments go down substantially. Such times are good to sell and book profits if you don’t intend to hold your stocks for decades. On the other side, when markets are down and everybody is selling, it is a very good time to buy shares of good companies which have the ability to survive the bad times and prosper in good times. A recent example of making a lot of money by investing in bad times can be the investments made in 2009. Investments made in large cap companies in 2009 have now turned out to be big multibaggers!!
Having said all this, I don’t intend to be known as a pessimist. But I prefer bear markets when I am investing and bull markets when I am selling. And since I am in accumulation phase of my investment life, I pray for Bear Markets and Crashes. 🙂
What do you think? Good times are here to stay or not? Do share your thoughts.
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I hate to say this but I too pray for Bear Markets & crashes.
Prashant Jain is a joke the way he has handled HDFC MFunds last 2 yrs.The results speak for themselves
Then we are sailing on the same boat. 🙂
But since a rising tide lifts all boats, we need to be much more careful in bull markets than in bear markets. 🙂
excellent analysis talking of mutual funds all have done badly including hdfc
Yes,we need to be very cautious. Do you think investing in Balanced MF or Midcap MF is answer if one has to invest.
Thanks Vijay
I think MFs are designed to work and provide returns which are average of its constituent stocks. And when compared with some of the fast shooting stocks, the returns by MFs are overshadowed.
If one is conservative and has to invest, its a good idea to stick with Balanced MFs. Midcap funds by design will be more volatile, both on way up and down.
I can't agree with you 100%. When markets are at such a peak, you got to be stock specific. There are still quite a few opportunities and will always be there no matter what the Sensex level is. But you are right, you can't dare to invest in broader market at these levels.
Thank you for your early reply.
just one word: awesome
Thanks Pratik 🙂
it looks like rally started.
May be yes…. But I guess its too early to take a call whether it will continue rising or not…
What to do when we already have 2 crores in hand ? How to utilize it properly, so as not to lose it over next 20 years because of inflation & a bit of regular monthly expenses ?
Thats great Rahul 🙂
Though I have shared an example of a person who did have truck loads of money and what he did with it, I think this will make for an interesting post idea. I will try to come up with an answer to your question and do a post on it.
In the meantime, you can read about the person I am referring to at the following links:
First:
http://stableinvestor.com/2014/04/frustrated-guy-in-job-retire-at-37-part-1.html
Second:
http://stableinvestor.com/2014/04/frustrated-guy-in-job-retire-at-37-part-2.html
Third:
http://stableinvestor.com/2014/09/frustrated-guy-in-job-retire-at-37-part-3.html
Thank you, I have gone through those articles. Trying to understand various aspects.
I started a bit of investment in MFs. I have been trying to research how can I use this 2 or at least 1core (or say 50 lakhs) in equities. Problem is how to invest this big lump sum amount in MFs or Stocks. Although I started SIP in a few MFs after a research of 2-4 months, but again, this is like nothing when I see my lump sum money sitting idle in FDs.
One of the problems new investors face w.r.t equity investments is 'how' to do it. Somehow I started MF investment via fundsIndia, but now how to begin with stocks. I have been reading a lot of blogs/articles but I request you as well if you can formulate an article dedicated to 'how to start investing in stocks' or how you or your group members here on this website are already doing it (Just an example, only because of no knowledge of 'how to', I could start MF investments after an year of starting thinking about it. So similar case/delay might happen with Stock investments as well). What platform/broker to use. What are your experiences. Reason I ask most of the things about you is because I feel I am into this stable/longTerm/Value investment style, although it's just the beginning. I have gone through almost all of your articles to get a feel of equity investment ideas.
Second problem is like my personal problem of lump sum amount. STPs in MFs (liquid to equity) help and I even tested it for 6 months. But I don't feel good in transferring 10/20 lakhs into equities in just a few months via STP (or is it the only way to do it ?). It's almost like transferring lump sum into an MF and then facing a market crash after 6 months. Property/Insurance/FDs etc are already there in my case, so the confusion continues only for MFs/Stocks because in past our family has never invested in equities.
I apologize for any mistake I do w.r.t financial terminology, I am completely new to all this.
Hi,
If you're going to write/suggest something then please consider another point that around 40 lakhs is being added into the 'cash' reserve/(problem) per year – again, in Bank, not in any equity. Of course, a bit of 'all the cash' I started transferring into MFs as I mentioned before.
Thank you for all your help.