In last few posts about Indian markets making new highs in 2014 and possibility of Sensex reaching 40,000 in next two years, I have been quite vocal about the recent rally. I have a strong feeling that Indian markets are pricing in a lot more positive news than what is actually possible in reality. In simple words, it’s the over optimism about the next government that is driving the markets now instead of fundamentals.
Just today I had a chat with a colleague of mine who seemed much more confident about Sensex reaching 35,000 in next 1 year than he was about Fixed Deposits giving more returns than Savings Account. 🙂 🙂 🙂
But when old timers like this person are so excited about future of stock markets, then can we blame the new ones entering it now?
I don’t think so…
Over the last few days, new recruits have joined my organization (employer). For sake of introduction I had a small talk with these guys. And the small chat made me realise that they were well on their way to commit the typical newbie mistakes which are quite normal in rising stock markets. These people are yet to get their first salaries and they are already sure what they want to do with it. If it was just about shopping for things which they always desired but never bought, then it would hardly have been an issue. But rather they are interested in putting their first salaries in deadly F&O (Futures & Options) game. And that is what concerns me. F&O are instruments where you can loose more than you invested. And I am sure that these guys are yet to understand this harsh truth.
To put it on record, I don’t think it’s a good idea for them to get into F&O…
And for benefit of many students who have recently joined their first jobs, I decided to jot down a few pointers….
Young & Fresh Out Of College?? Read Below…
|Done With Studies? How to manage your money starting from first salary.|
- Stock markets have rallied sharply. It’s very easy to feel that markets are the place to make a quick buck. But this not true. Its tough to consistently make money in stock markets. Period.
- You might think that because markets are continuously rising, there is no risk in stocks and it will continue going up. This is also bull shit. Higher (& quicker) the markets go, riskier it gets.
- No matter what your parents, new colleagues or friends tell you, just buy a simple life insurance Term Plan before investing even a rupee in stock markets. Do not go for endowment or money back plans or ULIPs.
- Do not buy stocks now. Its not a very good time to start investing. Just wait for a while now.
- But if you still want to go ahead and buy stocks, keep a small amount as your ‘play-money’. Use this money to buy shares you want. But…do not add any additional money even if your investments become profitable from the very first day.
- And even if you do invest this play-money in stocks, try to invest them only in shares of good companies having predictable businesses or pick stocks for really long term.
- Start paying off your education loan as soon as possible. (if you have it)
- Do not use credit cards just because it gives you reward points.
- Start investing in good index funds via SIP mode.
Stick with what I have said above and I assure you that you won’t regret it when sanity and common sense returns to our stock markets. 🙂 🙂
And if possible, read this.
Happy investing and be careful out there.