POSTED BY October 8, 2008 ONE COMMENTON
As I write this article on Oct 9, 2008, Sensex is below 11000 (10850) … Most of the Mutual fund investments returns (since peak of Dec 2007 – Jan 2008) must be down by 40-50% (lump sum investment) and 25-35% (if SIP). Looks like Sensex is heading towards it original value of 6000 or 7000 which will bring losses to 60+%.
Though most of the investors know in theory what to do in these situation, most of them will still not buy, Now the physiological investing problem happens, For long term investors its the best time to invest, but no one will take the plunge after burning there hands so badly.
Remember, the global markets are looking bad, not Indian. Indian markets are just following US and European markets because they are the “Big Boss”.
The US markets and European markets are the culprit for the global slowdown. The sub-prime crisis related issues will have deep impact on US and global investment banking firms. India or other Asian countries are just bearing the pain along with global stock markets.
Yes we are in Bear markets, in fact every country stock markets are, but the bearishness of markets are exaggerated because oh high oil and US sub-prime crisis and subsequent Bank Failures.
India is not short of its local good news like
- Nuclear deal
- Stable growth of more than 8% p.a
- Inflation now coming down from its high (and as Oil comes down, the inflation will come down further)
- Strong Corporate Earning and Many companies on the verge of setting global standards (Reliance starting its oil production soon, etc etc)
Once things are in control (should be soon, but no one can be sure), another bull market should be more exciting than the last one. Prices will move like rockets and people who will benefit most will be one who will do investments in these down markets.
This questions was answered by many pundits when Sensex was around 15,000-16,000. Some said YES, some said NO. People who did investments must be thinking why they did it and people who did not must be happy for not investing that time. The scenario could have been exactly opposite if markets would have gone up.
The best idea is to invest a part of the money now, If the markets go down from here, You still have another part of your money in hand which you can invest later and again invest more if it goes down further. It will ensure that your average cost is not very high, and a decent run in markets will result in profits.
If markets go up after you buy some mutual funds or shares, you at least are in profit and not LOSS. which is a privilege now a days in Market. Once there is a good confidence that markets are stable and wont fall further, you can then do rest of your investments.
Remember, Don’t try to make profits in stock markets, just try to avoid losses and make sure that you preserve your capital. If you can do that much, profits will be at your feet.
As Warren Buffet said “We need to take very less correct decisions in Life, as far as we make sure that we don’t take many wrong ones”