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08 August 2009

Lots of Money To Be Made - Really.

This year is going to be start of another bull market and it is likely to run for at least next few years. After Oct' 08 lows, everyone (including myself) thought that the market is going to hit another bottom. The stock market proved again that anything can happen. It never made another low and probably won't hit a new bottom again. The stocks which traded in hundreds came to as low as to 10 rupees. For example, my preferred stock HDIL made a low in 60s and went up to 300 rupees.

By looking at the patterns, I feel that there are lots of money lying with mutual fund houses, domestic institutional investors and particularly Life Insurance Corporation of India (LIC) that needs to come to market. These educated folks don't invest like kids. They are guys who make the markets move in either direction. These folks have real huge money and many of them are sitting on reasonable proportion of cash. This tells us that those money has to come to market sooner or later.

Ideally, one should have started to invest during October so as to "bottom fish" but literally one cannot bottom fish as no one knows where the bottom is. So, the key to successful investing is systematic investment. Like SIP plans in Mutual Fund, one should go for building portfolio at crucial support levels of each stock. By this, one can reduce risk and maximize the returns. While "buying at bottom" and "seeing at rise" is a common strategy, the strategy cannot be applied directly. One has to systematically plan for investment, spilit up the prinicple amount into at least 4-6 portions and invest at every crucial support levels (or for every 2000 points drop/rise in Sensex).

When you invest/trade like a machine, you must make a real lot money. Period.

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