Diwali is the festival of light. After Dussehra is over, all the shops in India gear up for their Diwali preparations. In India, many companies gives Diwali Bonus to their employees. Some super-rich employers have distributed Cars or even flats to their employers in the past because they achieved supernormal profits those years. Other employees at least make sure to distribute sweets or dry fruit boxes to their employees. We joke about most favorite sweet of employers -‘Soan-papdi’ that we forward to our relatives as it is without even opening it’s gift wrap. Apart from Diwali Bonus, Gifts and Sweets, Diwali is also a season of evaluating how your portfolios performed in first two quarters of the Financial Year and accordingly rectify them for remaining two quarters. Half year churning of Portfolio is important activity for the long term investors to make sure they are achieving their CAGR returns targeted according to their financial goals. There are five important days of Diwali – Dhanteras, Narak Chaturdashi (Chhoti Diwali), Laxmi Pujan (Badi Diwali), Deepawali Padwa and Bhai Dooj. In the year 2022, Diwali is starting with Dhanteras on 23rd October and will end on 26th October with Bhai Dooj.
Like Akshaya Tritiya and Dussehra, Dhanteras is one more important day when people in India buy Gold. Being agricultural economy, our ancestors made it a ritual to buy some gold on every auspicious occasions or after harvest, as a hedge against uncertain monsoon rain. Gold has more of a sentimental value in ladies of India. It is the most loved precious metal of India since ancient times. New generation may or may not buy jewelry but they certainly buy Gold Coins on Dhanteras. Other bullions which are preferred are bars of Gold. Financial Advisors always allocate 5% of total investment portfolio to Gold through ETFs or Sovereign Gold Bonds. Few people also started investing in digital gold in last 5 years. Dhanteras is also important for Market participants because most of the Brokerages houses in India gives their Diwali Picks on Dhanteras. They give analysis of how Markets performed from last Diwali to this Diwali and how markets will perform from this Diwali to next Diwali? Make sure that you will write down all the Dhanteras Picks 2022 in your excel sheets with their targets and time horizon. Don’t forget to write who suggested it and for what durations. If you can write the rationale behind that selection in a comment column, you will understand what story they are playing.
Muhurat Trading happens on the evening on the Laxmi Pujan day (Badi Diwali) on both the important bourses. On the Muhurat trading traders and investors make sure to take some profits home by squaring off some of their positional trades, and they also buy some new stocks as a ritual to take part in the wealth creation journey to keep their spirits for the new upcoming Samvat which starts from the Chopda Pujan of Deepawali Padva. Muhurat Trading will happen on 24th Oct 2022 from 6:15 p.m – 7:15 p.m. this year. Participating in Muhurat trading every years gives you a feeling that you belong to the investing/trading community of India. Avoid taking big trades on Muhurat trading day due to short session followed settlement delays. Muhurat Trading is only a Muhurat to start your investing journey in the new Vikram Samvat. Even though Indian companies no more follow Samvat to Samvat as their financial year, they certainly do their Chopda-Pujan (Puja of accounting books) on Deepawali Padwa day. In India majority of companies follow 1st April to 31st March as their Financial year. Some follow calendar year 1st January to 31st December as their financial year. Only few shopkeepers follow Samvat to Samvat as their accounting year.
In one of my previous posts, I explained which stocks can give good returns till Diwali 2022. In this post I will explain how you can invest Rs. 10 Lac on this Diwali to get good returns till Diwali 2023. Please note this post is only for beginners and not for Professional traders/investors. The sole purpose of writing this post is to guide newcomers to start their investing journey this Diwali. I am assuming that starting capital of Investor in Rs. 10 Lac and he/she will increase his/her investment in every year.
- Risk Profiling: Risk Profiling happens after doing proper analysis of one’s financial health. Investors should take professional help or do some research on internet for determining their risk profile. Based on the risk profile investors can be divided into: a) Aggressive (risk takers) b) Moderate c) Conservative (low risk takers). My suggestion is if you are in a share market, you have already taken some risk. Increase your risk appetite to at least Moderate level. Remaining Risk-averse can keep your Capital safe, but you won’t make money. For making good money, at least take moderate, calculated risks.
- Investing Profiling: In Market, first thing you will have to decide whether you want to become an Investor or a trader. You can be both simultaneously but it is not recommended. This profiling helps you decide your duration of Investment. My experience says that Wealth can be generated only in the long term investment. Intraday trading is very risky and positional traders do make money but loose many opportunities by booking profits too early. Real money is earned only in long term investing. Only 0.7% traders close their accounts in positive rest 99.3% only make losses. My suggestion – think market as a Marathon and not as a sprint running. Invest for long term.
- Assets Allocation: Depending on your age and income, you can decide what allocation can be done to which assets. If you are a moderate risk taker, keep your Equity to debt ratio somewhere between 60:40 to 65:35. Speaking about Rs. 10 Lac investment, you can allocate 6.5 Lac to Equity and Equity Linked Assets and 3.5 Lac to Debts. Diversification is important in both Equity and Debt investments.
- Diversification: Never keep your all eggs in one basket. There are many debt instruments like, Debt funds, Bonds, Govt Securities and so on. I don’t recommend hybrid funds due to annuity involved. Recently, bonds like Bharat 22, SGB, etc. have seen huge interest. But they are linked to Public Sector companies and Gold respectively. If you want to generate better returns with low risk, go for some good debt Mutual Funds. Bonds are for huge investments. For retail investors Mutual Funds are enough. I will explain where to put your Equity allocation in more detail.
- Stocks and Equity Mutual Funds: Now let’s see where to put your remaining 6.5 lac rupees? There are two ways to invest in Market either directly through shares or through mutual funds where you handover your funds to market experts. If you are a salaried person, who can’t sit all the time in front of screen to watch how your stocks are performing you should stick to Mutual Funds. Newcomers who don’t have sufficient knowledge about investing should also invest only through Mutual Funds. There are actively managed funds as well as passively managed funds. Passively managed funds which invests directly into indices are considered safer bets because in the long term markets have given only positive returns. Nifty has give 16% CAGR returns since its inception. Thumb Rule: If you are earning above 12% CAGR in Mutual Funds and above 16% CAGR in Stocks, you are doing good in investing. Allocate 60% to Mutual Funds and only 40% to direct Stocks. So now, out of Rs. 6.5 lac, your 3.9 Lac will go into various mutual funds and remaining 2.6 Lac will be invested directly in the stocks.
- Mutual Funds Investing: In India, salaried people make good money in Mutual Funds because they invest through SIPs mode and do it for really long term. They don’t fall to traps of quick money which Traders promote on Social Media by sharing fake screen-shots or photos of only profitable demat accounts for that day. Truth is there is no short-cut to wealth generation. Disciplined, consistent investing can only generate wealth. Because you need to give some time to your portfolio for ‘magic of compounding’ to happen. Never under-estimate the power of Mutual Funds. The flow of Mutual Funds is the only reason why Indian markets are resilient to global economical slowdown. Where will you invest your 3.9 Lac? You can start at least 3-4 SIPs and do 2 lumpsum Investments by doing proper research. As mentioned above for safety, you can do one SIP in Index Fund and one SIP in Bluechip Fund. Third SIP can be done in Fund which invests in Large Caps and Midcaps majorly with very negligible portion in smallcaps and Fourth SIP can be done in a FlexiCap Fund.
- Stocks to Buy: Now lastly, to invest remaining 2.6 Lacs, you can choose Market Leader Stocks from Nifty 50 index. You can do SIP in stocks if you want to create Focused portfolio of 10-15 stocks. But if you are planning to create well-diversified portfolio of 20-25 stocks, then you can also select companies from Nifty 100 index. Don’t go beyond top 100 companies. I am working in Market since 2009. I have seen many companies rise and fall in a short period of decade. Corporate Governance is big issue in India. Regulators are very lenient and there are many loop-holes in laws. If you want to keep your capital safe, stick to only well-known and well-researched companies with very high liquidity in trading. You can do value investing in few stocks which have low PE, but without proper allocation in the Growth stocks you can not generate that extra Alpha which is required to beat the rate of inflation. Have some exposure in stories which can become next big things. Avoid investing in Sectors which are cyclic in nature, if you want to invest for really long time. India has a second largest population. Some sectors like consumption, FMCG, Pharma, etc. will always remain ever-green here. But also know that India is rapidly doing progress so sectors like Auto, Financials etc. should also be considered while making your portfolio. I have given you outline of where one can invest as a beginner. I advice you to please consult your financial advisor and take proper investment decisions. Happy Diwali 2022 to all in advance. May all your dreams come true next Samvat. May Maa Laxmi keeps blessing you and your family.
Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered analyst. He is NSE’s Certified Investment Analysis Professional, NSE’s Marketing Professional Level-4, AMFI registered Mutual Funds Distributor, Authorized Person at IIFL Securities and MBA, B.Tech. This post is for educational purpose only. Consult your financial advisor before taking any investment decision. Thank you.