Investment Archives - Stocksbaazigar
Stocksbaazigar - The Ultimate Wealth Creator

Investment

Fear of Missing Out

by

‘Fear of Missing Out’ (FOMO) factor in the Stock Market is driving so much liquidity in Market that every bearish move is being negated by Buyers immediately. On Wednesday when a bearish engulfing pattern was seen in the Nifty Chart, Bears tried to short Market immediately after it opened gap down on Thursday. But Buyers were ready with their cash to invest on every dip, and Nifty managed to close near 10300. On Friday 26th March again Nifty closed above 10300. Nifty is holding 10300 from the last three sessions which clearly shows that it can move towards 10600 again. When Nifty made a bottom at 7511 in the March month many Investors didn’t invest in the market as they were fearing further fall in the Market. Analysts who come on Business Channels talked about 6500, 6100 then. Those who invested at those levels are sitting on 30-35% profits now as most of the stocks gave good rally in the last 3 months. Some even made 52 weeks high. Traders started booking profits since 10,000 levels on Nifty. Still Nifty continued to move towards 10600 thanks to FOMO factor in the Market. Stocksbaazigar won’t be surprised if Nifty attains much bigger targets like 10800, 11000 in the coming days due to this strength in the Index. Nifty will fall again to 7377 again from where it started rallying in a rising wedge pattern. The only question is WHEN? Dow Jones showed good correction on Friday. It has closed near its major support level. But a similar situation of FOMO is prevailing in the US Markets. Fed infused liquidity in the market, provided with stimulus packages, and ensured that Markets won’t crash beyond certain levels. From the experience of the 2008 financial crisis, they learned their lessons and were quick to understand that only ‘Liquidity infusion’ can boost the confidence of Investors in falling Market. Trump Govt started buying Bonds, made some policy changes in lending, and also focussed on reducing China-US Trade war tensions to save their economy. Every accusation on China for spreading Coronavirus fuelled the Trade war between the USA and China in the April-May months. From June, we have seen that President Trump has stopped tweeting about China as he understood that it can affect markets again. FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) are performing well. Foreign Portfolio Investors are searching for cheaper investing avenues like emerging markets to park their money again. They are ready to take Risk-On trades again which is helping Indian stock markets. FIIs are net buyers in Indian Equities in the last 3 months. In India, RBI and Govt of India too ensured that there won’t be any liquidity crunch in the Market. Banks and NBFCs are no more in panic mode. Moratorium related mandates are given by honorable Supreme Court, so there is no confusion anymore. Investors are doing ‘delivery based buying’ in stocks like Bajaj Finance, HDFC Ltd, etc. which shows that they are ready to go against the verdict of Brokerage firms which reduced ratings of these stocks. After Franklin Templeton’s Credit Funds issue, investors redeemed their money from Credit Funds but they continued to do their SIPs in Equity Mutual Funds even during Lockdowns. Many new investors joined the investors club of India. A record number of Demat accounts were opened by brokerage companies in the last 3 months and many investors started the first SIP of their lives during this pandemic. This liquidity in Market increased strength of Market and reduced fear considerably. It attracted investors who were sitting on cash. They were waiting for Market Crash after the second wave of CoronaVirus but Nifty didn’t give up. It took support at 9500 levels and gave a rally of 1000 points in no time. If Nifty remains above 10300 for some more time and keeps achieving higher targets like 10600, 10800; fear of missing out factor will increase further which will take Nifty to 11000 or even 11200 before December 2020 Nifty is trading at 26 PE which seems highly expensive if we consider the earnings of companies in Q1 of FY 2020-21. RSI level is also showing that Nifty is in overbought territory. More than 1 Crore people in the world are infected by Coronavirus now, still Capitalist Market is not seeing it as a NEGATIVE trigger for bringing Indices down. In such a situation, every correction in the Market will only act as a buying opportunity. The V-shaped recovery in the Market has increased greed on Investors. Retail investors will get bull-trapped by big traders very soon. But the question remains the same – WHEN? Sometimes, we fear that it is the Traders Market, as fundamentals don’t support the current levels. But on the other hand, we understand that the market is forward-looking. It has already discounted the effect of a pandemic on economics for the FY 2020-21 and it is rationalizing itself for the Next financial year from right now. Traders with good trading skills don’t fear uncertainty. In fact, they love volatility as it helps them gain more. Only Investors are in a dilemma whether they should wait with Cash in hand or should invest (due to FOMO factor)? Stocksbaazigar suggests you to stop timing the market. You can never catch the bottom. All you can do is analyze the charts and speculate based on it. Investors kept waiting for right levels and Nifty ran by 3000 points, if they had invested it earlier they might have gained good capital gains so far. I hope they won’t regret after Nifty reaches 11,000. If they start investing in small quantities now and keep on adding more in every market fall, they will still remain in the Game. So it’s always better to stay invested rather than feeling left out. Create a watchlist of good fundamental stocks where you want to invest and add small quantities at every dip in the stock prices. Keep your positions light and well-diversified. If you will follow … Read more

12 important steps to investing

by

Investing is an art. We have seen ‘Why Investing is important?’ Now let’s see what care should be taken while investing? Authorized intermediary: There are many investment avenues and different investment products. There are hundreds of Financial Services firms in India. It is important to approach SEBI registered Financial Advisers only. They will recommend products which are managed by authorized intermediaries only. Don’t fall for online Advertisements. Research is very important: It is important to do enough research about Authorized Intermediary through which you are doing the investment. Read about reviews on them, visit their websites, if possible talk to their existing clients etc. Same is applicable for the Investment products. You are investing your hard-earned money. Do proper research before investing in any product. Explore the options available: It is important to explore all the options available to you. It will help you make an informed decision. In Financial Services, client servicing is frequently needed. See if your Service Provider gives you customized services and proper attention or not. If anything goes wrong, it is difficult to switch in some products/services. A comparative study is important before investing. Obtain Written Documents: Don’t do any financial transactions based only on verbal communications. It is important to have written communication wiz. application letters, emails, acknowledgement of forms, fees receipts etc when you do any transaction. Go through all the documents related to the investment. Obtain copies of the all those written documents of your investment. Brochure of the products, Rules and Regulations, company profile etc. should be obtained before investing. Read and Understand such documents: We have developed a habit of scrolling down terms and conditions of installed software. We just tick on ‘I agree’ and submit it without reading single word from it. This shouldn’t be done while investing. It is very important to read and understand such documents to avoid future disputes. Verify the legitimacy of the investment: We have seen many cases of chit-funds and money-rolling businesses where the company management eloped by duping investors money. If such things happen, we hardly get any justice in time which leads to regret and frustration. The only way to avoid such fraudsters is to invest only in the products run by well-known companies or Government etc. It is important to verify the legitimacy of the investment before investing. Find out the costs and benefits associated with the Investment: Financial Products sellers have a Sales target to achieve. Sometimes they really don’t bother about the needs of the customer and sell them products on which they get good commission. It is the responsibility of Investors to find out costs and benefits associated with the investment first. Investors should find of whether there is any hidden cost which seller isn’t revealing to you. Fortunately, we have various websites where you can easily get details about these products. No harm in cross-verifying the facts before investing. Assess the Risk-Return profile of the investment: More the risk more is the return. is the basic principle of Investment. It is important to first know your own risk profile. Then accordingly you can see which products suit you more. Assess the risk-return profile of the financial products before investing. If someone promises you Double returns in short-time, run away from that person. Even a 10% CAGR returns are considered to be a good return which beats the inflation. More than 16% return on the portfolio is an excellent return on equities. Know the liquidity and safety aspects of the investment: In case of emergency, you should be able to sell your assets and raise funds from the same. Assets should be liquid enough. The safety aspect of Investment is one of the most important aspects of investing. We have seen people who have lost their down-payment in properties which didn’t have all the clearances certificates. Invest in safe investment avenues where the only risk involved in about ‘investing related risk’. Ascertain if it is appropriate for your specific goals?: The success of financial planning depends on how you choose an accurate product for achieving some specific financial goal. Goals can be divided based on time duration. Less risky products are good for long-term goals while you can take some amount of risk for your short term goals. Compare with other Investment Opportunities available: Suppose, you are willing to buy a financial product for Investment. You can have your Pension Fund with a company with which you are working, you could take Atal Pension Yojna or National Pension Scheme by Government or you can choose some Hybrid Mutual fund which can give 10-12% annual returns. The choice is completely yours. Based on your risk appetite, income, and requirements you should choose the right option. Right Fit in the Portfolio: Never keep all eggs in one basket. Proper diversified portfolios allow you to sleep peacefully in nights without worrying much about your investments. Your every Investment should be complementary to each other. Avoid Repetition and over-diversification. Examine if the product you are investing in fits in with other investments you have already done or considering to make. These are the most important steps to Investing. Next time when you will buy any financial product or invest in any investment avenues, please consider these points. Will you follow these points properly? Do let me know in the comments. Basics of Investing by Stocksbaazigar Part – 1 (Youtube Live video) (Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered Financial Adviser. He is NSE’s Certified Investment Analysis Professional and NSE’s Certified Marketing Professional Level – 4).

Stocksbaazigar Footer