Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Saturday 30 March 2013

Stocks Buying low & sell high a tough call

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

If past history was all there was to the game, the richest people would be librarians –Warren Buffett


I had once heard that the reason they make huge windshields and small rear view mirrors in cars is to indicate where the driver should be looking most of the time — right ahead. The same is majorly applicable to investing.


Unfortunately, in general, investors end up doing precisely the opposite. So if a friend of mine has recently shared with me how he made money in gold and real estate, then that would weigh on my mind and I would feel like having missed the bus. At the same time if the last news article I read was about how the global economy is in a poor shape and India too has not been spared, with GDP growth at a decade low of sub 5%, it is very unlikely that I would invest in equities. While making an investment, our recent memory tends to be a major guiding force.


In fact, that's how we make even our non-monetary decisions. So if there has been a robbery at our neighbour's place, then we will suddenly get more careful about security for our own house and might end up buying insurance or increase cover in our existing one. We will most likely also add some security equipment. In any such instance, the probabilities of the event affecting us before or after do not change. However, we suddenly become more aware of it and pay more attention to it. Over time, the memory fades. We have included a table here which indicates collective investor behaviour.


What explains investors putting in more and more money as equities become more and more expensive? Do we even know how to evaluate cheap and expensive assets while investing? It seems recent history overrides everything. So as returns become more dramatic, people get dazzled more and start investing more of their money. In many cases, this is not just an increase in absolute sums but also an increase in percentage of their overall portfolio.


So even an investor who was making money initially loses it by the end of the cycle as the gain is on a smaller exposure and the loss later on is on a much higher investment value. It is no surprise then that the people who have lost money in stocks far outnumber the ones who have made money. It seems that the problem is not with the market but with us as investors. It is likely that the same problem permeates other asset classes too. It definitely gets accentuated in equities. Buy low and sell high is easier said than done.


This behaviour leads to an average investor's investing experience being different from the data and records shown by a fund house or an asset class. So even though the sensex has grown at a compounded annual rate in excess of 16% (dividends excluded) since its inception in 1979, it is difficult to find investors who have experienced the same in their portfolio. In fact, there is an annual study Quantitative Analysis of Investor Behaviour (
QAIB)' done by Dalbar which repeatedly suggests that an average investor's return is far lower than the returns of an asset class or what a mutual fund might suggest.


What I am trying to drive home is that we should not get overawed by the recent performance of any investment or asset class at the time of making an investment. Instead, we should evaluate each situation and investment objectively. The question here is what can go wrong and the probabilities of it going wrong. What are we basing our decision on? Facts and data, or something else? If it is indeed facts and data, then is the source credible? Can the data be skewed for a certain reason?


Focus on maintaining a certain asset allocation based on your ability to take risks than on trying to time the market. It is boring and difficult to stick to such a strategy, but it will help you avoid lot of regret.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaverInvest Online
  3. DSP BlackRock Tax Saver FundInvest Online
  4. Reliance Tax Saver (ELSS) FundInvest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) FundInvest Online
  7. SBI Magnum Tax Gain Scheme 1993Invest Online
  8. Sundaram Tax SaverInvest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFundsInvest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

No comments:

Post a Comment

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts