Would like to share my perspective on market strategy

If there is profit we also have loss. It is Newton’s law of gravity which applies to markets also. There is nothing called permanent bull phase or permanent bearish phase. One has to be lucky to escape financial turmoils, economic recessions and institutional debacles directly or indirectly. The young generation of today have not seen the economic cycles of peak and slump. They have been in a dream world where markets only go up and the goddess of wealth is always smiling. This was one of the reasons of the financial debacle wherein exotic products/deals were structured with lack of foresight. Experience does count. The young financial wizards need to understand the concept of market equilibrium. Wall street debacle of 1907 or The Great US depression of 1930 or the Asian crisis of the 90’s or the stock market scam of 1992 & 2000, they were all elements of wealth destruction. The current market turmoil has left all investors in a soup. It is a catch 22 situtation wherein investors, traders, speculators are all wary about what will happen next. However, I view this situation a bit differently. When there is a distress situation in the market we have to be an oppurtunist of first order. Warren Buffet had aptly said ‘ Buy when there is panic in the market. If equity as an asset class cannot deliver returns in the long term then no asset class can do so’. My only mantra in such a situation is DIVERSIFY & STAY PUT. Never put all your eggs in one basket. A shrewd diversification strategy will hold fort in any situtation. Look out for fundamentally strong and liquid stocks which have been battered left, right and center for reasons otherwise.This is the right time to get in. Hold on for 3-4 years and do regular profit booking. Another strategy is to do a SIP in Mutual Funds. SIP allows you to forget about market variations as rupee cost averaging takes care of it by itself. To summarise, review and edit your portfolio depending on factors like fundamentals, liquidity and industry growth prospects. Diversify your portfolio. It is good to be a person with a balanced risk appetite in such situations. In the LONG TERM you definitely will make money. There is a need to be patient and disciplined.”

I read your profile on Gujarati bloggers and there on was hooked on to your article. It was interesting to read about the recesion, falling stock markets, economic crisis but with a different perspective. Even i strongly believe that the second chapter of the crisis is yet to open up and that will take down lot other banks and economies. Credit card defaults& impact of CDS unwinding will blow out of proportion. The dollar has still regained its strength against all currencies but it is just a matter of time when you will see the dollar at 35 INR per dollar. Downfall of dollar is inevitable and thus the US economy.

Again it was nice reading your views

Best Regards

Pratik Shah

http://pratikshah.wordpress.com/
http://www.pratikbijal.com/blog