Tuesday, November 18, 2008

What should Investors do now ?

What should I do with my investments ? Many market participants have asked this question. Here is my view:

Investment in shares is part of your total investment planning. You may have a plan that goes like this:
50% of liquid funds to be invested in shares
(this should be reduced to 40% when the market is in a strong bull grip. It should increase to 60% when you perceive the market is in a bear grip)

Now, we assume that the current market scenario may well be called a strong bear grip. having a plan makes the decision process easy. If your current investments in shares are more than 60% of your liquid assets, then you have to bring it down to 60%. You need to sell on rallies. On the other hand, if your investment is less than 60%, then you can add whenever there is a panic decline.

This is about asset allocation. The percentages given here are only indicative. You should modify them to suit your own needs.

Now, many participants purchased shares for making a quick profit. they are stuck with these shares which have suddenly become a long term investment. Trading must always have stop losses. if you still own these shares then you did not follow the stop loss rules. If you are one of these traders, ask yourself: what do you do when you make a mistake ? You should seek the answer to this question. Each trader will get an answer that suits his/her mental attitudes.

3 comments:

rajivhtc said...

namaskar sudarshan ji,

investors like myself did the mistake of not following the stop losses and then our trading picks became investment buys.
your assessment is absolutely on the dot. but would be grateful if you are more specific in guiding us how to handle the situation now.

warm regards
rajiv malik
email-rajivhtc@gmail.com

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