Stock Market Crash - Guidance For Newbies

[digitalnirvana 646]

I have some miniscule amount of shares in some stupid companies, bought ICICI, RelInd, ONGC, but also GMR Infra, Unitech! and DLF!

I bought most of these in one day in 2008 in a fit of madness, the markets had started to dip and my colleagues were buying and making money like crazy, so I got inspired and bought Rs 50K worth of stocks in one day. But little did I know that it was the beginning of the crash. I bought at 18K and the market went down to 8K. I watched in shock, too terrified to buy even at 8K. I thought of never buying stocks again.

Since then Ganga has become more polluted, Amul baby has become Big baba and my stocks have continued to suffer. I think that Rs 50K is now worth around 20K, I do not even check. Sometime back I bought few shares in MSat!, HUL and Unitech I guess! again at high levels.

Total investment around Rs 80K till date, networth might be Rs 30K.

Not proud of coming out saying this and making myself look like a fool, which I am to be honest.

I do not think about it anymore and the money is lying idle never to recover, but now the markets have been crashing again, I wondered what to do now? Do I sell these off, or again make a folly of buying?

My question and intention of making this post is - what do utter newbies like me do when goaded to make investments/quick money in the markets? We never know when to buy or sell and burn money like SAOL panelists.

This forum guides from mobiles to fans, surely someone can give us a "crash course" of the markets, now that they are crashing?

If someone can make my money back to Rs 80K I will give them my bricked Hero as token.

Disclaimer all incidents and references are completely accurate, any resemblance to any incident or person, living or dead, is completely intentional.

[raghav.cn 8]

I am novice in this subject too...

There are some important and funny quotations regarding stock market

1.Only buy something that you'd be perfectly happy to hold if the market shut down for ten years.

Warren Buffett

2. An investor without investment objectives is like a traveler without a destination.

Ralph Seger

3. Sometime, A long term investment is actually a short term investment that failed.

4.one who expect miracles in share market should leave it immediately.

5. Money is not a product by itself, it is a by-product, so don't chase it.

Dhirubhai Ambani

[raghav.cn 8]

Instead invest in mutual funds at least your capital will be safe to some extent... or just keep Rs 20000 aside and start playing with it for 1 year in the stock market so that you will again some experience...( reading books and articles help you to little extent , but playing with money practically in stock market gives you the real knowledge

[Karthik R 246]

@ Dipan

Deposit your future idle funds in banks (preferably the nationalised ones ). The yield, interest here, will be significantly lower than those that you have a chance of getting from stock market but it will be solidly secure.

[amitnsonu 72]

friends

here is my personal opinion

According to me safest bet is mutual funds through SIP.

I am investing in MF through SIP+occasional additional purchase on downfalls (like yesterday).

despite huge downfall of yesterday my loss is only Rs. 2200 on a total investment of Rs. 75000.

I took yesterdays downfall as opportunity to buy more to reduce the average per unit cost (I hope all of us who invest in stocks are well aware of "dollar cost averaging").

Amazingly MFs are more resistant to downfalls than direct equity invest and deliver more returns.

I am having HDFC TOP 200. HDFC EQUITY and IDFC PREMIER EQUITY FUND A all with growth option.

More over Gold is even better investment option than Stocks and MFs.... delivering continuous returns

[gauravjc 47]

My experience in mutual funds have been bad ... Kept the money with them for two years ... At one point of time in 6 months I was getting 50% profit .. Later at th end of the year I was 50% down ... Finally at 2 years I only got abt I investested ... Since then have stayed away from share market ..

[rohitgaur 78]

The Only safe haven for Investment is GOLD, Pure Yellow 24K taken from your regular goldsmith, cut from a brick or a whole brick if you can afford it.( do not go for branded coins, bank coins because they charge you upfront heavily)

I bought 221 grams for 2 lakhs in 2005 end, Last year upon 100% Achievement sold off and now have bought another 500 Grams. I usually take a PL to do so, I end up getting good ROI and maintaining a decent monthly payment for a Solid Investment.

In shares While DIgitalniravana started with 50K, I started with 8 lakhs of ESOP profits and nearly went to zero before recovering my losses in the return to 18K thanks to some really good calls on TCS, Satyam etc.. But after the return, My only focus is either ESOPs or Bullion( Not in demat) Hardcore Yellow beauty.

[raghav.cn 8]

Gold is not an investment option its a speculative asset that's what i heard from many others.Looking for someone explain the better investments in the thread.

[::Hitesh:: 1,763]

GOLD and LAND investment is safest as per my view, no bank give returns as much as gold and land gives,

you can also buy small amount of gold like 1gram per month, and after few years it will turn into a big investment, lite on pocket too.

Share market require day to day watch, also every one dont have knowledge of it.

If you really want to invest in share, put it and forget it.

Edited August 6, 2011 by ::Hitesh::

[PKC19 11]

This is going to be a long post, read at your risk.

There are certain rules one need to follow while investing:

1) What is the purpose of investment?

2) After what period will the money be required?

3) Is current income stable?

4) Are there any short term liabilities?

After answering the above questions one need to start the investment plan. As different people will have different needs we cannot say which is the best investment option.

1) Stock Market : People who invest in stock market directly need to be aware of all activities around the market, sectors and the stock. This is becoming quit difficult as no of factors are increasing all the time. Even if you invest make sure you invest in good companies which good business.

NEVER BUY STOCK CAUSE SOMEONE ELSE BOUGHT IT

2) Mutual Fund: This is the best alternative for people who want to get stock market benefit with there returns. A mutual fund is run by a fund manager who manages the fund and normally have good market knowledge. So before investing invest in funds with Good track records.

SIP for a period of 3-4 years is said to be a very good investment. Also there will be no tax after one year investment.

3) FD's : This the safest investment. But it bank FD's gave -ve return in 2010 and returns have turned just +ve in 2011 as interest rates have increased in past few months. Also one need to pay tax on the interest income earned.

Other alternative with a bit of risk is to invest in FD's issues buy different company's to rise the funds. Normally the fixed returns are better then bank FD's. One need to be very sure that the company which is issuing FD is a stable company and with stable growth.

4) Bullion : The asset class which has provided the maximum return on investment in last few years. There is lot of debate around the word if the same will be sustainable going forward also. There is no clear view on this till now. There is lot of speculative positions that have build in commodities around the world which many experts are calling it a bubble.

Like Silver jumped to 75K and returned to 50K in 1 one week which is huge for a large traded commodity worldwide. People may argue that this can also happen in stock market but we need to understand the commodity prices are similar around the world while in stock market PE ratios are very much different.

@DL send me the investment details and let me check if we can make some more loss/profit .

*** Markets will be volatile till mid of August, be causes of investing and trading till then (If any of the European countries defaults then be ready for a shock).

[raghav.cn 8]

Give some info on the taxes levied on profits from Mutual Funds / Shares.

[Sadikk 301]

Sell all ur shares.. invest in sadhana Forest.. Google it..

See movie Zeitgeist Moving Forward.. and forget about all investments and returns..

monetary system and capitalism is to collapse.. and no one know what happen.. because its never ever happened before.. this is just a suggestion and IMO..

also see what is trillion dollars..

[shripalkawdia 12]

@ digitalnirvana can u provide u r share name detail with quantity ?

[MOBILE FAN 42]

Digitalnirvana,

There are many wise ppl here. They are right and saying the same things which are the ideal way to deal with investment.

Let me be direct to your question.

You have ICICI, RelInd, ONGC, GMR Infra, Unitech, DLF, MSat, HUL.

My opinion - Take first exit from all infra and real estate companies - GMR, Unitech, DLF. This is because in the downturn they will be the hardest hit. Currently they are in too much of debt burden and there are no signs of reversals. One can take only contra view on this. If one wants to be in, they have to wait for 5 yrs from now.

Keep ICICI, RelInd, ONGC. And you may add more at dip.

Reasons:

ICICI will be the biggest beneficiary when when market start looking good. Banks are the beneficiaries if economy has to to turn around. Also, in the private sector this is the biggest player and 2nd best safe player after HDFC. Also, the interest rates will peak in 2 to 3 months and then it will stable for sometime before coming down. At that time this bank will get the max. advantage.

RelInd - No matter what ppl says, Reliance has always given good returns to its share holders in long run and is one of the biggest wealth creators in Indian history. The current negatives are - 1. Low gas output (many believe this is deliberate) 2. Low gas pricing (will be reversed - this is matter of time). The "settings" are underway and you will the reversal in the trend. The simple rule of Sensex - If sensex has to go up significantly, Reliance must have to go up.

ONGC - Consider this as a debt fund. This gives you good dividend. Will fall less with market. Incase of more deregulation on oil, subsidy burden will be less. If one assume that there is no govt. control on this company, the correct price is1800. You need to be patient with this company and it will create wealth for you. Again, a sensex heavy company.

HUL - All the FMCG companies do better during recession. Incase the monsoon will go normal, this will give good return in short term too. So keep it. The exit time will come when the economy starts recovering.

MSat - Cant say anything with confidence right now. Too many complexities involved here. 1. Its merger with Mahindra. 2. How the US market will pan out in coming future. 3. They have many cases going on. 4. Currency (especially Re.) is one of the important factor. Strength of Re will deteriorate its profit. Market never likes confusion so the advise would be to stay with market and get out of confusion.

Also, when you dont understand equities, the best way to invest in eqities is through MF. As somebody suggested here, HDFC Equity, HDFC Top 200 are some of the best funds. You may invest in it through SIP. You may exit in some of the above stocks and enter into these MFs.

Alternatively, IMHO, Gold will touch $1800 in very short time. One must be invested here. Dipper the recession, higher the Gold. The best way according to me is Gold ETF.

Do the investment only as per you need and plan.

Happy investing.

[digitalnirvana 646]

Thanks everyone for your time and advice. I have not been keeping well so very infrequently online. Will log off now, read through the posts in detail later.

Few people asked for details of quantities etc. so I took a screenshot as attached, infact I was wrong on the invested amount etc. too as I very rarely check the trading website. It is just lying there idle.

[rajivunique 6]

GOLD and LAND investment is safest as per my view, no bank give returns as much as gold and land gives,

you can also buy small amount of gold like 1gram per month, and after few years it will turn into a big investment, lite on pocket too.

Share market require day to day watch, also every one dont have knowledge of it.

If you really want to invest in share, put it and forget it.

Agreed 100%

[city02 63]

i disagree!

first we should define what 'safe' means to you;

it could be:

1. guranteed / insured capital [first rs. 1 lakh per bank - not branch in your a/c] or
2. fixed returns [fixed deposits] or
3. preservation of capital / principle [company deposits] or
4. lower volatility or
5. inflation adjusted [real] returns or
6. risk adjusted returns

since there is no universal definition of 'safe' its purely based on perception and hence different for different segments of the investing population

gold and land do NOT qualify as safe on the first 4 criteria above but do so on # 5

the jury's out on # 6 since there is much more liquidity risk with land / property than gold

there is virtually NO reason to buy gold physically anymore since you could buy ETF or 'paper' gold virtually

this eliminates storage / theft risk, impurity / fraud risk, any insurance risk associated with physical precious metals

there are old wives tales that state you % investment of your total assets in cash & equivalents [e.g., FDs] should be your age

so a 25 year old could be 75% in equity / property

and a 50 yr old could be 50% in MF / gold etc.

while age based may be easy to remember, your time horizon is actually far more important.

if you need the money within a month, stick to bank savings a/c,

within a quarter, stay with bank FDs

within a year, you can try company FD

under 2 years, put it in bond funds

under 3 years, put in hybrid funds / gold

over 3 years, put in equity funds / property

barring some notable exceptions,

higher risk = higher reward = higher volatility = highest inflation beating ability

GOLD and LAND investment is safest as per my view, no bank give returns as much as gold and land gives,

you can also buy small amount of gold like 1gram per month, and after few years it will turn into a big investment, lite on pocket too.

Share market require day to day watch, also every one dont have knowledge of it.

If you really want to invest in share, put it and forget it.

Agreed 100%

[digitalnirvana 646]

Have now read the thread. Thanks everyone for their views. I hope this thread will help people like me who have poor understanding of stocks.

To clarify what sort of risk and investment time I am looking at, I am ok for the money to sit and perform. The money in my share account is there since 2008 I have not withdrawn anything. My risk taking ability is moderate, I would not want to incur further losses however would not be panicking if the worth of the money currently there did reduce. Secondly, I cannot monitor the stock market each day or even once every few days because of work timings etc. So my aim is to invest not trade. If the money grows at reasonable rate beating inflation (which FDs do not now) then am ok.

Specific suggestions to turnaround my losses?

@Sadikk bhai what is sadhana forests I googled but it seems an ecological park/farm?

[city02 63]

without knowing more details of your particular asset allocation,

you should start a SIP of about 1% of your investment amount monthly into a few funds that you like

if you don't have a strong opinion, then just go for a mix of index funds and gold funds

after a 100 months you won't be unhappy!

that's over 8 years so equities would have out performed all other asset classes by then

if there is a weekly option and you really want to risk it, you could do 1%/week and see how you stand in 23 months

but i would not recommend it since equities need at least 3-4 years to outperform and we still might not have recovered fully by next FY

2012-13

its actually very hard to give meaningful advice without a complete picture of your net worth

BTW, your comment

My risk taking ability is moderate,

directly contradicts

I would not want to incur further losses .

since that implies ZERO ability to take risk and your only choice is bank FDs!

[digitalnirvana 646]

^

without knowing more details of your particular asset allocation

Thanks, have posted a screenshot in page 1 which shows it?

if you don't have a strong opinion, then just go for a mix of index funds and gold funds

Is there any recommendation or where/how I can find?

On the risk thing, of course would not want to incur more losses but the fact is that I have been - INR30K since 2008 so what I meant to say is have the capacity to absorb monetary losses. This is not my daily driver.

[vishalmcp 8]

This is going to be a long post, read at your risk. There are certain rules one need to follow while investing: 1) What is the purpose of investment? 2) After what period will the money be required? 3) Is current income stable? 4) Are there any short term liabilities? After answering the above questions one need to start the investment plan. As different people will have different needs we cannot say which is the best investment option. 1) Stock Market : People who invest in stock market directly need to be aware of all activities around the market, sectors and the stock. This is becoming quit difficult as no of factors are increasing all the time. Even if you invest make sure you invest in good companies which good business. NEVER BUY STOCK CAUSE SOMEONE ELSE BOUGHT IT 2) Mutual Fund: This is the best alternative for people who want to get stock market benefit with there returns. A mutual fund is run by a fund manager who manages the fund and normally have good market knowledge. So before investing invest in funds with Good track records. SIP for a period of 3-4 years is said to be a very good investment. Also there will be no tax after one year investment. 3) FD's : This the safest investment. But it bank FD's gave -ve return in 2010 and returns have turned just +ve in 2011 as interest rates have increased in past few months. Also one need to pay tax on the interest income earned. Other alternative with a bit of risk is to invest in FD's issues buy different company's to rise the funds. Normally the fixed returns are better then bank FD's. One need to be very sure that the company which is issuing FD is a stable company and with stable growth. 4) Bullion : The asset class which has provided the maximum return on investment in last few years. There is lot of debate around the word if the same will be sustainable going forward also. There is no clear view on this till now. There is lot of speculative positions that have build in commodities around the world which many experts are calling it a bubble. Like Silver jumped to 75K and returned to 50K in 1 one week which is huge for a large traded commodity worldwide. People may argue that this can also happen in stock market but we need to understand the commodity prices are similar around the world while in stock market PE ratios are very much different. @DL send me the investment details and let me check if we can make some more loss/profit . *** Markets will be volatile till mid of August, be causes of investing and trading till then (If any of the European countries defaults then be ready for a shock).

a very well said & detailed explanation......

same with me too.... i started investing in mid sept last year where index was at 21000 & since after that all my figures are in negative.... :( ;(

[ravindra1312 0]

hmmm i can help u!

there is no 1 way of getting ur money back by putting it in 1 stock!

1st sell off what u have in reality & banking stocks the reason ur investment has come down is that ur not a trader & banking & reality sector take most of the hits when markets fall always remember & ask ur broker to invest in bluechip companies or fmcg stocks as they might be slow but dont get hit that bad!

2nd contact financial advisor dealing in mutual funds who can suggest u some nice funds never go for small cap or large cap as ur not a trader balanced equity is best bet for u!

3rd invest in reliance gold mutual fund growth asap on dips!

Finally always have a long term approach dont trade in stocks directly always go the mutual fund way!

Hope i will get ur bricked hero