Wednesday, September 24, 2008

Give me a break FIIs - I do not have anything more left to donate....

I spent hours trying to formulate wonderful portfolio only to realise that I do not know what to do with it now. Why am I in such a peril situation. It was because I wanted to be the crowd. I wanted to buy because I saw anyone who invested got quick money. My expectation as against 9% in a bank in a year rose to 200% in a month. I don't know how and when to invest. I do not know how and when to get out of the markets. Neither I know nor I care because I always had a net inflow. When I started out with a portfolio - I took Large cap names in the industry. I had reliance at 100/-, L&T, Infosys.... you name it. Then suddenly I thought that I could be an investment banker or a portfolio manager - after all my money was growing. Then suddenly I looked around and saw that people were making more money in mid cap stocks. I disposed off my large cap stocks and shifted to mid cap. Then I wanted to lead the race by investing in small cap to catch the winners. My investment in large cap was just for stability and fell to 10% against the advise of 85%. -- Then one day it happened. The market took a hit and all stumbled... I was a disbeliever. After all who could beat me in stocks? - I made money. I had the midas touch. The penny stocks (read small cap) became worthless. I pooled in more money and bought the same junk stock I held - Averaging It I told others. The market fell more - I put in more money. It fell even more - I contemplated that this is the bottom - these so called learned do not know what they are saying on the idiot box. I borrowed money and put it in markets to Average my investments (read junk stocks). The markets are not looking up - Oh my GOD I will loose it all. I am panicking but still holding on to the junk I have (I want to be a millionare still). The markets are not recovering - I walk up to the highest building and want to look down - I wish I could fly.

What I have written above is what I am sure would have happened with a vast majority of people because they were wrong in taking markets for granted. They refused to see reality. The mistakes?
I am too good.
Shifted to mid cap.
Shifted to small cap.
Shifted to penny stocks.
Do not have an entry policy.
Do not have an exit policy.
My Stock advisor is my neighbour.
I invested what ever I had when I thought the market was at its bottom.
I was the crowd.

Today You have time to make a new beginning. You have time to study, prepare and make amends. That is if you are ready to learn to be the leader and not the crowd. This market may remain here for a few months, a few years and wait for you to jump aboard. Be a smart investor. Invest small but at these levels rather than where you did last time. buy Large cap companies - it is a misnomer that since a stock is at 20 and I can buy 100 - I will get better returns. 10 percent of both the stock will remain same and whenever the stocks revive - they will start from large cap. I will say small amounts. You will find the money grow. Like I was explained by Jaggu yesterday night - the don't mix economy with the crisis. It may slow us down - but we will not drown. Invest the money you do not require next month for buying that car you wanted. Do not borrow and invest. Invest with a Term horizon. that term can be medium or long but not a month (to double the money - marry your daughter and save for your honeymoon trip)

Okay once again I am sitting waiting for my sortie and it is 0241 at night now. The world markets upto US have closed and nothing good has emerged. Asia ended down with Hang Seng down 3.87% and Strait Times down 2.66%. Europe closed, FTSE 1.91% red, Dax 0.64% down and CAC 1.98% down. The problem with the Europe is that it is neither US nor Asia. It tries to show that this developed part of the world is independant. But has to look to US and snub asia to find support. Basically it is in middle ground. US was green till the mid session. then it dived red as there was apprehension of the bail out working out and the urgency in US lawmakers. The markets tried to recover but dived in red again closing well in red. Dow was down 1.47%, Nasdaq down 1.18% and S&P down 1.56%. This is about to ensure a red opening - unless the Asia now is fedup of the bad news from US on daily basis. Will have to wait and that is all.

The candle today on the charts was a black one but let me tell you that last two days of black candles have really not been able to write off the advance we made on monday. SO do not loose heart. The bollinger bands are widening still so the down turn might continue for some time. 5 EMA still is below the 20 EMA. volumes were lesser than yesterday. the MACD divergence has actually reduced inspite of the black candle but the red line continues to be below blue line. Mass index continues to look up RSI look down - both are bad signals. TRIX that was steeply down is now flatishly down - whatever that would imply. On the slow stochastics the red line continues to be above the blue line and the red line has touched the 80 marker. There is an divergence in the Slow Stochastics and our markets. This may work in our favour.

You want to know what will happen today when the markets open? Well I do not know. The markets are not behaving rationally and there are no simple answers. Events that are of importance are the Nuc deal that is likely to see the sunlight in US congress - infact our PM is there in anticipation. The bail out of its financial institutes will come through one way or the other. And the crude is at 107 $ - but I feel it should cool down again. (emphasise - I feel)

Best of luck and play safe. ;-)



dr.c.m.singh said...

cheema: wonderful...i think every second person on the street has similar expereince....but one gets trapped these days when there is deep cut/steep feels this is the bottom..and so we get fully invested....nice article sir.


S S Cheema said...

Thanks c.m.
Appreciation is always welcome. The point however is what are we doing to learn from our experience? I sure am trying - but how sucessful I will be will remain to be seen. I see your replies on Uma's blog quite often. This the reason for blogs in these times - we learn from each other.

Uma said...

I'm out of ICICIBank Misterr....and only holding Tata Steel longs with SL 450. The appearance of 'wildcards' in the top-traded line up has give me faith to carry on as a (slightly nervous) bull. I might add Nifty puts, but I find the premiums off-putting. And same goes for Nifty calls. Which idiot wants to pay a premium of 125 BUCKS for the 4300 calls (now that we're trading at 4150!!) and that too in a range bound market?? Ohh wait...something like 1031200 idiots!