INVESTOR WORRIESINVESTOR WORRIESANDAND

SOLUTIONSOLUTION

Kamlesh TripathiKamlesh Tripathi

IIMS BareillyIIMS Bareilly

DefinitionDefinition

““INVESTMENT IS THE INVESTMENT IS THE SACRIFIES OF THE CERTAIN SACRIFIES OF THE CERTAIN PRESENT VALUE FOR THE PRESENT VALUE FOR THE UNCERTAIN FUTURE”UNCERTAIN FUTURE”

The three legs to stand on the The three legs to stand on the financial stool are:financial stool are:

1.1. Income,Income,

2.2. Savings, andSavings, and

3.3. Investment.Investment.

Why are you saving ?Why are you saving ? Why do you want a lot of money ?Why do you want a lot of money ? When do you want this money ?When do you want this money ?

Common headlines:Common headlines:

1.Inflation has crossed 12 per cent.1.Inflation has crossed 12 per cent.

2. Interest rate are rising.2. Interest rate are rising.

3. Individuals with home loans are struggling 3. Individuals with home loans are struggling to cope with higher equated monthly to cope with higher equated monthly installments (EMIs) and simultaneously installments (EMIs) and simultaneously deal with inflation. deal with inflation.

CASECASE

A financial planner had an interesting episode to A financial planner had an interesting episode to narrate. He had recommended an equity allocation narrate. He had recommended an equity allocation of 25 per cent to a client and suggested that 75 per of 25 per cent to a client and suggested that 75 per cent be placed in debt. The client felt that the cent be placed in debt. The client felt that the allocation to equity was to high. His fear was that allocation to equity was to high. His fear was that 25 per cent of the portfolio would be in “Speculative 25 per cent of the portfolio would be in “Speculative investment.” But the advice of the financial planner investment.” But the advice of the financial planner prevailed.prevailed.

This took place in 2002This took place in 2002

Five year later, when this vary client’s public provident Five year later, when this vary client’s public provident fund (PPF) matured, he wanted to put the entire fund (PPF) matured, he wanted to put the entire amount in stocks. Suddenly , the stock market was amount in stocks. Suddenly , the stock market was not speculative in his mind, but a great place to not speculative in his mind, but a great place to earn fabulous return. Fortunately, the financial earn fabulous return. Fortunately, the financial planner once again prevailed.planner once again prevailed.

FactFact

In 2002, when the sensex was In 2002, when the sensex was around 3,200 levels, inflows into around 3,200 levels, inflows into equity funds were Rs 4,517 equity funds were Rs 4,517 crore. In 2007 , when the crore. In 2007 , when the sensex was in the range of sensex was in the range of 14,000 to 20,000, inflows into 14,000 to 20,000, inflows into equity funds totaled Rs 1,07,189 equity funds totaled Rs 1,07,189 crore.crore.

WHO ARE THE PEOPLE WHO WHO ARE THE PEOPLE WHO WOULD PANIC IN SUCH A WOULD PANIC IN SUCH A MARKET ?MARKET ?

Common Financial MistakeCommon Financial Mistake

1.1. Primary Mistakes:Primary Mistakes:

a) Putting all eggs in one baskets,a) Putting all eggs in one baskets,

b) No Monitoring of a portfolio,b) No Monitoring of a portfolio,

c) Inability to invest,c) Inability to invest,

d) Lack of awareness of risk taking ability,d) Lack of awareness of risk taking ability,

e) Ignoring liquidity needs,e) Ignoring liquidity needs,

f) Unrealistic expectation ,f) Unrealistic expectation ,

g) Not having a strategy, andg) Not having a strategy, and

h) Not investing systematically.h) Not investing systematically.

2. Secondary Mistakes 2. Secondary Mistakes

a) Retirement is for away. Is it ? My children will a) Retirement is for away. Is it ? My children will fend for me,fend for me,

b) College education is cheap,b) College education is cheap,

c) Buying consumer goods and non productive c) Buying consumer goods and non productive assets on credit, and assets on credit, and

d) Not taking responsibility of investment.d) Not taking responsibility of investment.

SUGGESTIONSUGGESTION

Don’t try to time the marketDon’t try to time the market

There are three things you should be absolutely clear There are three things you should be absolutely clear about:about:

1.1. You do not know when it is “safe” to get into You do not know when it is “safe” to get into equity.equity.

2.2. The wrong assumption that it is alright to The wrong assumption that it is alright to change your assets allocation guidelines.change your assets allocation guidelines.

3.3. Your gut level feel about the end being near is a Your gut level feel about the end being near is a good recipe for disastrous investment decision.good recipe for disastrous investment decision.

You will be rewarded for You will be rewarded for staying coolstaying cool

It is not easy to step back for It is not easy to step back for perspective when you are perspective when you are gasping for air as your portfolio- gasping for air as your portfolio- value plummets.value plummets.

Three Predominant emotions that Three Predominant emotions that rule the market:rule the market:

1. Fear,1. Fear,

2. Greed, and2. Greed, and

3. Panic. 3. Panic.

Not every beaten down stocks or Not every beaten down stocks or sector is worth buying.sector is worth buying.

“ “ Winning Formula is probably a Winning Formula is probably a more conservative mix that’s more conservative mix that’s mindful of heightened volality”mindful of heightened volality”

Now is a good time to Now is a good time to consider equityconsider equity

“ “ It would be wise to look at the It would be wise to look at the experience of renowned investor experience of renowned investor the late sir the late sir John TempletonJohn Templeton . .His His investing mantra was simple investing mantra was simple buy at the point of maximum buy at the point of maximum pesimism”pesimism”

Does investment in gold is Does investment in gold is really beneficialreally beneficial

The Global credit crisis has left The Global credit crisis has left investment feeling drained and investment feeling drained and devoid of investing option. In devoid of investing option. In such trying times gold offers a such trying times gold offers a glimmers of hope.glimmers of hope.

SPECIAL ADVICESSPECIAL ADVICES

In order to be successful in the equity In order to be successful in the equity market, investor's should divide there market, investor's should divide there portfolio between portfolio between “Held for Trading”“Held for Trading” and and “ “ Held for Investment” .Held for Investment” .

Portfolio rebalancing Portfolio rebalancing

ISSUEISSUE

Are greedy banker’s to blame for Are greedy banker’s to blame for this crisis, is to much complexity this crisis, is to much complexity in the financial world the real in the financial world the real problem,orproblem,or

Is it the government run regulatory Is it the government run regulatory system that have failed.system that have failed.

ConclusionConclusion

““There is no co-relation between There is no co-relation between making a lot of money and making a lot of money and keeping a lot of it”.keeping a lot of it”.