Do stock market falls like the recent one better times to invest money in stocks? If yes, then how should you go about investing in stocks? How long should you hold your positions if you have bought when the market was at its peak?
Is it a good time to convert your dollars into rupees? Or should you wait for another six months?
Is it a good time to invest in real estate? How should you invest your money in various assets like stocks, mutual funds, gold, fixed deposits etc to get a good return?
In a chat with Get Ahead readers on October 8, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund and stock market investments, real estate and financial planning
swaraj asked, Every One says this is the time to buy shares,Market has almost reached Bottom, but which Shares to Buy?
Vetapalem Sridhar answers, at 2008-10-08 14:07:39 Dear Swaraj, it is important to work out an investment strategy keeping in mind ur long term objectives. If the reason of ur investing is to ensure that ur wealth helps u fulfill ur objectives in life, then do not worry about wat others r telling u about the mkts. If ur focus is only return and not ur future objectives then u hv to keep acting based on wat the markets r indicating. But then this is a full time job. Falls r better times to invest. But more important is to continue to invest regularly throughout ur earning phase (maybe a 20-30 yrs phase) and maintaining a suitable asset allocation in line with ur long term objectives. It is best to stick to diversified Mutual Funds at this stage.
Rasika asked, Will the stock market go up from this stage? Is it a good investment if we invest in stocks now?
Vetapalem Sridhar answers, Dear Rasika, it is highly unlikely that mkts would resume a sustainable upward journey anytime soon. The problems from the US have now spread to Euro zone. Nobody knows for sure the extent of the problems there yet. We can now say that we r in a bear market. Generally it takes a reasonable amount of time (maybe 2 yrs) before mkts go up again. Before that we will have to see more bad days and we should feel the pinch in our day to day life. A lot of small company shares become junk and stop trading. The mkts generally move sideways for a while. Also there is generally a bear rally (during which mkts go up) post which mkts fall again. Once this happens, the mkts enter into a new bull run. It is difficult to say if things will pan out exactly as describled above, but this is the general behaviour of bear markets. So any invest made at current levels should be done with a 5 yrs horizon.
d asked, I am willing to take a hit of 5% to 10% at the current level of investment. I am investing 16K every month through SIP and looking at 5- 10 years horizon. I started investing agressively in jan 2008. i am very excited when Market falls because i get more units of Mutual fund units so that i can accumalate. My investment include HDFC Tax saver, Franklin India Blue chip,DSP ML tiger, Sundaram BNP paribas, ICICI tax saver etc. pl advise.
Vetapalem Sridhar answers, Hi, when mkts really start to fall, there is no level to which is can go on the downside. With a 10% downside risk appetite investing into such mkts may not be suitable. The mkts can fall much more and remain lower longer than wat people may anticipate. If u have a 5-10 yrs horizon, there is no need to change ur investment strategy. And I think it would be best for u to not watch wat is happening in the mkt. It will make life more stress free and ensure that discipline in investing is maintained. Funds seem OK.
kato asked, Hi - I stopped all my SIPs (Rs 25K per moth) several months ago and also liquidated all of my mutual funds. Looking at the current scene - probably a good move. Now I wish to take advantage of the low prices and invest up to Rs 50K per month for the next several months. Can you suggest any stocks or mutual funds? Thx
Vetapalem Sridhar answers, In most bear mkts there have been a lot of small cap companies which become junk stocks. A lot of them have stopped trading on the exchange. So in such times it is best to invest in frontline stocks or large cap oriented Mutual Funds. In MFs u can look at Sundaram Select Focus, HDFC Grwoth, Reliance Vision as suitable options.
Rahul asked, Is it a good time to purchase or should we still wait and watch?
Vetapalem Sridhar answers, Dear Rahul, how many investors were able to sell their investments at the peak or for that matter when mkts were higher and then remain in cash. Very few. As it is not possible to predict the top of the mkts, similarly it is not possible to predict the bottom. But atleast we know that mkts r lower. Hence it is better times to invest. The best method is to continue to invest regularly with discipline all thro the bad times in the mkt. Alternatively u can invest at current levels with a horizon of 5 yrs.
hitender asked, Hi, Is it good time to purchase high profile shares like L&T,SBI. i HAVE PURCHASED RELiance capital averaging and now cost is 1500/-Should i go ahead and mpurchase more to average it otu?
Vetapalem Sridhar answers, Hi hitender, this is one of the best times to build a strong core portfolio consisting of bluechip companies. Regular investing should be the focus rather than averaging. The idea of picking gud companies is gud.
Jose asked, I an retiring in a few weeks. My benefits will be around 15 lakhs approx. Which is the safest investment medium?
Vetapalem Sridhar answers, Dear Jose, I would suggest that u work out a suitable asset allocation based on ur future needs. U will find a debt options which r giving u higher return currently. So u can invest ur money into such options. Some exposure to equities should help ur funds grow at a higher rate. Identify wat part of the benefits u can invest with a 5-7 yrs horizon. Invest this long term money in 3-4 tranches over time into equity MFs like HDFC Growth, Reliance Vision, SBI Contra, Sundaram Select Focus, etc. Mkts r expected to remain down for some time to come. So u will find ample opportunity.
smashit asked, Is it right time to go for real estate sector?
Vetapalem Sridhar answers, Hi, we have not yet seen any serious cracks in the real estate sector. It seems currently sale of new flats have come to a standstill. It is now a matter of time before we see downward movement in the prices. It is the best time to start scouting for places that u wish to buy. Identify options and drive a hard bargain with the seller. If u like a property and are getting a good deal u can go ahead with the purchase. Though waiting some more time will not hurt.
Nadira asked, I have invested in HDFC Bank fixed deposits. IS that safe?
Vetapalem Sridhar answers, Dear Nadira, it is perfectly safe to invest in a HDFC Bank FD. If at all things get so bad that HDFC Bank goes down, then we can be sure that most other banks in India would be in trouble.
as asked, if gold is all time safe investment?
Vetapalem Sridhar answers, Gold is a hedge aganist uncertainity and to some extent against inflation in the long run. It is one of the best protectors of value (purchasing power) in difficult times.
ravi asked, Sir, what is the likely event of having the same 21k, is that possible in the near future?
Vetapalem Sridhar answers, It will take sometime before the mkts can retrace the previous high. This would depend on how things unfold at the global stage. But it seems highly unlikely that mkts will reclaim their previous highs for the coming 2 yrs or so. A lot of companies r now trading at very attractive valuations.
arunm asked, what asset class looks best for investment commercial property/gold/shares/commodities?
Vetapalem Sridhar answers, Dear Arun, instead of favouring any one asset class, it is improtant that u work out a suitable asset allocation plan. Invest in a mix of assets. Currently maintaining some amount of cash would be gud. Each asset class has different risk and different potential return. The choice would depend on wat u r looking for.
rajsekhar asked, Sir, With FD rates at 10 to 11% for 1year term, should invest in FD rather than in shares?
Vetapalem Sridhar answers, Dear Raj, if ur horizon is 1-2 yrs then, investing in a bank FD may be one of the best options. Alternatively a FMP from a Mutual Fund which is investing in 100% into high quality papers would also be a gud choice.
sad1 asked, Hi do u think that mkt will come in 4 figures? and any idea how much time will it take to recover?
Vetapalem Sridhar answers, In the last melt down the Sensex from above 6000 levels came down all the way upto, 2800 levels. This time too the NIFTY crossed a peak of 6000. It is now down to almost 3400 levels. Ur guess is as gud as mine as to where the bottom of the Index would be. Anything is possible. Though it seems that there is further downside left in this market. A bear market rally is a possibilty sometime during the next 1-2 yrs. It seems that it will take a while before the next bull market starts. For a common investor, it is very imp to focus on investing regularly with discipline irrespective of where the mkts r going. In the long run there is a potential to create gud returns by investing at current levels.
siva asked, Almost 50% i lost my investment in market. If the market has almost reached bottom, then can i buy those shares and average my cost and sell with little profit and come out of those shares. Is it advisable?
Vetapalem Sridhar answers, Dear Siva, if u hv lost 50% means u hv invested at higher levels in the mkt. When u were not able to predict the top and get out wat makes u feel that u will be able to predict the bottom and buy shares then. The whole idea of averaging to recover loss is not on a rational platform. However if someone is buying more stocks with a long term horizon as the prices have come down is a gud idea. Always invest money in gud companies with a long term horizon. If the company is gud, it will deliver return over the long term.
Sudz asked, I have a simple logic. If I put my savings into an FD @ 12%, it will take more that 6 years for the sum to double. Equities - even in the current turmoil - is likely to double my money in less than this timeframe. Is the thought-process right?
Vetapalem Sridhar answers, Hi, the logic is gud and it works. However the post tax return on FDs currently is not 12%.
wardhan asked, I have recently retired.corpus 1 cr. with one house.liabilities housing loan -20 lacs daughter marriage -3years-15lacs. want 1lac permonth & want to leave 1cr. with house for children. have kept 80 lavs in bank FD 6 lacs in mutual fund 6 lacs in Equity. Currently monthly expenses 60 to 70 thousand. Kindly guide - For safety of principal amount - minimum Income Tax - Risk free growth.
Vetapalem Sridhar answers, I think during this correction in the mkts it would make sense for u to increase ur allocation towards equities to around 40-50% of ur investments. It would enable u to be in a better position to fulfill ur objectives.
Sarma asked, Hi I have some dollars in US banks. Do you think this is a good time to convert to rupees without repatriation ability?
Vetapalem Sridhar answers, Talk is on about the exchange rate going upto Rs.50. It is very difficult to predict how currency mkts will behave. Though u r getting a gud rate at current levels.
rakesh asked, i invest in FT Prima Plus / HDFC Top 200 / ICICI Dynamic / HDFC Pridence and FT Blue chip evey month should I still continue - I have 3 years before I need funds
Vetapalem Sridhar answers, The funds r gud. I would suggest that u should continue to invest regularly. Slighlty more than 3 yrs should be the horizon that u should hv in mind.
soumya asked, I want to put in Rs.40k for tax saving for this F.Y. Which mf wud u recommend?
Vetapalem Sridhar answers, Sundaram Tax saver, HDFC Taxsaver would be gud options among the ELSS funds.
surendra asked, Hi - I am having few SIPs of Reliance Diversified Power Sector fund, J M Basic Fund & ICICI Prudential Infrastructure Fund going on from last 8 month. Should i continue with the same or should i change to some other fund looking at current scenario.
Vetapalem Sridhar answers, Dear Surendra, all funds u hold r thematic or sector funds. It is better to build some diversified large cap funds into ur portf and stop investing futher money into the existing funds. Look as funds like HDFC Growth, Reliance Vision, Sudnaram Select focus, SBI Contra etc....
Riya asked, Though there is fall in share market, there is increase in real estate prices, what is the good time to invest in real estate? Will real estate price come down in recent future(8months- 1year)
Vetapalem Sridhar answers, Real Estate prices have not risen since a couple of mths. Infact in some places there has been a slight correction. There is more downside that is left in the real estate space. Sometime during the first half of the next yr, it would be better times to get real estate a prices lower than current levels.
advise asked, Sreedhar,I regularly follow your discussion here. Can you please clearify "Financial Freedom" according to you.I recollect that when you have told this to one of the reader here.Thanks!
Vetapalem Sridhar answers, Financial Freedom: The state in life where u have accumulated enough Financial Resources, that would fund ur cost of living for ur entire life. U do not have to work for money so as to lead ur life. Enough money that would be able to support ur lifestyle for the rest of ur life. So the amt would depend on a number of factors like ur annual cost of living, rate of inflation, life expectancy, no. of dependants, etc.
shaun asked, Are there any chances of upward shift in the market? will the bailout by US fed would help it to recover? as today Rupee is 5 yr low? Would there be any improvement if yes then when?
Vetapalem Sridhar answers, The Financial Crisis in the US has now affected the real economy there. A consumer led recession in the US is being talked about now. Also there r some reports which talk about $700Bn, not being sufficient to stem the current crisis. The problems r far more serious. It would take some time before things can be stabilised in US. To that extent fund flows would flow out of India to take care of domestic liquidity issues by FIIs. India still is a domestic led economy. So the growth rates may slow down. It will take some time before mkts consolidate and enter into a new bull phase. With a long term horizon it is still one of the best places to invest.
Vetapalem Sridhar says, I hv run out of time for now.... Will be back to answer more queries soon!