3 Essential MUST HAVE Strategies for Investors:
1. Entering strategy
2. Exiting strategy
3. Re-entering strategy
1. ENTERING STRATEGY
It about buying
It about making portfolio
Right kind of diversification
Choosing right sectors. avoidng wrong sectors for e.g. fmcg and pharma and not telecom.
Avoiding all-time unfavorable sectors such as pulp and paper, plantations etc.
Use of technical analysis if/while investing in a bull market.
A review of situation and impact of other markets, for e.g. bond market, commodities market etc.
-why to invest?
Target/goal of investing, gains, speculative gains, dividend.
Deciding whether Economic recovery in sight or more pain for capital markets?
Comparison with other asset classes
Are valuations cheap or there is bubble element.
-Where to invest?
Sectors to pick and sectors to drop
Intra sector and stock selection i.es to chose between an l and t and bhel.
-how to invest?
Allocation of capital amongst stocks, sectors, intrasector and other classification.
2. EXITING STRATEGY
When to book profits.
Of What use the paper profits are?
When markets are fundamentally over priced and technically also.
The best way is to look for macro factors for overheating signals.
Also look for behavioral indicators such as excessive euphoria such as p/e ratios soaring to 50-100 and even more. And floods of IPOs over subscribing by several times with no justification for such a valuation of its business.
How much return should be a threshold for booking profit-50% or less or more? How much for individual stock and how much for the combined portfolio?
Oh oh …you may miss 20-30 pc market rise, but if you know the top, please let us know too.!
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Your targeted return has arrived or not.
Better opportunity in other sectors/stocks/asset class or shifting to debt or bank fd.
Valuations entering into bubble zone.
Strategy to exit NEAR top (and not AT top, which is not possible for all)
Making sure of your bull market PROFITS DOESNT remain ONLY ON PAPERS. (which happens with more than 70 percent of retail investors.)
3. REENTERING STRATEGY
When will you reenter into stocks?
May be you just wait and watch with cash during the bear market or you may invest into commodities or other asset class during this period.
Time for value buying.
Buying stocks at real real throw away prices in a completely distressed and panic driven markets. Having courage, confidence, vision and insight to do so.
The new economic policies, new themes of investing.
Rise of some sectors while fall of few others.
Reentering in wrong sector may give bitter experience at the start such as investing in telecom in this new bull market began in 2009.
Invest more and more when markets have corrected beyond 40 percent of its previous bull market high.
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Market trading at or below fair valuations like average p/e, historic p/e, historic low earnings, etc.
Worst and pain coming to be over
Valuations becoming attractive
Your targeted downside in prices and valuations achieved.
Readiness to bear notional loss up to 20 percent and readiness to average at further declines.
Strategies of entering NEAR Bottom (and not bottom)
Readiness to take contrarian call.
Readiness to go against the crowd.
Close observation of macro economic cariables, monetary policy hanges, and your targeted companies for investment.
Remaining ready with a list of your targeted companies and their prices at which you will buy,
Making sure we may be early but not late in the bull party.
3 STRATEGIES APPLIED TO AN INDIVIDUAL’S INVESTMENTS:
Portfolio building strategy.
Portfolio monitoring strategy.
Diversification strategy. Within asset class i.e. equity.
Asset allocation strategy. Between asset classes.
Portfolio shuffling strategies.
