Sunday, May 13, 2012

Active Investing - Part 2

This is the second and concluding part of my notes on investing. The first part was published here

My own observations over the years are summarised below:

-->It is not possible to identify multi baggers in advance.

--> Investors can identify themes and invest prudently in shares of such theme businesses. Here also, there will be significant danger of the theme falling apart. Therefore, prudent investing requires investing only small portions of the capital in any given theme. These theme stocks will not be multibaggers. The expectation is that they will be market outperformers. Examples of such themes have been: PSU Banks, Mid Cap IT, Large Cap Pharma. Themes that may emerge in the coming months include Capital Goods, Mid Cap Pharma.
All such themes require an exit strategy. Investors cannot buy and forget.
Such investments are in fact Position Trades.


--> To obtain gains from the market, the wise course of action is to invest in Index Funds. Investors who buy Nifty, Bank Nifty and CNX IT through Index Mutual Funds are likely to get a significant advantage over investors who try to buy individual stocks.

--> Investors should consider trading in stocks and investing in index funds.

5 comments:

Naran said...

Sir,
I think only positional trading give us significant profit than Investment. Buy and forgot can only suitable for FDI or mutual fund investments.Is it right ?

Akash said...

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Unknown said...

Hello Mr. Sukhani,

Very well said, I am 100% aggree with you.
However in selecting theme what is opinion on the long term bets of the following thems like ->

Education
Agriculture
Hospitality
& Divident yield stock

Appricaite your views on the above in your upcoming articals.

Thanks & Regards
Crasto Walter J.

Rushabh Shastri said...

Investment must be do in a part way or say SIP way.....any today's hero can be zero for tomorrow or can be multibagger, even their biggest stake holder cant know...so prudent ways should be to buy stock at your price and sell at your price...without thinking of the crowd....since In investing Its your heart who can direct you well and other is market...no other is better than these...Must say good topic to disscuss for

ramabhat said...

Sudarshan Sukhaniji, I feel we have to take positional calls in index funds also especially as the can go down by 24 to 30 percent. The positional trades should not be more than 2 or 3 times in a year.
If I am an avid follower of EMAs, could you suggest whether I should watch the Nifty weekly chart or daily chart and 1-year or 2-year chart ?