Fed up with the market crashes? Part I

Should you run away from the stock markets? 

In this issue: 

» Weak rupee to help exports 

» PSU banks need an overhauling of hiring policy 

» Which portfolios is best to invest?

» and often, people invest in mutual funds without understanding the nature of funds. The sole criterion used to select a fund is return expectation but while doing so they tend to ignore the level of risk they are exposed to. Such bad decisions result in loss on investment.

if you look at the volatility that we have seen in recent times, you must be asking these questions....

The debt instruments like fixed deposits have given better returns as compared to the stock markets if one looks at the past 3 years. However, these returns have been insufficient to compensate for the increased cost of living or inflation. Unlike stocks, debt does not have the capacity to ever compensate for the increased cost of living. For this you need equities or stocks and hold them for a long period of time. And the stocks you need to buy are of those companies that have good managements, strong fundamentals and that have built this strength without taking on too much debt. 

For those scoffing at the idea of holding stocks given that the markets have not really gone anywhere over the past 3 years, there is something that they need to remember. Not all asset classes deliver the same returns year after year every year.

Investors need to hold a bunch of asset classes that include equities, debt, gold, etc. So that if one asset class performs badly, then the returns from the other asset classes can help safeguard your wealth. 

Unfortunately the regulators, including SEBI, have done little to allay investor fears. If they can come up with a stronger regulatory system that actually works, then domestic investors would start investing in the markets.

And when that happens, India would no longer need to rely on FII flows for providing the boost to stocks. 

The main problem with the current approach is that it is entirely focused on stopping the rupee from depreciating. Rupee depreciation is a symptom of a widening current account deficit, falling GDP growth, and excessive corruption. If we are only focused on treating the symptom without treating the underlying cause, the problem will not go away. 

Instead, we need to focus our efforts on the three underlying causes. We need to boost growth, reduce our current account deficit, and get tough on corruption. Short-term fixes, such as the restrictions recently announced do not address these causes. These underlying causes are long-term issues, and they require long-term solutions. 

In fact, rather than battling to help the rupee, we should allow the currency to depreciate. A weaker rupee will boost our exports and reduce imports in the long run, and this is critical to fixing the current account deficit and improving GDP growth. 

There is a considerable deficit of trade balance as we have failed to earn more foreign exchange by gearing up exports. Instead of complaining about sliding Rupee can we not make use of this situation to boost exports? Perhaps, then the Rupee automatically would gain strength and the slide is arrested. Inviting FDIS and FIIs by by relaxing conditions/limitations and regulations, which are needed to maintaining soverign prerogatives is not the only a temporary measure like the pain killer and not a permanent solution. Let us diagnise the problem and find an appropriate solution to strengthen the rupee.

The methods of cure is worse than the decease!.

We all know this but our finance minister do not understand as he took his decision based on it's POLITICAL weightage.

The value of the rupee is determined by a host of external factors. This includes the value of the dollar, global equity markets, global commodity markets, and foreign investor sentiment. Most of these are largely out of our control. This is why we cannot make the rupee go up no matter what restrictions are put in. 

If we examine all the issues facing the Indian economy, the falling rupee is less important than others such as growth, employment, inflation, etc. We need to stop focusing on trying to fix the rupee, and start focusing on trying to fix the economy. 

Rupee weakening is not only our national problem also every individual problems also.  Intellectuals should think as to how our men can individually and collectively sacrifice and adopt to the changing situation and give call to the people. It is tough situation. Will take long time and needs patience.

Fed up with the market crashes? See this now... 

There are only two ways to invest in the stock market... 

One... invest in some stocks randomly, without proper planning, and hope that they won't be hit by market crashes and will make you some money. 

Or two... build a portfolio of solid stocks that are bound to grow in the long run regardless of the ups and downs or market crashes that may happen in the near term. 

Currently, we have to choose which one of these?  We all know it...  Certainly, we choose second one only. 

In the current situations, how can we get profit in the short term? We may get confuse to find the good stocks to invest during volatile?

- Continue in the next part...Guru