Saturday, June 6, 2015

Keep your head in the game even in the market's darkest moments.


 Courtesy : http://www.allstarstocks.com


It’s a lesson learned many times over in recent years: buy on the dips. For the past two decades, every time the market took a significant fall, investors who bought on the dip were soon were rewarded with a profitable bounce.
But the year 2000 taught investors a new lesson: there are no sure things in the stock market. With few exceptions the Dow blue chip stocks were anemic and the NASDAQ was abysmal. Anyone who spent the past year buying tech stocks on the dips knows now what’s it like to be kicked right in the assets. Instead of the dip and bounce, it was the dip, double-dip, and triple-dip.
Investors lost a whopping $5 trillion in market capital over an 12-month period—dwarfing any market collapse in the history of the U.S. stock market. At times like these, it’s easy to second-guess your investment strategy. And perhaps some second-guessing is in order. Once you’ve experienced the market’s dark side, you may have a better sense of what your threshold for risk really is. You also may have a better appreciation for diversification, dollar cost average, and some of the other conservative tenants of investing.
Just don’t get carried away. The one thing you don’t want to do is make a radical change in your investment approach. Remember, the past year was an exception. Most years, the market goes up. In fact, the Dow Jones Industrial Average has set new highs 17 of the past 20 years. The odds still strongly favor investors who keep their money in stocks.
So what should you do in a bear market? If you’re a long-term investor you do roughly the same thing in a bear market that you would in a bull market. You buy right through it. You make a continuing series of small bets. You select good quality companies and continue to build a position in those companies.
No question about it, it’s hard to get psyched up to invest good money in a bad market. In fact, it’s hard to keep from selling out of a bad market. You see your net worth continuing to fall. You see the money you invest being swallowed up into the steady slide of the market. You worry that the market may never turn around, and that all you’ve worked for, saved for, sacrificed for, will be lost.
Those types of emotions have caused more than a few investors to fail in the market. Fear drives many investors out of the market at the wrong time—when the market is near the bottom—just as greed lures them into the market at the wrong time—just as the market reaches an all-time high.
That’s why it’s important in times like these to focus on the long-term. And from a long-term perspective, market dives—painful as they may seem at the time—are the best times to add to your positions. Successful long-term investors see bear markets as "buying opportunities," when you can get stocks at bargain prices. Don’t think about how much you’ve lost. Think about how many more shares you can buy for the same amount of money.
The worst sustained bear market of the past half century occurred from 1968 to 1981 when the Dow Jones Industrial Average essentially stood still for 14 years. Now that’s a bear market! But even during that bear market, including dividends, you still would have earned an average annual return of about 4.3 percent. And that’s if you didn’t invest at all during that 14-year period.
But if you had continued to invest on a regular basis during that period, you would have set up your portfolio for a long and prosperous run. Once the market turned around in the early 1980s, investors who had a position in the market enjoyed exceptional returns over the following 15-year period.
An investor who added $10,000 a year each year for 14 years from 1968 through 1981—the worst period of the stock market of the past half century—would have seen his or her $140,000 investment grow to about $2 million by 1995 and $3 million by 1997. That’s an average annual return of about 15 percent. And all as a result of investing during the stock market’s darkest hours.
An investor who bought into the market right after the crash of 1987 would also have fared very well over the next 24 months. From its low of 1739 in the fall of 1987, the Dow moved up to about 2700 by the end of 1989—a two-year return of 56 percent. That’s why it would be a mistake to sell out of the market or cut back on your investments during slow times. Because once a market bottoms out, the returns on the bounce can be exceptional.
The hardest part is hanging in there while watching your investments plummet. Next time the market is tanking, and your commitment to stocks is wavering, here are some thoughts to consider:
Investing is a marathon, not a sprint. Wall Street experts tend to be on a different schedule than you. They’re running a sprint—looking for the best possible short-term returns—while you’re in a marathon—investing for the long-term. So when you listen to the Wall Street experts, you run the risk of getting caught up in their game, not yours. You don’t have to be concerned about the price of stocks today, about the next Fed meeting, or about whether IBM makes its numbers. Those are all short-term distractions. All you have to do is ask yourself whether the long-term prospects of the U.S. economy are solid, and where the electronics, medical technology, telecommunications, financial, and consumer markets are headed over the next 10 to 20 years. Clearly, unless we experience an unprecedented economic meltdown, long-term prospects continue to be strong for a broad range of American industries. That’s why it’s important for you to focus on the long-term and invest with an eye on the future.
The market always sets new highs. There has never been a crash of the U.S. stock market so severe that the market didn’t ultimately return to its former high, and move beyond it. That’s not to say it couldn’t happen. In the 1970s, the NASDAQ dropped dramatically, and did not return to its former high for about three years. After the recent market collapse, it may be some time before the NASDAQ returns to its all-time high of about 5100, but if history is any guide, the NASDAQ will ultimately rebound.
The goal is to build a winning portfolio. Your job as an investor is to build a portfolio of successful companies. If you can get a break on the price of those stocks while the market’s in the tank, all the better. Just keep building. Over time, that portfolio will serve you well.

106 comments :

  1. Excellent article to read and follow in these volatile market. Thanks for education.

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  2. Wonderful article and at the right time. Every Saturday I'm getting a quality postings. Thank you for that!

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  3. Just the right article at the right time. One has to hammer these points into ones brain every time the markets tank.

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  4. Excellent sir, I wait for the Saturdays. . . . . Thank you

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  5. Thank you for the writeup----words of encouragement.

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  6. very very nice article VP sir at the right time, i am also creating my portfolio in these market melt down, actually i was waiting for this meltdown since last 2 months

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  7. Thanx VP sir for this wonderful and timely article.

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  8. Now that is some motivation and should keep many going :)
    Thank you !!

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  9. Very nice article! Thanks for sharing

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  10. Hi VP Sir , Great post . Now a days I am excited to see these posts inline with stocks views . One thing I can confidently say is these posts are really helping in building the conviction . Thank you

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  11. Thanks for your quality article. ...

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  12. Dear VP sir

    On seeing your post I was highly convinced and feeling highly comfortable. Will invest in good companies and average all my holdings. Thank u for giving such confidence

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  13. Sir what is your view on anik industries as they are restructuring their dairy business (and strategic decision thereon on 10 th jun)

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    Replies
    1. ANIK industries is the owner of once famous ANIK SPRAY brand . But their diversification into unrelated fields negatively affected their concentration in Milk Processing business . Let us wait and see what they realised and what is their plans going ahead.

      Delete
  14. Sir, your views on Patel integrated logistics please

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  15. Dear VP Sir,
    Please share your views on Cairn India

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    Replies
    1. Not tracking after the change in management in favour of Vedanta Group

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  16. Though easy to read,understand and agree difficult to implement

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  17. Thanks sir good article please your view upon biocon and cipla

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    Replies
    1. Biocon is an already suggested company ,not tracking Cipla

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  18. If anyone has read many of your posts, the quality of this article would have become their character by default, but its always good to read the facts and understand we are right on track.
    Hope our traders and speculators realize this.

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  19. Sir pls share ur thoughts on umang diaries part of JK GROUP (JK tyre. JK lakshmi cement)

    ReplyDelete
    Replies
    1. Decent one ,expecting steady growth over a period

      Delete
  20. Sir, your views on sms pharma and sun pharma.. Which one you fell is better in current scenario.

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    Replies
    1. Though both are in Pharma space , not strictly comparable due to size of operations.I think Sun is an SIP opportunity now.

      Delete
  21. sir ur view on welspun india and shreyas shipping at cmp?

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  22. a must read article for all investors, i am an ardent follower of your blog and check it almost twice a day for your comments, suggestions etc. it keeps me grounded. sir, can i have your views on basant agro tech, on their latest results, the sales have increased, but finance costs and taxes have eaten into their profits a lot due to which the numbers have gone haywire...thanks.
    god bless you for the selfless work you are doing.

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  23. Dear VP sir,

    (posting again)

    Request your current views on Panacea Biotec. Its been more than 18 months since relisting in WHO of Pentavalent vaccine, yet it has turned profitable. is the turning around still positive? Thank you sir.

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    Replies
    1. Turn around is a process need long time especially in pharma space where regulatory formalities are high . I believe,Panacea is moving in the right direction.

      Delete
  24. hi VP sir, can i hold Ibrealestate company at 50 rupees level? Company has given good profit of 95crores in last 2 quarters...also let me know if i can buy Basanth agro at 7 rupees...wat is the target and time frame for the target...plz advice

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    Replies
    1. Not tracking any companies from Indiabulls group

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  25. Sir what is your view about la opal

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    Replies
    1. Laopala suggested @Rs.66 when its FV was Rs.10 . Considering the stock split in 5:1 ratio , it already multiplied by 27 times in 4 years . Neutral at CMP .

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  26. Sir,Whats your view on Pokarna?

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  27. Sir, at what price you have recommended REPCO. I tried searching in your search column but couldn't find it in any post. Could you pls advise. Thanks.

    ReplyDelete
    Replies
    1. Not published any separate posting on Repco , just expressed my positive view on it as reply for comments around Rs.300

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    2. Not published any separate posting on Repco , just expressed my positive view on it as reply for comments around Rs.300

      Delete
  28. Hi sir,

    Your views on vedanta and tata steel?

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    Replies
    1. Not tracking Vedanta , Prefer Tata Steel for an SIP for long term investors.

      Delete
  29. Sir,

    What is your opinion on Basant Agro? Though it has good marketing, management,clientele, product mix , stock is not doing well.

    Can you express your opinion on this stock?

    ReplyDelete
    Replies
    1. Not expecting much upside if management is now willing to unlock value through de-merger of Seed division

      Delete
  30. Dear sir, Your views on Novartis India at cmp?

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    Replies
    1. Novartis is an already suggested stock @ Rs.622

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  31. Ur view on Country Condos and Parnax Lab after results?

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  32. Sir ur views on SKM Egg please holding large quantities @ 170.

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    Replies
    1. There is no change in my previous view on this company. The reason for recent fall in its stock price may be due to the rise in egg price on account of Bird Flu issue in USA . But, in my opinion , this situation opening lot of new opportunities for the company for the long term. As you are aware US is the largest supplier of poultry and poultry products and any supply restrictions from there will influence the price of these products around the globe. If my understanding is correct , company is taking this as an opportunity to enter into new markets/customers and succeeding in their efforts . The closed farms in US is expected to open in near future and the price of egg come down to normal level but the business relations company can generate during this period will benefit it in the future too . In any business , when there is sudden increase in raw material cost ,it may take few months to pass on the same to customers and the impact of the same may be there for a shorter period .Different companies may combat such situations in different ways . Some may even adjust the production levels for that shorter period to keep the impact minimum and then pass on the increased cost to customers if the higher price of raw material prevailing for longer period.Any way , I believe the present situation is only a temparory one and in one sense it is opening up new opportunities for the company which is very beneficial in long term expecially considering company's plan to increase its production capacity going forward. I believe , in this overall negative sentiment in stock market , investors are looking only about the near term and completely ignoring the long term possibilities of a market leader like SKM .Because of this reason ,stock price corrected more than enough ( in my view) . Whether this is an opportunity or not depends on each one's investment philosophy - Whether one is positional trader or Investor.

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    2. I completely agree with you VP sir. your reading of the situation is a learning in itself. I have accumulated few qty and will add more............... I know this is your high conviction stock and I concur with the reasons to believe so......... God bless

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    3. Dear VP Ji,

      The process of pasteurization in SKM products and the Quality process eliminates risk of Bird Flue related issues, and actually beneficial, I feel.
      How does US Bird Flue Affect SKM?
      Could you kindly elucidate.
      Just wondering why market reacted so, while i added to my positions.
      Regards
      Ranga

      Delete
  33. SIR I WANTED TO ASK YOU ABOUT ONE COMPANY THAT IS Sharon Bio-Medicine Ltd is it a good company to invest for the long term can you just have a look if you can and please suggest me.

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  34. Dear Sir, Today it second Saturday. Any reason why you didn't recommend any new stocks.? Is it the volatile market overall.

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    Replies
    1. I don't think there is any relevance in recommending a new stock when many of the recently recommended stocks are still available at discount to recommended price.

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  35. Plz suggest about gati and patel integrated logistic

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  36. Hi Sir,
    Your views on Patel Airtemp ?

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  37. Dear VPji,
    I have one query regarding PFRL. Arvind limited business is also on the similar line of PFRL (after the merger process). They also own good brands link Flying machine, Newport and excalibur. Also they have the license for tommy, arrow, lee and many more. If we look at the growth and valuation in the past few years, and it is not that great. I agree with you that brands owned by Aditya birla (Peter engand, Louis phillipe, Allen solly ) are superior. But if we look at Arvind story, it is not that great.
    While discussing PFRL story, there was comparison with Jockey. If we look at the way page industry is managed, if we see its ratios, I do not think either Arvind or PFRL is close to that .
    Please leave your reply.

    Regards,
    chetan Biluve

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    Replies
    1. I never argued that in the present form ratios of PFRL is euqual to that of Page . But I expressed my opinion that many of the ratios will improvesubstantially from the present situation once the mentioned companies merged with PFRL . In case of Arvind , only 1/4 th of the total sales of Arvind coming from branded and retail business,and over and above this image of the group itself is not so good in stock market.

      Delete
  38. Hi your views on following please :
    vadilal
    CCL Products India Ltd
    Info count industries Ltd
    Intrasoft Technologies Ltd

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    Replies
    1. Vadilal is the only stock I am tracking from your list which already suggested @ Rs.105 . At current price of Rs.493 , neutral on it

      http://value-picks.blogspot.in/2012/06/vadilal-industries-ltd-buy.html

      Delete
  39. VP Sir,
    Can you please share your view on Bombay Swadeshi Stores Ltd.

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  40. Sir, Pl.share ur views on RS software and izmo ltd

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  41. Hi VP, any views on vakrangee doing business in providing softwares for e-governance and banking. It is growing nicely and have sound financials. Thanks.

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    Replies
    1. I am bit sceptical about it

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    2. Thank you for sparing your time and sharing your views on it.

      Delete
  42. Please share your view on samkring piston. Please sir.

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    Replies
    1. Already expressed my view on it

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    2. Sir, holding SAMKRG, since your post.
      Is it a good time to add fresh allocations?

      Delete
  43. Sir whats ur view on fluidomat ltd for long term

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    Replies
    1. Fluidomat recommended @ Rs.29 , neutral @ CMP Rs.237

      http://value-picks.blogspot.in/2010/07/fluidomat-watch-it.html

      Delete
  44. Sir alok ind can turnoround its huge debts ? Available at cheap valueation

    ReplyDelete
    Replies
    1. If you are ready to take that magnitude of risk , I will suggest Era Infra instead

      Delete
  45. Sir,
    Pls share your views on Polyplex Corp. Bought at 268.
    Thanks

    ReplyDelete
    Replies
    1. I believe , improvement seen in last quarter result will continue going forward

      Delete
  46. Dear Sir,
    Your views on Adani power and Provogue India.
    Thank you

    ReplyDelete
    Replies
    1. Adani Power is targetting to achieve 20,000 MW by 2020 and become India's largest power company , but on the other side company's debt level is an issue

      Delete
  47. Dear VP sir,
    Kindly share your views on Godavari drugs, Orchid chemicals & aimco..

    ReplyDelete
    Replies
    1. My view on all these companies already expressed and updated through further postings or comments.

      Delete
  48. VP sir,
    Can you share your view on prakash constrowell?

    ReplyDelete
  49. Hello,
    I read in one of ur replies to a comment that u track Akzo Nokel. After decline in profits in Q4, it has got corrected by ~10%. Can it be bought at CMP?
    Also, Exide too after not so gud last few quarterly results has corrected a lot. As I know, Exide is a well managed company. Is it a gud buy at CMP?
    Thanks,
    Tushar

    ReplyDelete
    Replies
    1. You can go for an SIP in Akzo Nobel and Asian Paints

      Not tracking Exide

      Delete
  50. Sir
    Can you share your views on Morepen Labs

    Regards

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  51. Dear VP,

    Pls provide your inputs on the Solar industry given that the govt has plans to increase it to 1 GW in the future. I read through your blog and gathered a set of companies.

    moserbaer
    websolar
    gujarat borosil
    suzlon
    surana solar
    Indo solar

    Pls let know your views on the industry as well as any of the above stocks you are tracking. Im holding Gujarat borosil for now.

    Thanks

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    Replies
    1. I think , Chinese companies are the major beneficiaries of India's renewable energy thrust. Recently Govt indicated their plan to cut subsidy on roof top solar projects which may also impact this sector.

      Delete
  52. Dear vp sir
    Your view on speciality restaurant

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    Replies
    1. Performance of the company is not improving as expected earlier

      Delete
  53. What is your view on freshtrop fruit for long term

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  54. Please guide about long term prospects of Sanghi Industries and Kesar terminals

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  55. Dear sir
    pls have opinion on development in era infra. (Cdr, preferential issue of shares by promoters at rs 12).
    Pls requesting u to publish.
    thanks in advance

    Regards
    deepak

    ReplyDelete
  56. Sir good article it gives more depth in our knowledge....In one of ur comment above u advised for high risk-taker Era infra for long term...i too believe this co has good track record in past but has been stucked in high debt ...considering its debt level n pledged shares...is promoter and governance are good ? plz share ur view

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    Replies
    1. Dear

      If someone buying it now ,It is @ Rs.4 and not @ Rs.40 or Rs.400 ,We can't expect this price and a perfect balance sheet together

      Delete
  57. what is the future of allied digital service

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  58. Sir please suggest me about Wockhart, Lycos, dr.datson, suzlon,

    ReplyDelete

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