Saturday, February 13, 2016

Stashing Your Cash: Mattress Or Market ?

Courtesy : Investopedia

When stock markets become volatile, investors get nervous. In many cases, this prompts them to take money out of the market and keep it in cash. Cash can be seen, felt and spent at will, and having money on hand makes many people feel more secure. But how safe is it really? Read on to find out whether your money is safer in the market or under your mattress.

All Hail Cash?

 There are definitely some benefits to holding cash. When the stock market is in free fall, holding cash helps you avoid further losses. Even if the stock market doesn't fall on a particular day, there is always the potential that it could have fallen. This possibility is known as systematic risk, and it can be completely avoided by holding cash. Cash is also psychologically soothing. During troubled times, you can see and touch cash. Unlike the rapidly dwindling balance in your portfolio, cash will still be in your pocket or in your bank account in the morning.
However, while moving to cash might feel good mentally and help you avoid short-term stock market volatility, it is unlikely to be a wise move over the long term. 

A Loss Is Not a Loss

When your money is in the stock market and the market is down, you may feel like you've lost money, but you really haven't. At this point, it's a paper loss. A turnaround in the market can put you right back to break even and maybe even put a profit in your pocket. If you sell your holdings and move to cash, you lock in your losses. They go from being paper losses to being real losses with no hope of recovery. While paper losses don't feel good, long-term investors accept that the stock market rises and falls. Maintaining your positions when the market is down is the only way that your portfolio will have a chance to benefit when the market rebounds.


Inflation Is a Cash Killer

 While having cash in your hand seems like a great way to stem your losses, cash is no defense against inflation. You think your money is safe when it's in cash, but over time, its value erodes. Inflation is less dramatic than a crash, but in some cases it can be more devastating to your portfolio in the long term. 


Opportunity Costs Add Up.
 
Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. Put another way, opportunity cost refers to the benefits you could have received by taking an alternative action. In the case of cash, taking your money out of the stock market requires that you compare the growth of your cash portfolio, which will be negative over the long term as inflation erodes your purchasing power, against the potential gains in the stock market. Historically, the stock market has been the better bet.


Time Is Money
 
When you sell your stocks and put your money in cash, odds are that you will eventually reinvest in the stock market. The question then becomes, "when should you make this move?" Trying to choose the right time to get in or out of the stock market is referred to as market timing. If you were unable to successfully predict the market's peak and sell, it is highly unlikely that you'll be any better at predicting its bottom and buying in just before it rises.



Common Sense Is King

Common sense may be the best argument against moving to cash, and selling your stocks after the market tanks means that you bought high and are selling low. That would be the exact opposite of a good investing strategy. While your instincts may be telling you to save what you have left, your instincts are in direct opposition with the most basic tenet of investing. The time to sell was back when your investments were in the black - not when you are deep in the red.


Buy and Hold on Tight.

 
You were happy to buy when the price was high because you expected it to go higher. Now that it is low, you expect it to fall forever. Look at the markets over time. They have historically gone up. Companies are in business to make money. They have a vested interest in profitability. Investing in equities should be a long-term endeavor, and the long term favors those who stay invested.Serious investors understand that the markets are no place for the faint of heart.


This is also the time to review the strength and weakness of our portfolio  and make necessary reshuffling to make it ready for next up move.Don't hesitate to sell the stock of a company in loss if we could find a better opportunity in another one considering the changing business environment.

138 comments :

  1. Good article sir, hope sanity returns soon in stock markets. In recent times there has been a lot of carnage in mid & small caps, are there any stocks which are unnecessarily beaten down without any chance of fundamentals and can give multibagger returns few years down the line. Also please share your views on magna electro castings at cmp should one add onto it.

    ReplyDelete
    Replies
    1. In case of corporate results , unfortunately it is one of the worst quarter in past many years albeit India's GDP data showing 7 % + growth.Really wondering about the data and ground reality .As stock prices and corporate earnings are closely linked it is no wonder for a correction in stock prices to adjust with expectation and reality . Lot of global factors also affecting this carnage . But if we study history,such factors are part of market and it is cyclical in nature . This will come and go but whether an investor can survive such carnage and remain in market till the cycle turns is the question .Leveraged positions, investing time bounded funds in market ..etc are the biggest mistakes retail investors normally commit each and every time. If you invested in a company with good business model and decent management , it will come back when the shake out is over .Meanwhile one should analyse whether there is any fundamentally negative happened to the company we are invested and take decisions accordingly . If our capital is limited there is nothing wrong in switching from a company with bleak prospects to bright prospects at any time.

      As you are aware there is certain limitations to recommend name of companies here from June 1,2015.

      Delete
  2. Dear VP sir
    Can you share your view on Jubilant Industries in long term. Thanks in advance.

    ReplyDelete
    Replies
    1. As of now not tracking Jubilant Industries.

      Delete
  3. Sir very nice article at the very right time. thanks a ton.

    ReplyDelete
  4. Thanks fr nice article.. wts ur view on v2 retail results n compny overall after results?

    ReplyDelete
    Replies
    1. Result was good ,but as per note No.5 company failed to repay loan and lenders sold a property which is one point to note.

      Delete
    2. Sir, whats your view on V2 retail after the sale of property by lenders? should we still keep holding it?

      Delete
  5. Thanks Sir for your valuable guidance.Pls comment on SKM in thia recent fall.Can i add here for decent return. thaks

    ReplyDelete
    Replies
    1. Due to increase in raw material cost and not so good financial situation in Japan ( the biggest market of Company) , In case of fresh entry I prefer to take a call after watching the next few quarterly results.

      Delete
  6. Great Article at great time.
    Thank you.

    ReplyDelete
  7. Dear Sir, Nice Article at Right time.keeping to present scenerio in mind,such as 1.world devloping economy in dielemma 2.fii pulling his money back 3. Psu bank suffering from worsen npa 4. Govt may levy long term capital gain tax etc .5. Commodity prices down globaly kindly share your experience. As a Long Term Investor.

    ReplyDelete
    Replies
    1. The most pessimistic time is the best to create a portfolio , but only with a long term view and without any over expectations about near future.

      Delete
  8. Hi VP Sir, Websol posted very good result today. Real turn around story. Very good pick by you Sir. Posted net loss of 17 lakhs Vs loss of 95 lakhs YoY , posted loss of 17 lakhs vs 1.24 crores QoQ. Almost posted profit but due to expenses cost, it posted slight loss. Hope it turns profitable from next quarter. Thanks for your turn around picks Subex, which posted very good result and Websol which is showing improvement every quarter. Your views please.
    Can you also share your views on il&fs engineering which posted loss this quarter also. I am feeling that until it find out a way for fund raising, we can't see any improvement in il&fs engineering results. I don't see any major news on fund raising as well.

    ReplyDelete
    Replies
    1. Yes, Websol is improving .

      As you mentioned fund raising at the earliest is important in case of IL&FS Engineering .Though it is one of the companies with highest order book ( More than Ten Thousand Crores) execution delay is happening due to working capital crunch.

      Delete
    2. Hi Sir,
      I was again reading the article you wrote on ILFS and got convinced to buy more at this level. With Gov spending increasing in Infra sector seems this company will do well in future.

      Your views on it will boost the confidence.

      Delete
    3. when there is no fund in the company to execute the orders and its well know to the entire world , why still companies are giving order to IL and FS ? even after knowing there will be delay in projects ?

      Delete
  9. whats ur view on sunil health care and delta corp

    ReplyDelete
  10. sir share ur thoughts on rolta india ,saint gobain,trident ltd

    ReplyDelete
    Replies
    1. Not tracking above mentioned companies.

      Delete
  11. Great blog sir.. As usual and always being great advice. Thanks for all your support and guidance. We will continue to invest in company not in the market.

    ReplyDelete
  12. Sir Rightly said I too hve experienced that if quality of stock we hold is good, gains in portfolio occur once again after some time. Thanks.
    What is your view on Hindustan Construction Company and Pipava Defence.

    ReplyDelete
    Replies
    1. Notional loss is not an issue for a real investor.

      Not tracking HCC or Pipavav

      Delete
  13. Sir, can u please hint us any unnecessarily badly hammered down good stocks?
    Which one of Orchid Pharma, SKMEggProducts, suzlon, aban offshore, salzer elec, tanla, mindtech, enkei wheels, intl travels make it to your list of being a valuepick at current price in your opinion?

    ReplyDelete
  14. Sir your comment on ABFRL results...I am expecting an EPS of 0.52 for FY16 and 1.5 for FY17.

    At these levels the stock is trading at more than 100 Earnings. Can average at lower levels. Waiting for your opinion on the same.

    Disc:Holding 186 @ 205

    ReplyDelete
    Replies
    1. Though the last quarter was below expectation ,I prefer to hold it and add on any further decline with a long term view.

      Delete
  15. Sir, Do you have any latest info on Krebs and its start of operations? I am still holding it and will hold, just could not get latest info on it.

    thanks
    Srini

    ReplyDelete
  16. VP sir,
    Great article and at very good time when market is tanking.

    Only 1 question sir, Do you see market falling significantly if government introduces Capital gains tax as being dicussed in media?

    These are more all external issue then the working of companies.

    Thanks as always

    ReplyDelete
    Replies
    1. If government extent the time period for exemption of LTCG tax , a knee jerk reaction is expected to happen . But market is already in pathetic situation and govt failed to raise targeted amount through stake sale of PSU's due to bad market .In such a situation whether government will take such a decision is a point one should wait and see.

      Delete
  17. VP sir can you please comment on PFRL result ?

    ReplyDelete
  18. Sir please share your view on Indian acrylics and VTM.

    ReplyDelete
  19. Sir,
    Most of the companies go up when they win any order from some other entity but later on the price goes down as market seems ignore these news... e.g. IL&FS engg ... good order book but price going down...

    Do you know how should small investor track the progress of these orders ?

    ReplyDelete
    Replies
    1. Expectation is a factor always influencing stock price .

      About IL&FS , replied above.

      Delete
  20. Hi Vp ur view on excel industries please.

    ReplyDelete
    Replies
    1. The entire sector is facing some headwinds which we discussed earlier.

      Delete
  21. Dear Sir,
    You are not responding anything for your recommanded havily beaten down stock i.e.Mindtek.Your goodself started discussing Mindtek on Rs.170 & today it is on Rs.76 only.
    Kindly let us know your view on this company with long term holding view.I have invested after seeing your view on MMB on Rs.170/-
    Kindly reply please.
    Regards

    ReplyDelete
    Replies
    1. My opinion about Mindtek expressed in MMB is still there in the following link :

      http://mmb.moneycontrol.com/india/messageboardblog/message_thread/35906629/37706629#m37706629

      Not sure what change needed for that view.

      Delete
  22. Respected sir, Desperately need your advice on mindtek. I am struck in this stock @ 160. Is it a hold after latest qtrly results. Unable to understand recent carnage in this stock. Though I am a long term investor, but will it be worth holding this stock. Further I could not find ur earlier comments which u have referred in ur previous post. Eagerly waiting for ur valuable advice. Thanks

    ReplyDelete
    Replies
    1. Replied above . Fall may be due to not so good December qtr result.

      Delete
  23. VP Sir - do u think one can now take a look at Wockhardt Pharma with most of the negatives priced in?

    ReplyDelete
  24. Sir during recent slump, thought to search for some good undervalued companies with good management but beaten down prices. Thinking of Tara Jewels, Bhandary Hosiery, MPS, Virinchi Tech and Vedavaag Systems. Do u Track any of these. If so, kindly help.

    ReplyDelete
  25. Dear VP sir, your old recco (July-2013@29) Gokaldas Exports
    finally seems to be turning around. At least that is what seems to be from spectacular Q3 results....

    Your valuable views please....

    ReplyDelete
    Replies
    1. Part of profit due to exceptional item . But even if we exclude this , result is improving.

      Delete
  26. vp: whats going on with marksans pharma , its going continously down whether one shall averageat current levels??

    ReplyDelete
    Replies
    1. Already suggested to take profit at higher level , not tracking as of now.

      Delete
  27. VP sir what are our views on MRO-TEK and manappuram finance at current prices? Some factors in fundamentals can be really fruitful in years to come.

    ReplyDelete
  28. Dear VP Sir,

    What is happening in SKM. Breaking all support levels. Looks like there is no stopping. Kindly provide your views for small retail investors.

    ReplyDelete
    Replies
    1. Sorry , no idea about technicals to advice based on levels.

      Delete
  29. Sir,
    I know overall market trend is down. However, there seems something wrong in SKM and some insider news is causing huge crack in stock price. What is your view? The price is very attractive and valuation is become very cheap. Should we add? I am ready to add - just waiting for your word. Thank you.

    ReplyDelete
    Replies
    1. Opinion about SKM already shared above on 13/02/2016 .Not aware of any extra negative happened on its fundamentals thereafter.

      Delete
  30. Hi VP
    Pls share view on marico for long term investment

    ReplyDelete
  31. Sir, based on your comments to various queries it appears you are suggesting to sit tight with what one has and not to add more to average out some that appear attractive at this time for investment , thanks

    ReplyDelete
    Replies
    1. 'Not to add more' is not a general suggestion. Strategy should be take based on case to case basis.While considering a purchase decision based on fall in price correction , one should look into possible changes in fundamentals too .

      Delete
  32. Is there any recent negetive news on SKM , sir? Ther way it is going down is not justified I think . Thank you.

    ReplyDelete
    Replies
    1. Lot of investors concerned about a steep fall in its stock price and some vested interests spreading messages to create panic among investors of this company as the fall was due to some fraud of management or something like that. But I believe there is no such issues and this fall is only due to some short term business related troubles like higher raw material price,possible reduction in demand from Japan due to their economic condition ..etc . Stock market will always react in advance and that's why I suggested to wait for a while for fresh exposure and take a call only after seeing how much is the impact of such factors which may visible in next one or two quarters.

      Delete
  33. Dear VP Sir, Any Views on Shreyas Shipping? Stock has traveled from 839 Levels to 133 in six months.

    ReplyDelete
  34. Please provide your clear opinion on Lakshmi Energy.. why I am asking this is your comment on FB says "Its an unfortunate" it is a confusion.. please let us know the pick it self is unfortunate for you or this quarter results only.. your comment matters .. even though we are dully studying about the company to take a decision your comment also matters to many people...

    ReplyDelete
  35. Sir .as far as i understand other than europe's growth problem there is no fundamental fear in cox &kings business model .then why the fall is so severe? Is there anything beyond my understanding . Please illuminate

    ReplyDelete
  36. Hi sir,
    I have recently started reading your blogs. I have a query.
    U had suggested Arrow Coated Products @ Rs 12. Currently the stock is @ Rs 487. Can i buy Arrow Coated at this price.
    Please suggest.
    Thank You

    ReplyDelete
  37. Sir,

    Please share your view on the ABFRL results. they have posted a profit after quite a number of quarters. But the other expenses seems to be very high in this quarter. Please share your views.

    ReplyDelete
    Replies
    1. There may be more than one reasons . Company planning rapid expansion and in such a stage advertisement cost will be higher . Since it was going through merger process , as part of balance sheet cleaning ,write off of around Rs.35 Cr accounted.

      Delete
  38. Sir you recommended saksoft at 82 and now available at 220. Looking to the digital India initiative can I buy at CMP?

    ReplyDelete
  39. Dear VPg, how is health condition of Suzlon? You said that you are tracking Suzlon. Please let me know your opinion/ views on Suzlon. In mmb there is lot of confusion among all the members including platinum. Please share your views. Thank you.

    ReplyDelete
    Replies
    1. Non conventional emery related business in India is highly dependent on government policies .Let us wait and see whether there is any positive steps in upcoming budget . Recently government paying more attention to Solar than wind , which is a point to keep in mind.

      Delete
  40. Dear sir, Lotus chocklate has corrected. Do we add it.Tks

    ReplyDelete
  41. Hi VP Sir, MIC electronics had clarified in recent announcement regarding the Q3 exceptional item of 7 Crores as bad debts write off. Hope it's moving in right direction.
    Also Sir as government is focusing on Solar energy, r u tracking any other Solar energy stocks other than turnaround pick Websol Energy. What's ur views about Swelect, Surana Solar.
    Thank you Sir.

    ReplyDelete
    Replies
    1. Nothing except Websol from this sector.

      Delete
  42. What is ur view on radha madhav corporation

    ReplyDelete
  43. Sir please give your current view after the latest result of the below two companies:
    - Tanla Solutions
    - Technofab Engineering

    Thanks

    ReplyDelete
  44. Dear VP, please give your valuable views about alufloride.

    ReplyDelete
  45. Sir should we average IL&FS engineering @ current CMP or wait for some news about fund raising, but when news came stock may upmove so quickly....please advise.thanks

    ReplyDelete
    Replies
    1. Opinion on the same expressed below the last posting on IL&FS , as a comment .Please use search option.

      Delete
  46. Sir, your view on results of International Travel House. Seems to be a dull result, do you still prefer a hold for longterm ?

    ReplyDelete
  47. Hello VP sir,
    Can you please give your views on Pioneer Embroidery. I regularly average the price by buying more and plan to hold it for 3-4 years.why is the stock falling daily.
    Thanks and Regards
    Govind

    ReplyDelete
    Replies
    1. Averaging ? . It is still almost 80 % higher from the suggested price of Rs.30.

      Delete
    2. Sir, you had expressed that Company is proceeding in right direction. I guess no fundamentals has changed after the same. I believe it is the general falling market that's pulling the price down. Correct me if i am wrong.

      Had a chat with Management and they conveyed that Sales to Singapore will start in coming FY and we should see consistent growth from here. Being Silver Jubilee, it looks, they are pushing to get the company back on strong grounds.

      Delete
  48. Hi Sir,

    What are your views on Ramky Infra? would they be benifitted from the coming budget.

    Thanks

    ReplyDelete
    Replies
    1. How a particular company, which operating in a sector in which many other companies are present ,will specifically benefit from budget ?

      Delete
  49. Hi,

    I was going through your old blog post on Bharat Gears. Do you still maintain your view and own the business?
    Thanks!

    Disc: I have taken starter position in the company.

    ReplyDelete
    Replies
    1. At this price , I prefer Banco Products over Bharat Gears.

      Delete
  50. Dear VP Sir, please share your Views on SBI ? Thankyou

    ReplyDelete
  51. Sir, what is your view on Zicom?

    ReplyDelete
    Replies
    1. Crisis in middle east due to fall in crude oil price may negatively impact Zicom for the medium term.

      Delete
    2. Sorry for my ignorance, but can anyone explain me, what is the relation of a security manufacturing company with the fall of crude oil?

      Delete
    3. I too was wondering on this, but when I went through the website of Zicom, I found following about its Group Company: Phoenix International WLL is one of the growing Engineering Services Companies, in the Middle East with its world headquarters at Qatar.

      Delete
  52. Dear sir any view on Lakshmi energy now Tks

    ReplyDelete
    Replies
    1. Waiting for the outcome of board meeting scheduled on March 1.

      Delete
  53. VP Sir - Feel like you are less active nowadays
    No new post and less comments to read.
    I believe this is the time we need a mentor like you to guide us to be financially independent by owning stocks long term.
    If possible could you provide a few recommended stocks which are at cheap levels and can be brought during this bear market.

    ReplyDelete
    Replies
    1. For the past many years spent too much time in front of computer screen,as a result facing some issues for eyes and forced to reduce time spend on it, hence least active for past few months.

      Many investors are ready to buy stocks now as they feel stock price came down drastically in many cases. It is not a bad strategy but the only think we need to keep in mind is , we should check whether the fall in price is only due to overall fall in market sentiment or due to any specific business challenges for the particular company .

      Delete
  54. Dear Sir, a very good article at the right time. Hope the budget does not add more fuel to the fire and hopefully things should settle down very soon. Whats your view on Ador welding? Stock has corrected 30% from recent highs. Is it good time to average?

    ReplyDelete
    Replies
    1. Ador Welding is an already suggested stock around Rs.120 and its current price is above Rs.240. It is a decent company from this sector but this entire sector is highly dependent on Industrial activities( mainly Automotive,heavy engineering..etc ). stock is expected to gain ground once there is growth in these sectors.

      Delete
  55. I am suspecting SKM has lost business in Japan. I do not see any exports to that country this month yet :(

    ReplyDelete
    Replies
    1. Up and down are common in any business. In case of almost all products, there may be temporary demand fluctuation when the entire economy of consumer country passing through tough times . This is applicable in case of any company and SKM may not be an exception.Unfortunately at the same time there is an unexpected rise in its raw material cost . So , short term challenges are there and it is a fact . Company strongly came back from even pathetic situations in past and I hope they can overcome these issues in long term though there is short term headwinds .Hence the investor strategy should be based on the time period of Investment one is planning to make.

      Delete
  56. Dear VP Sir,

    I gone through company declaring on BSE one of your old recommendation EPC INDUSTRIES LTD.

    http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/E937A4DB_0F29_4410_B2D0_39348CB31A30_122407.pdf

    Please need your view on this because I thinks it is clear indication of removing core business from the company.
    So, is it suitable to hold this stock or batter to leave and sifted to other one ?

    Thanks.

    ReplyDelete
    Replies
    1. Core business of EPC is micro irrigation .

      Please let me know where in the content of above link they mentioned that they are removing core business from the company.

      Delete
  57. Dear VP Sir, please share your Views on SJVN and BHEL ? Thankyou

    ReplyDelete
  58. Hi Sir .. Would you recommend for long term exposure in Godavari drugs in current situation .?

    Thank You .

    ReplyDelete
    Replies
    1. After the overall fall in stock market , there may be many better opportunities in market on a comparative basis .

      Delete
  59. Sir,
    Whether should I exit from SKM at current rate and re enter after next few qtrs

    ReplyDelete
  60. sir what is view on unitech, gvk power, jaypee infra for long period investment

    ReplyDelete
  61. sir ur view on technocraft industries please.
    Thanks in advance

    ReplyDelete
  62. hi Sir... can you please share your views on Jubilant life, waterbase after the current result.... there is drastic fall in the price. Is it just because of the global effect...

    ReplyDelete
    Replies
    1. Could not find anything wrong in Jubilant Life .

      Not tracking Waterbase.

      Delete
  63. Dear sir please your view on SMS Phrma

    ReplyDelete
    Replies
    1. Adjusted to stock split it is still 200% above from the suggested level. Neutral at CMP.

      Delete
  64. Dear VP, Please guide on prospects of JHS Svendgaard.

    ReplyDelete
  65. Sir any idea why Satin creditcare is falling is it due to overall negative sentiment or any change in fundamentals which i couldn't pick up or you spotted and is it buy at these rates what you would have done in this situation.

    ReplyDelete
    Replies
    1. Dear
      We are concentrating only on the stocks we are interested and we feel all of them are falling. But the reality is market is almost near two year low and everything is falling in this carnage..

      Delete
  66. Sir,
    Any guidance on the stocks you had indicated to be good investment. Can we continue to hold though market is in sell mood?

    Just confused so asking.

    ReplyDelete
    Replies
    1. It depends on stocks. Whether the fall in price is only due to overall market fall or due to change in business fundamentals.

      Delete
  67. Hellow sir,

    Why so much non sense talks in Money control regarding skm egg products and against you.

    Is it true you had given a sell call on skm egg products? if yes, Please share your reason, i believe in you and planning to add more around 80 level.

    Please share your view.
    If sell call is there, Please share any replacement stock name.

    Thanks
    Mahesh

    ReplyDelete

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