Volatile Markets

my experience of 3 days 20-22 sept 05:

this is the time to avg. ur positions
but only in fundamental stocks.
keep away from non-descript stocks for some time.

its ur hard earned money,
treat it with respect.
i am sure majority of us invest carefully.

this time i cud experience the advantage of
regularly booking profits and sitting on cash.
i did well to sell off my +ve positions,
but equally did mistake of reinvesting it same time.
whats the use, even those scrips went down.

Even though the ones i bought were growth stocks,
poised to rise with certain targets, but when the markets crash(not
fall). tuesday's was a crash fueled by rumours and fears of
regualtors,scam etc. like black monday.

no one can handle the crashing markets.
all run to press the sell button.
and the lower ckts r hit and u cant
even offload at that point,similarly as we say ,ohh! it was in upper
freeze, cudnt get the stock.

markets were overheated.
in this environment even if we go out stock specific shopping,
along with the speculative and baseless stocks they drag the whole
market down.
at that point markets become blind and everything falls.

This phenomena is purely a mental sentiment of the investors,
totally away from fundamentas,technicals or speculation.

ppl doing margin trading and for whom this is the primary income
source have no option but to flow in the market ups n downs.
they compulsarily have to square off their intraday F&O long/short
positions at the shortage of enough funds to take delivery.
As mostly ppl were long,
So forming a vicious cycle a sell from all sides creeped in.
thus adding to panic.

At this moment , one shud keep cool and behave opposite to the crowd.

Simply put by warren buffet also,
Buy when everyone is selling,sell when everyone is buying.

this may differ from ur funda,
but thats how a leader has said.


at this time what one cud have done is take a chance
by applying stop losses.
and reentering again if getting at further lower price,
this way ur earlier loss booking cud have been covered.

Myself , my portfolio took a beating of 20% within 3 days.

anyways, now since the markets r mature and based on strong economy
growth, this kind of corrections r welcome to highlight the signs of
healthy market.

but penny stocks are out or atleast their mad run to the hill is ruled
out for coming 6 months.

Mid/small and micro caps are re-rated now.

Its time to buy out good stocks out of these, if u have extra funds.
and for ppl who missed the bull party.

Also very important, i am not an expert but
i think one shud secure the equity profits in some other investments
like gold,insurance,FDs,property or
buying out something for oneself or family.

otherwise everything is on books.
whatever u book out is in ur hands and that is only urs.

So never speculate too much,
follow a disciplined approach and stick to it.

just for ex.
i bought surana inds. @ 29 from 10paisa recco.
sold half @ 31

then it headed north.
with upper ckts everyday.

i sold off @ 58 in upper ckt only.

later u all know , what it touched within 15 days rs 175.

but i do not regret it much now. this is just one case

coz here profits also and losses also both are divided.

a single person cannot have the whole cake.

Who knows it might have started back next day.(eg. spectra inds,
country club,millars etc)

but here was my mistake to adequately track it,
the basis on which it was rising.
there was genuine reasn here.
the company was going to post very strong results(kind of turnaround)
had i have done my calculations then i wud have held it till it
reached its fair-value target atleast.
then one wud form a wise investor.


great wealth consistently is generated only by careful
and long term investments,
overnight crorepatis r few and for short time.

it was my experience, a good one to feel.

other also write down their thoughts.

this way everyone will learn from each other.

and yes, this stock market is not only abt stocks and money,
it teaches u so many traits of general business,intuition,
sense of investment planning,general economics, things which one
learns in a MBA course :) and to make new friends also.

your sincerely,
--Mg