Investment in Equity is always considered to be complex. The reason being, lack of knowledge and/or fear of loosing hard earned money due to market volatality.

You really need to have time, knowledge and money to invest and make profits in Stock markets.

Though we agree with the above statement, we feel you can make profits and become rich with good investment strategy.

After the SEBI banned mutual funds from charging entry load which is used by MFs to pay commissions to their distributors/agents, investing in Mutual Funds became more attractive.

So, how do we pick the mutual funds from the lot?

It’s simple, just analyze the returns given by various fund categories over the past say 5 years.

History says that FMCG(Magnum FMCG fund), Banking(Reliance Banking fund) and Pharma(Reliance Pharma) sectors were always on top. (Data as on July 2010)

Often, top analysts advice investors to buy equity diversified fund but the above mentioned categories always topped and gave much more returns than equity diversified funds.

We believe it’s better to diversify by putting our money equally in the above sectors we mentioned.

It’s also relatively safe to invest in good equity diversified mutual funds such as HDFC Equity, HDFC Top 200, Reliance Growth through Systematic Investment Plan (SIP).

These funds have been in market from very long and has shown consistent performance. There may be funds which are doing very good currently but can you trust them for long term investment such as for retirement?

Disclaimer: Please consult a investment expert before making any decisions as they suggest you based on your risk appetite, tenure you wanted to stay invested etc.

Sensex being at 15000, we know that we went to a low of 7800 from a high of 21000. We recovered smartly in a short span.

We realized by now that, anything which grows suddenly can come down suddenly. However, it would not be right to say that we are again growing suddenly. Instead, we can say that we are ‘recovering’ smartly.

Let us understand, how this market grows. Though it’s difficult to explain precisely, we will give it a try.

Market is driven by investors who are investing in companies that contributes to an index like Sensex. These investors does great research on various parameters like past performance, projected performance etc. And this performance is linked to customers/consumers of that company’s product/services. So if the consumer confidence index (CSI) is good then market tends to grow better.

These consumers will consume the products or services only if they have enough money to spend. So, as long as he have a job and handsome salary and most importantly if there are products or services that he/she is interested in, then he/she spends.

Now consider a case where a product is priced very expensive. Let’s take an example. Any guess what example we are going to take? Real Estate..!!

When real estate prices increase due to greed of Builders or due to increase in demand etc, at one stage, prices will reach such a level that most of the investors will feel it’s very expensive so these consumers will stop investing in real estate. And the problem starts here.

Though he is earning handsome salary, he reduces spending thus affecting all dependents of Real Estate market. We also need to understand that sectors are depend on each other. To make our example simple, let us also consider that such consumers reduces spending on few other sectors. This results in decrease in demand and thus all the affected companies will have to cut costs by cutting salaries or cutting jobs which in turn will only worsen the situation as consumers have less money to spend. This will turn to a deadlock where one is expecting other to act first.

This is the time when investors will even stop investing in equity markets and will start investing in Gold or prefers to put their cash in Debt instruments like Fixed Deposits. This is the how market goes down. And when the deadlock that we discussed starts getting relaxed then slowly the market will recover and this is the state that we are currently in.

When people saw market at 8000/9000 levels, they though it may further go down to even 6000 levels but they lately realized that it was only going up. So what should they understand from the market? Never time the market.

If we are somewhere near market lows, invest more and if we are at market high, invest less. And if we are some where in middle, then invest consistently some amount so that you would be averaging your investment cost and most likely you wouldn’t regret for not investing or for investing.

Good Luck..!

It depends..!

It’s easy to say depends but difficult to give accurate figure at any given point of time and the reason being each fund house or an Asset Management Company (AMC) like SBI Mutal has the freedom to charge a maximum of 7% on the invested amount as exit load (now that the entry load is scrapped)

So each of these AMCs have the freedom to define exit load for each of their schemes and the duration till which they expect the investor to stay with them popularly called as lock-in.

So, always know the exit load and the lock-in period before investing into a mutual fund. It will be a available on AMCs website or some popular websites.

This way, they are safeguarding interst of their other clients who stay invested because every time there is a withdrawl or redemption from a customer, that fund house has to sell shares in effect bringing down the share price. Now the problem is..when you wanted to sell, people ask for a lower price and when you wanted to buy, they demand higher price.

With lot’s of complications on Mutual funds, it may be wise for a short term investor to buy Index funds or even better ETFs where commissions are less and easy to transact.

Please read our articles on ETFs to know more about this area. (You can simply search ETF in our site.)

As the name says, it’s all about offering shares to public for the first time. They are often issued by corporates looking to raise capital to expand or to become publicly traded company.

From the public perspective, it is a chance for them to own a part of company which they believe will reap profits for them. While some investors invest for long term perspective, some invest to sell in secondary market on listing day to make some quick profits. Individual investors should read the prospectus carefully and check out the CRISIL rating.

Why IPOs took a big hit

When the markets were high, there was huge demand to acquire stocks to make quick profits. And when the markets are crashed, this route has no takers and even big companies had to withdraw their plans to raise capital through IPOs and were looking for alternative sources of funds.

In 2008, when the market was high, companies offered their stocks in higher price bands and investors went crazy and bought these stocks and now many such stocks are trading at a discount of more than 50%. Investing in IPO market is very risky for retail investors as they would not have done research on the company. It’s advisable to invest in secondary market as the real price will be unleashed over a period of time.