Stocks Strategy : Lighten Long Positions

Small and Mid Cap indices and stocks have been on the bull run since early September 2013. There has been a sustained run up in the stocks for the past 19-20 weeks without any significant correction so far. 

Quick Take on the Stocks Strategy

While the BSE Small Cap Index has risen about 32% and BSE Mid cap index has risen 33% over this period, the Sensex  rose 23%.

The Q3 results season has begun. History tells us that  we have seen stocks rise ahead of the results hence  there is a good chance of them correcting before or post the results.

Further  IIP numbers of November 2013 have been  disappointing although there is no clear correlation between the IIP numbers and the Sensex. Even the export growth for the month of December 2013 has fallen to 3.5% as against 6.2% growth for the period of April 2013- November 2013.

Hence taking some trading profits off the table especially in small cap and mid cap stocks seems a wise idea at this point. Some profits on investment positions also may be taken.  

The markets could correct for 5-7 weeks and then make a base for the next up move.

Written by Deepak Jasani

4 RESOLUTIONS TO FINANCIAL WISDOM 

This is that time of the year when millions of people across the globe cross their heart and make a promise and make a "New Year Resolution." So what are you doing to make your hard earned money feel better? Just 5 simple resolutions, which will help you keep you financially fit in 2014. 

Track your Money Trail

Get a complete idea of your money trail-how much you earn, save, invest and spend. This should cover all your income sources such as salary, investments rental income etc. You also list down all the loans and interest payments to each of these loans. This will give an exact idea of where you stand financially. On the asset side, you should mention you investments in equities FDs, gold and insurance. You can use our Portfolio Tracker to get the real time value of your financial kitty. This will be the first step to plan for your future financial goals.

Invest more 

More the better, especially when it comes to investments. When you lower your trivial expenses, you have more cash to invest. Ideally you should be investing at least 30% of your take home salary on a monthly basis. It can be higher at 60% in early years of your career especially if you don’t have a housing loan or other financial commitments. You will build a bigger corpus due to compounding effect. To start with, set a savings goal this year. Then you can monitor your performance on a monthly basis to see if you can achieve it. 

Diversify

Don’t put all your eggs in one basket.” This is a well-known proverb, which best explains the concept of diversification in a financial portfolio. The process of diversification of portfolio to different asset classes significantly reduces the risk quotient of your portfolio.  Hence even if you buy blue chip stocks, ensure you invest in different sectors to avoid any risk related to a specific sector. 

In case of mutual funds, the components in a descending proportion would be large cap, mid cap, index funds and small cap funds. Financial advisors recommend 60-70% of an investor's mutual fund investment should comprise of large cap diversified equity schemes. 30% of the investment portfolio which can also be referred, as the satellite portfolio should constitute mid cap funds. "20-30% of your core portfolio should be index funds, 30% should comprise of actively diversified funds.

Start planning for your Golden Years

Retirement isn't what it used to be. Increase in longevity, higher inflation, absence of retirement benefits in most private sector set-ups has changed the ball game of retirement planning. In simple words, today’s retirees are living longer, active and independent for most of their golden years. A 65 year old, for instance, needs to plan for a retirement that can last 30 years or longer. National Pension System (NPS) fits as a good retirement solution for 3 reasons.

• It invests in equity. Hence it can beat inflation 
• The equity exposure is capped at 50%. Hence the risk quotient is under check
• If you are a risk-averse investor, you can avoid equity investing altogether