After a rally of more than 8 per cent in the first two months of 2017, voices have become louder on Dalal Street that the benchmark equity indices may touch fresh all-time highs in the coming weeks.
The 30-share BSE Sensex surged 2,186 points, or 8.21 per cent, to 28,812 on February 27 from 26,626 on December 30, 2016.
The momentum may remain positive in the long run, as India could see a rating upgrade in the coming months on account of a slew of reforms by the government, including an ambitious plan to introduce the Goods and Services Tax (GST).
GST is expected to improve tax compliance in the medium term besides removing barriers to investment, particularly for foreign direct investment. It will also improve the ease of doing business.
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Hmm … When WAS the best time to invest you mean?
Well, the day your dad was born if you had money … this is circa 1959 .. or when your grandfather died …. or … but hey since we did not do any of those things, it has to be today.
It’s not surprising that first-time investors often worry about the timing of their initial share purchases. When you follow stories which keep saying “market is up” or ‘Market is Going down” this has to happen! It looks like you have started at the wrong point in the market’s ups and downs and it can leave you with losses even before you reach the batting crease!
But relax kiddos: Whenever you first invest, time is on your side. So the kid who started at 22 is smarter than the kid who waited till he / she turned 32. In the long run, the compound returns of a smart investment will all add up nicely. How the market was when you began will not matter if you do a sip.
That is what is important! Instead of wondering about when you should make that first share / mutual fund purchase, think instead about how long you will stay invested. If you are 22 years of age, you will stay invested for say 50/60 years! Different investments offer varying degrees of risk and return, and each is best suited for a different investing time perspective. In general, debt instruments like bond funds/ bank fixed deposits, etc. offer lower, more assured returns for investors with shorter time frames (say 24 months). Historically, short-term Treasury bills yielded roughly 5% per year. Savings bank gives you about 3% p.a. taxable. With inflation at 7% these rates may or may not attract you.
Longer-term government bonds like the 10-year gilt can provide higher returns – say 8% p.a. These returns could be stable only in the short run. In the long run even these bonds could be volatile.
Shares have also been very good to sensible and patient investors. Overall, the BSE’s Sensex has returned an average of 19.4% per year from 1979 to 2017 — way ahead of debt instruments. The range of the returns for stocks OBVIOUSLY much larger than the range for debt instruments over the same period. Stocks suffered a decline in 1993 – of 42%, but this was obviously the outcome of an amazing 1992 of about 241% !! It enjoyed several particularly strong years of course, and the period 2002 to 2007 took the cake when the market went up 7x in 4 years!
How long will you stay invested?
The more the time that you have to create wealth, the greater risk you can accept. This comes from having a good income, and ability to save money. And since you’ll have more time to wait out periods of bad returns you SHOULD stay cool.
If you need the money within the next five years, you should put say 70% of your money in bonds and only about 30% in shares. If you need the money within the next three years, you should also avoid long bond mutual funds – you are better off investing in bond funds with duration of 3/4 years. The lesser time you plan to be invested, the less you can afford to lose. On the other hand, shares are an attractive option for long-term goals like children’s education, long term and retirement. The higher returns are simply too good to ignore because you do not understand. Take time to learn it!
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The original post appears on www.subramoney.com and is available here.
Since 2008, the global asset management industry has been reeling under a relentless tsunami. While the assets under management (AUM) of actively managed mutual funds (MFs) have increased from $9.0 trillion to $13.4 trillion, passively managed index funds have surged from $0.6 trillion to $2.2 trillion. These now account for 12% of the total MF industry. Vanguard, the international company most identified with passive investing, had less than $25 billion in AUM for over two decades since its inception in 1975. It crossed the $100-billion mark in 1995. The march of exchange-traded funds (ETFs) has been equally impressive. By various accounts, the total AUM of ETFs has crossed the $2.1-trillion mark. ETFs have made significant inroads into the fixed income asset class, while index funds have been focused on equity.
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While this article may seem dated, it does not in any way diminish the importance even at this point in time.The article has been written by D. Muthukrishnan (Muthu) and can be found on his blog
The article has been written by D. Muthukrishnan (Muthu) and can be found on his blog here.
For last 3 years, I’ve made it a practice to give performance comparison of various asset classes- Sensex (Equity), Fixed Deposit (Debt), Gold and Silver and the impact of inflation on them beginning from the financial year 1979-80. Why 1979-80? That is the year from which Sensex came into existence with a base as 100.
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The Union Budget of India – a financial exercise in the largest democracy of the world! It is the day when the Finance Minister of India cracks the whip as he presents the Annual Financial Statement. The Indian hoi polloi are so used to increase (well sometimes decrease too) in taxes, duties etc. It is that day of the year that holds so much of hope and despair too. 11 am IST and the markets watch with bated breath as stocks either soar high or come hurtling down.
As we approach the budget day of 2016, the question on top of everyone’s mind then always is how will the stock market behave this year? At Stock Architect, we are always gleaning through information trying to bring you something interesting. We found this post which we are sure you will love to read and understand. May this Budget Day ring in prosperity for all investors.
How Stock market behaves during budget?
Panic in the stock market? Historical budget data says NO
Market is going to go down substantially!!
Government is going to give this time a very good budget !!
This budget is very very unique and a game changer !!!
Above three are most running rumors or humors that move around stock market, but they are present for all budgets. The following table indicates data of returns by Sensex in pre and post budget sessions for recent four budgets.
|Average 17 days
|Change(1st day till 17th day)
|Pre Budget – Market Performance
(1st to 8th day)
|Market was neutral
||Market was down
|Post Budget-Market performance
(9th to 17th day)
Data for sensex pre budget 8 sessions and post budget 8 sessions as shown in the table provides following takeaways,
- Highest closing loss was 2.30% viz previous day closing in last four years data during budget period
- Highest closing Gain was 2.09% viz previous day closing in last four years data during budget period
- 1st day to 17th day keeping the budget session in centre; Gain was maximum 4.17% during 2014 and loss was maximum -3.28% in year 2012
- Market expectation and market reaction over 17 trading sessions as shown in table clearly show that market did factor in plus and minus viz pre and post but it was not huge number
What should be done in pre budget and post budget rally??
- Data indicates it is better to be patient nothing big is going to happen in pre or post budget sessions, if you think long-term (it is important event but over long-term)
- Data suggests stay away from intraday positions and sector specific calls as it is very difficult to time market especially during Budget days
- In case of trading don’t get exposed to single sector, have diversified calls
- Even after budget declaration, you can buy from the market. The market is not going to close immediately after.
- Even if looking to invest in the hope that budget will be good, go and buy Nifty or Nifty ETF to play safe.
Although, there is a risk reward relationship, it is better to keep away from short-term greed for gains and if at all trade be initiated, it should be under the guidance of your expert, who can guide you for the long-term. As Trading / calls / investment decisions will be sole responsibility of readers, readers are advised to consult their expert before taking any action / decision.
The original article appears here – https://expertmile.com/arti.php?article_id=1016&title=How-Stock-market-behaves-during-budget#sthash.hbdGUH4d.dpuf