Time-share - does it work for you? - Business Line

Time-share - does it work for you? - Business Line

“Where to invest in 2013 ?”

“Is it the right time to invest ?” or “Will the market be bullish in the coming year ?  what is your take?“

Some of the common questions we frequently face in any investor meet are monotonous and repetitive. I always wished I can “pass” these questions to the other guest speaker to answer. Nobody is going to believe the truth – that, quite often I do not know the exact answer! They always think I do not want to share the secret with them; may be, I am a bad guy who want to keep all the tips to myself and make tons of money in the markets!

Fact of the matter is, it is high time investors understand that the typical tips alone won”t take you closer to money. At the most, it can increase the distance between him and money, by making him trade more!   

What is needed is a game plan or a design or a strategy to play the market and win it most of the times! If you have proper strategies in place to tackle the volatility, the rest follows. In other words, expect the unexpected and you will be automatically a high beta investor. Having said that, lets look at what kind of strategies an investor can adopt to reduce losses and increase profits.

Lets take a look at 2012; this was the year of traders and bond investors. High quality bonds & debentures yielding better interest rates were offered to the investors, with tax benefits as additional bonus. It was also the year of fixed deposits. During the first half, banks were offering double digit interest rates and started reducing it later. But it is most likely that we may not see the repeat of 2012 in the coming year. Interest rates are softening and chances are quite high that they are bound to move further southwards. So debt is ruled out in the present form unless otherwise it is packaged attractively and innovatively - like the Inflation Indexed Bonds.  

Stock Market was volatile – as it should be – but again, within a broader range, providing opportunities for swing traders. Most part of the forthcoming year is also likely to be a repeat of 2012, probably with a smart rally in the first quarter depending upon FII alllocations. I hate to say this, but only a smart trader is going to make money this year and investors have to be a bit more cautious. With elections coming up in the following year, in all likelihood it will have a populistic budget and all of us know what that perception does to the market. Lets not forget, Market reacts in advance!

It may be wiser to use the initial positive rallies to book profits, atleast partially and be in cash to grab the opportunities that may follow later due to political situations.

For those who believe the Banking sector as a whole is a safe bet, a word of caution: SBI has appreciated by almost 40 % in about a year during which the Sensex has appreciated only by about 20 % or so. Though the sum-of-parts valuation makes it look still attractive, NPA levels are going up with the likes of bad advances to the aviation sector. The real issue is even more serious; the actual NPA could be much higher as many loans are restructured by Banks for various reasons! Instead a scrip like IFCI looks less harmful!

Ramdeo Agarwal talks about a strategy called moats - something similar to the Blue Ocean Strategy - and chooses EMCs or Economic Moat Companies which have a strong reputation of sustained profit making track record even during competitive times. There are lots and lots of strategies to be learnt from others. It makes sense for us to develop a strategy which suits our risk profile and financial needs.

Asset allocation is an excellent tool that can be used to tackle uncertain times. Instead of a strategic asset allocation, this year, a little knowledgeable investors can try the aggressive mode called tactical asset allocation model. While strategic asset allocation model is by and large a static model, tactical asset allocation model is more flexible. But it may be construed as timing the market as the allocation changes according to the market movements.

In a way, it is like switching from SIP – Systematic Investment Plan to VIP - Value Investment Plan. Rewards you better, but needs a better understanding too.

The New year is also going to usher in the new Stock Exchange; more new investment products may be expected. Wait for them.

This new year, remember one thing; let the market go anywhere. But, you must benefit from it. Stop spending a lot of time in guessing the market and instead spend your time on winning strategies. You will be much closer to the Mr Profit!

( This article by me was published in the Tamilnadu Investor Association"s monthly Journal in December/January, 2013.)