10 reasons why it still makes sense to stay invested

10 reasons why it still makes sense to stay invested

Markets have come down from their recent highs in the past few weeks. While some of us might be thinking of cutting losses and putting money in safer havens, there are more than one reasons still favouring the equity markets. Feel free to agree/disagree to any or all of the reasons, after all it’s your money so you’re the one to decide if you would want to buy, sell or stay invested.

#1. Long-term plan: Wasn’t your investment in that stock supposed to be long term? Then why sweat in the so-called blood bath that the street has witnessed? The basic principle that often gets buried in a bull market situation is that one should make investments with a long-term perspective. “Any serious investor should remain invested in stocks, no matter what the current market situation is, for a couple of years but if the idea is to make quick bucks, probably he should sell and walk away,” says Value Research’s chief executive Dhirendra Kumar. The intervening years may be volatile but the light at the end of the tunnel is what we all should look forward to.

* UPDATE *
In his yesterday’s budget speech our Finance Minister Mr. P. Chidambaram has proposed an increase in the short term capital gains tax from the current 10% to 15%. You still wanna play short-term? Think again!

#2. Value-picking: It’s raining discounts, SALE SALE. Perfect time for value picking, isn’t it? Stocks you always wanted to own but deferred, thinking they are a little overpriced. Experts believe that this is the opportunity to buy stocks, now available at better valuations. It’s like picking your favourite stuff from a superstore at, say 20-50% discount. So, hurry while the offer lasts.

#3. Diversify: We all are aware of the need to diversify our investments, not just in different asset classes but also within classes. So if you had failed to do so, this is the time to add stocks of sectors missing in your portfolio. It might be that you had picked up stocks from sectors expected to give good returns in past but now have run out of favour. “Sectors that will participate in India’s growth momentum will be telecom, banking & financial services and engineering & construction,” said Birla Sun Life Mutual Fund CIO A Balasubramaniam. So take your pick from the buzzing sectors of today, now.

#4. E for Economy, I for Intact: The growth story of Indian economy is largely in place. There were signs of some softening recently but again such policy matters are gauged with a long-term perspective. “There are no reasons why the outlook of Indian economy in the foreseeable period should change. Huge investments lined up in Indian companies are going to drive the economy further. Also, India’s contribution to the world GDP is on the rise and the current market situation is just a reflection of the global markets.

#5. Bottom fishing: There are talks that the markets may have bottomed out. Which means one can make fresh investments during this downturn. Did anyone ask what if the markets correct further? Probably, it will be an even better buying opportunity!

#6. Invest step by step: Time spent trying to time the market is better used analysing stocks good for holding in the long term. No one can time the market; it’s like saying ‘when the next earthquake will hit Delhi’ with surety. Here, the rupee-cost averaging strategy becomes even more important. By doing so, the ups and downs of the market get smoothened out by investing a fixed amount of money on a regular basis over a longer period irrespective of the market situation.

#7. Why hate volatility: But markets are that way, or else how did we get the terms bulls & bears. “Markets by their very nature move up and down. The real nature of the market doesn’t get reflected without this. In fact, volatility gives the chance to fund managers and small investors to revisit the market and pick stocks.

#8. Get Set Go: If you haven’t made investments in equities but always wanted to, now is the time to get started. From 21k level, not too long back, the Sensex is now trading in the 17,000-18,000 range. So, what are you waiting for? It’s all yours.

#9. Taxes Times: How can we miss on taxes? Actual returns on any investment are known only after factoring in how much tax we pay on the gains. As far as equities are concerned, one is liable to pay short-term capital gain tax if investing in equities (stock per se or equity funds) for less than a year. This means one can save on these taxes by playing ‘long’.

#10. Returns: Ahhh, wasn’t this the MAIN motive of investing in the equity market? Sensex alone has given a historical record of 18% in the past 20 years or so. This means that if we simply invest in index stocks every year, the investment will generate better returns than from other avenues like FDs, NSC, PPF, post-office saving schemes, etc.

Still not convinced? Well, then you should try the Mutual Fund route. Research on the fund(s) you would like to buy according to your financial needs and go for it!

If you enjoyed this post, make sure you subscribe to my RSS feed!

Check out these posts:
Author: Austin Comments: 8 comments Date: 1 Mar 2008
Categories: Investing Tags: , , , , , , , ,

There are 8 comments. Leave a comment!

  • ¬ Capital Gains » Blog Archive » 10 reasons why it still makes sense to stay invested
    #4 March 3rd, 2008 at 5:06 pm

    [...] 10 reasons why it still makes sense to stay invested Markets have come down from their recent highs in the past few weeks. While some of us might be thinking of cutting losses and putting money in safer havens, there are more than one reasons still favouring the equity markets. Feel free to agree/disagree to any or all of the reasons, after all it’s your money so you’re the one to decide if you would want to buy, sell or stay invested. (more…) [...]

  • ¬ Stock Investing Tips
    #71 June 13th, 2008 at 10:15 pm

    Stock Investing Tips…

    Make sure that any investment system you use is free of bias. If the purveyor of an investment system has a clear interest in a specific market or industry (oil industry, telecommunications, or precious metals for example) then his recommendations may…

  • ¬ Stock Investing Tips
    #74 June 14th, 2008 at 8:11 am

    Make sure that any investment system you use is free of bias. If the purveyor of an investment system has a clear interest in a specific market or industry (oil industry, telecommunications, or precious metals for example) then his recommendations may well be slanted toward his industry.

  • ¬ Money Hacks Carnival #6 - Famous Hackers Edition | Bible Money Matters
    #87 July 14th, 2008 at 11:13 am

    [...] presents 10 reasons why it still makes sense to stay invested | Saving Money, Personal Finance, Investing in … posted at The Orange [...]

  • ¬ Nitin Gupta
    #5902 March 15th, 2010 at 6:06 pm

    I don’t know If I said it already but …Great site…keep up the good work. :) I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say I’m glad I found your blog. Thanks, :)

    A definite great read..Nitin

  • ¬ Austin
    #5913 March 16th, 2010 at 7:43 am

    Thank you Nitin :)

  • ¬ Pradeep
    #6004 March 21st, 2010 at 4:21 am

    Thanks for the valuable information. Look forward to reading more of your blog.

  • ¬ Austin
    #6018 March 21st, 2010 at 7:23 pm

    Thanks Pradeep.

Name (Req)

E-mail (Req)

URI

Message
CommentLuv Enabled

Powered by WP Hashcash