Blood on the dance floor
Well not exactly the Micheal Jackson song but it is blood on the stock markets all over. Its scary how deep the sub prime crisis has been and the impact it has had on global markets has been devastating to say the least.
My personal portfolio has been wiped out by over 45% and it is easy to panic. I dived into the markets thrice. Once when the Sensex was at 14000, then at 20500 and then again at 14500. Since now we are down to 12500 the math is very simple to arrive at how much I am in the red.
This morning, while driving to office I was chatting with my colleague (in these tough times it makes a lot of sense to car pool) and he was advocating to jump out right now since there are rumours the market will go to 9000 levels. Will it? Who knows? But its difficult to jump out right now. My logic is how much more will it hurt? Not much considering I am already 45% down. But I think I come from a school of thought, which a lot of folks still advocate, which is invest for the long term. But looking at the market conditions the long term is getting longer than ever.
So I guess it boils down to the fact that in these tough times if you want to make your money grow, you will have to work harder at doing so. You will have to be glued to the screen for a decent part of your day and keep monitoring your portfolio. Junk whats not adding value and load up the ones which are looking good. But then if you start doing it you might end up getting sucked into it. So what do we do?
As for me I think the first thing is to reduce expectations from the stock market. I don’t think it will give huge returns for quite a few years. Deep wounds take a while to heal. The fall to 12500 (or maybe even lower) will take a long time to recoup. Second is to keep looking for value buys and reduce the size of investment into the market. Don’t expose yourself to more than what you can afford to lose. Be it 2000 bucks or be it 50000. This way you won’t feel bad. Third don’t go on hearsay. Fourth is to look for investments in businesses you understand. When the markets were at 20500 I invested in Jhagadia Copper based on a tip without having a clue on what they do. My investment has tanked so badly that I have written it off. Fifth is to keeping nibbling at the SIP. I think it makes a lot more sense now due to volatility. And lastly before this ends up being a long list, remember that cash is king. Use FD’s or RD’s to beat the inflation impact on your cash. After all if the market does go to 9000 you’d be grinning if you have a decent bank balance to dive into the market 
PS: This is only 2 cents on how to go about it. Considering my track records I am no expert but hindsight usually has lot to offer for the future.
