What is the post-budget equity strategy?
Speculators and short-term traders must be happy that the FM did not tinker with the STT (securities transaction tax). Long-term investors, those with three to five year view, will benefit from implementation of progressive policies on education and healthcare. As we had indicated in an earlier article, the key to today's budget would have been to understand where the government spends, rather than from where it generates its income. While the FM did well to announce a slew of measures for agriculture, education and healthcare, what he failed to do was to disclose as to what percentage of the total expenditure is to be spent towards these ‘inclusiveness’ initiatives.
Our broader view on equities remains that of high-risk. However, we continue to believe that long terms investors can still find good opportunities. One is required to continue to invest by understanding the businesses of companies, quality of managements, and with a strict regard to valuations. Leave speculation to speculators! If the job is done correctly when a common stock is purchased, the time to sell it is - never! Not even in panic situations like the one we were witness to today.
While it might not be a one-way ride for stocks going forward, what is more important to note is that equities will provide attractive inflation adjusted returns in the long term? You just have to be rational in your choices and not follow the herd, and you need to value stocks not beyond any accurate or rational reflection of their actual worth. This is not to say that your equity investments cannot legitimately enjoy a huge leap in value, but this leap should be justified by the prospects of the underlying companies, and not just by a mass of investors following each other.
The unreasonable belief in the possibility of getting 'rich' quickly is the primary reason people burn their fingers in market crashes. One tends to neglect the fact that there is a direct correlation between high risk and high returns. While the history of market crashes does not in any way foretell anything dire for the future, the best thing that you, as an investor, can do is to keep yourself educated, well informed and well practiced in doing your homework.
Speculators and short-term traders must be happy that the FM did not tinker with the STT (securities transaction tax). Long-term investors, those with three to five year view, will benefit from implementation of progressive policies on education and healthcare. As we had indicated in an earlier article, the key to today's budget would have been to understand where the government spends, rather than from where it generates its income. While the FM did well to announce a slew of measures for agriculture, education and healthcare, what he failed to do was to disclose as to what percentage of the total expenditure is to be spent towards these ‘inclusiveness’ initiatives.
Our broader view on equities remains that of high-risk. However, we continue to believe that long terms investors can still find good opportunities. One is required to continue to invest by understanding the businesses of companies, quality of managements, and with a strict regard to valuations. Leave speculation to speculators! If the job is done correctly when a common stock is purchased, the time to sell it is - never! Not even in panic situations like the one we were witness to today.
While it might not be a one-way ride for stocks going forward, what is more important to note is that equities will provide attractive inflation adjusted returns in the long term? You just have to be rational in your choices and not follow the herd, and you need to value stocks not beyond any accurate or rational reflection of their actual worth. This is not to say that your equity investments cannot legitimately enjoy a huge leap in value, but this leap should be justified by the prospects of the underlying companies, and not just by a mass of investors following each other.
The unreasonable belief in the possibility of getting 'rich' quickly is the primary reason people burn their fingers in market crashes. One tends to neglect the fact that there is a direct correlation between high risk and high returns. While the history of market crashes does not in any way foretell anything dire for the future, the best thing that you, as an investor, can do is to keep yourself educated, well informed and well practiced in doing your homework.