BLOG MEANT FOR 29 AUGUST 2018 Wednesday
Markets continued to be strong today as Nifty went up by 47 points and closed at 11739. However, if you have been observing, only certain index shares are doing well whereas many others have been quiet or weak.
Also, investors would have noticed that many small cap and midcap stocks are not doing well inspite of the index reaching life time highs. This is the reason we mention in our Workshop to invest in large cap stocks (index stocks) so that there is always safety even if returns may not be very very high.
There may be some profit booking tomorrow looking at the global market cues as of now.
Nifty index is in Hold Zone.
The indications for individual stocks for short term only are –
HOLD ZONE – RELIANCE INDUSTRIES, ITC, AXIS BANK, SBI, TCS, M&M, HINDALCO, INFOSYS, VEDANTA
DON’T BUY ZONE – HDFC BANK, TITAN
WAIT TO BUY ZONE – ASIAN PAINTS, HDFC
TOO LATE TO BUY / HOLD ZONE- MARUTI (it has gone up much above the red line and it is slightly risky to buy for short term now)
SELL ZONE –YES BANK (as mentioned in the blog yesterday, markets have been very volatile and today it fell to Sell zone inspite of positive day for markets)
Question from a participant –
I am 32 years old participant working in a private company. I want to know which one is more profitable? Long term or short term? Short term trades seem to be more more attractive and exciting to me. Please let me know.
Our Answer –
Yes, short term trades seem very exciting to investors since it promises quick returns in short periods. However, as you would have noticed Short term trades have the following characteristics –
- We need to be very alert and watch markets every night
- We need to have some risk appetite to bear losses now and then in short term trades
- We get disappointed when we make a loss in short term trades
- We do not get the benefit of compounding of money
- We cannot be always sure of how markets react to many aspects happening in the world.
Generally speaking, if you are an investor below 55 years of age, long term is the priority since the returns you make from long term is much higher than what you can make in short term.
Also, since you are likely to be employed or have a business until at least 55 years age, you are not dependent on profit from short term trades for meeting your regular expenses.
The General Rule is –
Below 55 years old- Long Term Investing is Compulsory, Short term trading is Optional
Above 55 years old – Long term Investing for 5-8-10 years is Preferable, Short term trading is Recommended
Many young investors in the age group of 25-40 years, ignore long term investing for many years in the initial stages and then repent later that instead of short term, they should have done more long term investing to enjoy the Power of Compounding.
Hence, do not miss Long term investing if you are below 60 years and if you are above 60, then ensure that your children/grandchildren invest for long term in Stock Markets.
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All the best!
Dr.Bharath Chandra and Rohan
(The above comments are only the personal views of the authors of this blog. Please do your own research before taking any investment decisions. The reader of this blog must understand and take full responsibility for the profit or loss made by taking actions based on the above views)