How to Know When Foreign Investors Will Pullout Money from Indian Stock Markets?

Actual Question:

How can I know in advance if foreign investors are about to pull money out from Indian stock market?

There is a large chunk of money in Indian stock market, which are pushed by investors from foreign investment companies. Is there a way by which we can know if foreign investors are about to sell huge numbers of stock for any XYZ reason?

Answer:

Dear Friend!

The fundamental reason underlying your question is the concern about the potential steep fall in stock prices when foreign investors pull their money out from Indian stock markets. If you dig deeper you will discover that the question/ concern stems from other fundamental reasons, as follows:

1. Investing in stocks really not intimately knowing the companies, their business models and their true value.
2. Investing in stocks at very high valuations not knowing their intrinsic value.
3. Investing in stocks presuming that returns from stock markets accrue only from increase in stock prices and if prices fall, investments will generate losses.
4. Investing in stocks for short term, again with an intention of making a profit from price fluctuations.

However the problem is that nobody can predict reliably when they might do so.

While I may not be able to provide solace by reliably predicting when foreign investors may pullout their money from the Indian stock markets, I can surely show you a way:

1. How you can be a happy investor not worried about when foreign investors are likely to pull their money out.
2. How to invest safely and profitably in every market situation - both bull and bear markets.
3. How instead of attempting to predict the unpredictable, you can simply react to the markets.
4. And finally, how to surely make significant riches out of stock markets.

This sure and safe path is called ‘Value Investing’.

Buy a copy of the book, ‘The Intelligent Investor’ by Benjamin Graham. It is a masterpiece, Warren Buffett cherishes till date.

Read following articles that may completely change your attitude to investing:

• Miracle of Compounding
• Risk Comes from Not Knowing What You are Doing
• You Only Find Out Who is Swimming Naked When The Tide Goes Out
• Margin of Safety
• How to Calculate the Intrinsic Value Shares?

To conclude, it is not possible to reliably predict when foreign investors are likely to pull their money out, but certainly possible to overcome the underlying concerns behind the question and profit form the stock markets.

Thank you,

With Best Regards,

Anand

Is Daily SIP Superior to Monthly SIP?

Actual Question

Is a daily SIP of Rs. 2,000 in a mutual fund a better idea than a monthly SIP of Rs. 60,000?

Dear Friend!

You have asked a very interesting question.

The key concept behind a systematic investment plan (SIP) is to even out the price fluctuations. Since timing the market is extremely difficult, wise people had devised to achieve the next best thing, the ‘Dollar Cost Averaging (DCA)’ through SIP.

Now the focus shifts to your question regarding whether it is ideal to achieve DCA by investing daily or monthly.

Of course, it goes without saying that as the frequency of investing increases better averaging is achieved.

If this is so, why once a day?

Why not every hour?

So it is all about the question of reasonableness.

One has to strike a balance between the improvement in results and the time and effort involved in making investments. Obviously there is an opportunity cost involved for the time and efforts expended!

And finally in real investing, where we are talking about long times of two to three decades, it really is not going to make much difference whether you are investing through SIP on a daily basis or monthly basis.

To conclude in the real world of true value investing monthly SIP is adequate and one need not take the trouble of investing daily to achieve better dollar cost averaging.

Related Articles:

• Miracle of Compounding
• What Are Investments Actually?
• What is the Best Frequency of SIP Investment Subscription?
• What Are the Alternatives to SIP Schemes?

Thank you,

With Best Regards,

Anand

Buy Stocks When Others are Fleeing

"Berkshire buys when the lemmings are heading the other way."

Warren Buffett

Avoid Dancing In and Out of Securities

"If you feel that you can dance in and out of securities in a way that defeats the inflation tax, I would like to be your broker - but not your partner."

Warren Buffett

What Stocks to Buy when the Market is at its Peak?

Dear Friend!

Your question is a very good one, as today the Indian markets are at their record highs. The Sensex is above 30000 and the NIFTY is above 9300. An investor naturally wonders what stocks to buy in India at these levels. Fortunately the key to this riddle lies in the nature of the market itself. The stock market is an imperfect and irrational one. Because of this imperfect market behaviour, a value investor mostly is able to find good opportunities to invest in wonderful stocks at reasonable prices.

Let us see the good stocks that are still available at attractive valuations even when Indian markets are at record highs:

The dividend yields of SJVN, NLC and GE Ship are slightly below the minimum dividend yield expectation but their Price to Book Value Ratios and Price to Earnings Ratios are in the attractive zone.

In conclusion, in the imperfect stock markets an investor usually is in a position to buy good stocks even when the markets are at their peaks.

Thank you,

Best Regards,

Anand