How To

How to Invest When the Stock Market is Sinking?

Let me create some fear if you aren’t fearful as yet.

India’s economy is going downhill, fueled by a rising deficits, and falling rupee, governance, and hopes.

Foreigners are taking note, and pulling money from their Indian investments.

Led by this, the stock market is tumbling. The Sensex is down almost 22% or 4,600 points from its last peak in November 2010 (18 months).

Some so called ‘safe stocks’ are down even more – like BHEL is down 59%, L&T is down 46%, Tata Steel is down 36%, and Infosys is down 23% (since Nov. 2010).

How can such a scenario not trouble even the most sensible of long term investors?

Is it sane to invest during such bad times?
Should you sit on the sidelines?
If not, how should you invest in these volatile times?

I tried to provide answers to all these questions in Safal Niveshak’s Friday Night Facebook Jam…

…which finished just an hour back.

Click here to read the transcript of today’s session if you couldn’t participate.

Click here to read the transcript of last Friday’s session.

The next session of the Friday Night Facebook Jam will be held on 1st June 2012 between 7 PM and 9 PM on Safal Niveshak’s Facebook page.

Block your calender!

Real Life Story: How to Increase Your Savings by 9200%

Most queries I’ve received on Safal Niveshak over the past ten months have been from young men, either newly married, or already with one child. And most of their questions have revolved around…

How do I start saving and investing money?
How do I plan for a well-structured financial life?
How do I meet my life goals?

While I have responded to these queries, here is the real life story of a close friend (let’s call him Ravi) who was in the same fix almost 9 years ago, how he has been progressing well towards his financial goals (at least what it seems as of now), and how he has grown his savings by a massive 9200% over four stages of his life.

How to Invest after Sensex Rises 20%

“Bull markets go to people’s heads. If you’re a duck on a pond, and it’s rising due to a downpour, you start going up in the world. But you think it’s you, not the pond.” ~ Charlie Munger

“I’m loving it!” said my friend as he entered my home for a family dinner.

“Why, did you just eat a McDonald’s burger or what?” I asked.

“What a poor joke, man!” he said while switching the channel from Star Cricket to CNBC. “Haven’t you seen how the Sensex is rising these days?”

“I don’t keep a track of the Sensex, you see!”

“It’s sad! Then you’ve missed a great rise in stock prices,” he said as if he was mocking me for not watching CNBC.

How to Know if Your Company is the Next Kingfisher Airlines?

Image Source: Economictimes.com

Succeeding in our professional and personal lives requires tremendous confidence.

Our natural desire to be highly confident, however, leaves us at risk of becoming overconfident, which may be the biggest error of judgment that we make.

It is when false confidence drives overconfidence that we become susceptible to hubris.

Such hubris is commonly seen across people in power – like corporate CEOs or Chairmen.

In fact, according to researchers, the most reliable indicator of financial fraud is not good corporate governance practices, but rather, the ego of the chief executive.

How to Profit from Your Stock Market Losses

Image Source: Donmilleris.com

Let me start today’s post by asking you a question.

Assume that India is preparing for the outbreak of an unusual Asian virus, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed:

If program A is adopted, 200 people will be saved.
If program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.

Which of the two programs would you favor?

Well, if you think like 72% among a few hundred smart physicians who were asked a similar question by the Nobel Prize-winning psychologist Daniel Kahneman, you will choose option A, the safe-and-sure strategy.

Most doctors would rather save a certain number of people for sure than risk the possibility that everyone might die.

How to Avoid Your Worst Enemy as a Stock Market Investor

If you have been a member of the Safal Niveshak tribe for long, you know our hottest topic of discussion here. It is how various aspects of human behaviour influence investing.

As we have discussed at times, we are often our worst enemy when it comes to investing our hard-earned money.

An understanding of how vulnerable we are to our own psychology can help us avoid the stupid investor delusions that can screw up our financial security.

There is an old adage about the game of poker: If you sit down at the table and can’t figure out who the sucker is, get up and leave because it’s you.

These insights about investor psychology can keep you from being the easy prey.

Burton Malkiel, in his investing masterpiece, A Random Walk Down Wall Street, cites the study done by Charles Ellis, a longtime observer of stock markets and author of another brilliant investing book Winning The Loser’s Game.

How to Get Very Lucky as an Investor

The famous American writer Dorothy Parker once said, “I hate writing. I like having written.”

I know many people who are like that about their life and work. They love to fantasize about what life will be like when they ‘make it’, but they like to skip over the part that reads – hard work.

Like the young man I met a few days back who has spent the past ten years of his life destroying his body with alcohol, excessive food, and a sedentary lifestyle…but wanted to know a quick way to get fit, lean and healthy in just the next six months!

He, probably, expects to get ‘lucky’ in his life by getting whatever he wants without the hard work to accompany it.

Really? Is ‘luck’ really about instant gratification?

If I look back to the lives of great people, the answer I get is something absolutely different.

How to Get Rich, Stay Rich…and Die Poor

First, how do you get rich?

Work hard…and earn a lot.

Second, how do you stay rich?

Save a lot…invest a lot…and get smart about your finances so that you are never the target of scamming financial advisors.

Okay, you now know how to get rich and stay rich.

But how do still die poor?

It’s even simpler than getting rich and staying rich.

I’ll tell you the answer, but before that…

Safal Niveshak Classroom: How to Read a Balance Sheet

You might remember Cuba Gooding Jr.’s immortal line from the movie Jerry Maguire, “Show me the money!”

That’s what financial statements do for investors – show the money that companies earn, own, and owe.

These statements appear in a company’s annual report, and are broadly classified into three categories:

Balance Sheet
Profit & Loss Account
Cash Flow Statement

Over the next few weeks, we will discuss these key financial statements that companies use to communicate their performance with investors, and how you can use them to identify the best long-term investment opportunities.

Let’s start with the Balance Sheet, also known as the ‘Statement of Financial Position’ of a company.

How to Stop Worrying and Start Investing

In the spring of 1871, a young man picked up a book and read twenty-one words that had a deep effect on his future.

He was a medical student at the Montreal General Hospital, and was worried about passing the final examination. He was also worried about what to do in the future, how to build up a medical practice, and how to make a living.

These twenty-one words helped him to become the most famous physician of his generation. That’s not all. He organized the world-famous John Hopkins School of Medicine.

He was knighted by the King of England. When he died, two huge volumes containing almost 1,500 pages were required to tell the story of his life.

This man was Sir William Osler, and the twenty-one words that helped him live a life free from worry were…
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