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Commentary

Dow down 366, Oil near $90

The Dow Jones Industrial Average is down 366 points, or 2%, on Friday. This has been attributed to lower earnings, oil prices close to $90 and general recessionary concerns in the US.

Note: the media will blow this out of proportion over the next two days.

Stil, I wish to caution you that if we fall like crazy on Monday, it may be a reversal that prompts action. My suggestion: Don’t do ANYTHING on Monday, if you’re not a trader. Wait for the closing and then decide. Don’t use stop losses intraday as life will be extremely volatile.

Just a note to say this is quite serious, but don’t panic.

  • Anonymous says:

    >”it may be reversal which prompts action”. What is the meaning? Reversal from Bull to Bear market?

    I invested for long term 3 years to 5 years horizon at index level of 19,000. What should I do when I see my MF investments are down 12% as on date? Should I take action to cut my losses and re enter at a later stage? Or should I stay put and hope things will be OK. I am reminded of Nasdaq 5000 to 1000 journey and still today it has just managed half way. But it is too much painful to see my hard earned saving loosing money. I could not sleep well for last 2 days and have been quarelling with my wife.

  • Crick_Love says:

    >annonymous…Let me be direct !! you are displaying characteristics of an investor, whose calculation have gone soar. But the good part is that you are atleast admitting the guilt and that is the good part. Please stay away from such tendencies as carrying your reactions to home !! be level headed on either gains or losses (I do understand that it is easier said than done..we are rational folks and life was there before and it will continue after..sans a few bucks !! so, be cool..but all we can do is to advice)
    Coming to travel from 19K down – there is no point in relating it to NAS fall from 5 to 1. That was built on soap bubble and hence it has hardly recovered. India story has more substance and barring extreme conditions, we shd touch back 19k in about 4-6 months.
    As an investor with 3 yr view, you should not worry but the steep rise was expecting for 1 excuse to fall steeply and P notes proved to be one..agreed, tomorrow there can be another scare and we might see 15k but sanity will prevail and Indian MFs will start their getting into the act. I am told that right now, they are mostly sitting on cash.
    Finally, please invest in markets, what you can afford to loose only. Portfolio splitting and balancing is an age old wisdom, retold millions of times and beaten to death.
    So- what made you invest at 19k..perhaps you got tired of waiting for corrrection that never came for almost 4 months…such impatience is no good sign of an investor who can do his homework..keep it cool..you will see returns, if not a windfall. Much depends on where you have bet. If possible, enter selectively more on dips and most important – stay level headed, come what may

  • Deepak Shenoy says:

    >anon: It’s only down about 10% right now. Don’t let it get to you. 12% is not as bad as 50% or more which happened in the NASDAQ.

    In your case you are already uncomfortable with the losses. So exit right now! Why ruin family life for mere things such as money? So you lost a bit, that’s ok, it’s only money, you can earn it back. Invest later, perhaps even at HIGHER sensex levels, but when the market doesn’t swing quite this much.

  • Anonymous says:

    >Gentlemen: Thanks for your advices, but let me narrate the background.

    I am basically Fixed Income Investor. But past 4 months some foreign bank have been approaching my wife (I am working on Ship) and steering her to invest in their portfolio management scheme.

    Recently they (3 financial quacks with MBA degrees and impressive titles)recently came to our home (with their expensive Ties and Laptop) and asked us many financial questions typed it in their Laptop and came to conclusion that our risk taking capacity is 80% and our risk tolerance is 70% and we should be invested accordingly. Despite my apprehension they convinced (or steered) us into investments which was not suitable for us. They told us “time in market is more important that market timing”, “Dont bother about valuations, you can invest any time” etc. My wife also pushed me to follow these quacks saying “they know more about these matters”.

    Now within a week I am seeing my portfolio melting down. This has hurt me emotionally and have no respect for these conmen and their software.

    We shippies are conned everywhere. We are born fools. As old English saying goes “fools of the families go to seas”.

  • Anonymous says:

    >hi deepak!

    interesting blog.
    regarding, ‘Don’t do ANYTHING on Monday, if you’re not a trader’, don’t u think its a gr8 time for selective investments if one has a
    long term horizon as anon has.
    rather the traders can be wiped out with the kind of volatility we’re seeing.

    I’m really intrtsd in building a sound portfolio for long term..
    Would you advise bottom-fishing on monday(or tuesday) on scrips such as RIL, L&T, ABB, Tata Power etc(bluechips i mean).
    can i hv ur email id. if yes, pls mail me.. lots to advice needed.
    thanks
    Jatin
    (jatin28@gmail.com)

  • Anonymous says:

    >Quality of comments have been getting better in Deepak’s blog. I have 2 specific comments to make:
    @Anonymous: If you have invested at 19k, just chill. Don’t do anything or if you have anything else to do other than watching the stock ticker do the same. In the last 2 days, I suffered a notional loss of 70,000/-, but I don’t care. My retirement is at least 12 years ahead, and frankly the sensex will conquer 19k in 4-5 months any which way. FY09 sensex earnings is estimated to be close to 1k and usually sensex trades at 18-19 PE historically. 19k seems very reasonable. Just don’t bother.
    @Jatin: There are not 1 or 2, but tons of stocks trading at extremely attractive valuations. There are single digit PE stocks in this market, that are 40% off their recent highs for no fault of theirs. I will not give you clues but this is true and Deepak should agree. You should not bother about the volatility unless you are one of those types who cannot look into their own mirror image if they lose the next 10% midcap mover.

  • adi says:

    >to 1st anonymous.

    just chill. if they r good stocks leave it and average. u will learn something about markets also and it is a fascinating world out there.

    if really uncomfortable as in headaches/diarrhea etc remove money put in safer mutual funds. this time go for established funds with good track record not nfo’s.

    clearly u are not willing to take risk so u r not in the high risk category.

    tc!