There is one most important thing about finance and i.e. Investments. It is always the question, how, where and when to invest. The investment should be such that it gives considerably good returns so as to beat inflation, and at the same time it should be quite safe!! Yes!!! And that only requires a proper skill.
Actually, in this world there are two types of Investors, one risk takers and another risk averse. The risk takers are the people who are willing to take more risk, and they can be ready to put even the principal at the risk. And these people prefer equity oriented investment instruments. And the risk adverse investors are the people who do not want to take the risk, so they prefer debt oriented instruments for investment. Yes equity oriented investment is the biggest hope to give the return which can beat the inflation in the long run. But here there is the risk of even loosing principal also. And on the other hand, the debt oriented investment, more safe, but the return on the investment would be less. And always High Risk High Return is the principle of the nature which is applicable in all walks of the life!!
Ok so question is, how to make investment, so as to maximize the returns and to safeguard principal also. But how exactly?? Yes I have an idea which would work. Simply monitor the Capital Market movements , and please remember following points which would be helpful.
Important thing, Please don’t be rigid in your investment approach:
Yes!! Be open to all kind of investments. If one thinks that no to equity at all, then it would be difficult for him to maximize the return on the Investment. Similarly, if someone is not willing to increase the stake of investment in debts, then he tends to have more stake of investment on risk.
The better idea is to shuffle the investments as per the market conditions:
Right! Be flexible, and definitely you can increase the overall return on investment.Always remember about two important things about Investment and that are Equity and Debt. I have discussed about this in detail in my article Balancing Equity and Debt.
When Stock Market is moving up or stagnate:
As long as market is going up, or it is stagnate, simply invest more stakes in the debt oriented mutual funds. There are many open ended mutual fund schemes which invest in debt instruments. So these investments are less prone to market risk. There are two advantages of these mutual funds. One is that you can remain invested with exposure to debt, and still enjoy the liquidity, as these funds are open ended!!
When there is fall in Stock Market:
Yes! This is the buying opportunity ! Whenever there is sharp fall in the capital markets, simply sell your investments accumulated in the debt funds and divert funds to equities! Just like debt funds there are so many equity oriented mutual funds with open ended schemes. You can invest in these funds or else you may directly invest in stock market. But I would strongly recommend to invest in stock market directly only if you have adequate knowledge, study and research about it, and prefer equity oriented mutual funds only. So for every fall in equity market, divert your funds from debts to equities, gradually.
When there is again Bull Run in Stock Market:
As and when there is again upward movement in the stock market, yes you guessed correct!Simply book profit from equity oriented investments, again gradually in regular intervals and divert it to debt.
So, here we follow the simple principle to be successful in stock market i.e. Buy, when everyone is selling and Sell, when everyone is buying! And whenever there is no buying opportunity, simply park your funds in debt!
I am sure you will follow this simple principle and will maximize your returns!!
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