January 21, 2016

Start investing for long term

Markets are off 20% from their all time highs.

Good support is expected around 7200. If this breaks, we have even stronger support around 6500 levels.

In other words, if you are a long term investor, the region between 6500 and 7200 will offer good investment opportunities.

Which stocks to buy?

Basically any stock you can hold for 10-20 years with all problems in the world.

Ideally the company should be in a business you easily understand, a market leader in its segment, should have been around for 10-20 years at least, is dividend paying, professionally managed etc etc.

You can add more conditions if you feel like.

Now this will be a personal choice so do not ask me for names but I give some examples as a guideline.
- Maruti in automobiles
- Bajaj Auto/ Hero Honda in 2 wheelers
- Battery/ tyre stocks... you need to change this every 5 years so replacement market only grows
- Paints like Asian Paints
- etc etc and so on

The choice should be yours and personal depending on the way you think.

The ideal entry level is 30-50% correction from life time highs.

How much to invest?

This is the most important question.

Limit investment to under 2% of your capital. This will mean a portfolio of 50 stocks.

If you can manage with 1%, then even better (100 stocks).

Doing above will ensure excellent risk management and even a company goes bankrupt, you are losing only 1% of your capital.

Do not worry about tracking the stocks - since investment is long term, you need not track this every day or every month.

What about stoploss?

There is no SL as you are investing for long term in a good company which is available at a good discount.

Risk management is already done via low investment per stock.

When to sell the stock or book profit?

Sell the stocks only when you need the money. Otherwise continue holding forever.

The ultra long term investor has generally always made money.

No comments:

Post a Comment