Why should one buy stocks when their prices are not cheap? One reason could be that the company is a good dividend payer but if the dividend yield is not attractive, why should one buy it? Another reason could be the company’s business holds a lot of potential. But why should an analyst recommend buying that stock when the prices have moved up sharply? I understand this may be so if the company does exceptionally well and declares a bonus or a hefty dividend, but even then it may not be profitable to enter a stock after a particular time has elapsed.
You are right. Only strong fundamentals are not required for a good investment decision, but its timing is equally important. The aspects related to the valuations, future potential and earnings are very important, but their timing is more important as investing at the wrong time can never give you fruitful results. For the purpose of timing, technical studies and technical tools are being used, which are very helpful.
I have recently invested in HDFC Top 200, Birla Sun Life Frontline Equity Fund, DSP BR Top 100 Equity Fund and Reliance Diversified Power Sector Fund through systematic investment plans (SIP). I’m investing with for a minimum of three-five years. I want your views on my current investment and I also want to invest in one more fund. Please advise which fund I can opt for. I do not want to take high risks but I do have an appetite for average risk. Also, should I go for SIP or lump-sum investment in the next mutual fund in the current scenario?
Your current investment is very good and I think this portfolio is quite balanced and has a potential for good growth. Regarding your second query, you may choose to invest in Tata Infrastructure fund, SBI Magnum Contra and Reliance Regular Savings Equity Fund. Coming to your query on mode of investment, in the current scenario it would be better to invest after the Union Budget is announced. If the market scenario looks favourable then, you may invest some amount in lump sum and then take an SIP. If markets fall after budget, then you should invest through SIP.
Please suggest three-four large- and mid-cap stocks for an investment horizon of two-three years and the level for entry in the stocks.
At current levels, Tata Consultancy Services Ltd, HDFC and Bharat Heavy Electricals Ltd look good among large-cap stocks with a time horizon of two-three years. Among mid-caps, LIC Housing Finance Ltd, Shree Renuka Sugar Ltd and Sesa Goa Ltd look good.
Answers are based on a technical analysis of the markets and individual stocks. The views expressed on this page are not the newspaper’s opinion and are provided for information purposes by Vipul Verma. Readers are requested to do their own research before participating in the stock markets. Neither the paper nor the information provider will be responsible for any outcome based on information provided here.