Stock Market for 2010: What’s Your Prediction ?
For many of us retail investors, there is a perennial dilemma about two issues. One is about how we should invest and where we should invest. The second one is we always say (or crib) we do not have big enough capital. We never get out of this loop. Which stock to buy or where to invest is decided based on what was read yesterday. Everybody from the top VP of financial firm to any small investors like us, we keep churning out ideas, themes, predictions, estimates, etc. But we do not have conviction in our own ideas. Honestly, I love reading all those ideas as they do make some interesting reading material, but that’s not the way to manage your personal portfolio. .
As year 2009 is nearing completion, I have been reading new predictions and themes for year 2010. It is quite amusing to read what folks have to say. I always wonder do any of these forecasters follow their own advice. Could we take a peek at their portfolios? Here are few excerpts:
This one is from Ashok Sharma, There are quite a few good generic investing wisdom. But few of them caught my attention.
- “As said earlier 2010 will be the most profitable year for investor’s worldwide especially in India”
- “Learn the art of portfolio churning at regular intervals as per your investment style and after a major event like Budget, Election etc.”
- “Never overtrade in margin. Ideally not more than 10% of your capital is deployed in margin trade in volatile times like this”
- “Invest in sunrise sectors in 2010 like logistic, media, power, infrastructure and so on”
This one was published on Livemint
- Kotak Institutional Equities saying, their research has cut its EPS estimate for fiscal 2010 for the Sensex firms by 2.9% to Rs913 after the quarterly results, while it reduced its fiscal 2011 Sensex EPS by 2.8% to Rs1,098. So if they have to cut the estimates, that means they estimated wrong last time?
- UBS Securities India Pvt. Ltd, “forecasts a Sensex EPS of Rs1,344 for fiscal 2012, and says, we base our March 2011 BSE Sensex target of 20,000 on a forward P-E (price-earnings) multiple of 14.9 times fiscal 2012 earnings EPS.” I wonder when will this be revised?
This one was published on Economic Times says,
- “With the stock market, as per technical analysis, setting itself up for a larger bull run that is likely to begin sometime in 2011, you can look to buy scrips in the mid-cap space next year.”
- Dinesh Thakkar of Angel Broking, “too expects infrastructure stocks to be outperformers in 2010”
- 2009 proved to be the best year for the markets since 2000
- Motilal Oswal expects “2010 to be in favor of the bulls”
I wish someone could remind these folks that there are numerous retails investors who are still in red, even after 2009 being the best year. These folks happily ignore the drop in first three months of 2009. But keep harping 65% returns. Numbers are just numbers, you can make them look good or bad, it’s your choice.
The point is these are all good reads; and entertainment at most. These folks have to write because their salary depends on this BS. As retail investor, it does not help me. One guy says learn to churn your portfolio and its OK to take up to 10% margins (yeah right!), few other folks actually come up with EPS estimates (to be revised later on), one guy using technical analysis says bull run from 2011 (wow!).
I know many of us like to chit chat and highlight that “I got xx% return which is much higher than market” or “I bought this stock which became a multi bagger”. Again, it makes us look good in front of others and we may have indeed had few successes. But the reality is, more than 90% of us have had less than 15% average per year capital appreciation. i.e. less than market average. Make a sincere attempt to calculate your last 10 year return and you will know it. Chalta hai and ignoring your cumulative results will not improve your investing returns. So how does one overcome this?
Time and again it has been observed that emotion is investor’s worst enemy. If you invest without a conviction, without your own process, it is a recipe for disaster. Identify an investing process for yourself based on your risk taking ability. Execute it will discipline.
- In my view, it is perfectly acceptable to trade, if you believe you can follow a process and have time to study and execute in short time. Trading on someone else’ tip has failure written all over it.
- You want to be a growth investor, understand what is/are characteristics of growth stocks, and be one. Investing based on themes and prediction is again setting up for failure.
- Follow value investing only if you have patience and have guts to ignore the media and market. If you cannot, then value investing is not for you.
My conviction is buying high quality dividend paying stocks. I chase the expectation of sustainability over long term. It is my belief that as company earnings grow over time, dividends will keep growing. Furthermore, I also believe that any company that can afford to keep paying good quality of dividends (and keeps growing it), I know my capital is likely to be safe, and returns will be better. I am always happy to welcome downturns as it gives buying opportunities. A scared market always provides opportunities for cheaper stock.
I have to make a prediction like everybody else right? Well, I make two predictions (1) my portfolio will not be in red; (2) my total portfolio dividends will be more than 2009 dividends.
What is your prediction for 2010? Can you share in comments section below?
2010 stock market prediction, beginners guide, investing process, personal portfolio management, risk profile, stock buying process
My prediction is that there will be more bullish predictions as the market moves upwards, and more bearish predictions as the market moves downwards.
None of them will be any good, but that will not stop the people making these predictions make more predictions
Hello Manshu,
That’s a good observation. Folks will make continue to make predictions, because their salary depends on it. And there are enough morons who will follow them.
Best Wishes,
@ Tip guy,
all these brokers and even the newspaper/media sites are morons. They are second of our idiot politicians. These guys are here to make money from your commissions. if they don’t recommend churning, how will they get their fees?
I lost 70% during last downturn, so effectively this 65% gain these morons are touting is zero for me. i have left my existing broker and decided to take my own decisions. But as you mentioned in the first para about two dilemma. that is very real.
less capital and I just find it difficult to identify what to buy and when to buy. i guess will take time, but i hope to no lose money.
some of stuff on your blog is very direct and it hurts, but it is very true. my 10 year capital appreciation is only 9% average.
thank you for inspiring blog.
Hello Priyanshu,
I am happy to know that it is an inspiring blog.
I don’t think you should worry about 9% return. In my view, you should be happy that you are not running in red.
you are not the only one in this dilemma. The best approach is to make a start (instead of cribbing). Yes, it takes time, but then you would have a strong foundation.
Good luck and keep sharing your thoughts.
Best Wishes,
hi tip guy,
i have reading our blog for last few months now and very motivational and inspiring. personally i got exposed to dividend investing which i was not aware of.
one thing i do not understand. you keep talking about buy and hold. how will one make money if there is no sell. without selling how can one increase wealth?
I would like to know your thoughts.
thanks in advance.
Aslam
Hello Aslam,
You have a very good question. Stay tuned. I will be write a post on it.
Best Wishes,
thank you tipguy. looking forward to your post.
Aslam,
Look at this mode of investing as a “balance-sheet” investing versus the “income-statement” investing which is short term investing or trading. By balance sheet, I dont mean the company’s balance sheet, rather your own. By long term investing, you create a ‘going-conern’ which is your portfolio, whose book value increases over time. If there is ever a need, you can liquidate your assets and the value realized will be much larger than the constant churn which is the hallmark of a trading approach. The other reason to liquidate your holding may be something to do with the company – something gone wrong, or a deterioration of the business environment.
cheers,
arun
Hello Arunsg,
You got it buddy! Over long term, when the balance sheet becomes very strong, at that point in time, PL and cash can be improved.
Think of a portfolio as a business, where you optimize all three. In the beginning, you build balance sheet (while PL/CF remains low). Over time it continues to builds. Dividend Investing is a one product. Index investing is another product. Some food for your thought.
I appreciate your thoughtful conversations. It helps raise quality, and directly helps individuals.
Best Wishes,
thank you Arun
My prediction for 2010:
Personal
a. Dividends will grow
b. There will be buying opportunities
Overall:
Most analysts will get it wrong (again)
There will be another cycle of fear and greed
THere will be incidents where rationale will take a backseat.
Cheers,
arun
I like your personal predictions. Those two are my conviction (and continue to execute them).
Best Wishes,
As per my past experience if the euphoria continues & all the guys start predicting a very rosy picture That will be the perfect time when the Tide Turns & people know who was swimming naked -( bought it from Legend WB)
So my funda always sit on min 40 % Cash ( I have not invested a single money after sep-09 & removed all laggards ) & continue holding winners
Time has not turned so great -so I am hoping to have a severe drop may be 30-40% who cares by apr-10
Hello Rohit,
Very well said. I liked your fundas.
Happy New Year and Best Wishes,
I make two predictions on myself ( not too late in the year yet).
1. I will continue to lose money in trading ( trading , not investing )
2. My investment portfolio will do better than my trading portfolio
Hello Studnet,
Yup, its not too late.
Somethings never change. you know you will lose money and you won’t stop.
why don’t you give me your trading capital. I assure you to give back atleast +8%
Best Wishes,
this is my second year of trading. and if I can arrest loss of capital by year end, I would have achieved something. So, right now I am paying tuition to the market. One reason I am trying my hand in trading is that I am not terribly good at fundamental analysis whereas I do have a flair for fluctuating numbers ( read price ) – discipline in trading is an issue which is I am trying to overcome.
My trading capital is significantly low compared to my investment portfolio – to that extent I have protected myself!
Thanks for your best wishes. I enjoy reading your blog. your analysis on MIC – however short it might have been – was excellent and should convey to most investors the message to stay away from the stock. When you have time, please check out Bartronics. I have begun to accumulate it. When I say accumulate, I usually keep buying for two three years in small amount and then hold it for the next 5 years or so. Usually a good company rewards you by that time. In fact if I can recover most of the invested capital by that time, then I do so and let the rest “free” amount play freely and keep giving me dividends.
Best wishes to you for 2010.
Good Luck! Acknowledged your suggestion on Bartronics. Will look into it.
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