investment strategy in 2011

2010 has been a roller coaster ride for major asset classes such as equity, debt and real estate. The only exception was Gold which not only survived the wild swings on the way downward but made new highs with the spot price crossing the 18000 mark for the first time. Since the peak gold has corrected almost 6-7% and seems to be consolidating at the current levels. So what will be investment strategy for investors in 2011?

Let’s take a look at each asset class and explore the opportunities and threats.

Equity: 2009 has proven to be a golden year for the stock market with returns of around 64% till 21st December 2009. Markets have been range bound for a while now and Nifty was unable to break 5200 on the upside and it seems now that we are in a corrective phase since the last few days. There is a lot of noise of a further 20-30% correction. There is nothing impossible in the markets and there is no sane way of really figuring out whether a 20-30% correction would indeed happen. If a sharper correction does indeed happen, then it could be an exciting opportunity for people who have missed the bus. On the other hand what happens if the market corrects a little (10%) but then goes up sharply in the first couple of weeks of January or does not correct from the current levels and goes up.


Your investment strategy should be to invest regularly through SIPs or in a staggered manner and take advantage of the dips. This has been one of the best ways to make money in the Indian stock markets in the last 25 years and 2010 will be no different. At the same time if the market shoots up sharply we will rebalance your portfolio. In fact rebalancing the portfolio will be a very important theme in 2010.

Gold: Indians have always been big buyers of gold. However once the price crossed 15000 and scaled new highs, buying interest has gone down as many believe that gold prices are way too high. At the same time central banks around the world have been buying gold as if there is no tomorrow. One of the key reasons is that gold is an alternate currency that can come in extremely handy during tough times. I decided to check on the Gold Knowledge Quotient of several people with a very basic question and trust me the answers were uninspiring.
Gold is traditionally weighed in Troy Ounces (31.1035 grammes) which is 3.1 tolas. The proportion of gold in jewellery is measured on the carat (or karat) scale. The word carat comes from the carob seed, which was originally used to balance scales in Oriental bazaars. Pure gold is designated 24 carat, which compares with the "fineness" by which bar gold is defined.

Real Estate: After a correction of 20-30% or so between January and May 2009, prices have started to look up again. Builders have been able to raise funds easily after the election results in May 2009 as some FIIs were more than keen to take exposure to the real estate sector. However this is one asset class where you can see a huge bubble building up because the single factor – affordability, which determines the fate of the real estate market, has gone for a toss. No business can run on funding forever and a business must sell and generate free operating cash flows. A slowdown in home loan growth is clearly visible even at very low rates. One of the key things which a lot of builders are missing out is that people do not buy real estate markets because interest rates are low. They buy because prices are affordable and there is a clear need. Ask yourself “Would you buy something if interest rates are 0% but you are unable to afford it?” We all saw the effects of this miscalculated borrowing through the sub prime crisis. A sub prime might not happen here as a lot of real estate dealings are still in cash and also the fact that Indians have been prudent savers and buyers. However given the state of real estate prices which are artificially held up, prices must correct by 30-50% from the current levels for houses to be affordable. 2010 might not be that year as a lot of developers have paid off their debt for 2010 as well but the same cannot be said of 2011 and beyond if prices are not brought down meaningfully. Till then you will not miss much by not taking exposure in this space unless there is a mouth watering deal that comes around.

Stock Market Investment Strategy for 2010 and 2010

we saw in spectacular growth for stock market investments in the year 2009. Many stock market investors who started investing in the stocks around the begining of 2009 would have doubled or tripled their investment during the last year. This is mainly due the cheap valuations of stocks towards the end of 2008 due global economic crisis and the way Indian marched forward by pumping liquidity into the system and strong domestic demand that more or less shielded the indian economy from the crisis to an extent. 2009 was an exceptional year and the same the returns can not be expected in 2010 and going forward.

Coming to year 2010, we started seeing the consolidation of stock markets. It is time for investors to be very careful and they have reset their expectations and look at the big picture. Stocks are not cheap any more. The Sensex is currently trading at a P/E around 22.2 and P/B around 3.7. Historically sensex has traded in the range of 15 to 16 P/E. That means the stocks are currently commanding high valuations with respect to their earnings. We are in overvalued zone. Expecting higher returns from an already overvalued markets is not wise. These valuations can only be justified if the earnings of the Indian corporates grow substantially and the free liquidity continues to be available in the system.If we observe carefully, there has been no growth in the earnings of the sensex companies. So going forward it is very important that our corporates register good growth. If Indian companies register good growth, the sensex P/E could come down and stock markets can sustain current valuations or move forward. If the growth is lacking, then the rise in stock market has to be considered as mere speculation and excess liquidity. This will carry more risk.So if we see EPS of indian companies going up in the next few quarters, w could see a rerating of Indian markets and the sensex and go up. If EPS remains constant, market should correct from the current levels as they are already overprices but due to excess liquidity in the system the markets could rise again after correction. But this situation presents substantial risk because of high hopes.

So the overall situation of the current stock markets does not suit serious long-term passive investors. Such investors have to wait for correction and should invest in specfic stocks are that fundamentally sound, has good growth potential and are available at reasonable valuations (typically with PE < 20 if the stocks are not in the high growth and high margin sectors).Meanwhile the current situation of high liquidity can be used by active short term traders to make good short term returns. Follow strict stop-loss policy for all your short term trades.

Guide to Investment Strategy in india

A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment.As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance.In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return.Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behavior or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favorable investment strategy.

An investment strategy is centered on a risk-return tradeoff for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment.A passive investment strategy attempted to minimize transaction costs.An active investment strategy guide used to maximize returns based on moves such as proper market timing.
Small time investors can adopt the buy and hold investment strategy to invest in equities, which although volatile in nature, give favorable long run returns. Investing in equity markets for small time investors is associated with the investors holding on for very long periods. In the case of real estate
, the holding period extends the lifespan of the mortgage. Notably, in case of this strategy, indexing or buying a small proportion of all the shares in market index or a mutual fund is a purely passive variant of the above strategy.

Investment strategies can also denote the investment strategies a national or federal government should follow to bring about economic growth in a country. This can only be achieved by domestic investment as well as significant FDI (Foreign Direct Investment) flows to particular sectors of countries, especially the less developed ones of Asia and Africa.

In case of India, infrastructural problems, excessive government intervention, rigid labor laws and corruption are stifling the flow of FDI in the critical sectors. Less developed countries such as those in the Asia- Pacific region and Africa can bring about much needed development in these economies.

Investment strategies from HDFC, Reliance

HDFC and Reliance Mutual Fund have emerged as the top fund houses in terms of returns for three consecutive quarters in the ET Quarterly analysis. ET Intelligence Group met Sunil Singhania , head equities, Reliance Mutual Fund, and Srinivasan Rao , senior fund manager, HDFC Mutual Fund , to discuss about their wining investment strategies.

INVESTMENT STRATEGIES
Srinivasan Rao: We essentially continue to follow bottom-up stock picking model. The management quality of companies that we select for investment is an important factor for us. We strive to build a portfolio of such companies with sustainable earnings growth. This should help us beat the instances of an economic downturn.

Sunil Singhania: We continuously evolve our strategies considering that India is an emerging country. We feel a premium has to be given to quality rather than quantity of companies in the portfolio. The Satyam scam has also taught us to avoid companies wherein the management is slightly of dubious reputation. We are keen to invest in niche business models.

SECTORS BULLISH ON:
Srinivasan Rao: We are bullish on India-centric consumption theme. The sectors such as financial, infrastructure (more of capital goods companies) and pharma (selectively) look attractive.
Sunil Singhania: Consumption is the buzz word today. The way the young India thinks, spends and invests is different from the previous generations. We are bullish on banking, infrastructure and cement sectors

SECTORS STAYING AWAY FROM:
Srinivasan Rao: We are underweight on the power sector. Also commodity-driven sectors such as metals, real estate and cement continue to remain low key.
Sunil Singhania: We are avoiding telecom, metals and reality sectors. We are not comfortable with the current valuations in these sectors.

Investment Strategy Guide to Investment Strategy

A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment.

As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance.

In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return.

Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behaviour or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favourable investment strategy.

An investment strategy is centred on a risk-return trade off for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment.

Investment Banking - Careers and Prospects

Banking Investment jobs are some of the most sought after jobs by both fresh graduates as well as those who are already in the field. The truth is that these jobs offer impressive remunerations and benefits and at the same time are promising platforms for progression in the banking industry. There are different types of banking investment jobs depending on the functions of any given banking or financial institutions. Those financial institutions that are primarily concerned with private equity and venture capital are less accessible in terms of entry level graduates while banks offer more opportunity for those fresh graduates with an interest in investment banking.

Corporate finance is an area of investment banking that is lucrative and attracts a lot of people both fresh graduates as well as those who are already in the banking sectors. Though the truth is that the position of a corporate finance investment banker is one that is difficult to attain unless one stays in the same bank for a long time. This position is mainly concerned with venture capital, stock and assets trading and mergers and acquisitions. It is a job that requires extensive knowledge and experience in the analysis of market trends in order to offer clients the appropriate advice for the business strategies.

Investment bankers are also found in the areas of retail banking and structured finance, international sales and institutional sales, private and public investment banking systems rating banking, analysis banking as well as commercial and retail investments. The position that one holds in a bank or in an investment banking firm is dependent on their area of expertise as well as their educational background. It is also important to note that this is a very competitive area of banking and that the most experienced are more likely to land higher paying jobs than the ones whose experience is limited. Thus for fresh graduates it is vital to view investment banking careers on a step by step basis until they attain the level that they aspire to.

What is Investment Banking?

So you are going to college or university and want to pursue a profession that pays good money. Somewhere along the line you asked yourself what is investment banking? Quite simply, it is the side of banking that makes an investment in a company, rather than traditional commercial banking which deals with banking tellers, deposits, withdrawals and other everyday banking activities.

This is not a job for people who are cuddly or who enjoy curly problem solving. It is the study of curved businesses and damp scenarios involving dangerous finances and deafening profits. If you are not going into the deep then you will be defeated. Investment banking has long been labelled as one of the most cut throat, competitive, jobs in the world. It has become so competitive due to the nature and size of the funds/accounts that one must deal with on a day to day basis.

The profession requires an understanding of the defiant and a delicious appetite for delightful financial reports. You cannot be depressed and you must be determined to do the dirty work that disgusted the CEO. Accountants are disturbed by investment bankers because they spin numbers in a dizzy manner while their dry, dull and dusty calculators do the maths. This is one of the reasons that investment banking flies so far under the radar. Everyone hears about accountants doing this or that, and many college students aspire to be a number crunching accountant with a decent salary. The cut-throat world of investment banking however yields far greater profits, and can be far more demanding.

Eager young people will be elated to learn that many companies are embarrassed by their recent failures in the recession and will take anyone on board with empty pockets. The companies are encouraging and seek energetic and enthusiastic employees.

The job requires an understanding of the markets and a keen eye for companies with solid portfolios and income steams. The banker will find businesses eager to expand and recommend an investment that correlates with the projected profits. It is, to some degree, business forecasting in that the banker behind all of this, is looking to guide the businesses on their investments. The bank may seek an interest return or company shares or a percentage of profits. This shares risk and reward. One of the most highly publicised and sought after (in terms of jobs) investment banks in the country is Goldman Sachs. Roam those halls and you will run into some of the most powerful people in the world.