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Thursday, December 30, 2010

Targets in Trading

Targets can be of 3 types

  1. Time-based—I will hold my Positions for a X amount of time Say 1 week depending on the type of trader/Investor.
  2. Technically-based – You get your targets technically set up. You can use Pivots, Exponetioanl Moving Average, and MA or based on your trading system.
  3. Price/Profit-based –I’ll get out when I have an open profit of Rs 10K or when trade when it reaches target price
All 3 methods discussed above have their own pros and cons.
Time Based can never be used as a Solo tool as we are in a globalized world and markets gets affected by turn of events thought out the world and we can be wiped off the market if some disaster happens.
Technical exit works extremely well when markets are in a strong trend but fails when we have a range bound or congestion market like one we are having now in Nifty. Bears and bulls both are at losing end as Nifty is trading in such a small range.
Profit and Price Based Exits can force a trader/Investor to exit when the Stock/market has just started its bull run and Person can be left just scratching their heads why the stock moves after I exit. This is the same story of most of the traders/Investor.(Correct me if I am wrong J)

Best Strategy to Exit

The best exit strategy is to set price targets which are make sense based on market structure and reflects market existing support and resistance. If you trade plan takes into market support and resistance on all time frame i.e. Hourly,Daily,Weekly and Monthly your changes of taking what all market offers will be far and far higher if your trading is emotionally driven i.e. Fixed Profit or Technically Driven which let you keep lots of money left on the table.

Rebalance your portfolio periodically to retain its risk and returns

Seasoned investors can vouch for the fact that the key to maintaining a good portfolio mix is periodic portfolio rebalancing. Rebalancing helps in maintaining the portfolio's original risk-return characteristics.

Asset allocation strategy is crucial to building a strong portfolio. It determines the proportion of any given asset class represented in your portfolio. An older and risk-averse investor has a retirement asset allocation of predominantly fixed income investments. A young and aggressive investor will have the bulk of his money in the stock markets. In a nutshell, a portfolio's asset allocation strategy determines its risk and returns characteristics.

What happens to the original asset allocation when one asset class yields phenomenal returns while others pale out? As different asset classes give different returns, a portfolio's asset allocation changes considerably with time. It is essential to retain the original risk and returns characteristics of a portfolio. Investors can rebalance by buying and selling portions of their assets in order to regain the weight of each asset class back to its original proportion.

Time to rebalance portfolio

When should an investor balance his portfolio? The characteristics of the portfolio's assets determine the frequency of rebalancing. If there is a high correlation among the returns of a portfolio's various assets, the performance of assets under the given market conditions will be similar. This significantly reduces the likelihood of the portfolio drifting from target allocation, and hence such a portfolio has little need for rebalancing.

Rebalancing becomes critical under these circumstances:


• It is time to rebalance the portfolio when some of your investments become out of alignment with your goals

• Your portfolio loses its original asset allocation proportion when some asset classes become over-represented

• If your risk profile has changed

• When an asset class makes a significant profit or loss

• Another strategy is to periodically rebalance the portfolio - say once every six months

Strategies to rebalance portfolio

How can you rebalance your portfolio? There are three strategies for rebalancing a portfolio that has strayed away from the original asset allocation mix. The most common strategy is to sell star performing stocks and reinvest the profits in debt instruments to regain the original equity-to-debt ratio.

Most investors hesitate to rebalance at a time when the stock markets are yielding lucrative results. Rebalancing is essential to maintain the risk level of your portfolio.

Another strategy is to weed out under-performers from your stock basket and reinvest the money in bonds or cash. This way, you can also get rid of risky stocks that are worthless.

If you have surplus money, you can make fresh investments and raise the percentage level of asset classes that have trimmed down.

Portfolio rebalancing helps maintain an acceptable level of risk, and in times of turbulence, will prevent gross erosion of portfolio value.

Avoid frequent churning

When implementing a rebalancing strategy, do not forget to factor in time spent, redemption fees and trading costs. These expenses will reduce the returns from the portfolio. Hence, rebalancing too frequently is not advisable.

CASE STUDY

Mr.INVESTOR has invested Rs 10 lakhs in stocks and bonds. Since his risk appetite level is medium, he has invested 50 percent of his money in stocks and 50 percent in bonds. In the bull run, the representation of stocks in the portfolio went up to 70 percent. His original investment of Rs 5 lakhs in stocks grew to Rs. 12 lakhs. His investments in bonds moved up marginally to 30 percent at Rs 8 lakhs.

The portfolio has churned out to be quite risky with excessive exposure to equity. Mr.INVESTOR can sell 20 percent of his stock portfolio that have fared well and use those proceeds to invest in bonds to reset the original equity-debt allocation ratio.

  After rebalancing this way, the equity-to-debt ratio has come back to 50:50 at Rs 10 lakhs each.

If Mr.INVESTOR hesitates to sell stocks performing well, he can explore investing more money in bonds to regain the original asset proportion.

Consequences of not rebalancing this portfolio

What happens if Mr.INVESTOR does not rebalance his portfolio? Assuming that during the bull run Mr.INVESTOR's portfolio has an equity exposure of 85 percent, only 15 percent of his portfolio is invested in more stable and less risky debt instruments. Assume after a few months, the stock market bubble bursts and a bear market ensues. The incessant selling in the markets plunges investors into gloom.

Consider a scenario when the crumbling market pulls down Mr.INVESTOR's equity holdings to peanuts. With his debt exposure already at a dismal 15 percent, Mr.INVESTOR has no safety net to fall back on in these troubled times.

Tuesday, March 9, 2010

People are afraid of speaking against bankers

 
 
 
The former deputy governor of the RBI says that if a bank offers you a higher rate of interest than its peers, you should be a little careful

The questions and answers (Q&As) below are part of a discussion that took place on International Women’s Day at a financial literacy workshop organised by Moneylife Foundation. Kishori J Udeshi, Chairperson of the Banking Codes and Standards Board of India (BCSBI) answered the questions asked by the audience. Earlier, the Moneylife Foundation felicitated three women activists who have a made a difference to society, fighting for various causes and standing up for the middle class. Ms Udeshi, the former deputy governor of the Reserve Bank of India, felicitated Ms Indrani Malkani of the Malabar Hill Residents Association, Ms Anandini Thakoor of the Khar Residents Association and Ms Sumaira Abdulali of the Awaaz Foundation. Here is the first part of the Q&A.

Audience (ML): What do you mean by ‘know your bank’?
Kishori J Udeshi (KJU):
What I meant by ‘know your bank’ is, you should know about your bank’s financials. Whatever is published, whatever is on their websites, if you even know that much, it is more than enough because the amount of disclosures, half of us don’t even read it, the rest of us don’t even understand it. However, there are a lot of disclosures now, so it is good to know who your bankers are. As rightly pointed out by Sucheta (Dalal), there is something called as greed. When someone offers you a rate of interest that is higher than what the rest are offering I would say avoid. It’s greed that drives them and greed has no limits. But as a basic rule, I would say, that if a bank offers you a higher rate of interest than others, you should be a little careful and if it is not a bank then don’t even go near.
ML: What do we do when banks demand unnecessary information that is unrelated to the loan or investment?
KJU:
You need not give any information which is not needed. They are not supposed to (ask for it) and you can complain (about it) and be assured you can be heard and they will take action, but if you have given it (the information) on your own, violating your rights, nothing will be done. I know these instances. Why don’t you bring it to our notice? It seems that people are very afraid of speaking against teachers, doctors and bankers.
ML: Can you explain the minimum balance that banks require on savings accounts?
KJU:
The minimum balance can be any amount except for a no-frills account. But any bank is free to fix any amount as minimum balance, that is because neither the Reserve Bank of India nor BCSBI would like to interfere with commercial considerations. As long as they are transparent about it, as long as the bank tells you about it, this is our minimum balance and would you like to open an account, then you open it, then it is your option and we would not consider it as a grievance. Having said that, we do feel that this is not correct. Some banks have minimum balance requirements of Rs25,000-Rs50,000, and these are mostly foreign banks. We haven’t taken up these cases yet. First, these are commercial considerations beyond our scope and secondly if customers want to open accounts with such banks that stipulate such high minimum balance, then why get into it?
The no-frills account is for the urban poor who don’t have banking services available to them. Now RBI has said that banks should not turn away any customer who comes to open a no-frills account for which the balance cannot go beyond Rs50,000 in a year. Yet, no bank has cared to open any account. Here we are talking about the urban poor. There are about 80 million urban poor, as per the National Sample Survey. All over the country, we have politicians and bankers using the buzzword of financial inclusion. But everywhere they talk about only villages. Yes, we do need to, but who is taking care of our domestic servants, drivers, house cleaners and so many? Why should a vegetable seller or hawker be denied a banking service in Mumbai just because he is poor?
ML: Banks are asked to give 3.5% interest per annum on savings accounts on a daily basis. Is it really beneficial for a common account holder?
KJU:
Let me tell you something about your savings account. You think that your savings account is earning 3.5%, but the reality is that you are getting only 2.8%. We fought for it and the RBI had agreed and now from 1st April you’re likely to get 3.5%. I say 3.5% because who knows they may even postpone it. Banks will have to give interest on a daily basis and not the old system. Do you think banks have taken this quietly? Banks are running on the basis of your deposits. You put your money there not realising that inflation is more than 10%, and banks are saying that if you are saying that banks should pay on a daily basis and therefore it should be 3.5%, then you should lower the rate of interest and the interest should be 2.5%. Why should it be reduced? Depositors are always at the receiving end. It is only the elite, the corporates who are heard. They get what they want and nobody writes about the depositors. And it is our savings and we never say a word.
ML: How do we deal with the inoperative account rules of banks?
KJU:
It is sad that even if there are credits to an account—say your interest, but you don’t withdraw, it (the account) is considered as inoperative. If for two years you don’t use your account then they would start putting charges or say it is inoperative and then put a penalty afterwards and then you would have to close that account and again start and open a new account. But if you read the banking code, now they (banks) have to write to you three months in advance and inform you that your account is inoperative. Therefore, they have to write and notify you of the ramifications, as a right. Even if you put Rs20 it becomes operational. And the RBI has also said that in order to make it operative, banks shall not charge
 
 
Note: This was the article written by Moneylife digital edition team.Thanks for the great message.
I kept it here for more public to read.
Courtesy: MoneyLife 

Saturday, February 27, 2010

No Relief for Low Income group from Budget

NEW DELHI: A century ago, Justice Oliver Wendell Holmes Jr said taxes are the price we pay for civilisation. Truth or not, it's always a wrench to pay up. The finance minister made March a lot more bearable by introducing major changes in the tax slabs that ensure a bonanza for the middle-class taxpayer.

Though tax at the rate of 10% will continue to kick in at an income of Rs 1,60,000 for men, Rs 1,90,00 for women and Rs 2,40,000 for senior citizens, the income level at which the next slab of tax rate at 20% will start has been raised to Rs 5,00,000 from the existing level of Rs 3,00,000. Not only this, the highest rate of 30% of tax will be levied on income of above 8,00,000 as against above Rs 5,00,000 so far. The new tax rates will be applicable for 2010-11.

Pranab Mukherjee said this will lead to savings for 60% of taxpayers. But not everyone gets a share of the booty. A substantial portion of middle-class tax payers are left out. At present around 2.79 crore individual taxpayers file income-tax returns. That means around one crore taxpayers who fall in the 10% tax slab are left out of the benefits given by the government. The hit that the exchequer will take — around Rs 26,000 crore.

The aam admi is also not feeling like a khaas admi since inflation affects those from the lower income group more. Some say that if Mukherjee gave the tax concessions to compensate for the inflationary pressure, he should have been given more to the lower income group. For that, an increase in the income level of Rs 1,60,000 at which tax incidence kicks in was necessary. But there's also no denying that any increase in the exempted income would have applied to everyone and would have affected tax collection very adversely. Even a Rs 10,000 increase in exemption limit would have cost the government around Rs 2,500 crore.

Because of the new tax rates (see box), people having a taxable income of up to Rs 3,00,000 will not benefit but those who earn more will gain substantially. Incomes above Rs 3,00,000 and up to Rs 5,00,000 will now attract a tax at a lower rate of 10% as against 20% earlier. Therefore, the taxpayer will save 10% of his income between Rs 3,00,000 and Rs 5,00,000 in the new tax system. If his income is Rs 5,00,000, his net savings will be Rs 20,600 along with 3% education cess.

The benefit will further increase with income. For a taxable income of Rs 5,00,000 and Rs 8,00,000, the tax incidence will now come down to 20% from the earlier rate of 30%. That means tax liability will be reduced by 10% for those with incomes between Rs 5,00,000 and Rs 8,00,000. For a person with income of Rs 8,00,000, the net gain will be Rs 51,500. Beyond that, the tax rate will be the same.

The new tax rates have put more money in the wallets of the middle income group. This should encourage them to spend more, thereby increasing the demand for goods and boosting economic growth.

Experts feel the rejig may not result in substantial loss of tax revenue as tax concessions generally lead to more compliance. Mukherjee, too, said the new relief had been extended as taxpayers responded positively to the relief provided in the last Budget. The government had also withdrawn 10% surcharge if taxable income exceeded Rs 10,00,000. Minimum income level for tax to kick in to Rs 1,60,000 from Rs 1,50,000 was also hiked. Final estimates show that tax collection is up to Rs 1,31,421 crore in 2009-10 from Rs 1,20,593 crore in 2008-09.

Courtesy: Times of India

Monday, February 1, 2010

60 reasons to Love India

Dear Friends I found this one very interesting and truthful of IndiaOne.
I'm not author of this one but received from someone and thought of sharing it being Indian

Read and cheers

1.Our ability to adapt other cuisines to our tastes:
Hot and Sour Chinese soup has desi tadka. Sandwiches aren’t thinly sliced and lightly buttered slices of bread with slivers of cucumber. We add green chutney and sliced aloo and beetroot. We invented Chicken and Veg Manchurian, developed Udipi pizzas, concocted onion omelettes, created vegkheema, de-Japanesed Japanese food by cooking up gajjar-ka-sushi, and now are well on the way to Indianising the seafood diet of penguins in Antarctica just in case that becomes the hot new phoren cuisine of 2010.

2.Faith and spirituality:
Tell someone you don’t believe in God. Go on. You’ll find yourself arguing so vehemently to make your case that you could well be accused of having a severe case of faith – faith in no God in this case. Because that’s what we do – believe. Hard. With passion. In anything we want to believe. Which is why practically every faith known to God is right here in India, and we’re not above inventing several more if we think we haven’t enough.

The way we are so flexible: Checked anyone’s filofax lately? Know anyone who has a filofax? We may set off in the morning expecting to follow a strict schedule of assignments and appointments, but we are always happy to chuck all our plans at a moment’s notice, particularly if the alternative involves partying.

Our many and varied stories: Our history goes back 5,000 years – and so do our epics that contain every emotion, possibility and philosophy that humans have ever managed to come up with. Not to mention a frightening amount of maths, if we’re considering the ages that make up the four yugas. Add to that the epics of Islam and Christianity, local folk traditions and tales that simply emerge from our fertile brains, and we’re wondering why our TV channels need to import bad reality shows from phoren and inflict them on us.

Chai:
It’s raining. We need chai. It’s cold. We need chai. It’s hot and sweaty and miserable. We need chai. Yes chai, not tea. The over-boiled, over-milked and over-sweetened stuff that could rot our teeth and turn our insides into shoe leather, yet never fails to put life back into our tired frames. Then there’s also tea. Darjeeling, Assam, Nilgiri, Kangra... Mmmm, the fragrance.

Monsoon mania:
 Who needs marijuana or Ecstasy? The monsoon is what we get high on. After a long summer spent gazing up at the sky through a magnifying glass looking for the merest hint of a cloud (and in imminent danger of setting our eyebrows on fire), we see the sky begin to darken, then the first drops of rain hit the earth, then we breathe deep and our nostrils fill with the delicious scent of wet earth... and then we complain bitterly about floods.

Weddings and family occasions: Our weddings are attended by family, relatives, friends, past and present neighbours, people who invited you to their or their siblings’ weddings, past and present colleagues, random strangers because we had 300 wedding cards extra and didn’t want to waste them, plus gatecrashers – a guestlist so long it rivals the population of the whole of Africa. If however, our homes are filled with the population of only one small country, like Bangladesh, we’re just having a family dinner.

Bollywood jhatkas: Hips swirl in one direction while the torso twists in another and the shoulders go somewhere else entirely even as the head moves so violently, it could spin off the neck entirely. We’d make excellent weather vanes, only no one would know where the wind was actually coming from.

Autos: Germany had its cute little Volkswagen Beetle, we have our cute little autos – three-wheelers packed with hi-tech music systems and disco lights that would put nightclubs to shame, which trundle up and down roads as their drivers overcharge everyone in sight, including themselves by mistake.

Bargaining: Worry about being cheated, who us? It’s the people we’re buying from who are tense. That’s because we don’t see bargaining only as a legitimate means of lowering prices. We see it as a sport. So we will not move an inch from the thelawalla even if the sun is blazing down at 53 degrees. We want that 30 paise off our kilo of apples and that is that.

Desi hospitality: Atithi devo bhava… and we will be devo-ed till our stomachs burst. (Perhaps because our hosts bargained so hard with the thelawalla that the apples were practically free?) When we step into anyone’s house we are fed, watered and pampered so much, we’d never believe there was a single nasty person on this planet. The only difficulty is getting away – if they could, our hosts would adopt us on the spot.

Tel maalish (Oil Massage): Even as we read the stories by our lifestyle journalists on the joys of spa massages, we are getting our hair cut in full anticipation of the head massage that will follow. It’s hard to fathom why the phoren people get so excited about massages. Haven’t we been tel-maalished from the second we were born?

We’re child-friendly:
Aside from the fact that we love children so much that we’re soon going to produce enough to populate the entire world, everything in our lives is geared towards their happiness. So much so that our parents never want us to leave home.

So many newspapers and magazines:
Whatever the rest of the world may think about reading, we have so much respect for knowledge that many of us literally worship our books (i.e., take them to temples to be blessed, instead of actually opening them). This may explain why new newspapers and magazines are constantly being launched even as marketing people complain that nobody reads any more.

We survived the recession: That’s because even though we are clambering up the conspicuous consumption ladder just like those phoren people who drove their economies to the brink of extinction, unlike them we have a culture of caution and saving that pulled us through when entire countries had to declare bankruptcy. That’s why. Our stash of black money certainly had nothing to do with it.

We’re a democracy, thank God!: You say, I say, she says… we all can say. And many of us do say – very, very loudly. Ideas and arguments are alive and though some of us (call them Party A) feel a great desire to clonk some others (call them Party B) over the head for having foolish opinions, we’re lucky because still others (call them Party C) are just as thrilled by the idea of clonking some of us (Party A) over the head for their ideas, as meanwhile, Party D lurks about, thinking hard thoughts about Party C. So a balance is maintained at all times.

We’re miserly and extravagant at the same time:
 We spend approximately the amount required for a new house on a new handbag, but we turn purple with rage and start throwing things about (though not our new handbag) when the auto driver suggests Rs 25 as a fair fare.

Raddiwalas:
 When those phoren people start making noises about our carbon credits – ours, for heaven’s sake, when we are the most frugal people on this planet always trying to save 10 paise here and 20 paise there, never mind that there are actually no coins in those denominations any more – we can tell them that we are green without even trying because ours is a country where recycling has always been a business, thanks to the raddiwalla.

Jugaad:
Nothing in India need only be what it was originally meant to be. A motorcycle can be attached to a cart and become a bael-gaadi, a tangle of wires could become a satellite dish, and when prissy parents refuse to serve alcohol at weddings, the boot of a car is a bar.

The sheer number of holidays:
There’s a New Year’s Day practically every month, not to mention some festival or the other courtesy one community or the other. And if we don’t take the holiday, we are nasty exclusionists who do not believe in unity in diversity. So there is a minimum of three holidays every month not counting weekends and if we live in Kolkata, we also have bandhs.

Our values are still (mostly) intact:
Family – check (see the millions who turn up for our weddings). Friends – check (see movies like 3 Idiots). Frugality – check (ask the thelawalla if you need proof). Hospitality – check (look at the size of our stomachs and we haven’t been home for weeks). Modesty – uh oh. What’s that we keep telling ourselves about Asian tigers?

Our patriotic songs:
They can be truly heart-rending. Just the first few bars of Saare Jahaan Se Achcha can make us weep – and not only because our neighbour sings it so badly that we’re convinced she’s a Pakistani terrorist. And they are also so rousing that it takes just one hearing of Hum Hindustani to make us grab anything at home that might serve as a weapon and queue up at the Defence HQ, ready to sign up for the Army.

Amazing diversity of food taboos:
We have vegetarians who won’t touch anything that once had the potential to move (though we don’t understand this too well – don’t palak leaves flutter in the breeze?), we have vegetarians who will eat all vegetables but won’t touch garlic or onion, we have eggetarians who will only eat vegetables and eggs, we have chickenatarians who only eat vegetables and chicken but not eggs, we have fishitarians who will not touch dairy with a bargepole and non-vegetarians who think green veggies are a form of mould. We have so many people with so many dietary problems that it’s a wonder we get to eat anything at all.
Amazing diversity of food: Food taboos, shood taboos! When we set off for school or the office clutching our tiffin boxes, we know very well we’re not going to eat anything that’s in them. Because the second it’s time for lunch, tiffins are exchanged for what our classmates or colleagues have brought. Which is why, in one day, we could find we have eaten anything from akoori (Parsi) to aloo poshto (Bengal), to sai bhaji (Sindh), to bisi bele bhaath (Karnataka), to aloo-bhaji(UP), to tandoori chicken (Punjabi), to biryani (Muslim) to de-Japanesed Japanese like gajjar-ka-sushi (wholly Indian,mera Bharat mahaan).

Amazing diversity of us!:
 For a people who have so much in common, we come from a wide variety of races. Across the world, we are mistaken for Chinese (anyone from the North-East), Caucasian (Parsis and Sindhis), Italian and Spanish (Goan people, especially with curly hair)... You name it, we’ve got the gene.

Amazing belief that anything worthwhile could have originated only in india:
We don’t care what anyone says about Africa being the cradle of civilisation, we know for a fact that we invented everything in the world – including the world’s genes, so there! We’re responsible for shampoo (champi), bungalow (bangla), thug (thugee), chicken tikka masala... Err... Well, we’re responsible for the chicken tikka and the masala and since the combination is so ghastly, we’re fine if the Brits take the credit for that.

We’re a nation of ideas:
 Tired of the sheer boringness of branded shoes? Someone will paint your keds for you. Want a poem for a loved one but can’t rhyme anything but moon and loon? Call the poet-for-hire. Ordered 3,00,000 wedding cards and find you actually know only 2,50,000 potential invitees for the wedding (oh, the shame of it)? Call the rent-a-baraati company in Ambala. We are short of many things in our lives, but we’ll never run out of ideas.

Sunday, January 24, 2010

Investor Information

If You want to know much details of listed Public Sector companies lease visit the following link

http://www.bsepsu.com/

http://www.complaintsboard.com/
Register your complaint here
With Local police station FIR
If you made loss
Or made complaint lost capital
Due to false commitment of trading buy-call any PMS (NON REGISTER PMS )
Any individual or company taken money and then he start giving buy call in loss
This is old trick that they first send you messages on cell for making money tempting you to subscribed and after payment of buy call or trading call he stop performing in profit.
Make complaint to SEBI because officially to give buy call trading call for gain is not allowed all business is illegal so far SEBI had not given any license to any one

Fear of Losses

The latest issue of The Economist has an article about an experiment in behavioural economics. The management of a factory in China asked consultants to design a better incentive bonus system. Most of the consultants suggested fine-tuning the amount of bonus, but two behavioural economics researchers worked purely on the language of the letters through which workers were informed about their bonus.As an experiment, one group was told that if they met certain targets, they would get a certain amount of money as a bonus. Another group was told that they had provisionally been awarded a certain amount of bonus based on their capabilities. However, if their work fell below certain targets, then they would lose the bonus. In reality, the two schemes were identical.As researchers had suspected, workers who had been given the provisional bonus were much better at meeting the targets. The fear of losing something you already have is much stronger than the motivation to gain something new. This loss-avoidance urge is well-known to behavioural researchers in other areas like investments.The loss-avoidance urge is not a fringe phenomenon. It is absolutely central to what makes a good equity investor. The idea that some of the money you have earned may go away at any point is difficult to accept. There's a friend of mine who has been a steadily successful equity investor over many years now. He has this mental concept of 'market ka paisa' and 'mera paisa'. He divides the total worth of his equity investments at any point into these two categories, and generally considers about a fifth of the value to belong to 'the market', which the market can take back whenever it wants to.This has always enabled him to think clear-headedly about what he should be doing at any given time and has prevented knee-jerk reactions every time there's some volatility. In my experience, investors either have this kind of a mental framework or they tend to take wrong decisions under pressure. This is the kind of instinct that makes people sell off their investments after they have dropped and then not invest again till the climate has changed, thus making their losses permanent. As an investor, either one should have the self-awareness and the self-control to modify one's loss-aversion instinct, or one should go for investment products that are not prone to volatility. These can span conventional fixed deposit, or post office, type of products, or they could be products that have some type of equity elements. For example, there are some capital-protection oriented funds as well as funds that invest only gains from fixed income into equity.Such schemes offer only a fraction of the gains that real equity products do, but they do earn more than pure fixed income while offering peace of mind, thereby catering to the loss-aversion instinct.


Courtesy: Value Research Online