A Maniac Monday Massacre

Call it “A Blood Bath on Dalal Street” or ‘Financial Wipeout’.. Every Black Day on Dalal Street had lessons to teach us – the sooner we forgot the more intense the pain has been.

It is now that you realize, that just as you had Career Goals / Personal Goals it is equally important to have financial goals.

And if the word “Goal” just made you feel sick then lets call it “identifying a purpose for earning money”. Very obviously we all earn to: get married, support a family, maybe retire early, go on a vacation abroad etc etc

But when you write down and set aside an explicit amount and associate it with an appropriate investment vehicle for that purpose, you would never wear an expression as horrifying as those outside the BSE did, on yesterday’s Maniac Monday Massacre when the markets world over fell and all the Stocks in Sensex and Nifty closed in Red.

For those who may be completely unaware of the term “Investments”, here are some pointers that worked for me since Year 2004!

1: Keep a Track of your Spendings: you can record your spendings religiously just for a month to analyse where you could cut expenses. Expenses have to be realistic and not exhorbitant since what you may be affording now you may not necessarily be able to afford it 25 yrs down the line. So it always made sense to be wise early on to enjoy similar status for as long as you lived.


2: Never Take on a Debt that is more than 40 % of your take home Salary: Your EMI’s towards Home Loan, Car Loan, Personal Loans etc should never be more than 40% of your earnings – else you are sure to loose sleep over your Financial Standing. If it is, then it makes sense to consider liquidating some of your savings/investments to get rid of that debt.

3: Diversify your Portfolio: Never put all of your savings in just one instrument eg: only Equities or only Debt or only Real Estate or only Gold.
There are online Risk Analyzers that determine your apetite for Risk and suggest you a Percentage Portfolio Allocation in each of the above which you can adhere to. But a thumb rule for equity works well: exposure to equities = 100 – your age. 100 – 26 = 74 % So early on in life you could do well with having a major portion of your savings in VALUE Stocks and give them a time frame of 10-15 years to grow and eventually reduce your investment in markets as the older you grow the lesser your apetite for losses.

4: Benefit from the Power of Compounding: Investing regularly in MF’s through the SIP route is the best way to benefit from this. Also if you invest for eg: 30K in PPF, make sure you park this 30K in the beginning of the Financial Year into a Liquid Scheme [Debt] and then liquidate this amount to deposit it in the PPF account in Feb. This way you make your money work harder and stay away from volatility that you would otherwise be exposed to had you set aside this amount in stocks – also liquidating would be difficult since timings the markets is impossible.


5: Don’t Invest Just to Save TAX but to create Wealth for the Long Term: Investments in Section 80C right from PPF, ELSS, Insurance Premiums can each be linked to more than one of your Financial Goals of Providing for retirement, preparing for your Child’s Education, Protection for your Loved Ones etc etc

6: Medical Insurance is Extremely Important: It comes at rock bottom prices but could save you from the biggest financial drain in the event of a tragedy god forbid. Yes the company does provide for one but if you were in between jobs or rendered jobless tomorrow and had health problems then this is the vehicle that sees you through. A cover of a 1 Lakh for a Year comes for as cheap as 999 which by any standards isn’t a huge amount at all.

7: Do not time the Markets and Allow your Investments sufficient time to Grow: If you have identified sectors that look promising for the long term, identified just 2-3 best companies within these sectors that look optimistic in their growth & developments, invested in them at the right price, accumulated stocks of these on dips and waited for a feasible horizon of 3-5 years and even more you are sure to look like a contended investor and not like an apprehensive trader who looses sleep on every downturn.

As an expert rightly said “Such is the way of Financial Markets that a few Participants will go down under and never be able to get back to the market again, but most will survive. The pain will linger for many months, maybe years, but lessons have to be learnt.”

With an optimistic outlook for the teary eyed, the weak at heart - the financially wiped out families…

Signing off,
~ a long term investor in value stocks.