Thursday, March 17, 2011

Japan Crisis - What should investors do now?

Japan crisis seems to be bigger than what people anticipated a week back. Before the Middle east unrest could even stabilize, Japan event occured and had shaken the investors confidence twice in the last 2 months. One after the other global events have spooked the Investors confidence in equity assets across the world. At this point of time there are lot of uncertanities which might unfold over couple of weeks. Investors are confused on what they should do now. What should be the correct strategy to follow in this market situation.

There are few things that one should do at this point of time to avoid big losses and generate long term wealth. The focus undoubtedly should be more inclined towards protecting the capital instead of making huge punting gains.

1. Cut your levergaed position if you are long. Series of events and uncertanities will keep the bigger investors away from putting fresh money into equities in the next 1-2 months.

2. Hold on to quality blue chips even if there is quotational loss. Once the market recovers they will be the first to absorb inflows and hence rise.

3. Selectively buy quality midcaps available at cheap valuation. Use every dip to incremently put money into these themes and keep a horizon of 1 to 2 years.

4. Allocate some money to fixed income assets & utilize the advantage of high interest rates on Fixed deposits by banks and companies. Some companies are even offering an interest rate of more than 12% per annum for a 3 year deposit. Please ensure that the fixed income scheme of the company you invest in has a stable credit rating.

5. And last but not the least, don't panic and take decisions in haste. The world is not going to end. Every time the crisis hits the riskier asset classes are sold first but it rises euqally fast when things stabilizes.

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