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Investment Method in a Volatile Market

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Stock Market Investment is not for just Profit, but for an Investment in Nation...!

The stock market investment is riskier than other investments. It is because the growth of this investment depends upon various factors, which may be national or international. To prevent this, an investor should constitute a strategy in investment style.

I am not a stock market expert. I am not an expert to analyze the audited annual accounts or predict the growth or fall of a company. But continues made some small profits by investing in markets through selected mutual funds and through exchange-traded funds through a special method of investment.

I don't believe in invest the whole money in the equity market, because there are some other investment options beyond stocks which is essential to balance our portfolio as all investment methods are giving an unpredictable return at a specific time.

By including all types of the fund like Commodities, Bonds, and Liquids in our portfolio, which will minimize the collapse of our hard-earned money when one sector of our investment faces a huge loss at some context.

exchangetradedfundsinindia

As an India, I depend on the national index of India Nifty 50 for the equity investment. don't increase the percentage of investment in stocks, without the index moving downward at a certain point. I fix a selling point which depends on the market condition. And also book some profit, when the market reaches the same point upward.

TABLE 1

Unit value of niftybeesAmount InvestedNumber of UnitsTotal InvestmentTotal UnitsPresent Value

600

10,000

16.67

10,000

16.67

10,000

500

20,000

40

30,000

56.67

28,335

400

40,000

100

70,000

156.67

62,668

300

80,000

266.66

150,000

423.33

126,999

200

160,000

800

310,000

1223.33

244,666

In the great collapse of markets in 2008, Nifty bees have come down to a pathetic low of INR 250 from INR 600 (Valuation of nifty has split to 10 times in2019). Nifty Bees is an important Exchange Traded Fund in India, which is on the basis of the Nifty 50 Index in India. About 60% of its value had dropped out during that period and investors suffered a huge loss. There is a method to protect our funds from such a situation. Any investor can use this method only in the case of exchange-traded funds of Blue chipped indexes like Dow Jones, FTSE, Hang Seng, CNX Nifty, etc


Imagine that you had bought Nifty Bees at the rate of INR 600 for INR 10,000. In such a collapse time, you again buy Nifty Bees when it comes down INR 500 for INR 20,000. Again buy @ INR 400 for INR 40,000, when the market crash continues. Buy when Nifty Bees come down @ INR 300 for INR 80,000. If at any time when the most collapse of the market has occurred and an index like Nifty stoops to 30% of its high time value, you can courageously buy the Nifty Bees @ INR 200 for INR 160,000. The total value of your investment is INR 310,000. Please watch the table below:


TABLE 2

Value

Unit value of Nifty beesTotal InvestmentUnits AvailedPresent valueProfit

200

310,000

1233.33

244,666

-65,934

300

310,000

1223.33

399,999

59,999

400

310,000

1223.33

493,332

183,332

500

310,000

1223.33

616,665

306,665

600

310,000

1223.33

733,998

423,998

After the end of every great collapse of stock markets, there is a tendency of growth, and the market will regain some advantage to investors. No doubt the market will rebound to its old state within five years after the problems after changing situations.

But in rare cases like the fall of the New York Exchange at the end of the 1920s, the Dow Jones Index of the USA took about 25 Years to regain the previous highest point of the Index. By the method detailed in the above Tables, the Indexes don't need to reach the Highest point to attain the profit.

For example, look at the second table, in which it is clear that the investor will regain his fund value, and 20 % of his loss will transmute to more than 25 % of the profit while the value of Nifty bees reaches at INR 300. Also, when the value of Nifty bees reaches INR 500, the fund value of the investor will be doubled.

Don't invest fully inequity at any time and always keep a lump sum to invest at debt instruments for unforeseen expenditures, in the times of shattering of the stock markets.

Kindly select this method only after your self-studies about the market and as per your capacity.

It is an important motto in the world of investment that one who is ready to take high risk will attain a higher benefit. Happy Investment.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2012 Indra

Comments

Indra (author) from India on March 16, 2018:

Yes. Thank you buddhaanalysis

buddhaanalysis on January 31, 2014:

Very interesting hub. It would be great if we buy stocks at lowest prize and sell it when it rises. Such stocks should be chosen from A rated companies.

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