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MUTUAL FUND INSIGHT

Posted by Bijo Kuruvilla Tuesday, August 14, 2012 5:28:00 AM Categories: Stock Advice

 

“A market downturn doesn’t bother us. For us and our long term investors, it is an opportunity to increase
our ownership of great companies with great management at good prices. Only for short term investors
and market timers, it is a correction and not an opportunity.” - Warren Buffett
 
The equity markets have been dilly dallying for the past few quarters in a row. For every market
correction there always has been a reason behind it. In 2000, it was the tech bubble, in 2008 it was
the sub prime mortgage crisis and now it is the Euro Zone crisis. But prior to these bear markets for
what ever reason they might have, it must be noted that there was a period of unjustifiable exuberance
buttressed by wild optimism. The eventuality of any such protracted state is a short or long period of
slump in which we are currently in. In the light of this, we would recommend you to read the quote of
one of the greatest investors of all times who solely made his billions out of the stock market.
Rationality has been one of the most important qualities of this great investor and according to him
equities clearly lose their sheen when the market starts rallying. This is exactly contrary to how the
general investor thinks. However Equity markets have been the greatest wealth creators for those
who follow the above principle. The largest advances witnessed in equities mostly were just after a
major wave of pessimism had swept the planet. And in almost all cases this happens quite unexpectedly.
That is one of the main reasons we have never tried to predict where the markets would be in one or
two years time. A rational investor like Warren Buffett would embrace bear markets and would busy
himself gathering good companies at attractive valuations. Infact the longer the bear market remains
the happier should an investor become, as the markets are providing an excellent opportunity to
invest all the while. For investors who do not have the expertise to research companies, an equity
mutual fund does that job fairly well.
 
As we said earlier, it is almost impossible and irrelevant to predict were the markets are likely to be in
the next few years. The euro zone crisis is very much complex, but as time passes on a definite
solution is likely to emerge. It would be very difficult to predict when and how a solution is going to
come out. As far as we know, the fact is that the markets are currently trading at a much cheaper
valuation than they were in 2010 which provides an ample “margin of safety” for the long term investor.
We at DBFS believe that this is the right time for investors to take a long term view into the stock
market and invest into a portfolio of equities bonds and cash in a systematic manner always not
forgetting to allocate capital within these various asset classes based on their attractiveness from
time to time.
 
We are therefore recommending three portfolios for the aggressive, moderate and the conservative
investor for a three to five year perspective.
 
For queries: Contact: DBFS Research Department, Mobile: 9349778313 Email: stockupdate@dbfsindia.com,
Stock related: 0484 3060126, 3060000, Commodity related: 0484-3060169.
 
Disclaimer: This report is only for the information of our customers. Recommendations, opinions or suggestions
are given with the understanding that readers acting on this information assume all risks involved. The information
provided herein is not to be constructed as an offer to buy or sell securities of any kind. DBFS and/or its group
companies do not assume any responsibility or liability resulting from the use of such information.

 

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