Monday, March 31, 2008

Importance of setting targets

One should always know the objective whenever putting any money
into the market and ask yourself “Why are you investing in the markets”?
I know all of us want to make a quick buck from the markets but how
much do we want? As much as we can...
most of the person will
answer this. But always that is not correct. Sometimes or say most
of the times, in trying to get the most returns, persons had to face
losses. So always try to set your targets for all stocks.

Now the question arises how to set the targets and on what basis?
Let’s see some of the ways to get better returns or some ways to
help you understand how to set the targets.

# If you are a long term investor, by long term here I mean if you want
to invest for years...
I'll sub-divide this long term into two points:
- If you want to invest for your retirement or for your childrens, their
education then you should not take operator driven stocks at all and
try to invest in fundamentally strong stocks or can say in blue-chip
companies. But that doesnot mean you just forget after investing your
money. You have to keep track of your portfolio atleast 3-4 times in a
year. Here you dont have to set your targets as such but have to track
your portfolio and market conditions periodically.

- If you want to invest for some of your personal needs (near future) that
is for a period of 2-10 years, then again above mentioned rules apply
but here you may set some targets like 50 – 200% profit or more
depending on the scrip and you should track your portfolio atleast after every 15 days.

# If you are a mid-term investor, I mean if investing for a period of 6
months to 2 years then you should set some targets ( realistic targets ).
It should not be like you are buying some scrip at around Rs. 500/- and
set the target of Rs. 2000/- or 3000. Targets should be realistic and
also it depends on the future of that sector, like currently banking and
infrastructure seems to be having decent future. So set some target
and if your target got achieved sell them off completely or if you think
its having some more up-trend, then sell half of the shares and hold
rest of them but again set some target for that.

# If you are a short term investor, means investing just for 0-6 months in
order to make some quick bucks, then you have to take some more
risk, you have to follow HRHR rule (high risk high returns). Here you
should track your portfolio almost daily or atleast on alternate days.
And set some targets like 10-30% and exit whenever you reach your
target. Here you may have to book some losses sometimes in order to
take out the money from the non-performing stocks and to put in better
or market performer stocks.

If you just enter the markets without even knowing what you want from
them, you might be in for some big time trouble. You might just be
revolving between long term and short term investments without knowing
a clear direction. View them as vehicles to create wealth and not as vehicles for some “short term excitement”.

If you don’t know what are you are getting into, you might end up being a
helpless spectator when this uptrend reverses.

Check various other options to invest money.


Unknown said...

good one!!!


Yaduvir Singh said...

Good article for naive investors