Life After 7,000 ; There Is Still Money to Be Made From the Stockmarket. Here's How.

Summary

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There's good news and there's, well, good news. 7,000 (or 7,300- odd), it transpires, isn't the highest the Sensex will see over the next few years. After all, although the Sensex has zoomed North, it hasn't exactly kept pace with corporate earnings; thus, in terms of the price-earnings multiple, the Sensex is still in the mid-teens with room for growth. "Today's valuation has still not reached the frenzied levels reached in earlier bull runs of 1991, 1994 and 2000," says Mihir Vora, Vice President and head, Equities, ABN Amro Asset Management. All this would imply that there is money to be made from the stock market, even now, with due respect to that old caveat about retail investors entering the market just around the time it peaks. The way the experts this magazine spoke to see it, there are three broad ways in which investors (or potential investors) can make money with the market at its present levels: by getting into equities; by getting out of equities and investing the proceeds elsewhere; and by churning one's investment portfolio.

Entering at 7,000-levels: You could be a whiz at picking stocks, you could be a consultant with a multinational firm in possession of sound knowledge of how companies work, or you could have a lucky charm that never fails, but listen to reason. Do not, we repeat, do not invest directly in equity. "The retail investor who wants to enter the market at this level should invest in the systematic investment plan of mutual funds," says Ved Prakash Chaturvedi, CEO, Tata Mutual Fund. "That way, he can ride the ups and downs of the market, yet not have to do so on his own." Indeed, most experts like Chaturvedi caution retail investors from investing even in sectoral or niche mutual funds. They have a point there: the current bull run is broad-based and it is virtually impossible to make informed choices on sectors. "The new retail investor should leave stock- picking to the experts," says Nilesh Shah, President, Kotak Mutual Fund. So there.

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Life After 7,000 ; There Is Still Money to Be Made From the Stockmarket. Here's How.

Exiting at 7,000-levels: The exit itself is easy enough. If you have a portfolio and have stayed invested for at least a year, you are sure to make money, a lot of it, now. The tricky part is what to do with the money, assuming that you, as a rational investor, would want to put the money into a sure t...

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