Trade and Invest

 

Why should one actively manage his investments instead of simple buy and hold strategy?

If you have knack of identifying fundamentally strong stocks trading at discount to its intrinsic value and have patience to hold on to the same till it reaches its true value. Power to you !!! keep doing that but, remember quote from Keynes “Markets can remain irrational longer than you can remain solvent” 

So, what do we do when we say Trade as Invest? We scan only the fundamentally strong scrip but, we do only quick due diligence on the state of health of the stock and industry and not the whole caboodle an fundamental analyst would do. Once we have our stock universe identified we break them into two categories – value stocks & momentum stocks.

Value Stocks are those which are in downtrend, we keep monitoring them till we see a base forming and consolidation happening. Once the S & R levels are identified we start SIP’ing into these and start building position. We are well endowed when that breakout in the stock happens and then we start actively trading the stock with multiple strategies ( partial profit booking at the next resistance, re-entering at the support levels, covered call writing, etc..). The time horizon to reap benefits from this is anywhere between 6 to 18 months depending upon the turnaround that happens within individual scrip and does require patience.

Momentum stocks are those which are in strong uptrend and are moving up in spite of overall market sentiments. They are in a zone where there is no history of past resistance (ceiling) and we don’t make an attempt to identify the ceiling for them. We just follow them and look for topping patterns in the price action, to bail out at right time. You need to monitor these trades on EOD basis. These are quick spurt swing trades and gives returns in matter of weeks albeit you need to have an appetite to take the Stop Losses when necessary. If you have been lucky to have build up an nice cash position in these stocks worth at least a single lot traded in F&O segment then the possibilities are unlimited on how you can milk the position.

Below is an nice chart from capitalmind.in on the returns made possible thru passive investing in NIFTY, these is true even for investments in Mutual Funds, etc… A typical passive investor would’ve been better off with low risk investments even FD’s

Get handle on your investments and make them work for you, it just takes couple of hours a week nothing more then that.

Let me know your thoughts, its been quite lonely over here