What am I doing now?

I have a couple of friend who trade almost everyday (and read it sound, they trade). Every other day I am asked the question, what to buy today? I have been opening up with my suggestions which mostly no one likes as they are much interested in high volume, euphoric scrips, which give instant returns. However, I being a patient investor could never understand the logic behind euphoric scrips, which inherently distribute the money. Some make profit and some make loss. It is mere a redistribution akin to gambling.

Well the short answer to the question is that I am sitting tight, holding cash in my hand and looking for bargains (almost impossible to do so in the current scenario). In the mean time if I find any of my investment reaching their max price, I am slowly rid of them.

On the other hand I am increasing my allocations in some of the already help scrips.

Day trade and technical analysis!!!

Since the day I had a dmat account, my phone has been flooded with ready to zoom stock ideas. Once in a while when I dabble with the remote control of my TV set and stumble some channels oozing with investment ideas. To my surprise they talk about day trading and classify this act as investment. I humbly respect their views but I don't agree at all with the technical analysis.

Technical analysis says one should starts buying when prices are rising and sell if prices are coming down. Stock market is rife with case studies of failed fund managers who tried to time the market. Secondly, investment is all about thinking and planning for the long term. At least I, as a value investor, don't understand the daily watch on stock prices.

Current status of the portfolio

A good news for my portfolio. Since last three months I have started working on my portfolio actively. Around three months ago when the market was hovering around 18k, portfolio was at 12% loss. Today again market is hovering around 18k and my portfolio loss has come down to 2.5%. Certainly a good improvement within three months of rigorous portfolio churning.

Currently my portfolio consists three types of investments.

Bonds (NSCs, RDs, FDs and debt MF)
Equity MFs
Equities

During the last three months phase I have partially reduced my loss making equity investments and placed into better valued stocks, FDs & MFs. Over all churning has been close to Rs 100,000.

Recent allocations:
NHPC
SJVN
Bharti Airtel (Somehow I liken Sunil Mittal to Steve Jobs)
IOC (Before it shot up :-))
RIL
Alok Industries
Moser Baer
Tata Steel

Key learnings have been

1. Bonds provide a stable foundation; never underestimate them
2. If we have entered into a bad scrip. Evaluate the possibility of exiting or averaging equally. Don't blindly average.
3. Dividends are important. ( If India has to grow, eventually interest rates will come down to 4% to 5%. Lets assume that the time frame for such change is 10 years. If I invest in a good dividend paying stock with dividend yield of 3% and annual dividend appreciation of 10%, my dividend yield after 10 years would be ~8%. This returns would be apart from the capital appreciation I enjoy after 10 years.)
4. Commodity exposure is important ( I am still evaluating the possibility of adding this in my portfolio. As stated previously, I probably take much more time than required in analyzing investments. But then there is no fast way to make money I suppose. )
5. Buy good business (I am long on solar energy)
   
6. Seek investor friendly good management. ( I am long on Tata * )
7. Always keep a small portion of fund available for arbitrage opportunity. This activity should never be a part of long term wealth building portfolio.
   

With this update I conclude my today's post. I shall be putting more about my investment process and the way I value stocks in a matter of days.