Should I sit on cash?
No people do not ask me this question, they tell me. “I am sure you will agree…during such times one should sit on cash”. I almost wince.
I do know that oil is floundering, the US $ is rising. Yes there will be a Greek vote, yes the Euro is clueless. Japanese currency’s strength is hurting its exports, India is slowing down, China may crashland….Wow!
So, should you sell everything and invest in gold? Or to be even more safe should I sit on cash?
So, I ask ‘Why are you sitting on cash?’
They no longer know. Gold has been sideways for at least ONE year. Most people in the SIP mode in gold have NO clue about what rate of return they are getting on gold. They just half heartedly know that the markets are not doing too well, that is all.
I have seen scrips in my portfolio giving me 10% return in the current month. If I were to just sell off the shares I could wait for ONE year and then look for an opportunity. I bought last month, last week and this week.
Sure I do think that the probability of the markets coming down is equal to the probability of markets going up, but what the hell!
A Pricol at 15 – with a current yield of 3.5% could not have been a ‘risk’ right?
There are many such tales, and I hate saying anything on my blog which is specific to any stock – and I am actually happy that Pricol is already higher! 19!
Similarly I found some value picks – and at my size of portfolio I need only 1-3 companies in a year…so I am fine.
If you have a 10 year view, hey, put it in a large cap / value based fund…and you will live to tell the tale …to your children or grandchildren!
arjun
I have a small amount approx 5.5 lakhs which I received after leaving my last job.It was a part of my PF.I have currently left it lying in an SBI liquid fund for almost a year with the ultimate aim to divert it into my equity SIPs ( HDFC Top 200/Equity,UTI Dividend Yield and IDFC Midcap).Is this a wise decision ? I do not need this money ( hopefully 🙂 ) any time soon.
Sreedhar
Definitely sitting on cash is not wise. But, putting it in equities also may not be very wise – forget gains, not even sure of capital preservation! Not everyone is lucky as you Subra sir! Simpler way will be to invest in company FDs like Shriram Transport or Dewan Housing which is CRISIL rated etc.
Sreedhar
Btw, I will not put my money in Pricol even if Subra sir gives to me in writing!! Financial ratios are average be it roce, ebit, pat..also balance sheet is not very encouraging..high debt in books. Cannot put money purely looking at dividend yields for sure..Also, with RBI’s current move and govt sleeping I will not be surprised to see Pricol in single digits soon.
Selvan
It is all about the objective of the money you have and time horizon for achieving the objective. As rightly said by Subra, if the time horizon is 10 years then it should be in Equity as long as you don’t panic for short-term market volatility or media excessive porn. If you or me who doesn’t know much about individual pick, then choose a Fund.
Geo
Selvan
Mutual funds will at the most give you 2-3 % more than the index. Pick 3-4 scrips now after diligent research and hold it for 3-5 years. You will beat the index and the best fund managers by a mile. What they will deliver in 10 years, you will make in 5 years. The catch being holding a small portfolio and that too picking the right stocks.
Pooja Ram
Subra Sir, waiting for your reaction! Sreedhar choice of companies is also awesome. Does silence over such a long time mean you are in agreement with Shreedhar sir? Eagerly waiting for your comments….
Pooja Ram
ksm I am longing for the day when Economists understood banking and bankers applied Economic logic. ha that will be the day
Pooja Ram
Subra sir waiting to see your reply to Sreedhar. Specifically I want to see your reaction to investing in debt esp in cos. of dubious parentage and semi decent rating.
Pooja Ram
Subra Sir waiting to see your reply to Sreedhar. Esp to the choice of debt over equity for a 10 year period and choice of these doubtful parentage and semi decent rating. This is also proof that there are people who still believe in ratings!
subra
I saw comments by Pooja Ramakrishnan…but somehow it seems to have got deleted. My comments on Sreedhar’s strategy:
a. THIS is not a portfolio investment service, so I have no clue which reader has what goals and what he/she does.
b. I have invested in Pricol in April/May @ Rs. 15 – and you can see my RoI, and I am happy with the result.
c. My idea of a good company is a AAA rating like a SBI bond – in which I have invested to do a SWP esp with falling interest rates. It is a cumulative debenture and listed. These 2 companies, are, like Pooja had said ‘of doubtful parentage’.
d. I do save in debt instruments, not invest. My equity returns in the immediate past one year is surely FAR, FAR superior to the index and 3 of the best fund managers 🙂
e. If good portfolio results can be got with JUST luck, let me wish ALL the readers lots of luck, and let fund managers look for a job
Pooja R
Subra Sir waiting to see your comments on Sreedhar’s post on:
a) choice of companies
b) rating
c) luck in portfolio returns
Eagerly waiting…not sure why my earlier posts have not been published.
Dheeraj
Subra, I agree you have made money from shares..
you should share info about your calls which went wrong as well..
I dont think you didnt buy anything when nifty was 6100+.
subra
a. This is NOT a PMS site
b. Do not want to visit SEBI for doing anything close to PMS
c. Frankly what readers do with their money is their call, not mine
subra
my buying has NOTHING to do with the Sensex, but it might just be possible at 6100 I may NOT have found anything worth buying – simply because I am too much a Value guy, and a cash flow guy. I would happily pick Hdfc at a price of 600 – and in current situation wait to buy. Happily sell Hdfc at 710 – just as an example. That which is sold at 710 will get replaced even at say 630 without a bat of an eyelid, but fresh position will ONLY be at 600. OBVIOUSLY THIS IS ONLY AN EXAMPLE and should not be taken as a transaction that I did or will do. Caveat, chief
shinu
Sitting on cash – For God’s sake the inflation is 10% plus
Subra sir, i made another land deal last week in an area which i have been searching for over 3 years (prices have doubled or more). 50% from savings, almost 25% from sale of gold ornaments…(is liquid than you fear and also if you can convince your better half that the price is going to fall :)), & rest from debt. Gold is good & debt is good so long as you are in control is what i believe, but cash is defenitely NO-NO.
Now SIP will go on and on and on… hoping to see the branches and fruits grow one day, but not just the roots.
Sreedhar
Completely agree with Dheeraj! We all know its not a PMS site. But, then not sure why do you keep bragging about some shares you bought and profits you made with them in the last 1-3 months. Whats most suprising is that you dont seem to make any mistakes..almost a perfectionist!! Even greats like Rakesh Jhunjhunwala/Ramesh Damani seem to have got things wrong in the market!!
JS
agree totally with sreedhar, and just fr a reality check deepak shenoy in his blog pretty much took this guy’s viewpoint of “invest in a super good fund and do your sips” to the cleaners … LOL @ this guy
Pooja Ramakrishnan
I feel like a veteran on subramoney.com ..for the newbies who have not seen the full site like JS and Sreedhar..Subra has posted ‘my mistakes of the decade’…etc. etc. of the mistakes in choosing a wrong broker, bad shares, etc….so comment after seeing, please.
Rajeev
We all like to brag about our success.
Let us not divert from the essence of this topic. I fel people who stay away from the market at such time will come in hoardes when the market starts reaching new peaks. What they do not understand is why buy stocks when they are already selling at higher prices. If you believe in long term benefits, then this is the ebst time to accumulate for long term. If you do not have the time or skill to locate good stocks, believe in some blue chip based mutual fund or large cap fund and keep doing SIP.
I personally hope this low period continues for some more time. Will allow my SIP to become substantial 🙂
If we read the pearls of wisdom written by many, normal investor behavior is to buy whe market has risen ansd sell when panic hits.
Regards