I am Not an Astrologer but A Conservative Investor

At times people ask me to predict sensex in near future. " I am not an Astrologer. But an conservative investor " is normally my humble answer. Sometimes they understand, sometimes not. Even I feel, some people do get a bit angry when I say this. It seems, knowingly I am not telling them the truth! What a petty.

I can tell you what I will do with my investments, if market moves up, goes down or remain flat for a defined period of time. I have a plan for each of these situations. But how can I predict the sensex figures? In fact, can anyone predict that? simple answer is NO. How many of experts has predicted the recent crash? I do not know any of them. Let me explain it a bit further, why it is impossible to predict the market :

Price of a stock is determined by the sentiments of large investor community as a whole and their willingness to pay for that stock. Behaviour of this large mass is determined by n numbers of factors. Moreover, interpretation of these factors are different for different people of this large mass. The only way you can tell exactly what will be sensex number in a defined future, if you can accurately assume all these influencing factors and behaviour of the large mass upon these factors. Now both is humanly impossible. Because, you never know, how many factors influence these large mass and moreover how these large mass influenced by those factors. As sensex is determined by the price of these stocks, it makes it impossible to assume sensex number accurately.

Then, what is the way out?

First of all, do not assume how the sensex will move. You can not control sensex, so don't think about that. When you are investing, have a clear set of plans for each of the three situations - if price of the stock you invested, moves up, moves down or remain flat. This plan should be made for a definite time period.

Secondly, never go against present market sentiments. If market is moving upwards, assume that it will keep going up, till it actually comes down and vise verse. Always invest with the market trend. When market reverse, you need to execute your plan you already made at the time of investing in that stock.

How to determine the stock price for action in case of upwards or downwards movement, when making a plan?

There is no as such method for this. I can tell you what I do. I normally give more focus on stop loss price or downwards price. I keep tab for every 5% downwards movement of a stock and try to analyse the reason. If there is no clear reason for that, I stay invested in that stock. But if the movement is due to some specific reason like - overall negative sentiments, sector has started doing badly, although the company is doing fine or a negative report about the company, then I exit immediately. Normally, for every 15% change of a stock price, you can assign a definite reason.

I will be writing more article about this and will try to explain the process in details in coming days.