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Investment Method in Volatile Market

Updated on August 6, 2014

The stock market investment is riskier than other investment. It is because the growth of this investment depends upon various factors, which may be national or international. To prevent this, an investor should constitute a strategy in investment style. I am not a stock market expert. I am not able to analyze the audited annual accounts of a company. But made some profits by investment in markets through selected mutual funds and through exchange traded fund through a special method of investment. Don't believe in invest the whole money in the equity market, because there are some other investment options beyond stocks which is essential to balance our portfolio as all investment methods are giving an unpredicted return at a specific time. By including all types of fund like Commodities, Bonds and Liquids in our portfolio, which will minimize the collapse of our hard earned money when one sector of our investment face a huge loss at some context.

As I am from India, I depend the national index of India CNX Nifty for the equity investment. I don't increase the percentage of investment in stocks, without the index moving downward at a certain point. I fix the selling points which depends the market condition. And also book some profits, when the market reaches at the same poits upward.

In the great collapse of markets in 2008, Nifty bees has came down to a pathetic low of ` 250 from ` 600. . Nifty Bees is an important Exchange Traded Fund in India, which in on the basis of the CNX Nifty Index in India. About 60% of its value had dropped out during the period and investors suffered a a huge loss. There is a way to protect our funds from such a situation.Any investor can use this method only in the case of exchange traded funds of Blue chipped indexes like Dow Jones, FTSE, Hang Seng, CNX Nifty etc


Imagine that you had bought nifty bees at the rate of ` 600 for ` 10,000. In such a collapse time, you again buy nifty bees when it comes down ` 500 for ` 20,000. again buy @ ` 400 for ` 40,000. Buy when nifty bees come down @ ` 300 for ` 80,000. If at any time when a most collapse of market has occur and an index like nifty stoops to 30% of its high time value, you can courageously buy the nifty bees @ ` 200 for `160,000. Total value of your investment is ` 310,000. Please watch the table below:


TABLE 1

Unit value of niftybees
Amount Invested
Number of Units
Total Investment
Total Units
Present Value
600
10,000
16.67
10,000
16.67
10,000
500
20,000
40
30,000
56.67
28,335
400
40,000
100
70,000
156.67
62,668
300
80,000
266.66
150,000
423.33
126,999
200
160,000
800
310,000
1223.33
244,666

After the end of great collapses of stock markets, there is a tendency of growth, and the market will regain some advantage to investors. No doubt the market will rebound to its old state within five years after the problems begin. But in rare cases like the fall of New York Exchange in the end of 1920's, Dow Jones Index of USA took about 25 Years to retain the Highest point of the Index. By the following method, the Indexes don,t reach the Highest point to attain the profit. For example, look at the second table, in which it is clear that the investor will regain his fund value, and 20 % of his lost will transmute to more than 25 % of profit while the value of Nifty bees reaches at ` 300. Also, when the value of Nifty bees reaches at ` 500, the fund value of the investor will doubled. Don't invest fully in equity at any time and always keep a lump sum to invest in the times of shattering of the stock markets. Keep a large amount of fund always in liquid or Bond funds. Please select this method only after your self studies about the market. It is important motto in the world of investment that one who is ready for highest risk will attain the highest benefit. Wishing you all the Best.

TABLE 2

Unit value of Nifty bees
Total Investment
Units Availed
Present value
Profit
200
310,000
1233.33
244,666
-65,934
300
310,000
1223.33
399,999
59,999
400
310,000
1223.33
493,332
183,332
500
310,000
1223.33
616,665
306,665
600
310,000
1223.33
733,998
423,998
Value

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      buddhaanalysis 3 years ago

      Very interesting hub. It would be great if we buy stocks at lowest prize and sell it when it rises. Such stocks should be chosen from A rated companies.