Friday, January 9, 2009

Satyam fiasco ; I had kept on buying satyam stock regularly over the years !

Satyam fiasco may have shocked most of the investor community and it may have given another point to prove to the people who beleive in safe assets like FDs and LIC and PPF.

There is this person who says let us take a good bluechip company and keep investing and buying there stock regularly every month for a certain period and if you were the one who was investing in the Satyam stock might have lost more then 90% of your value in few trading sessions.

Does this prove that buying stock regularly or investing regularly is wrong strategy ?
No. The strategy is not wrong what the IMPORTANT LESSON to learn is that there was no diversification. yes you will find few companies doing wrong but there will be many more good companies out there. how do you know ? when even a index stock can behave like that.
Well the answer is you have to have DIVERSIFICATION. you need to shortlist 5 to 10 good scrips and invest for a long term. Another way would be to invest regularly in a index fund. Index does take care of this abberation like this time satyam is kicked out of NIFTY. so you dont have to worry about any company specific issues here also NIFTY is well diversified portfolio of 50 top stocks.
But then too much diversification also reduces your profit. well but that also reduces your risk also.
Well there are many small investors out there in the market who have full faith in Reliances and L nT's and Infosys and Tata's but I would strongly recommend dont have all your money in just one scrip.

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