Couple of decades back, when DIP tea bags were marketed, I am sure many would recall the jingle
” Dip dip dip. Dip it a little longer, If you want it stronger, dip dip dip ”
Now read below to see how dips can be used effectively.
We all have heard the saying that ” Cash is King”. If you have cash,you can always get the best deal. The deal will be the best, if you can bargain and get the best price or If you can pick up at the best price that is thrown up.
This is very much possible especially when you want to buy the share of a company, which you wanted to be a part of your portfolio.
Stock market is not the perfect place and that is why you see variations in the price every second and every day. If the stock is fairly priced, there wont be any trade. Because the price is not fairly priced, you end up buying either at a low price to its fair value or pay a higher price to its fair value. But it is difficult to determine the fair value.
Because of the variations, the market offers opportunities and sometimes the stock is available at price below its fair value. If you really want to make good money, you need to wait for it.
Especially in the last one year, we had enough such opportunities. Some big events which gave these opportunities were
a. The market crash on 24th August 2o15 on china market crash and global sell off.
b. The day union budget for India was presented on 29th February, 2016,
c. There were some other opportunities which were not generic ( as it is called systemic) but specific to a particular sector or company which is termed as unsystemic. Example Sun Pharma on USFDA inspection dropped in July /August. Likewise Lupin also dropped to 1324
However no one knows these events before it happens. There fore one should
- always keep some cash, in their portfolio to utilise such opportunities to buy the stocks you want. It is suggested and my opinion is that 20% of your portfolio should always be in cash.
- Watch for the stock you want to buy and pick it up at the price you think it is fair.
I have checked up the performances of the stock which are highly liquid and in the Nifty 50 in the last one year.
a. The high point of the stock in the last one year.
b. The low point of the stock during the year.
c. The price as on 11th May 2016 and the returns one would have got if he had bought the stocks the lowest price.
If one is averse to playing the stocks, you could have invested in the mutual funds route also and there could have been opportunities to make decent returns.
The table below gives you the low, high and the latest prices of some of the stocks and mutual funds and the return one could have made in the short term
Of course, there is a 15% short term capital gain and in case of mutual funds, there is an exit load which may be applicable. IN spite of this for a person, who buys his time to pick stock, Money comes knocking.
It is important to keep
Keep Cash. Wait for that Dip. & Buy the stock or fund you want. Deposit the money in your kitty.
ABCD – A Buy on Cash on DIPS
DCBA – Deposit Cash in Bank Account.
You don’t need great knowledge but cash in hand & patience. to make money
For any clarification or help, please feel free to contact me.