The biggest mistakes investors make

your price would keep getting hammered.

Therefore, for long-term, consistent success in a stock market, buy 'value' not 'price'.
There is lot to learn from these mistakes. If avoided, you can be reasonably sure to

Money is an integral part of our day-to-day life. From the time we start earning till we die, we are involved with money -- earning, spending, investing, managing, donating, lending and borrowing.
Strangely, when we leave school, we have a fair amount of knowledge in math, history, geography, science, languages and hat not. But when it comes to money, we are left on our own. It is our family, friends, books, magazines, television channels and the Internet that contribute to our financial upbringing.
Hence, we grow up learning about money in a highly unstructured manner; the end result is generally a poor understanding of it.
As such, when it comes to investing, we all make some mistakes. Here are five common ones.
I don't have the time!
Not investing time is a big mistake. A vast majority of us tend to invest money on hearsay.
A suggestion from the broker, a hot tip from a friend, the discussion at last week's party, the positive recommendation from  financial newspaper/ magazine/ Web site, and so on and so forth are what investments are based on.
The sad part is that most do not devote even a little bit of time and effort before investing to check:

1. Whether the credentials of the investment opportunity are really as good as stated.
2. More importantly, does the investment suit our profile or not?

We, therefore, need to do some homework to avoid any fraudulent investment and ensure that it is suited to our needs and risk profile.

I like a fat bank balance 
We may have a good amount of money in a bank fixed deposit. Yet, when it comes to buying a television or a bike, we go for a loan. There is a psychological comfort in having a bank balance. The debt does not register any serious concern in our mind.
This, however, is false comfort and definitely a very foolish thing to do. How much do you usually earn on your fixed deposits -- 6% or 7% maybe even 8%, and that too taxable?
As against this, the interest on a loan could vary from anywhere between 12% and 15%, or even more. Therefore, it makes no sense to have such loans and investments running side by side. Of course, the only exception being a home loan, whose effective cost is usually quite low. To make ones' investments worthwhile, first of all you must pay off all your high interest loans as soon as possible.

Insurance is an investment
When you talk to people about their investments, they speak about insurance too. Many function under this very common misconception.
Insurance is a cost. It is not an investment. When we buy an insurance policy (term, endowment, money back, Unit Linked Insurance Plan), insurance companies first deduct a part of the premium towards various expenses. Then, a portion of the  premium is deducted towards providing us the risk cover. Whatever remains after all these deductions gets invested to provide us returns. Since all these investment options are very safe (except in ULIP with an equity exposure), hence the returns are very low. 

So the effective return from an insurance policy is hardly anything to speak about. Therefore, please remember, insurance is NOT an investment. Just follow the herd
We have seen a classic example of this irrational investor behaviour in the last few weeks.
Till the first week of May, we witnessed an unprecedented one-way rise in the stock market for almost six months.
Valuations  were stretched. Experts were advising caution. But people had forgotten that markets do fall. So they kept buying.
Why?

They were afraid that if they did not buy today, the prices would go up tomorrow and they would have missed out. It was a case of panic buying.
Then we saw a market crash.
The Sensex fell almost 1500-1600 points.
Now, people were selling as if there was no tomorrow.
Fundamentally, the economy still looks pretty solid. The expectation of corporate growth is promising. So there is no reason to believe that the shares have lost their basic value. This is just panic selling.
If we look at our investments from the fundamental perspective, we will not buy when everyone is buying and the market is over-valued Similarly, we will not sell just because everyone is selling.
I only invest in penny stocks

Most investors prefer to buy a stock whose price is low -- preferably below, say, Rs 50. The so-called penny stocks are 'supposedly' available cheap.

There is a feeling that it is easier for a Rs 50 stock to double to Rs 100, than, say, for Infosys to double from Rs 3,000 to Rs 6,000. Undoubtedly true. But there is a catch.

More often than not, these penny stocks are manipulated. They do not have a sound business model to support their price. Thus, while it is easy for the stock to double, it is equally easy for it to halve to Rs 25 or even go lower.

However, would really be quite difficult for the Infosys stock to halve to Rs 1,500.
Moreover, if a penny stock is being manipulated, you might find it easy to buy them. But, when it comes to selling, you could experience great difficulty. There would be no buyers and 

 build considerable wealth

Economy surges in 4Q, spurring full FY06 GDP growth
India's economy grew a much faster than expected 9.3% YoY in 4Q of FY06, beating Merrill Lynch as well as market expectations for that quarter. Our estimates of 8.2% YoY growth in 4Q were based on the government's previous forecast of an 8.1% expansion for full FY06, while a Bloomberg poll put the 4Q figure at 7.9% YoY. However, the government raised its full FY06 estimate to 8.4% - the strongest growth since the 8.5% expansion posted in FY04 when the economy rebounded after a drought. To be sure, farm output in FY05 was a lackluster 0.7%, and FY06 marked a recovery from that below-trend number.

Boost comes from an unexpected quarter - agriculture
Farm growth reported by the government was a big surprise, with the number for full FY06 at 3.9% compared with advance estimates of 2.3%. The 4Q number at 5.5% YoY was a stunner, given that most in the market believed that weak rainfall during the rabi season likely resulted in almost flat growth for the winter-sown crop. The government also revised up its 1Q and 2Q farm output numbers to 3.4% and 4.0% YoY but cut the 3Q number slightly. The focus now is on this year's monsoon. The India Meteorological Department has forecast below normal rains, but the going looks good so far with the monsoon setting in ahead of schedule. Still, it's early to say as much depends on the geographical distribution of the rains and the amount of rainfall in key crop sowing month of July.

Industrial output prints at a slightly lower number
Industrial output picked up rapidly in 4Q to 7.9% YoY compared with 7.0% in 3Q. For the full year, it grew 7.6%, lower than the 8.0% index of industrial production (IIP) number released earlier this month. However, the mismatch between the IIP and the industrial GDP numbers could be because the government has changed the base year for calculating GDP but not for IIP. Industrial growth for all the quarters in FY06 was revised down mainly on account of the manufacturing sector, which still turned in a robust 9.0% growth for FY06 albeit lower than the 9.4% initially forecast. Mining and electricity were also revised down a little.

Services remains the big growth driver
Services, which account for 55.2% of GDP, continued to turn in stellar growth of 10.3% in FY06, surpassing earlier estimates of a 10.1% rise and outperforming last fiscal year's 10.2% growth. Construction along with trade, hotels, transport & communications powered growth in the broader services sector. Growth in the financing, real estate and insurance sector was also revised a couple of notches higher, reflecting the consumption, retail and real estate boom in the country.

Outlook for the current fiscal year brightens
The FY06 GDP data indicates the growth momentum in the economy remains strong, with all three sectors churning out robust numbers. As a result, we are reviewing our economic growth estimate for FY07, which is currently at 7.5%.

Sensex recovers 654 pts to close below 10,500

INDIA TIMES NEWS NETWORK & AGENCIES [ MONDAY, MAY 22, 2006 04:30:05 PM]

NRI's Open account with $750 off

Sensex drops another 450 points on selling

Nearly 900-point swing on Friday

MUMBAI: In a highly volatile trading on Friday, share prices continued to fall on bourses, losing another 452.82 points on top of 826.40 points on Thursday. The benchmark index, Sensex, shed about 1,279.22 points or 10.5 per cent in two days. For the week ended Friday the Sensex lost 1,346 points or 11 per cent The Bombay Stock Exchange 30-share Sensitive Index (Sensex) fluctuated by more than 898.10 points but closed lower by 452.85 points at 10,938.61, as many funds started selling blue chip stocks. The National Stock Exchange (NSE) 50-share index, Nifty also dropped by 142.00 points at 3246.90. Friday's swing of 898.10 points is the largest in the BSE history. It swung by 833.53 points on Thursday. According to the latest data available, foreign institutional investors (FIIs) have sold Rs. 12,891.40 crore worth shares over the past five days, while they purchased shares worth a gross of Rs. 10,025.80 crore in the same period. FIIs turned net sellers on four days out of the total five consecutive trading sessions.