Myth Of The Safe Stock

21st January 2008, a day most traders/investors would not forget in a hurry. A day the Indian markets fell by more than 1200 pts on the bse index. Since then the markets have never breached the earlier highs. But, for the past few weeks the markets have started to show some sign of resilience and has started to make all those who have lost money in the 2008 crash to start to get a bit optimistic. Some retail investors who have sworn to never come back to the markets are slowly making their way back to the markets. So I thought of penning a few things which has made a few millionaires.

During the market crash of 2008 and early 2009 all the index stocks took a tumble. The small cap, the midcap and the larger caps stocks more or less took the same beating. Yet we have somehow been brought up to think that investing and trading in large cap, index stocks is much safer than the smaller firms. Yes, there are advantages to investing in large stocks for a very long period of time which can yield decent returns. But when FD interest rates are hovering around the 8% mark investing in large stocks with returns around 12% which has its own risks of frauds/market crashes aint too smart either. The Satyam Fiasco is a example to the kind of fraud that can happen to the so called safe stocks. Yet, we end up believing all the stock pundits and their notion of safe stocks as the starting point to our investment guides.

to be contd brought to you by esjeresearchlabs