How to Make Investment in Stock Market?

18/07/2010 02:51


Investment Strategy:

In case you are an active or a moderate player in stock market, choosing stock is a periodic activities of managing your money. 

This is not for conservative stock market player who holds only in large cap stocks with strong dividends.

When to churn your portfolio between small cap, mid cap and large cap is your decision. However, I would like to point out some factors which will help you to churn your portfolio. 

Typically, money rotates from sector to sector based on current market sentiment. 

Small caps have been outperforming their large cap peers throughout the past several months, but over the past couple of weeks there has been a subtle shift back toward large caps. Typically, money rotates from sector to sector based on current investor sentiment. During periods of strong market performance, riskier asset classes such as small caps tend to outperform as investors seek maximum performance. During more volatile periods, investors seek safe places to invest their money such as Treasuries or large cap stocks with strong dividends.

Investors fled to safety during the height of the financial crisis. While the general trend has been lower since that peak, there are short periods where money rotates back into large caps. Recently, the ratio started to tick higher after a strong period of out-performance by the small caps. While the markets remain healthy, this could be the beginning of a rotation back to safer investments.

"In an inflationary world, stocks outperform bonds, and long-term bonds fare particularly badly. Foreign stocks with undervalued currencies outperform stocks denominated in inflating currencies".