Dear friends, It’s that time of the year again which individuals and corporate eagerly await for. The time when the Finance Minister opens the suitcase that affects the fortunes of millions at least for a year. Yes, it’s time for ‘The Union Budget 2011-12.
As individuals our primary interest in the budget is how much money are we going to pay/save as tax and which things are going to be cheaper or expensive. However, the Union Budget is important from another perspective as well – the effect it has on the price of stocks because of speculation on the outcome of the budget!
Every year, we see the market rise or fall leading up to the budget; once the budget is out, we again see a rise or fall depending on whether expectations were met or not. So, how does this help us Value Investors?
Remember what Warren Buffet said about investing –“Be fearful when the market is greedy and be greedy when the market is fearful!”
And one thing you can be sure of is that close to the budget, the market is usually acting greedy or fearful – never rational!
So, the budget could present you an excellent opportunity to buy that awesome stock that you always wanted in your portfolio but could never buy because the price seemed quite high. Or it could also give you an opportunity to book profits on some of your stocks (You only earn returns when you sell your stocks remember!) and laugh all the way to the bank. This is the time when you have to put on your Value Investor’s shoes, stretch a bit and get ready to buy or sell stocks!
So pull your socks up & jump into the market, but with safety precaution (read thro research & valuation)…
