Always Buy Quality Stocks During A Bull Run

There has been a change in leadership in the world’s largest democracy. Many believe that the markets are in for a prolonged bull run due to enhanced business sustainability and rejuvenation of the economy from policy changes. The market has so far in the year 2014 rallied around 33% and things are looking further up.

When investor attitude was observed - whether prior to the recession, in the middle of it or even after, investors have always sought to purchase that which is priced low rather than opt for quality stocks. Asset classes and the time factor consideration alone while looking at better value will not bear the desired results. Many analysts believe that this is often a lesson hard learned and thus believe that only when people lose money in a bull run will they realise.
Quality Stocks:

The quality stocks definition is simple. They are the shares of listed companies or entities which have strong cash flows and a sustainable business model. These are stocks which perform steadily and are more bankable than the lower quality equities which rally up in the initial phase of a Bull Run and then taper.

Thus, the objective should be to invest in companies with:

Fair valuations.

Professional management.

Earnings and growth decent track record.

Average businesses provided sustainability perceptions are good.

Common mistakes which investors make and are avoidable:

Investors focus on price per share instead of looking at the stock’s ability to generate profits in the future. Hence, companies with better projects in the pipeline and deliverable synergies should be selected.

Investors should avoid purchasing mutual funds based on Net Asset Value (N.A.V.) per unit and should in fact look at the track record or future plans of the fund manager for viability to return profits on the portfolio.
Invest in good quality stocks with high dividends early into a bull run and not in the middle when they appear costlier as compared to small caps or low quality equities.

Post august 2013, from a historical price comparison most stocks of quality are at trading at a high price band. Favourable business conditions often make investors opt for low priced securities and thus spell their doom and become the reason for erosion of capital. In the late 90s blue chip stocks made people lose some money when the bull phase tapered. However, cheap substitutes caused complete loss of principal components. Hence, the idea is to invest with a long term horizon with not much correction expected to occur in the indices which matter such as Nifty, where 7800 is expected to hold out as a base.

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