The basic idea behind buying on dips is to accumulate a certain stock you are interested in at a time when it has already fallen to a level from where there will less likely be a fall. Ofcourse the stock may still fall a bit but then it will bounce back immediately from there as the market goes up making you gains. Also by this strategy, you get a chance to get entry into a stock at a lower level thus maximizing your gains from that certain stock.

What a lot of new investors do is buy the stock when its constantly going up and then they end up buying the stock at a peak from where it falls giving them a loss and thus creates a panic in them. Often at this step they get upset and sell off that stock thinking their investment was horrible and the company has no potential at all. The common thing among every stock is they always rally up along with the market and once the correction in that stock or the market itself comes, the stocks fall down to certain extent, where it consilidates and again with the market goes up. It is at this post correction phase that you have to accumulate the stock from where the only way is up (unless the market sees an unexpected dip).

I would suggest to monitor the stock for a certain time. Have a look at the weekly and monthly graph for that stock (try money.rediff.com) and see if the stock has only rallied up or even corrected. See what the technical analysts are talking about the stock (try moneycontrol.com). And if the stock has only rallied up, then wait for a correction in the stock and then enter it.

I would say that every stock that I bought into at a peaks have only given me a loss and every company that I entered at post correction phase which is the consolidation phase has only given me profit. So I am sticking with the buy on dips strategy. Are you?

Also if you look with a broader prospective, Infrastructure has to do good here. India lacks infrastructure badly and so the government is giving it a lot of attention lately. A lot of infrastructure projects are getting planned or already being built and so the companies related to that are soaring high in profits. Don’t forget that this year’s budget has already given some good benefits towards infrastructure which could be a major reason of the buying spree into the infrastructure related companies recently. I still remember those two days last week when the sensex dipped 100-200 points, but my daily earnings from the stocks was still showing positive because of either Punj Lloyd or JP Associates stocks. Whether the other sectors in the market are doing good or bad, the infrastructure sector will still be doing well. Buy into these stocks for a long term and you would surely book heavy profits in the future.

I might also be looking to buy into steel related stocks as I believe they are quite related to Infrastructure also. If infrastructure projects will get into action, I’m sure that there will be a heavy demand of steel as well which could up the profits of companies like SAIL, Tata Steel etc. So I would suggest keeping eyes onto those stocks as well. As for other companies that I mentioned above, blindly invest your money onto them. They are most likely to be doing the best out in the market.

Categories of people: -

1. Spend everything and save nothing - These people have a habit of spending everything they earn. They will spend everything to make their life luxurious right from the start. They will buy a good home, large TV, big car, costly dining at hotels etc. And after all these spending, their interest will be so high that they will not be in a state to save anything. Thus they live a life of luxury enjoying and anytime they have any money left, they will go and buy something else as this is the time to enjoy and savings and all can be done later on in life. Satisfying themselves by planning to start saving later on in life is pretty common with them. But remember that once you get into a habit of spending everything, it is very difficult to resort back. You just cannot see a lot of money in your hands, you are addicted to spending and without spending you wont feel nice at all. And thus the “will save later” story will continue on and on. Now remember, you earn nothing extra, you have no savings and thus your passive income is zero.

2. Save everything and spend nothing - These people have a habit of saving up everything of what they earn. They would just have some minimum expenses and rest of all will get saved into bank or invested into stocks. They have extra expenses once in a blue moon. Well of course they will end up having a lot of money, especially passive income from the investments and savings, much more than the category 1 as time passes, but I would ask that what is the use of earning money if you just cannot spend anything? You still live in a small home, drive a small car etc, and live a frugal life forever. I believe that saving is good but just saving and no spending is not justified. They might enjoy their life like that but I’m pretty certain that if they spend only a part of their income in improving their lifestyle, they would be happier. And I am not asking to spend everything, but spend only a part of. Let the passive income flow in and spend some of your income and reduce the saving as by this time the passive income is already generating nicely and the only way for it is up. So just spend a little bit and see how your life improves and makes you even happier.

3. Spend some and save some - Probably the best category out there. Here people save and spend both. You are spending a part of income on enjoying the life and saving a part of income to enjoy even more in the future. Since money is getting invested into the stocks, passive income will flow into the pockets, so tomorrow is bright for sure and even today is not dull at all. You don’t lose the habit of spending and you also have the habit of saving. This way we can enjoy life forever, once a good passive income flows, we can get richer than the one who always spent everything, we can even buy everything they have and still have savings increased as the passive income would flow till your savings stay invested and which always will. They will be less rich than the category 2, but the life prosperity would definitely be higher.

I will discuss more on savings and importance of savings in upcoming posts. Stay tuned =)

I was monitoring the budget and the market simultaneously and as I noticed a fall in the market, sensex being around -150, I sold the shares I had bought a few days ago since it looked certain that the market is going to see a sharp fall today. I believe that the market will continue to fall for a few more days before it stablises itself and so prepare for more losses, incase you still have shares invested. We can even see the market below 13,000 in the coming days. Although it’s been clear that the market will bounce back very soon, but for now the sell out is expected to continue for a few more days. I have planned to invest again as soon as the market becomes stable which could be next week. If you had bought any share in recent days and there is not much loss till today, then sell out tomorrow and wait for the market to stablise and then invest the money again, you could end up making more profit then.

There could also be a benefit in the education and power sector. Rural and Export areas are expected to get some benefits as well. So you might want to eye on those sectors also. Some of the big players are investing into all sectors to minimise the risk, that could also serve well. Now lets sit back and hope that the budget serves in favour of us.