China Impact

By now we all can see the Chinese economy is falling apart. Will that affect us? Yes, What happens in China will have a massive impact on economies around the world, which means most stocks will get hit. We have to remember China is not Greece.
The China has continued to build high-end real estate in order to show GDP growth, but very few people live in these so-called ghost cities. (Same can be said about India in few years, if we realized it on time and learn from China now.)  The Chinese government has also banned short selling, temporarily halted IPOs, pressured state-owned banks to make loans to struggling businesses, allowed pension funds to invest up to 30% of their net assets in stocks, and temporarily banned company shareholders with stakes of more than 5% from selling. If these aren't desperate measures, what is?

If the Chinese stock market crashes, it means that the investors do not believe in a bright future for China's economy.  As people see their portfolios shrink, they might start selling stocks.  That may trigger more selling.  Another thing the Chinese might sell is gold.  And if gold prices fall significantly, there is a good chance panic would come to India as well because the Indians traditionally are holding onto a lot of gold.

But there are other views too, which elaborates Indian economy much stronger to survive such external stock. And we all should believe that but just trade cautiously. Having said that there is no need to get panicked either, rather it can be seen great opportunity to invest in companies which we use and hear about everyday. These are companies will be there for long time.

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BLUE-CHIP STOCK

Blue-chip Stock can be defined as stock of a large, well-established and financially sound company that has operated for many years. A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector. You will invariably find that is to be a household name. Most blue-chips have a record of paying stable or rising dividends for years. The term is believed to have been derived from poker, where blue chips are the most expensive chips.

A blue-chip company may have survived several challenges and market cycles over the course of its life which leads to it being perceived as a safe investment.

 

 

 

 

 

 

 

 

 

 

 

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Why Diversification?

Diversification is one of the central concepts in investments. Theoretically your money should not be locked in any one asset. It should be split to buy different types of assets like land, shares/mutual funds, gold, FD’s etc. The reason is no particular asset can keep delivering profits year after year consistently. There will be exceptional growth in some years and then it will be followed by sluggishness. This phenomenon is true in almost every and any assets class. So, if your investment is in a single asset, you make money only if that asset increases in value and at the same time, you also miss the chance to participate in any other asset boom. Hence, the risk you take is high.

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