There are several stocks that will outperform Gold. Normally Gold should be bought on leverage because a small movement will create larger gains.

Where Many Investors Trip Up

Whether you realize it or not, many investors often commit mistakes that regularly go unnoticed. Or worse, the mistake is made under the false assumption that the activity is actually correct. Such common traps include:

1. Investing for capital appreciation when instead you should be investing for capital preservation. Investing in this manner is like crossing the street after only looking straight ahead. The destination might be clear, but without looking left and right, the consequences can be perilous.

2. Interpreting market volatility as a destroyer of opportunity when it is instead a creator of opportunity. If your approach is sound then volatility allows you to buy that which was cheap yesterday cheaper today.

And most important of all: spending time thinking about when to sell a security when all your time should be spent learning when to buy a security. This is a mistake that many investors commit without ever realizing it.

Many people believe that knowing when to buy is much simpler and easier to do than when to sell. However, the real reward in investing comes from making smart buying decisions. Selling is simply the activity that rewards your disciplined buying approach. Far too many investors exaggerate the selling process. In doing this, they subconsciously approach the investment process backwards. In my most recent letter to partners, I discussed the fallacy in "learning" when to sell an asset:


"...you only need to do a few things right to be a successful investor. Knowing when to sell a security is not one of them. Money is made when the asset is bought not when it's sold. Learning when to sell is a task that far too many investors spend far too much time attempting to perfect. In his 50+ years as an investor, Warren Buffett has realized losses on an absurdly low percentage of his investments (less than 5%). Buffett spends little time worrying about when he should sell his investments and instead on focuses on buying assets cheaply. This buying process should be at the center of an investor's focus. You can never go broke by taking profits. If you maintain a disciplined approach to the price you pay for an asset, the selling process will take care of itself. Echoing Shelby Davis, 'you just don't know it at the time.'"

Your profits (or losses) are made the minute you buy an asset. You just won't "see" it until you sell. If you concentrate your efforts on buying businesses selling at a discount to intrinsic value, the odds are favorable that when you need your money, you will sell at a higher price. Understand of course that intrinsic value can be impaired if the fundamentals of the business deteriorate. This is possible with any investment, but much less likely with superior businesses with successful long-term operating performance.

The common mistake is made when investors confuse buying a business and buying a stock. When buying something cheap, investors often take that to mean buying the stock at the bottom. This is flawed thinking. You can still make money even if you buy at top--as long as the intrinsic value is substantially higher.

Also, investors assume that if they sell at a profit only to see the share price advance further, then they made a mistake by selling too soon. But that too reflects the wrong perspective. First of all, anytime you sell an investment at a gain, you have succeeded. I learned at an early age that you will not lose money by selling something for more than you paid for it. So, if that's the name of the game, then mastering the buy side is how you win the game. Warren Buffett once remarked that "investing is simple, but not easy." It's simple in that all you need to do is find a handful of great businesses selling at reasonable prices and let time do its thing.

Yet investing is not easy because most investors have a hard time being patient. Mohnish Pabrai once told me that two things occur to him after he makes an investment: When he buys, the stock usually dives, and after he sells, the stock rockets. Yet in the almost nine years that he's been running the Pabrai Investment Funds, he's boasting an annualized return above 20% -- after fees.

Paramount is your composure and ability to ignore whats happening in the markets when it gets too extreme. Construct a portfolio that you shouldn't need to liquidate atleast for the next 3 years. Be mentally prepared to face a time when your portfolio may be down and you want to buy more but cannot. Never lose control of your cash flows and you'll be fine after 3-4 years. If this is once in a century event, I hope we come out of it and use what we learn from it.

State-owned commercial banks are expected to garner at least Rs 20,000 crore of additional bulk-deposits from public sector enterprises following an advisory from the finance ministry that government-owned companies should park their surplus cash with state-controlled banks.

These public sector enterprises hold between 10 and 40 per cent of their cash with private banks. This development comes at a time when a few private sector banks are not accepting bulk deposits which typically attract high interest.

The 45 listed public sector firms alone have cash and bank deposits of Rs 1,13,500 crore as of March 2008, according to Capitaline data. This excludes unlisted entities like state-owned telecom major BSNL Ltd, Coal India Ltd and Oil India Ltd.

The amount of Rs 20,000 crore was arrived after talking to six companies that collectively account for nearly 75 per cent of total deposits of listed state-owned firms and are planning to move between 10 per cent and 40 per cent of their desposits to public sector banks.

At present, officials of state-run companies say private banks offer interest that is two percentage points higher than the public sector banks offer. Thus, a shift of Rs 20,000 crore away from private banks would mean that the state-run companies will lose at least Rs 400 crore on an annualised basis.

Oil and Natural Gas Corporation (ONGC), India’s largest oil producer and the highest profit-making public sector company, has decided to transfer its entire Rs 25,000 crore of deposits to State Bank of India, ONGC’s largest banker.

“Our board has decided that the entire deposits will now be with State Bank,” confirmed a senior ONGC official.

The oil producer has around 15 per cent of its deposits in private sector banks.

“Deposits with the private banks have come down in the last month,” admitted a SAIL official, but did not specify how much. SAIL banks mainly with Bangalore-headquartered Canara Bank. The steel maker, with the third-largest cash balance among the listed state-run firms, had around 15 per cent of its deposits with private sector banks at the end of September 2008.
 

The finance ministry advisory came a month ago. The ministry had also said the companies cannot call for competitive bidding on interest rates and will have to make deposits with the bank with which they have had prior banking experience.

A couple of months ago ONGC called for interest rate quotations on Rs 1,000 crore it wanted to deposit. Indian Oil Corporation, which is going through a liquidity crisis, quoted more than banks and took the deposits by agreeing to pay interest at over 11 per cent.

The move by the finance ministry comes at a time when the country’s banking system is facing a liquidity crisis with credit to firms drying up. The government has been trying to raise cash with banks which will help them lend to companies.

“With public sector companies depositing primarily with state-owned banks the government will get a freer hand in asking the banks to lend. But this affects the interest earnings of the public sector companies,” said a Mumbai-based analyst.

A senior official of Powergrid Corporation of India Ltd (PGCIL), India’s largest power transmission utility, agreed that the finance ministry circular will result in two percentage points drop in interest earned on deposits. At present, PGCIL has 60 per cent of its cash surplus with public sector banks and most of their deposits have a shorter tenure of 30-90 days.

However Coal India Ltd said they already comply with finance ministry directive and plan not to shift the deposits, said Partha S Bhattacharyya, chairman of Coal India.

Coal India, which is not yet listed in stock exchanges, along with subsidiaries have a total deposits of Rs 17,000 crore, with three-fourth deposited with public sector banks. Internally, the company has put a cap of 25 per cent on deposits with private banks.

Source : Business Standard.com