The markets are going up and you see all and sundry investing in stocks. Next day the markets crash and everybody panics and starts rushing out from the markets, thus aggravating the market conditions. US economy is down in dumps and the FIIs start pulling out their money, so even your neighborhood uncle withdraws his money from stock markets.

This type of investing is called as emotional investing where human emotions like euphoria, panic, greed and fear impact the decisions made by the investors. But not many know that emotional investing is bad for your wealth. Here is why.

When emotions take over he person’s rational thoughts, he cannot think clearly. He is easily swayed by the emotions and takes decisions that his emotions tell him to do. He doesn’t realize that markets work in cycles. What goes up comes down and vice versa. So if you manage to hold on though the tough times and avoid over exposure to stocks when the markets go up, you can easily make money in the stocks.

Unfortunately not many understand this principle. They lose focus when they get emotionally charged. They make wrong decisions and so don’t make money in the stock markets. So if you don’t get swayed by your emotions, you can rest assured that market movements will not affect the value of your investments in the long run.

‘Green’  is the new buzzword in all the businesses today. Financial industry is no exception. But then how does going green improve your finances? Will ‘green’onomics really make you rich? Let us see the answer to this question.

While solar power may work out cheaper in the long run, its initial costs are quite prohibitive. You may have to spend anywhere from 1-3 lakhs just to get it installed initially. It is due to this that solar power generation has caught on in India. Moreover during rains, solar power my not be adequate. So you may have to install an electric generation as a backup. Also you’ll have to wait for 10 years before you can recover your costs. Not to mention, the  rapid advances in technology will make your current solar power generation equipment obsolete.

However you can opt for energy-efficient appliances, like acs, light bulbs and other electrical and electronic equipments. They will save you a lot of money as they tend to use lesser power but will not impact the performance. Here the benefits are immediate. So you can definitely choose this option.

You can also opt for public transport or car pool to reduce your transportation costs. This will immediately lower your transportation costs.

So when it comes to going green, find out your costs, the time required for you to recover them and their pros and cons. This will give you an idea of how much you will earn and how quickly.

Mutual fund houses are quite adept at catching latest fad in the market and launching new funds based on the fad. Once such fad they have capitalized on is the government’s plan to divest its stake in government-owned companies or PSUs, and introduced mutual funds, called as PSU funds.

PSU funds are those mutual funds that invest in scrips of government-owned companies. These include companies like BHEL, NTPC, IOC, SBI etc. Many fund houses mislead customers by telling them that they will be filthy rich by investing in these companies. But is it true? Will the customer benefit from investing in these funds?

The answer – no. When choosing a company for investment, you have to look at its merits. You need to consider its present and past performance, its growth prospects, its comparison with peers, dividend payout etc. This is applicable even for PSUs. All of them are not gems. You should be able to separate wheat from chaff.

While PSU companies do have an edge when it comes to policy making, there is a major drawback as the government holds a dominant stake, and so can force these companies to bend to the whims of the ministers and MPs and MLAs. Moreover some companies do not have quality customer service, slow decision making etc. All these will impact the functioning of these companies.

Hence it is advisable to give these funds a miss. Instead go for pure diversified fund that will help you get higher returns.

Exchange-traded funds (ETFs) are a type of mutual fund that works like shares, as they can be traded on the stock exchange. Just like stocks, their prices are affected by the trading that takes place on the stock exchange. However they do offer some tactics to help you safeguard your investments. So what are they?

• Proper timing: Proper timing is the key to maximizing your returns. You should have proper timing for both buying and selling the stocks, as you won’t gain anything by holding on to the stocks by hoping that the situation will improve. Instead it is advisable to exit the stocks if there is a decline of 8% in the value of the stock from its highest price. Then once the market has stabilized, you can again buy the stock. It will help you in saving some amount of capital.
• Stop orders: Place a stop loss on your stocks so that if their prices go below this figure, you can sell them. It will help you in protecting your downsides and lower your losses.
• Selling: Sell your ETF to raise cash if you are in desperate need of money, as  it will help you in getting necessary cash for your needs. Alternately you can invest that money in some low-risk investment avenue like bank FD or government bonds, to protect your money.
• Rebalance your portfolio: Divide your portfolio amongst stocks, bonds, gold and mutual funds. This means if the stocks are not doing well, you always have other investments to fall back on. Similarly divide your stocks amongst those belonging to different sectors. So if one sector like IT is not doing well, it will be offset by good performance of another sector like FMCG.

Follow these tactics and protect your wealth even during the downtimes.

It is a normal practice for most investors to look at the NAVs of the funds when evaluating the performance of the funds. However this is not true. Here is why.

The NAV of the mutual fund is calculated on the daily basis, based on the value of its underlying assets divided by the total number of units in the scheme on a specific day. E.g. if the value of the securities in a mutual fund is Rs 3000 and the fund has issued 100 units, then the NAV of the fund is Rs 30. Similarly a fund whose value of the securities is Rs 6000 and has issued 200 units will also have a NAV of Rs 30.

This implies why you should not focus much on the NAV of the mutual fund. Low or high NAV does not matter, when it comes to a mutual fund.

Instead concentrate more on the track record of the fund, dividend history, holdings in the portfolio, service levels, fund manager’s performance etc. This will help you choose the right fund for your needs.