Correction in markets is an opportunity for investors

The annual results season of the financial year 2011 has come to an end, and the markets are weak due to profit booking by domestic as well as foreign investors . The correction in the markets is an opportunity for investors to take fresh positions. On the other hand, you should analyse your portfolio and make the necessary adjustments based on the results.

Here are some strategies you can adopt in the current market conditions:

For short-term investors

The objective of a shortterm investor is to take advantage of market volatility and make money through trading. Since the markets are quite volatile, there are ample opportunities for short-term investors.

However, it is important to stay cautious and make a thorough analysis before taking positions. You should also maintain a tight stoploss level to cut losses in case a position turns negative .

For medium-term investors

The objective of mediumterm investors is to make money in the equity markets over a period of around 12 months. Usually, mediumterm investors base their decisions on positive developments in a particular stock or sector.

Mediumterm investors do not get too many rallies or correction phases during their investment tenure. Therefore, it is important for them to identify the right entry and exit levels.

These investors should also maintain a tight stoploss level for their positions in order to cut down losses if an investment does not fructify.

For long-term investors

Long-term investors look at taking advantage of capital gains as a result of business growth. The usual strategy of long-term investors is 'buy and forget' their investments. In fact, some investors do not even track their stocks for long. It is important for long-term investors to do a through analysis about the company before making an investment and keep track of the performances of their stocks.

Long-term investors have sufficient time to accumulate stocks at regular intervals during market correction phases. You should take the necessary steps to make the required adjustments to your portfolio based on the macroeconomic conditions and annual results. Longterm investors who cannot track the markets and related developments regularly would be better off investing in equity-based mutual funds.

Here are some tips for investors:

Invest risk capital only: Investments in the stock markets are risky by nature. Therefore, it is important for investors to invest their risk capital only in the markets .

Realistic expectations:

It is important to have a realistic returns expectation from investments in equity or equity-based instruments. Investors looking for very high returns often invest in high-risk options and often end up losing their hard-earned money.

Analysis:

It's always advisable to spend some time on understanding the markets and on making an analysis of the stocks you plan to buy. Reading reviews increases your understanding of the overall situation and helps in taking the right decisions.

Diversify:

You should diversify your equity portfolio by investing in stocks of different sectors with a good outlook. Investors should always evaluate the investments at regular intervals and keep shuffling the portfolio based on market conditions.

Balance portfolio:

You should balance your overall portfolio carefully based on your risk appetite. It is important to strike a balance between various classes of investments such as insurance, debt instruments and equity instruments. Investors should never get carried away by market waves and allocate a higher percentage of their total portfolio to equitybased instruments. Any decision to change the allocation should be taken after weighing the pros and cons carefully.