Things to know before redeeming investments

In an interview to CNBC-TV18, personal finance expert, Harshvardhan Roongta of Roongta Securities shared views on how one should play the current market trend and when should one redeem investments.

Below is the verbatim transcript of Roongta's interview with CNBC-TV18.

Q: For investors looking to take some money off the table given the current equity momentum, what would your advice be? Do you redeem funds when they are making profit or cut losses? How do you look at profit taking and trading in mutual funds?

A: If one look at the behaviour pattern of investors, one will see that in all aspects it is generally the opposite of what should be done. For example all retail investors will enter the equity markets after the bull run when the markets have rallied and would possibly sell when the markets are at virtually the lowest for the last 52 weeks.

Also Read: Things to know before buying professional indemnity policy

After having made an investment the behaviour is still the same. Let us take an example of a person who has invested about a year ago in two stocks; ITC and Wyeth. After one year ITC was at about Rs 225, Wyeth was at Rs 918. After one year ITC has gone up by about Rs 100 and Wyeth has gone down by about Rs 100. Now if the same investor had required money, which stock is he likely to sell? Most of the investors would definitely look at selling ITC because it is in profit and hold on to Wyeth because it is below the cost.

Generally this behaviour that we notice in the behaviour of finance as a subject, we see that one land up having accumulated stocks, which are possibly not performing well and one has  sold something, which has the potential to do better in future. This is the exact thought and the practice that we need to educate investors to change. If there is a possibility of a stock going up further one would need to hold on to that and sell something, which is not performing well. In this practice in a way what one is doing, if one does the other way round is if one cut the possibilities of earning profits instead of cutting losses.

If one look at the mutual fund investments, if there is a redemption requirement, one should definitely look at the funds which are not performing well rather than look at funds, which are already doing good. This is generally what an investor should keep in mind that first look to cut losses and not profits. It is a very strong statement I am making, one should look to cut losses and not profits so then one will be able to take better investment decisions.

_PAGEBREAK_

Caller Q: Can you please explain what all facets do mediclaim policies cover; in terms of sorts of health issues, percentage of rebate, etc? Also which are the best mediclaims to purchase?

A: I would like to clarify that mediclaim policies are those policies, which look to reimburse the cost of hospital expenses. So, essentially one needs to be hospitalised and all the expenses that incur, will be reimbursed. It is on actual basis. One needs to be hospitalised for at least 24 hours. In case one is not hospitalised for 24 hours then the claim is not accepted.

There is an exception to this, due to advancement in medical science certain treatments and surgeries do not require to be hospitalised for 24 hours such as cataract. One can undergo the cataract operation and leave in couple of hours, which is covered under mediclaim.

What you need to keep in mind is that the policy, which you take, should have the least amount of restrictions. We have two types of policies. One set of companies have restrictions on room rents payable, the operation theater charges. The other sets do not have sublimit in policy. What I would recommend is that you look at buying policies from either Tata AIG Mediprime Policy or an Apollo Munich Easy Health Plan. These policies do not have any sublimit or restrictions in terms of claim for the room rent and doctor fees. As far as scope of coverage is concerned, all the ailments or injuries are virtually covered, anything that one need to be hospitalised because of injury or because of an ailment is covered accepting for a few, if one go for plastic surgery, which is not related to an accident or a burn case. However, one is doing it as a part of beauty treatment, which is not covered. Pregnancy and child birth is not covered in this hospitalisation policy.

So, these are basic facts, which you can keep in mind and you can buy a policy from Tata AIG or Apollo Munich.