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Emerging from this year’s equity markets debacle are some important investment strategies, which if by-hearted will ensure that you remain heart burn free.

Firstly, have a gameplan in mind. Keep the big picture in mind and then move ahead. Without a road map and clear destination, it was easy to get sidetracked by the blaring horns and gyrating neon -- software this, IPO that – etc. Tailgating the latest trend rarely works. A recent international study has proven that (Financial Research Corp.) found that fund investors sliced 20 percent of their returns over the past decade by chasing hot performers. The basic thought is that: You need a plan, and not one that says buy high, sell low. What are your goals? When do you need the money? How much risk can you take? - think like a financial planner and ask all these questions to form your grand financial plan. And when you have a plan, you will be able to sit through the market’s ups and downs dispassionately. Also when eyeing your returns keep them reasonable. Don’t keep thinking of the returns of the boom times - think of those as bonus keep your expectations are in line with reality.For all those years of 50 percent plus returns in the past decade, there may well be times when the market doesn't do much. Some years you may even lose money. Get used to it and build the long term trend into your plan.

Secondly, always – always and always - insist on quality stocks. Whether the stock is big or bite-size, go-go growth or steady value, it should be a quality company with good earnings, pristine balance sheets and topnotch management. Infatuation with media, techie -- and the explosions of software IPO’s -- led too many of us to stray from market leaders to early-stage startups with uncertain business models. So, don’t repeat this mistake. Real fundamentals do matter. And owning the great companies of the world -- that's where individual investors should focus.

Remember, no one has ever lost big, over the long run, when they bought quality companies after significant crashes. That's why fund managers love big downturns, because they can load up on their favorite stocks at bargain prices. Investors should think exactly the same way. Dips in the market are good things because they give you opportunities. Corrections are good for investors because they purge the market of untested companies with "flaky business plans" and flushed out speculators who drove up prices to unjustifiable highs. So, use dips to buy at the right price. Of course, it's tough to get into a buying mood amid bleak headlines of corporate layoffs, missed earnings estimates, and sinking consumer confidence. But try to set emotions aside. Today's slowdown will be forgotten once you see the prices at which the quality beauties are available.

Agreed, no one can pick the precise moment when a particular stock or sector has hit its lows. Rather, this is about having discipline. Buy stocks when their PEG ratio (price/earnings ratio divided by expected earnings growth rate) is less than 1.5. Stocks that are growing significantly faster than the market average may deserve a higher PEG. It's also valuable to compare the stock's P/E and growth rate with the market's. Best bets: stocks growing faster than the index companies as a whole and trading at a P/E that's lower than the group P/E.

Also cover your back by spreading your money across a variety of stocks and industries, so that your net worth doesn't hinge on any one sector. Next, you want to balance the growth in your portfolio with value stocks with very low P/E ratios. And don't forget to think small. Dazzled by large-caps, many investors have ignored stocks with small market capitalizations. But the small-fry sometimes outperform the big fish. An equity portfolio that encompasses these strategies might look like this: 40 percent in core growth companies that have strong brands and predictable earnings (HL, Colgate, Archies, Dr.Reddy’s); 20 percent in more aggressive growth companies (Infosys, NIIT), still keeping that focus on quality; 20 percent in value stocks (GACL, Punjab tractors); and 20 percent in a good small-cap companies (Alps Industries, Aurobindo Pharma). Just as you can't buy and ignore, you can't allocate and ignore. Check your portfolio at least annually to ensure that one sector hasn't become too large, and use the market's ups and downs to trim outsize positions or add to holdings where you could use additional exposure.

Aru Srivastava

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