Invest fearlessly and grow wealth through Equity MF
Each
one of us should understand why we invest and for whom we invest. We invest for
ourselves and our family. If we are investing for ourselves it has to be the
best. The Best is something which can be converted quickly and easily into cash
(liquidity), must be safe i.e. it should be giving me a return beating
inflation and since my money is going to be used in an economic system, I
should be adequately compensated in terms of return.
We
invest because there are many needs and requirements which will come in
different stages of life and we require adequate amount of money for it. How
much we will be requiring in future is very difficult to say but one thing is
sure it will be much more than today’s cost. Since apart from normal inflation there is
bigger impact of lifestyle inflation due to increasing aspirations, needs and
wants, I will require much more money than originally thought . We can look
back into our own lives 5, 10, 15, 20…years back and would have never thought
of new types of expenses we incur today.
The
asset which is closely related with lifestyle products and takes care of
lifestyle inflation is Equity. Equity is most closely related with economy vis a
vis other asset. if I am investing for
myself and my family my definition for best investment should be one that gives
me desired amount when I want and that I will get from equity investment. E.g.
in 70s and 80s having scooter or motorcycle was a normal Indian dream. Today
all dream to have car and that also premium one. If one had visualised that 20
years ahead his need will be car and if in line with change in lifestyle he had
invested in Maruti or in stock of big car then by the time he wanted to buy a
big car his investment would have also grown much more than the cost of that
car. But this one can say in hindsight. For a normal person not easy to
visualise his need or new product years ahead nor can he analyse the trend but
he does not need to worry as there are professional to take care of this.
If
leading a prosperous life means having luxury products at one end then he has
to have enough money to purchase those things when desired and that can happen
without much of stress by investment in right asset (equity) and right product
(Equity Mutual Fund).
Rather
than investing directly on own in equity, investment through a proven fund is
always better because stock selection is research based, diversification is
based on risk-return optimisation, decision on logics rather than emotions.
Fear
of losing in Equity looms on the mind of many investors but if he has this
conviction that it is aspiration / need of the individuals / household that
leads to creation of products by different companies then there is nothing to
fear. The pattern, trend is analysed by research and money is invested by fund
manager in those companies where there is sustainable positive growth.
The
risk which has to be managed by investor in Equity Mutual fund is selection and
time. Selection risk is managed by investing through a proven fund having a
sound and methodical investment process, consistent good performer across all
market cycles. Time risk is managed by having a long-term horizon (above 5 years)
and not timing the market and investing regularly. Yes, in short term there
will be volatility in stock market and fund NAV can go up or down but investor
should understand volatility is an opportunity for fund manager. Volatility is
an interplay of movement of money in stock market among stocks on account of
mismatch of prices vis a vis performance. This is due to changing investment
behaviour moderating variable expectation of different investors. It is also
due to sentiment due to changing economic conditions. In first case money will
find its way to better performing companies as investors want profit and they
will recognise and reward performance in long term. Regarding economic
situation there could be temporary factors which are to be ignored as it is
short lived or it could be slowdown or recession which can extend from few
months to some years (like in 2008-09) but if as an investor my conviction on
economy is strong i.e. growth is all what all human being wants then ultimately
the long-term trend is positive only. There is no loss in long term as neither
individual nor economy wants to remain in bad or negative situation. There is
always a natural trend of normalising and move towards betterment i.e. growth.
Invest
in Equity Mutual Funds fearlessly but taking care of selection and time risk . Grow
rich . be wealthy .
