Invest fearlessly and grow wealth through Equity MF

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 .