Since
independence first time the people of India has given a clear mandate to non
congress rightist party lead by Mr. Narendra Modi. He has proved himself to be
pro development and his Gujarat model is well accepted by the people of India.
Undoubtedly the mandate is for growth and development in the country. Not only
people of India are looking for positive change but mood outside India is also
jubilant. The NRI'S have also welcomed the change and we have seen celebration
outside India too.
The
expectations are naturally high but we have also to be realistic and see the
ground realities before taking aggressive stand. The economy is not in good shape and there
are lot of concerns to be addressed. We have not seen major action in last few
years and there was totally a policy paralysis. But, one major change at centre
changed the things overnight. The stable Government at centre means a lot of
actions on economic front in near future. The confidence of the investor's
across world has increased and we are likely to see major activities in trade
and business soon. Yes, there is a lot of hope and aspirations across India and
also reasons to believe that new Government will deliver.
The
Sensex and Nifty are near at all time high and investors are confused and are
in dilemma that what to do. The existing investors call us to know whether to
book the profit now and shift part to debt or stop SIPs. On the other hand the
set of new investors think stock market will do much better than other asset
class and would like to jump in without knowing the risk involved in it.
Investors
must also try to understand equity as an asset class before investing. Every
asset class has its risk reward ratio and before investing investors must know
this. Risk comes from not knowing what you are doing. Higher the return higher
is the risk and vice a versa. You cannot expect overnight profit from equity as
it is always a long term game. If you understand and follow the basic rules of
investing in equity then you are likely to gain in longer run. Your time
horizon for investing in equity should be minimum 5 years and above. You must
invest as per your asset allocation ratio and never go overboard and
concentrate on single asset class. Never try to time the market and always stay
invested is the success mantra for investing in equity.
Here
are some tips for the investor’s which can help them taking any investment
decision in equity in present bull run.
1) Avoid Direct Equity
Investment:
Direct
investment through stock markets requires in depth research and analysis. We
firmly believe that individually it is not possible for us to do so and devote
time for the same. Therefore, it is not recommend investing directly in equity. Also avoid investing in ULIPs
or PMS.
2) Mutual Fund is best
option:
We
strongly advise our clients to invest through mutual fund schemes. Mutual Fund
Investment can help a lot to investors. You get the benefit of diversification
when you invest through MF schemes. You also get the advantage of professional
management and easily compare the fund performance vis a vis other schemes in
the same category and its benchmark index. Instead of investing in sectoral or
thematic funds, invest in well-diversified funds, which invest in stocks of
many sectors, which give good diversification across sectors.
3) SIP is the proven
strategy.
SIP in mutual fund schemes is the best solution for investing
in equity for the long term. SIP is the way of creating wealth by investing
fixed amount regularly month on month on a selected date in one of mutual fund
scheme. The advantage you get is rupee cost averaging, which lowers the average
cost. Secondly you are not worried about daily volatility of the market and it makes
market timing irrelevant.
4) Monitor and Review the
performance:
It is always advisable to monitor and review the performance
of the scheme in which you have invested. Your fund can not stay in first three
always but has to remain in first quartile at least. The active fund has to
beat its benchmark and if your fund does not perform better compared to
benchmark consistently you need to take a call and shift your investment to
other performing fund.
5) Rebalance your
portfolio:
Asset
Allocation plays a major role in deciding your returns over a period of time.
Your portfolio returns more depends on asset allocation than fund performance. Asset Allocation once
decided should be followed seriously and accordingly should be rebalanced
periodically. Rebalancing is the process of restoring your portfolio back to
its original asset allocation. Rebalancing generally should be done every year
or when you get some good profits from one asset class like today.
6) Stay away from IPOs
and NFOs:
In
upward market we always see more and more new offerings come in the market as
everybody would like to take advantage of rising market. This period is good
for IPO not only because you get the good response but also get the premium
which otherwise unlikely to get. NFOs are also not good and we advise our
clients to invest in the equity scheme only if it has completed three years and
has proven track record.
Don’t
be greedy in the high market but do some home work before investing in equity. The
expectation of higher return without understanding the risk involved sometimes
leads to big financial loss.
