What are your top 5 Investment Lessons in 2017?

Nutan Gupta

14 Jul 2017

New Page 1

In 2016, the total wealth in India stood at $5.2 trillion. According to market research group New World Wealth, this means we are the 7th richest country in the world!

People are often under the impression that they have to be an economist or have a strong understanding of investments to know how money works. But that’s not true. All we have to do is look at everything that happens around us; the constructions of residences and malls, people vacationing, jobs created by new companies, money earned and spent, etc.

Some look at investing as a science, some look it as an art, and others look at it as a craft. But we can improve our understanding of investments and other related decisions only with practice. There is much to learn from the perceptive insights and thinking. Here are just a few things that we learnt this year.

Time

It’s essential to invest in the stock market for a long-term. The right time to invest in stocks is when they are available cheap, i.e. the bear phase. Purchasing opportunities in the downturn can help your stocks multiply and become wealthy, over a period of time. One should wait till their stock appreciates a good percentage.

Value

Before buying a stock, it’s important to study closely all aspects of the company. Value oriented companies tend to offer higher value for the long term. If there are two products similar nature, go for the one that is less expensive.

For instance, direct plans of mutual funds are priced lower than regular plans. A lower expense ratio directly translates into higher returns for the investor.

Stability

Consistent investment in the stock market will reap a lot of benefits. If done right, the stock market will always deliver, though the quantum or strategy of investments can differ.

For instance, the banking and financial sector was benefitted with people forced to deposit cash into their bank accounts during demonetization. Any investor who could have thought about this strategically would have made a windfall from his investments by now.

Inspection

You can’t make wealth the same way someone else did. You need to do your own research before making any investment. You can take advice and help from someone but it’s important to make your own decisions as per your requirements. One should invest only in businesses that they understand.

Evaluation

Tangible and intangible assets are also considered while valuing a company. Investors must be wary of the intangible assets, i.e. goodwill, involved. Sometimes due to goodwill, companies with good brands usually trade at higher multiples. Paying too much, even for a great branded company, might not be a good investment then.

To sum it up

Here is a quick recap of the important investment lessons:

  • Time: Buy when stocks are cheap, sell when they are high.

  • Value: Value-oriented companies offer higher stock value for a longer term

  • Stability: Consistent, and not sporadic, investment for greater benefits.

  • Inspection: Advice from experts is necessary as scenario changes for every person.

  • Evaluation: Tangible and intangible assets (such as goodwill) to be assessed while evaluating company’s stocks.

The coming year could play a crucial role in achieving India’s long-term potential of sustainable economic growth. Investors such as us can participate in this growth story through the equity route.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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What are your top 5 Investment Lessons in 2017?

Nutan Gupta

14 Jul 2017

New Page 1

In 2016, the total wealth in India stood at $5.2 trillion. According to market research group New World Wealth, this means we are the 7th richest country in the world!

People are often under the impression that they have to be an economist or have a strong understanding of investments to know how money works. But that’s not true. All we have to do is look at everything that happens around us; the constructions of residences and malls, people vacationing, jobs created by new companies, money earned and spent, etc.

Some look at investing as a science, some look it as an art, and others look at it as a craft. But we can improve our understanding of investments and other related decisions only with practice. There is much to learn from the perceptive insights and thinking. Here are just a few things that we learnt this year.

Time

It’s essential to invest in the stock market for a long-term. The right time to invest in stocks is when they are available cheap, i.e. the bear phase. Purchasing opportunities in the downturn can help your stocks multiply and become wealthy, over a period of time. One should wait till their stock appreciates a good percentage.

Value

Before buying a stock, it’s important to study closely all aspects of the company. Value oriented companies tend to offer higher value for the long term. If there are two products similar nature, go for the one that is less expensive.

For instance, direct plans of mutual funds are priced lower than regular plans. A lower expense ratio directly translates into higher returns for the investor.

Stability

Consistent investment in the stock market will reap a lot of benefits. If done right, the stock market will always deliver, though the quantum or strategy of investments can differ.

For instance, the banking and financial sector was benefitted with people forced to deposit cash into their bank accounts during demonetization. Any investor who could have thought about this strategically would have made a windfall from his investments by now.

Inspection

You can’t make wealth the same way someone else did. You need to do your own research before making any investment. You can take advice and help from someone but it’s important to make your own decisions as per your requirements. One should invest only in businesses that they understand.

Evaluation

Tangible and intangible assets are also considered while valuing a company. Investors must be wary of the intangible assets, i.e. goodwill, involved. Sometimes due to goodwill, companies with good brands usually trade at higher multiples. Paying too much, even for a great branded company, might not be a good investment then.

To sum it up

Here is a quick recap of the important investment lessons:

  • Time: Buy when stocks are cheap, sell when they are high.

  • Value: Value-oriented companies offer higher stock value for a longer term

  • Stability: Consistent, and not sporadic, investment for greater benefits.

  • Inspection: Advice from experts is necessary as scenario changes for every person.

  • Evaluation: Tangible and intangible assets (such as goodwill) to be assessed while evaluating company’s stocks.

The coming year could play a crucial role in achieving India’s long-term potential of sustainable economic growth. Investors such as us can participate in this growth story through the equity route.

Have Referral Code?