The age-old fundamentals taught to us at schools never change, right? A Gurukula has now become a Convent, or a blackboard could have changed to a smart-board but the values imbibed in us remain the same.
Same works for Investment Choices.
The performance of the Indian Economy can be determined with the help of the GDP (Gross Domestic Product). GDP in simple words is the market value of all the final goods and services produced in a period of time. India’s GDP growth rate was 8.3 percent in the year 2003, raised to 10.4 percent in 2010 but fell to 3.2 percent in the year 2013 and again saw a rise in the year 2017 with 6.7 percent as the growth rate.
So an Economy depends on various economic factors and numbers do fluctuate, so it’s quite natural for other indicators like Inflation, Interest Rates, Corporate Profits, Currency Strength and also Stock Market to go through a roller coaster ride. The Indian Economy is facing a shock wave and we definitely foresee a doubtful future with the three C’s of Confusion, Consternation, and Concern.
The Stock Market is known for its volatility in stock prices. But trying to track the Stock Market on a daily basis to gauge the performance of your long term equity funds, is like trying to find a needle in a haystack. Yet, there are people who do this as a job, they are called Traders or Speculators and it is their role to inspect the market minute to minute.
But we are investors. Most of us are salaried people and do afford to set aside savings every month. But the normal mistake seen in investors is that we get into a “herd mentality”. We buy more when the market goes up and sell when the markets go down. It’s likely we follow the herd and do what other investors do. But in reality, the ones who make money are the ones who stay invested.
So rather than getting baffled by the volatility of the markets, what we can do is invest a small chunk of our savings every month in equity through a well-structured plan called SIPs (Systematic Investment Plan). If you invest with the objective is to make high returns from your valuable investments, then the best way is to stay put for a long time. By doing so, you will not only earn index-beating returns but also meet the rising prices in the economy. So all you need is the fourth C: Consistency.
Behavioural Finance plays a key role in understanding the investment activities of people. Another aspect where the “herd mentality” can be seen again is with Gold and Real Estate. 8 out of 10 people in a family gathering or a common forum will brag about their success stories of earning high returns by investing in real estate or gold. But what they don’t include is the making charges that go into Gold returns and transaction costs, taxes, cost of maintenance, registration or stamp duty, when it comes to Real Estate. And not to forget about the hassle involved in finding or selling property in India, including the cost of fixing the house for the tenants. Also, we don’t keep a close watch on the property prices or gold prices as much as we look at the day-to-day variations in the stock market. If we did, we would realize that Gold and Real Estate also go through volatility. When it comes to risk, Real Estate does go through price, liquidity and legal risk and Gold is equally risky as it is not a source of regular income. But thanks to the stock market, although it is risky, at the same time it is also transparent, helping us to track them and also help in creating and generating wealth/income.
If you’re a person who reads and consumes a lot of knowledge on Mutual Funds, you would have noticed that a number of books, magazines or articles still follow“Logical Investment Techniques”. Where investors like you and me gasp at day-to-day conditions in the stock market and ponder on our decisions regarding funds, famous authors like Monika Halan (Editor, MintMoney and author of “Let’s Talk Money”) and Dhirendra Kumar (Founder and Chief Executive, Value Research and author of “Best Investments”), believe that equity fights inflation, provided you stick to the knit.
To get access to top recommended Equity Mutual Funds, MyWay Wealth is a one-stop destination. From Equity to mid-cap funds, tax saving to advanced investing, you can find them all on MyWay. And for investors who feel Gold is a good investment option, you still invest in them through Gold funds with MyWay rather than physical Gold. All you need is a few minutes to complete your KYC process and input your monthly contribution.
As stated before, numbers in an Economy aren’t stable always, volatility in the market shall prevail, but what remains unchanged is that fact that your investment decision will rely on your risk appetite and your financial needs. This will not alter even if you would choose a bank for an investment or an app for the same. For example: If Equity funds through Systematic Investments Plans (SIPs), was your choice to meet your short term goals 5 years back, then, you can still choose the same investment for your present goals. All that would change is the amount you would deposit through SIPs (it’s wise to increment the amount you contribute to SIPs as and when you’re earning potential increases) which will be according to your present goals, needs, and profile.
Remember not to get disenchanted with the daily fads of the Stock Market.