Thursday 19 September 2024

Stay Invested with Indian Equities.





Let me start with my own start with equity and why I have most of my investments in Equity and have a full financial freedom, choice to stop working any day and a good corpus for my family. It was2001 and I was blessed with a boy. 

Grandfather gifted a good amount to him. I invested half in RBI bonds and half in Indian Equity. Post 7 years. 10 lacs with RBI Bonds accumulated to 15 lacs , while equity fund made it to 70 lacs( thanks to that bull run of 2004). It wast that day and I have not invested a penny in fixed deposit. It has been equity all the way. 


I always stay invested, continue with my sip, add more to corrections, increase SIp when corrections are major and show patience when markets consolidate and goes through time correction 



Many Investors who have made good gains in Indian Equity are thinking of booking profits and may be trying to re enter on corrections or investing in other asset class. Wealth is created by staying invested and enjoying the power of compounding. Many have been creating noise of correction since Nifty was 20000 and missed out the entire rally. 


India is in in a multi year  bull market as US was in 90's . Quoting few excerpts from Morgan Stanley recent report


India’s Bull Market Revs Up  

Morgan Stanley expects India to drive one-fifth of global growth in the coming decade—an assumption that hinges on the country’s growing status as the back office and factory to the world, as well as a burgeoning consumer class empowered by a digital economy and a transition to green energy. India’s stock market reflects this narrative and has been on a steady rise, marking new highs. Investors’ confidence in future growth and moderating volatility, especially compared with other emerging markets equities, is driving up the price to earnings ratio. 

 


Private spending growth: . Private spending, on weak footing for much of the last decade, has been showing signs of recovery on the heels of significant infrastructure investments by the government. Indeed, private sector projects in the works were growing 16.9% in December 2023, versus a decline of 4.2% in December 2019. “Our view is that in three years, India could move from primary deficit to balance,” says Desai. “The resulting widening gap between real economic growth and real interest rates would provide more support to share prices.”  

 

India’s 401(k) moment: Currently, Indian households are less exposed to equities relative to other asset classes such as gold, but that is set to change. A 2015 change allowing retirement funds to invest in stocks is expected to create a demand cycle akin to what the U.S. experienced from 1980 to 2000, after a new law allowed employees to put some of their paycheck toward tax-deferred investment in stocks via retirement plans. “Domestic flows to U.S. stocks surged over two decades after that change. We see a similar boom in India coming, but expect it can last longer than 20 years given India’s much younger population and the low starting point of equity ownership,” says Desai. 

 

Rising Social Equity:  Forecasts for 7.9% growth in gross domestic product for this year and 6.8% in 2025, should help diminish poverty further and feed a cycle of job creation, higher consumption and growth. “We think the continuing decline of poverty and rising worker and consumer class is one of the most underappreciated trends unfolding in India,” says Desai.  

 

Other factors driving the bull run include: a burgeoning ecosystem of startups, in particular those addressing deep tech and agriculture needs; competition among Indian cities and states to be innovation and investment hubs; and a lending boom driven by digital credit enablement system that could give several million previously unbanked people access to financing. 

 

Staying invested in Indian equity markets, or any equity markets, is often advocated for long-term wealth creation due to the power of compounding and the potential for higher returns over time. Here's a detailed breakdown of why staying invested is crucial and how booking profits prematurely can hinder the compounding effect:


1. Power of Compounding

  • Compounding refers to the process where the returns earned on an investment are reinvested to generate additional returns. In equity markets, long-term investments allow both your principal and the returns (like dividends and capital appreciation) to grow exponentially over time.

  • Indian equities, due to the country's economic growth, offer attractive long-term returns. Staying invested allows you to benefit from this compounding effect over multiple years or decades.

    Example:

    • If you invest ₹1,00,000 in the stock market and earn an average annual return of 10%, after 10 years, the value becomes ₹2,59,374. After 20 years, it’s ₹6,72,750. The longer you stay invested, the higher the compounding effect.

2. Market Timing is Challenging

  • Many investors try to "book profits" during market highs and re-enter during lows. However, timing the market is difficult, even for experts. Missing just a few of the market's best-performing days can significantly reduce your overall returns.

    Example:

    • If you missed the 10 best days in the Indian market between 2000 and 2020, your total return could be drastically lower than someone who remained invested throughout.

3. Premature Profit Booking Breaks Compounding

  • When you sell investments to "book profits," you're effectively stopping the compounding process. The money you take out stops growing, and you lose the potential gains you could have earned on those reinvested returns.
  • Compounding works best when left uninterrupted. Investors who sell during short-term market fluctuations often lose out on the market’s long-term uptrend.

4. Emotional Bias

  • Investors often book profits due to emotional reasons (fear of a market crash, or the excitement of short-term gains). But historically, equity markets recover from downturns and reward those who stay patient.

    Example:

    • In the 2008 financial crisis, the Indian equity market (Nifty) fell by over 50%. Many who sold at the lows missed the strong recovery that followed. By 2010, the Nifty had recovered most of its losses, rewarding investors who stayed invested.

5. Opportunity Cost

  • When you book profits and hold cash or invest in low-return assets, you may miss out on the higher returns equities offer over the long term. Those who hold onto their investments typically benefit from dividends, stock splits, and capital appreciation, all of which can compound over time.

6. Long-Term Trends in Indian Equities

  • The Indian economy is one of the fastest-growing in the world, driven by demographic factors, urbanization, and increasing consumption. The stock market generally reflects this long-term economic growth.
  • Staying invested in quality companies or index funds in India allows you to participate in this growth, potentially yielding much higher returns compared to short-term investments or frequent profit booking.

When we book profits in equities unnecessarily, we often trade-off small, short-term losses for larger, longer-term losses. So, whenever you feel the need to protect your profits, simply remember: Compounding is free until you choose to pay for it!

illustration of past returns when investors booked profits and parked in debt funds on reaching a particular return and how they made less gains than those who stayed invested 


Conclusion:

Invest and hold strategies benefit from the power of compounding, which allows for exponential growth over time. By frequently booking profits, investors interrupt the compounding process and reduce their long-term returns. Equity markets, particularly in growing economies like India, reward patience and long-term investments, making it important to stay invested rather than focusing on short-term gains.

Tuesday 5 March 2024

Mutual Funds versus Monopoly Game – Decoding the Best Moves
Blog from anchoredge

Mutual Funds versus Monopoly Game – Decoding the Best Moves

Are you ready to roll the dice and learn about the fascinating world of investing? In this blog post, we're going to compare mutual funds with the classic board game Monopoly. Yes, you read that right – Monopoly! So grab your top hat, and let's dive in!

First off, what exactly are mutual funds? Well, think of them as a diverse collection of investments, kind of like owning multiple properties in Monopoly. Instead of putting all your money into one house on Boardwalk, you spread it out across different assets like stocks, bonds, and more. This diversification helps reduce your risk, just like owning multiple properties protects you from landing on someone else's hotel!

Now, let's talk about building wealth. In Monopoly, your goal is to buy properties, build houses and hotels, and collect rent from other players. It's all about generating passive income and growing your net worth. Similarly, mutual funds aim to grow your money over time by investing in a variety of assets. Instead of collecting rent, you earn returns in the form of dividends and capital gains. The more you invest, the more your wealth can grow – just like in Monopoly!

But here's where the real-world magic happens: accessibility and expertise. In Monopoly, anyone can play, regardless of their financial knowledge or experience. Likewise, mutual funds are accessible to everyone, whether you're a seasoned investor or just starting out. You don't have to be a financial expert to get started – just find a fund that matches your goals, and let the professionals take care of the rest.

Plus, mutual funds offer something Monopoly can't: professional management. Instead of relying solely on your own decisions, mutual funds are managed by skilled professionals who analyze markets, research opportunities, and make strategic moves on your behalf. It's like having a team of seasoned Monopoly players guiding your every move, ensuring you make the most of your investments.

In conclusion, while Monopoly is a fun way to pass the time, mutual funds offer a real-world opportunity to build wealth and achieve your financial goals.

Remember, investing involves risk, and it's essential to do your research and consult with a professional fund manager before making any decisions. But with mutual funds, you can take a step closer to financial freedom.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Saturday 17 February 2024

Blog from anchoredge

Millennial Money Moves: Navigating Mutual Funds for the Next Generation

Hey there! If you've ever thought about saving or investing your hard-earned money, you might have stumbled upon the term mutual funds. Pretty daunting, right? Especially with all the technical jargon thrown around. But, worry not! Today, we're breaking it down into bite-sized, tailored for us - the young, dynamic, and future-forward Millennials. Ready to dive in? Let’s unravel the mystery of mutual funds and why they might just be the perfect fit for your financial goals.

Why Mutual Funds?

Mutual funds are essentially pools of money, collected from many investors, to invest in stocks, bonds, or other assets. Here’s why they are worth your attention:

Diversity: Instead of putting all your eggs in one basket, mutual funds spread your investment across various assets. This means, if one investment goes south, you won’t be losing all your money.

Professional Management: Not all of us are finance gurus, and that’s perfectly fine. Mutual funds are managed by professionals who make the investment decisions for you.

Accessibility: Starting your investment journey can be with as little as a few hundred or thousand rupees, making it accessible for us who might not have a huge amount of capital.

Decoding the Types of Mutual Funds

Before you jump in, it’s crucial to understand the different flavours mutual funds come in and what suits you best.

Equity Funds

These funds invest primarily in stocks and are known for their high risk &  high returns. As they carry higher volatility, they are perfect if you’re in it for the long haul and can ride out the market's ups and downs.

Debt Funds

Looking for something safer? Debt funds might be your go-to, investing in bonds and other debt instruments. While they offer lower returns compared to equity funds, they are comparatively less risky. They are ideal for your short term investment goals.

Hybrid Funds

Can’t decide between risk and safety? Hybrid funds invest in both stocks and bonds, offering a balance between risk and returns.

Tips for Success:

Start Early: The power of compounding works best when you give your investments time to grow. The earlier you start investing, the better.

Stay Consistent: Make investing a habit by setting up automatic contributions from your paycheck or bank account.

Don't Panic: The market will have its ups and downs. Stay focused on your long-term goals and resist the urge to make impulsive decisions based on short-term market movements.

In Conclusion

Investing in mutual funds can be a smart move towards achieving your financial goals, providing the benefits of diversification, professional management, and accessibility. Remember, the key is to start early, stay informed, and invest regularly. With mutual funds, you’re not just saving your money; you’re making it work for you.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

 

 

Thursday 1 February 2024






Transform Your Extra Income: Best Areas for Mutual Fund Investments

Are you looking to maximize your extra income? Do you want to make your money work for you and generate more returns? If so, investing in mutual funds may be the perfect solution for you. Mutual funds offer a diverse range of investment options that can help to grow your wealth over time. In this blog post, we will explore the best areas for mutual fund investments and provide you with insights and tips to make informed decisions. So, let's dive in!

Diversify Your Portfolio with Equities

Equity mutual funds are a popular choice among investors who seek long-term growth. By investing in equities, you become a part-owner of the companies in which you invest. This allows you to benefit from their growth and profitability. When considering equity mutual funds, it is essential to diversify your portfolio. Investing in different sectors such as technology, healthcare, finance, and consumer goods can help reduce risks and maximize returns.

Diversification is key to managing risk in your investment portfolio. By spreading your investments across different sectors, you are not reliant on the performance of a single industry. If, for example, the technology sector experiences a downturn, your investments in healthcare or consumer goods may act as a buffer against losses.

Bond Funds: A Stable Income Stream

If you prefer a more stable income stream, bond funds may be the right choice for you. Bond funds invest in fixed-income securities such as government bonds, corporate bonds, and treasury bills. These funds offer regular interest payments, making them an excellent option for investors seeking a reliable income source.

Bond funds are an attractive option for those looking for a steady income stream. The fixed-interest payments from the bonds provide a regular cash flow, which can be particularly beneficial for retirees or individuals who rely on income from their investments to cover expenses.

Sector-specific Funds: Capitalizing on Opportunities

Sector-specific mutual funds focus on particular industry sectors, such as technology, healthcare, energy, or finance. These funds allow investors to capitalize on specific opportunities and trends within those sectors. For example, if you believe renewable energy will shape the future, investing in a clean energy mutual fund could be a smart move. However, it's crucial to conduct thorough research and analysis to understand the potential risks and rewards associated with sector-specific funds. Remember that these funds may be more volatile than diversified options.

Conclusion: Growing Your Extra Income

Investing your extra income in mutual funds can be a game-changer when it comes to growing your wealth. By diversifying your portfolio and exploring various investment options, you can maximize your returns while mitigating risks. Remember to prioritize your investment goals, and seek advice from financial professionals. As with any investment, it's important to evaluate your risk tolerance and invest accordingly. So, why wait? Start transforming your extra income into a valuable asset by investing in mutual funds today!

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Thursday 11 January 2024






Mutual Funds Decoded: Common Questions and Answers

Welcome to our blog post! Today, we'll be diving into the world of mutual funds and answering the top 9 most common questions regarding this popular investment option. Whether you're a seasoned investor or just starting out, these questions and their answers will help you navigate the complex world of mutual funds. So, let's get started!

1. What is a mutual fund?

A mutual fund is an investment vehicle that pools money from various investors to invest in a diversified portfolio of securities such as stocks, bonds, or a combination of both. By investing in a mutual fund, individuals can gain exposure to a wide range of assets without needing to directly purchase them.

2. How do mutual funds work?

Mutual funds are managed by professional fund managers who make investment decisions on behalf of the investors. When you invest in a mutual fund, your money is combined with that of other investors which allows the fund to buy a variety of different assets. The returns generated by these investments are then distributed among the investors based on the number of units they hold.

3. What are the different types of mutual funds?

There are several types of mutual funds available, each catering to different investor preferences and risk appetites. Some common types include equity funds, debt funds, hybrid funds, and sector-specific funds. Equity funds invest primarily in stocks, debt funds focus on fixed income securities like bonds, while balanced funds aim to provide a mix of both.

4. How do I choose the right mutual fund?

Choosing the right mutual fund depends on your personal financial goals, risk tolerance, and investment horizon. It's crucial to conduct thorough research and seek professional advice.

5. What are the advantages of investing in mutual funds?

Investing in mutual funds provides numerous benefits. They offer diversification, professional management, liquidity, and affordability. Additionally, mutual funds allow investors to easily enter and exit the market, making them convenient for both beginners and experienced investors.

6. What are the risks associated with mutual funds?

While mutual funds provide growth potential, it's important to be aware of the risks involved. Market fluctuations can impact the value of your investments, and some mutual funds carry higher risks than others. Additionally, poor fund management or economic downturns can negatively affect returns. Understanding these risks is crucial to making informed investment decisions.

7. How can I track and evaluate the performance of a mutual fund?

To track and evaluate the performance of a mutual fund, you can refer to various metrics such as the fund's historical returns, expense ratio, and benchmark comparison. Additionally, analyzing the fund's consistency, risk-adjusted returns, and fund manager's tenure can provide valuable insights. It’s a difficult task and requires expertise, so it’s advisable to take the help of a financial expert.

8. Can I invest in mutual funds with a small amount of money?

Yes, you can invest in mutual funds with a small amount of money. Mutual fund houses offer Systematic Investment Plans (SIPs) that allow investors to start with minimal initial investments. SIPs also help in rupee cost averaging, meaning you invest a fixed amount regularly, regardless of market conditions. This approach can be ideal for beginners or those with limited funds.

9. How do I redeem my mutual fund investment?

Redeeming your mutual fund investment is a straightforward process. You can fill out a redemption form provided by the fund house or make a request online. Generally, your funds will be transferred back to your registered bank account within a few business days. It's important to note that certain exit loads or taxes may apply, depending on the duration of your investment.

Conclusion

Mutual funds offer a convenient and accessible way to invest in a diversified portfolio of assets. By understanding the basics, assessing your financial goals, and conducting thorough research, you can make informed investment decisions. Remember to consult a financial expert and monitor your investments regularly. Happy investing!

This blog is purely for educational purposes and not to be treated as personal advice. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.