Ad­van­tage Bear Mar­ket

For the past four years, you’ve not gained much from your eq­uity in­vest­ments. “So what?” says CEO of Value Re­search and Edi­tor of mag­a­zine, who of­fers sound ad­vice

Reader's Digest (India) - - Book Bonus -

Dhiren­dra Kumar, Be pa­tient: You may have been sold eq­uity mu­tual funds by agents promis­ing you high re­turns, which is just their sales strat­egy. But you’re still safe. Four years is too small a pe­riod to mea­sure the re­turns from any eq­uity in­vest­ment, and all you may have got is a low 3% an­nual yield. For any eq­uity in­vest­ment to live up and de­liver its full po­ten­tial, you must see it over at least one full mar­ket cy­cle of ups and downs. The past four years were nowhere near that. In­vest reg­u­larly: A sys­tem­atic in­vest­ment plan ( SIP) is where you in­vest in eq­ui­ties, or a cho­sen eq­uity mu­tual fund scheme, ev­ery month re­gard­less of mar­ket con­di­tions. Study the maths: Had your SIP started six years ago, in­stead of four, it would have re­turned 8.5% per an­num in­stead of 3%. Had you started eight years ago, the re­turns would have been 11%. Ten years ago would have yielded 16%, which means a 440% to­tal growth in a decade! The pit­falls: Many in­vestors buy into eq­ui­ties only when there are big up­swings—too late—and ex­pect that to con­tinue. It usu­ally doesn’t. And they stop in­vest­ing when mar­kets are down—a big­ger mis­take. Mar­kets move up and down but tend to grow im­mensely over decades. Bright fu­ture: Over such long pe­ri­ods, you can ex­pect eq­ui­ties as a whole to grow about as much as the nom­i­nal GDP growth—which is growth un­ad­justed for in­fla­tion. And In­dia is grow­ing! While you got only 3% in the past four years, the econ­omy has grown at nom­i­nal 15%. So take heart—you should get those re­turns in the fu­ture. Re­gard th­ese “bad” years as good news be­cause, if you keep in­vest­ing reg­u­larly, you’ll be “buy­ing low.” With eq­ui­ties, noth­ing could be bet­ter.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.