This may be a good time to take a plunge in the stock markets. Focus and consistency may yield the pearls that you hope for.
October 18, 2017 / 03:20 PM IST
Have a long-term outlook | Timing investment is logically impossible because the best entry and exit opportunities are known only in hindsight. No one can predict market movements with certainty. Therefore, it is important to allow your investments to compound over a long term.
If you are a millennial, this is the time to start investing in stock markets. Why? With a new job and a fat pay cheque every month, you feel richer with every spend you make. A credit card or personal loan is not the way out. As your spends stack up, you lose your way in the financial jungle. Let us show you a way out: ride the Bull to emerge a winner.
Now is the time to start
If you are still wary of investing in the stock markets, consider this: the Sensex and Nifty have risen by almost 13-18 percent so far in 2017. They are now correcting, as they continue to struggle with GST, a weak economy and poor corporate results. That, however, should not dishearten you; this dip in stock markets is just the time to begin and what better occasion than Diwali?
If you think it’s too early to start investing in the capital markets, think again! The ‘early bird’ adage is apt for millennials eyeing the market. Assuming you are 35 years old, let us assess how delaying investments affects you. If you had started investing Rs 2,000 a month at the age of 20, in an equity mutual fund (growth plan), your current corpus would have grown by five times to Rs 17.8 lakh, on an investment of Rs 3.6 lakh. By contrast, if you had started investing the same amount in a similar fund at age 25, the delay of five years would have shrunk your corpus to Rs 5.79 lakh, on an investment of Rs 2.4 lakh. Thus, the earlier you begin, the better.
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A plethora of options
If you are a beginner, opt for a host of mutual funds — diversified equity funds, debt funds and balanced funds. If you need money at short-term intervals, you can opt for liquid funds that offer better returns than FDs and allow easy redemption. Mutual funds are an easier way of investing in equities, as they spread your investment (and risk) across a range of stocks. For higher returns, you could try investing in direct equity.
“Young investors with a better risk appetite can easily park bulk of their savings in equity, either through the mutual fund route or through direct equity. If you are looking to create wealth in the long term, you can benefit from Sharekhan’s offerings such as Top Picks and Power Portfolio. Top Picks comprises a set of 10-12 well-researched companies with sustainable businesses, in which you can invest a lump sum amount at one go and start an SIP, simultaneously. Similarly, Power Portfolio is a basket of stocks — mostly large-caps — that are actively managed. Both Top Picks and Power Portfolio have consistently outperformed benchmark indices,” says Gaurav Dua, Head – Research, Sharekhan.
IPOs: Good entry points, but tread carefully
With initial public offerings (IPOs) headed for a record year in 2017 — total issuances are estimated to cross USD 5 billion mark this year — it is natural that you are prompted to try your luck with every issue. However, the success or failure of an IPO does not depend solely on the listing day gains. You must study the draft prospectus carefully, keeping an eye on three things: the issuer’s business model, its debt levels and its past financials.
Overall, this may be a good time to take a plunge in the stock markets. Focus and consistency may yield the pearls that you hope for.