How Long Term helps

23/05/2009

Some Wealth Inspiring thoughts

Ø      Timing is vital. It is much more important to buy cheap than to sell dear.

Ø      Time in the market is more important than timing the market.

Ø      It is never your thinking that makes big money, it is sitting.

Ø      Success in market usually comes to those, who are too busy to be looking for it.

Ø      Managing money requires more skill than making it.

Wealth as they say is like old wine. The more time it takes the longer it stays for you to savor it!!

Stock Market is generally feared by all! And may be rightly so!! Investors usually see – or rather made to see—the short term fluctuations rather than the long term upside potential which comes steadily but without much of an announcement! It’s the short term upheavals are talked about in every newspaper—much to the contrary!!!

Stock prices are a matter of individual perception and every investor has his own views on a particular stock and its target price. Unfortunately we fail to sell a stock even if our target price is met. For example at Rs. 850 levels (November 2007) TISCO was not that great a company and it is indeed worth much more than Rs.150 levels it fell to in November 2008. In fact we get so carried over by our emotions and views expressed by so called "experts" on business channels that we do just the opposite -- buy at Rs.900 levels and sell off at Rs.150 levels.

Hence we at AIMS believe it is better and much safer to access the stock market through mutual funds rather than practice do-it-yourself equity and burn a big hole in your bank account.

It is not that we despise or discourage direct equity—direct equity is preferable only if you have the habit of digesting the fluctuations and also have the time to do your research because investing in shares without proper research is like playing cards without looking at them.

Another compelling reason for investing in Mutual Funds is highlighted in the last wealth inspiring thoughts stated above—managing money requires more skill than making it!

There are very few options currently available where the real returns -- returns in excess of the inflation—are positive. Hence investments in PPF, Post Office; RBI Bonds or bank deposits tend to depreciate your retirement corpus in real term rather than appreciate. They will in all likelihood not see you through your retirement or even be able to fund your child’s higher education! Only Equity has the power to give you inflation adjusted returns to provide you with the retirement corpus to enable you to “SAR UTHA KE JIYO”. Consider this :- a monthly investment (on 1^st. of every month) of Rs. 1,000/- in DSP Merrill Lynch Equity Fund(Dividend reinvestment option) from 02/05/1997 till date would have grown from Rs. 1,43,000 to about Rs. 7,75,000/-( valuation as on 27/05/2009) -- a compounded annual growth of 25.83% (Source DSP Black Rock Mutual Fund). AND THAT TOO TAX FREE!! AND THAT TOO after all the downfalls over the years.

The thought now looming in your mind is “What Now”? “Where will the market stabilize”? Whether this is the right time to invest or not??

We must admit frankly that we are unable to forecast the index level from where the markets would start climbing up! No body in this world – not even the legendary Warren Buffet—will be able to predict the index level!

As for “WHAT NOW” – we can only say that the India story is very much alive and with a heavy discount sale currently on – GRAB IT—before it’s too late!!

At the end we would only repeat what Lord Krishna said to Arjun during Mahabharata – tum karm karo, phal ki chinta mat karo (Do not worry about the results, just do your duty!)

Investing is your duty today!

Happy Investing!!