Web Based Tools For Investing

SECRETS OF WEALTH CREATION

Never depend on single source of income, invest to create the second source.

Invest with confidence in Mutual Funds.

Investing in shares may be risky..... but ....

...... Mutual Funds are never risky if you adopt SIP mode of investing and invest for long term.

Invest hassel-free, without boring paper-work ..... view performance of your investments on your hand phone anytime.

When you invest...  you buy a day in future to spend without working.

Start early. ..best time is now.

Know more..... from a friend. ....

Take advantage of technologically upgraded, automated, hi-end, web-enabled tools, especially designed for you, to make your investing a blissful experience, like never before.

I am passionate to help you to become wealthy and to share with you SECRETS OF WEALTH CREATION.

Fix an appointment with me today.

Rajiv Kapoor
FCS
98390-34761
rajivfcs@gmail.com
www.rajivfcs.weebly.com

Saving is not Investing

Saving is not Investing

The two wonders of personal finance "Saving" and "investment" are often perceived as same by most of us. But, both these terms are distinct and have a very important role to play in our financial life.

An investor must understand the difference and relevance of both the elements. And we have to participate in both activities to secure a sound financial future for ourselves.

To begin with, let's understand the meaning of the terms "saving" and "investment". Saving is nothing but the excess of income over expenses. So, if your monthly income is Rs 50,000 and your expenses are Rs 30,000. So your saving is Rs. 20,000.

This Rs. 20,000 helps you in meeting your upcoming family emergencies, buying clothes for a cousin's wedding, or buying gifts for your family this new year, or meet other unexpected expenses, etc.

This saving can be in the form of cash at home or money lying in your savings bank account. When this saving is put to use with a view to generate a return, this process is called investment.

So, when you use your saving and buy a mutual fund, or an FD, or put it in real estate, you do it because you want to generate an income on your money. So, these are investment activities.

Although your money lying in your saving account is also giving you a return of about 4%, but it isn't your investment, because the return is not even able to cover the cost of inflation.

If Rs. 2000 can get you a third AC train ticket from Mumbai to Delhi today. Five years later, you would need around Rs 2800 for the same ticket.

Now if you deposit Rs 2000 in your saving bank account today, it would give you around Rs 2500 after 5 years, which will not be enough to provide for the ticket.

Therefore, money kept in a saving bank account is not enough to cover the cost of inflation and hence is not an investment.

This means money looses its value over time because of inflation, and in order to combat with the evil of inflation, we must Invest. A major differentiating factor between saving and investment is the purpose behind engaging in each. 

And that is where we shall give a deep thought and decide if the goal for which we are saving, will be met by simply saving or if we need to put in more efforts and "invest that saving" and actualize our goals.

Saving is generally not backed by a goal. The money is being saved because that money is not in use today, or is saved for meeting any uncounted expenses. Or even if there is a purpose it isn't a defining factor of your life, it can be saving for buying a mobile, or a dress, etc.

On the contrary, there is a specific purpose behind investing which has a significant impact on your life. We invest for buying our dream house, we invest for our children's education, we invest for our children's marriage, we invest for our retirement or may be we invest simply to create wealth.

These goals can not be achieved by just saving. Imagine saving Rs 10 Lacs in a bank account @ 4% interest for meeting your daughter's wedding expenses which is planned 10 years hence.

There will be a huge mismatch between the funds you have in your saving account then and the funds you require. And this gap can only be filled with investment.

Therefore, it is important that in order to achieve our life goals, we invest. And each goal must be aligned with an investment.

For each goal, a particular type of investment is required which is determined by the investment horizon, amount required, your financial position, risk taking ability and various other factors. Your financial advisor will help in selecting the investment products ideal for your goals.

The bottomline is it is important to save and to invest the saving. Both of them are independent as well as interdependent. You must be able to draw a boundary between saving and investment, and not just save for your future. 

Saving & Investment is an ongoing process and should not be disrupted. So, if you are saving and not investing or worse not saving at all, then you must get your act together as your financial health is dependent on these exercises.

Rajiv Kapoor
FCS, CIA
9839034761

Women Play an Important Role in Shaping of Country's Economy

I play such an important role in India’s economy and all this while I thought I was just a housewife.

I have spent years and years playing hide and seek with my savings, saving and hiding, saving and hiding and more saving and more hiding my savings from my family.

I secretly and proudly felt richer and richer with the increasing count of my savings every year. No one and no one except me knew how much and where that money was.

After all, that was my true treasure and world’s best kept secret. I had seen how my mother resorted to her secret treasure in the times my father needed money. Impressed, I believed in carrying the same tradition. And would have continued to do so, sigh! Happily.

I still remember those ideas of sewing additional pockets in my purses where my treasure could be nicely placed. I still remember how I had to once protect my treasure from being eaten by the rodents which attacked my kitchen (yes, I had kept a few thousands first and then filled my jars with pulses). I had once fallen from the stool trying to keep one hiding in the upper part of my cupboard.

Sometimes my money needed extra protection as I had kept a few under the ‘tulsi’ plant in my courtyard. I offer prayers to ‘tulsi’ daily, though my money hasn't really grown.. if wishes were horses.. !!

My daughter who is now in graduation, would often make fun of me by calling me a ‘hoarder’. Yes, she was my partner in crime as she counted ‘my’ money for me once in a while with a ‘God promise’ to not share with anyone.

On the fateful night of 8 November 2016, when my husband announced on the dining table to look for all the currency to be exchanged in the bank, my heart sank.

I did not want to share the world’s best kept secret so openly and so easily with the same set of people I risked my life to hide from.

After all, it was for them that I was doing all this, just like my mother did, for a rainy day!

How will I ever emerge like a super woman with all the money when my family will need – perhaps on my daughter’s wedding? Or even better, for buying a house a few years later? My dreams shattered.

This was not all. While I was recovering from this shocking news, I heard my husband talking on phone with his friend “that’s why, its best to keep money in the banks. Not only the money grows, it offers opportunities to invest elsewhere and also protects our hard earned money” (in my case hard ‘hidden’ money).

I glanced at my tulsi plant which was swaying with the changing direction of winds. I instantly knew what I needed to do. I confessed to my husband about my savings. All the sewn purses, secret pockets, kitchen jars were emptied. After a hearty laugh, here he was, explaining to me what I should have done for the benefit of my family, instead of hoarding the money ‘for the benefit of my family’:

I should have opened a bank account and deposited my money instead of hoarding it.

Had I been a smart investor in addition to being a smart saver that I already was, I would have actually multiplied my money several times.

By not investing my money rightfully, though I was able to somehow protect them from rodents in the house, I could not protect them from the fall in their value due to inflation. My money kept losing its worth sitting in my purses and I never got to know.

All I needed was a bank account to start a systematic investment plan (SIP) of as low as Rs 500 a month.

The timing could not be better to be financially wise. My husband did understand my self-esteem need of having my ‘own’ money, my ‘own’ savings.

He suggested that I should immediately start investing. In the era where I can withdraw and transfer money with the blink of an eye, there was really no need to keep real currency at home at any time. With the changing times, one needs to change. I wonder why I did not, earlier.

He introduced me to an app known as ‘NJ Wealth’. 

There are several other such apps in the market now. I particularly liked it as it appeared extremely user friendly (even for non-finance savvy persons like me) and helped me make my financial decisions with a lot of ease.

When one door closes, the other opens. For me, this blow was an eye opener. I will no longer have to decide where to hide my money. Instead, I will now make decisions on where to invest.

The ‘tulsi’ in my courtyard was springing and my partner in crime was smiling!!

Rajiv Kapoor
BSc, LLb FCS CIA
9839034761

Why don't women make investment decisions?

Why don't women make investment decisions?

Today the world is talking about Women Empowerment.

In India, most public discourses on women focus on their safety. However, when you dig deeply, many of the issues boil down to empowerment in an everyday sense, and one of the issues underlying empowerment is often money.

The obvious problem here is that women in general earn less than men, often a lot less.

However, that's just one part of it.

There is another dimension to this.

Even when women earn well, and even when they belong to a milieu where there is no overt discrimination, they are less likely to be managing their own money, their savings and their investments.

Leaving out those who are in a financial profession, it seems that investments is something that women just don't do.

This state of things wouldn't come as a surprise to anyone but we need to pause and question it a little deeply. What exactly is the reason?

The obvious answer is that in families, it's the men who manage savings and investments. 

Also, there's the basic assumption that men are the savers and investors while women are the spenders.

This is incredibly widespread and not just in a traditional background. Watch the ads on TV. There are plenty which show women as the wise and smart and sensible decision maker and men as the impulsive ones.

However, these are all likely to be in things like nutrition or consumer goods and such. When it comes to ads that are about financial products, you see the reverse. The wise and foresightful husband plans for the future while the woman is buying LCD TVs etc.

So how will this change? I for one don't think that any kind of top down, patronising solution (an investment equivalent of a women's bank, for instance) is going to work. Nor are the bizarre 'specially for women' bank accounts--they're just marketing gimmicks.

Money is power, and that power extends not just to earning money but managing it, investing it and having a say in what's done. This kind of power is something that's transferred not when someone who has it gives it away but when someone who doesn't have it steps up and acquires it.

At the end of the day, there's no difference between men or women who don't know enough about personal finance. Both are in majority. And there's no separate men's and women's solutions to this.

Regardless of gender, there are plenty of resources out there to educate oneself and pull one's level of understanding up by the bootstraps, as it were. It's sounds like a tough job, but there it is.

Rajiv Kapoor
BSc LLb FCS CIA
9839033761

Effect of Rupee Movement On Stock Prices

Effect of Rupee Movement On Stock Prices

 

Rupee is again near its lows against dollar. In recent past rupee movement has been quite volatile and this volatility can be attributed to factors like Government Policies, Interest Rate Scenario and demand and supply imbalance. Although as an individual stock market investor we cannot control volatility but we can definitely device some strategies which will enhance our returns. If you can proactively sense the direction of rupee movement (either up or down) you can use it to your advantage by capitalizing on price fluctuation of exchange rate sensitive stocks.

In this article we will identify exchange rate sensitive sectors and stocks in Indian stock market and try to understand the correlation between stock price and exchange rate. Individual investors can exploit this knowledge to earn appreciable returns in short term.

Impact of Exchange Rate Fluctuation

Indian companies can be divided into two groups based on the impact of currency fluctuation on their stock price and profitability:

1. Net Exporters – These companies sell product to outside world and receive payment in foreign currency (be it dollar, pound, euro etc). Whenever rupee appreciates as compared to these currencies, companies are exposed to translation loss as they can buy fewer rupees with same amount of foreign currency. This translation loss hurts their profitability since the raw material cost is in terms of rupees. Similarly, company’s profitability increases in case of rupee depreciation.
2. Net Importers – These companies buy product from outside world and make payment in foreign currency. Whenever rupee appreciates they are able to buy more foreign currency for payment resulting in overall translation gain. Profitability of companies increases in this case and similarly, profitability decreases when rupee depreciates.

Choosing the sectors to invest

Now we know the broad impact of currency movement so let’s focus on the sectors where one should bet (long or short) in case of anticipated currency movement (up or down)

Information technology 

This is one of the sectors which are most sensitive to exchange rates. It falls into category of net exporter hence benefits from rupee weakness as compared to foreign currency. This is one of the recommended sectors to take exposure for short term as the stock price movements are in the tune of 4 to 5% in very short span of time.

Textiles 

This sector is a net exporter and receives most of the payment in dollar terms. It benefits once the rupee gets week.

Petrochemical 

Earnings in most businesses of this sector are linked to dollar as the key raw material i.e. crude oil is purchased in USD. Rupee appreciation benefits this sector in short and long term.

Pharmaceuticals 

This sector has exposure both in terms of export and import. They earn foreign currency through exports but they need it for importing various chemicals too. This sector is a tricky one with respect to exchange rates.

Auto 

This sector has considerable amount of income from export of vehicles. It benefits from rupee weakening but there is one more angle to it. Sometimes the parts they use for assembly are imported. The one who uses more indigenous parts benefits the most in case of rupee depreciation.

Summary of Buy/Sell decisions in Stock Market

Sector	Category	Rupee	Exposure
Information Technology	Exporter	Strong	Sell
		Weak	Buy
Textile	Exporter	Strong	Sell
		Weak	Buy
Petrochemical	Importer	Strong	Buy
		Weak	Sell
Pharmaceuticals	Exporter/Importer	Strong	Tricky
		Weak	Tricky
Auto	Exporter	Strong	Sell
		Weak	Buy

Conclusion

This article covers important sectors and you can use it as reference to take informed decision. There are a lot of other sectors which might get affected based on their foreign currency exposure. If you want to analyze impact of currency movement on a sector of your choice you need to focus on basic pointers like company status (net exporter or net importer) and how much hedging company does so as to mitigate the effect of exchange rate fluctuation on its profitability.

RAJIV KAPOOR
FCS
Company Secretary in Practice
9839034761

I AM YOUR WELL WISHER BUT ARE YOU YOUR OWN ??

I AM YOUR WELL WISHER BUT ARE YOU YOUR OWN ??

I wish all my friends to be healthy and wealthy. Discipline is the key for being healthy and wealthy. Follow regimental life-style for being healthy and disciplined investment plan for being wealthy.

Invest in Equity Mutual Funds for long term wealth creation. Have full faith and conviction in equities. Best way to invest in equities is through mutual funds and that too through SIP mode. Invest religiously and without predicting the sensex. Equities are NOT volatile in long run.

Someone who has made good money from equities would never share that fact with even a close friend, as that would lower his esteem in the eyes of his friend. He would always show that whatever he is, that’s because of his hard work in the calling in which he is actively engaged.

There would be many who would give casual negative remarks on equity investing. With due respect to the feelings of all those people who have actually had bad experience in equities, I would say that, they are pre-conceived and excessively biased.

Being disciplined in investment means remaining invested for long term and investing consistently over fairly large period of time. People blame equity investing  because they enter when sensex is high and exit when it sinks. They try to time the markets and there they fail.

No one can time equity markets hence best strategy to follow is to keep investing through SIP mode and if possible by investing more when markets not performing.  Equities give better returns than any other asset class including immovable properties.

One is happy appreciating his wealth in immovable asset class after holding it for fairly long period of time, but had the investment in equities been for the same period of time, then the returns might beat the returns from immovable properties.

We offer many on-line and automated facilities which will make your investing an enjoyable and blissful experience. Be your own well-wisher. Talk to me to evaluate your existing investments for free. I am passionate about helping friends to get wealthy.

Rajiv Kapoor
Kanpur
9839034761

Life Cycle and Wealth Cycle Stages - FIND YOUR CATEGORY

Life Cycle and Wealth Cycle Stages - AN ANALYSIS

The life cycle stages of an investor can be classified as follows :
o Childhood stage
o Young unmarried stage
o Young married with children stage
o Married with older children stage
o Pre-retirement stage
o Retirement stage

· The income level of investors, the saving potential, the time horizon and the risk appetite of the investor depend on his life cycle.

· Younger investors have higher income and saving potential, take longer term view and may be willing to take risks.

· Older investors may have limited income and saving, shorter time horizon, and unwilling to risk their savings.

· There are 3 wealth cycle stages for investors :

o Accumulation stage is when investors are earnings and have limited need for investment income. They focus on saving and accumulating wealth for the long term. Equity investments are preferred in this stage.

o Transition stage is when financial goals are approaching. Investors still earn incomes, but have also draw on their earnings. Investors choose balanced portfolios that have both debt and equity.

o Reaping stage or distribution stage in when investors need the income from their investment, and cannot save further. They reap the benefits of their savings. They prefer debt investments and preserving of capital at this stage.

· Inter generational fund transfer refers to transfer of wealth to an investor. The preferred investment avenue will depend on the life cycle and wealth cycle stage of the beneficiaries.

· Sudden wealth surge refers to winnings in games and lotteries. Investors should be advised to temporarily park their funds in money market investments and create a long term plan after thinking through the plan.

And Finally affluent investors are of two types :
Wealth preserving investors who are risk averse and like to invest in debt.

Wealth creating investors who prefer growth and are willing to take the risk of equity investments.

RAJIV KAPOOR
9839034761

WHY DO PEOPLE INVEST IN LIC POLICIES WHEN THE RETURNS ARE SO BAD ???

WHY DO PEOPLE INVEST IN LIC POLICIES....

People in India tend to believe that LIC has an implied govt guarantee. Most Indians looking for safety of their money, think LIC is the best for them. It is like saying that your money is safer in SBI & not in private banks !! Really ?

So the safety seekers are more likely to invest in LIC, even though the returns are very average in most LIC endowment based plans. If you are happy with 4% returns, all the best to you.

LIC has the most entrenched network of advisers & its a legacy of 50 plus years. It has become customary to buy LIC, atleast your dad is bound to recommend you the same once you start your first job.

However the fact is that the times when 4% returns from LIC were good(1950s to 1980s) are long gone. With inflation running 10% for a decade, LIC plans have been a big value destroyer for most. 

Unfortunately, it takes 2 decades for you to realize that you have lost money on LIC investment. So most people don’t even understand the 4% returns i am talking about from LIC.

The LIC agent is mostly a known social person from the same locality. It becomes almost obligatory to buy policy from agents, even if you know that you don’t understand the investment.

Also what is the adviser’s interest in pushing the plans ? Of course, LIC is one of the best in commission payouts largely because of the nature of the policies sold (endowment plans). 

Whats worse, there is no accountability on returns since most plans work on 20 plus years tenure. So you can’t even confront agent like you can in case of ULIP/market linked plans. You tend to feel that your investment are good & guaranteed !!

Most importantly, majority (tempted to say all) LIC agents almost have a similar pitch.They almost never talk to you about “annualized returns”. The pitch is “your money grows 4 times in 20 yrs…..6 times in 30 yrs, etc”. 

Most people can’t calculate what the annual % returns are. Fact is most returns are 3.5% to 5% max. But it is never stated clearly on paper & the agent gets away by quoting “additional bonus” & other stuff.

No clear track record of past annual returns % ( considering all bonuses) is disclosed by LIC. This actually helps the agent & LIC is not taking any efforts to curb this mis-selling. Who will buy any policy if it were known that returns will be 4% only ??

Hope the above points help you understand the key reasons why LIC & traditional endowment plans even by private insurers, still dominates the Indian market.

Happy Investing in Insurance Policies !!

Rajiv Kapoor
9839034761

I AM SO GRATEUL - THANKS

Thanks for every support, help and courtesy.

I am so grateful.

Even though having realized importance of financial planning and understanding strategies which create wealth, I made few mistakes early in life that prevented me to create more wealth than what have I created by now. This lead me to inquire from people and friends around, whether are they also committing similar mistakes?? The result was astounding. I realized that most of my friends did not commit any mistake because neither did they knew enough about financial planning nor they were aware about need and importance of investment and wealth creation strategies. For most of them to become rich was only through slogging, real estate or lottery.

Initially it was really difficult for me to prove my genuine intentions, gradually however I could prove my mettle and garner confidence, faith and credence of those who were apprehensive initially with my principles and concepts.

Having gained enough confidence in this area of knowledge and realizing that this can be part of my professional services as well, I started selling Mutual Funds and other investment and insurance products in a very humble way about four –five years back.

And since then there has been no turning back. I am happy to understand the power and the truth of the quote “Give out what you want to get back”. Selflessly, helping others has made me to be loaded with enough of information and knowledge that has immensely helped me to care for my own investment and wealth creation strategies.

I am grateful to all my friends who have been trusting me and seeking my help in their financial and investment decisions.  Their expectations has steered in me, the need to remain updated and equipped with enough of knowledge in this field which has eventually helped me in a big way.

I am happy that all those friends and clients who sought my advice for investing their hard earned money have already made good money out of the investments that they made and that number of investors are increasing every month most of whom are through referrals, which itself explains the level of confidence, affection and trust that I have received from you all.

Thanks for every support, help and courtesy.

I AM SO GRATEFUL.

RAJIV KAPOOR

9839034761

INVEST WISELY -START EARLY

Traditional financial planning is so simple it can be summarized in one sentence...

Make more than you spend and invest the difference wisely.

Even the "invest wisely" portion is simple because academic researchers have fully documented how to properly construct a passive, indexed, asset allocation portfolio.

There is no "mystery" or "secret". No experts, formal education, or specialized training required. Anyone can do it. Just open a brokerage account, save, and invest. You don't even need a broker - you can do it on your own.

The problem is almost nobody does it.

Why?

When you're 20 years old you can't be bothered with something like retirement saving because it's so far off in the future it appears irrelevant.

When you're 30 the focus is on buying a home and/or starting a family so every penny is needed.

When you're 40 the kids need braces, eat like horses, and their college funds need maximum contributions.

When you are 50 it's too late. Too much time has elapsed to allow compounding to magically convert small investments over long periods of time into large sums of wealth. The easy door to passive wealth accumulation is closed.

So start early ..... start SIP in Equity Mutual Funds now.

Call.....

RAJIV KAPOOR
9839034761

FINDING YOUR ROAD TO SUCCESS

FINDING YOUR ROAD TO SUCCESS:

Your starting point is the one where you are standing today. You know your destination but you do not know the route. You have to look for someone who can guide you so that you reach your ultimate goal.

Come to me, I am passionate to help you define a road which you shall follow in order to achieve your target. The end of the pathway is your ultimate target, which in most cases is a happy retirement life.

I can assist you in devising the road for you according to your goals, your demographics, your income, assets and liabilities. I can give you solutions for various hindrances that you might face while steering on the path, and also guide you on crossing the periodical laps i.e the points where you will achieve your short term and long term goals.

On the road to success, you'll confront a number of challenges and opportunities, your journey can be characterised as:

The road is long: The road of your life in very long. Keep calm and carry on. Your ultimate destination i.e your biggest life goal is yet too far, so you have to be energetic and follow the path because there is a lot lying ahead. At any point, you must not give up and stop following the investment path because it is the only way you can achieve your mission.

The road will have pits: The investment path is simple, but not easy. There will be bad times and your investments might not fare well, at this point you must not panic, you must have the courage and confidence on the road that you have chosen. The strength of your portfolio will take you out of the pit to help you move on.

There will be laps: The laps are the points of actualization of your short and long term goals. Your investment plan will comprise specific investments for each of these laps. These laps are predefined. For example let’s say your first lap of buying a car will come after five years, the next lap of buying a house will come after another five years. So, whenever you are near a lap, your SIP for 5 years would be there to fund the car purchase.

The road will have bumps: While there are certain goals to be achieved, there are uncertain emergencies as well. A solid investment plan will provide for theses bumps also. A sudden job loss can cause a lot of financial disturbance, yet a preplanned provision for contingency will help you from falling, though there will be a little mental instability, but your investments will take care of your expenses till your next job. Though the bumps might disturb the stability of your investments, yet you'll cross it because of the strength of your portfolio and your will-power.

You'll see shortcuts: On the path of investments, you'll come across various diversions and shortcuts, which might promise to help you achieve your target quickly, but you must not pay heed to such shortcuts and keep moving on the set path. You might come across a flyer which says invest Rs 1 Lac and double your money in six months. Don't fall prey to such claims, because the shortcut might have a dead end ahead.

A bend in the road is not the end of the road: The investment path that you chose, might require you to take a turn. If this happens, it is best to modify your portfolio in order to meet your present needs, or if the present market offers some new and better investment opportunity than what you already have. So, you should keep moving as the road suggests to.

The finish line: This is your ultimate goal, a happy retirement.

The bottomline is there will be steep turns and tolls where you have to stop by to achieve your short and long term goals. There will be diversions as well, but you do not have to deviate from your set plan, since these diversions are the temptations to take a short cut which will ultimately mislead and prevent you from achieving your life goals. You have to overcome and exploit them wisely.

Your investment plan is the road that you will travel on, your determination is the fuel which will keep you going, your hard work is your engine, and when you are on the hot seat, feel the thrill and be ready for the best.

So, take my help, call me now.....

Rajiv Kapoor

9839034761

What is the best SIP (systematic investment plan) in India with great returns? How long should the investment be done for?

What is the best SIP (systematic investment plan) in India with great returns? How long should the investment be done for?

Investment in Mutual Funds through SIP route should be for a minimum period of 5 years. (If you want your money back in less than 5 years, then invest in pure Debt Funds or AAA-rated Fixed-Interest instruments like FDs or NCDs (Non Convertible Debentures etc.) etc.

The rule is “High-Risk ~ High-Returns” when you invest in Mutual Funds.

Always invest in Mutual Funds of reputed Mutual Fund Houses, if you want your money to be in safe hands.

Large and Very Large Cap Funds are considered very safe to invest in.

Small and Micro Cap Funds are considered very risky to invest in but they give best returns.

 Mid Cap Funds are also considered risky to invest in, but they are considered safer than Small and micro cap funds.

    

Indicative TAX-FREE Returns, through SIP, for minimum 5 years 15% which means that the investment would double in 5 years.

So, in 10 years, value of your investment will become 4 times the invested amount.

In 15/20/25/30/35 years, it will become 8/16/32/64/128 times. Your money would just keep on growing.

Your investment will grow as if money is growing for you on a money plant.

This investment journey & opportunity will give you much better returns than your investments in gold.

Rajiv Kapoor

9839034761

MUTUAL FUNDS VS STOCKS – WHO WINS THE RACE?

Mutual Funds vs. Direct Equity – Who wins the Race?

Is a direct foray into the stock markets preferable over investing in mutual funds? The answer probably lies in the investor’s capabilities. For instance, when we talk about wealth-creating stocks, blue-chip names, such as TCS, Reliance, Infosys, Wipro, etc come to mind. While they have managed to garner great returns in the past 20 odd years, how many investors would have spotted these winners right at the beginning? Not too many, we suppose. However, it would have been relatively easier to identify top mutual funds vis-a-vis top stocks a decade ago. Let us assess these two fine investment options on some parameters:

1) Behavioral Science

A critical element in successful investing is "how you react to feelings of both discomfort during the market's fear cycle and invincibility when markets are booming," writes Marty Leclerc in an article in the Forbes magazine. During periods when share prices drop, he says, data shows that most investors want to end the discomfort (basically stop loss?), which is the "root cause of poor returns.

It is quite surprising that emotions and fear have a link to investing habits. Let us understand this with a simpler example. This is an experiment conducted by a group of scientists as part of understanding behavioral science. A group of monkeys were put inside a cage with a ladder having some bananas on the top. One of the monkeys started climbing the ladder to pick up the bananas. Once it started climbing, the scientists started pouring cold water on the remaining monkeys due to which these monkeys started to beat the climbing one. Water stopped after the first monkey got down. This happened every time a monkey tried climbing the ladder. Slowly, they started replacing these monkeys with a new set of monkeys. However, one change was that they stopped pouring cold water now. These monkeys failed to notice this change and kept beating the monkey which tried to climb the ladder.

This is (in)famously known as the herd mentality. Herd mentality could prove to be disastrous, especially in the investing world. Your reactions to various ups and downs in the market can have a greater impact on the final returns. Patience is the master. The more patient you are, it is highly likely that you beat all odds. It may not possible to be patient or invest systematically in a stock, which can move from East to West in no time. However, by starting a Systematic Investment Plan (SIP) in mutual funds, you can definitely imbibe the patience in your nerves.

2) Investing in top companies

Anyone would love to invest in top companies such as MRF Ltd, Eicher Motors or Bosch. However, can you imagine the prices these are quoting at? They are currently trading between Rs. 20,000-40,000 per share, which puts them out of reach for the average investor. However, a good mutual fund allows you to indirectly obtain a decent exposure to such scrips.

3) Investing regularly in small amounts

It is not quite easy investing small amounts in the same stock every month, quarter or year. It requires keeping track of the stock and sometimes the volatility can get the better of you. In comparison, it is easy to opt for a 10, 15 or 20 years SIP in any of the decade old funds. The best part is that you can actually start off with as low as Rs. 500 per month.

4) Professional Management

We had discussed on how tough it would have been for the common investor to identify an Infosys, Wipro or TCS at the beginning? It is the same case even today. When we lack the knowledge and tools to identify stocks that may turn out to be winners/ losers in the future, it is better to lean on the expertise of a mutual fund (manager). A fund manager possesses all the skills as well as equipment to be able to identify these next-gen stars.

Final Word

The above factors clearly point out to mutual funds as an easier entry option for investors. However, this is not an invitation to move to mutual funds from stocks. If you are already investing in stocks or have the skill-set to pick good stocks from a large universe, persist to make the most of it.

HAPPY INVESTING

Rajiv Kapoor
B.Sc., LLb., FCS
9839034761