When I meet people to advise on Investments or Personal Finance, the most asked question is “How much will I get if i invest for 1 year?”.
I honestly don’t have answer to this question. So, I would say, investments in mutual funds / Stock market is for long-term and not for short-term.
Next question is “How long is long-term?” or “How many years is long-term?”
My answer is > 3 – 5 years. Then they think for a while if they can invest for so long.
Generally, we don’t ask these questions while investing in land / plot / real-estate. We invest in land without thinking about the investment duration and generally keep it for very long-term….may be 20 yrs, 30 yrs or even for a life time and pass it on to our successors. This is the reason why it grows in value over long-term.
In my previous article, I have given enough evidence to show that Mutual Funds / Stock Market beats Real Estate in terms of returns over longer periods of time. But still penetration of Mutual Funds & Stock market in India is poor compared to developed economies.
In urban India, just 9% of the households invest in mutual funds, according to a recent report by Nielson titled—“Building the Mutual Fund Market in India: The Need for Financial Literacy”.
A major reason for the low participation is the low level of financial literacy among Indian consumers, which leads the average investor to view options like mutual funds with suspicion and caution.
In Australia, Rs. 96 Lakh Crore is invested in Mutual Funds, where as in India it is only Rs. 8 Lakh Crores. Population of Australia, which is 2.5 Crore, is far less compared to that of India (120 Crore). I hope Kangaroos are not investing in Mutual Funds in Australia.
Stock market’s are volatile and fluctuate up and down in the short-term. But in the long-term, they have given phenomenal returns.
Mr. Warren Buffet’s Stock market investments fell in value by 50% more than 6 to 7 times in his investment life time of 65 years. Still he made $ 70 Billion in 65 yrs starting with just $ 10000. He has gone through several Stock market Bull and Bear (Crash) cycles but still stayed invested with out getting perturbed. He always says “You are investing in a Business, own it for a life time”.
In wealth creation – “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”
– Warren Buffet
Mr. Warren Buffet used to sell Coke bottles to make tiny profit when he was a kid. Now, he owns 10% of Coca Cola company’s shares. He started investing in Shares at the age of 11 and he once remarked that he started very late!! He still lives in the same 3 bed room flat in Omaha, which he purchased in 1958.
He once remarked “Success is really doing what you love and doing it well. It’s as simple as that. Really getting to do what you love to do everyday – that’s really the ultimate luxury…your standard of living is not equal to your cost of living.“
My mutual fund portfolio:
Third scheme – LTEF (ICICI Long Term Equity Fund) – is a Tax Saving Mutual Fund for Section 80(C). I have been investing in this scheme since Mid-2012 through SIP. Returns are 22% p.a.
Last scheme – IDFC PEF (Premier Equity Fund) – is Mid-cap fund. I have been investing in this scheme through SIP since Nov-2011. Returns are 27.8% p.a.
In all other schemes, I have been investing from last 15 months only. So the fund performance / returns can’t be judged over such short periods of time.
Some of my clients (who are dear friends too), who are marked this mail, namely KVS Kiran, I Ganesh Kumar, Sunil Dayalapalli, Ratheesh Nair…have got these kind of returns in their Mutual Fund SIP investments, which they have started 3 – 5 yrs back.
Investment is all about long-term. Don’t let the short-term temptations make you redeem your investments. Investments are made for future long-term goals such as children’s higher education, down payment for home loan, buying a flat, funding foreign tour, children marriage expenses, retirement etc.,
Attach your investments to a particular goal and redeem only to fulfill that goal.
For example, if your goal is retirement, then don’t touch the investment until retirement.
For example, if your goal is creating wealth, then don’t touch the investment for a life time.
For example, if your goal is children’s higher education, then don’t touch the investment until your child needs money for his/her higher education.
In all my previous articles, I have shown how certain Shares and Mutual Funds have created wealth for investors in the long-term. If you can’t pick good Shares on your own, invest the money in mutual funds through SIP route monthly and continue for long-term.
Mr. Rakesh Jhunjhunwala, who is famously called as Big Bull and India’s Warren Buffet, started with an investment of $ 100 in 1985 and today his net-worth stands at $ 1.9 Billion (Rs. 12540 Crore).
He once remarked “I first bought Titan shares at Rs 30. The stock went to Rs 6,000. I have had nobody in history come and tell me: Why don’t you buy Titan? The only advice I get is: Why don’t you sell Titan?”
Titan Share price movement in last 15 years
If someone tells you Stock markets are risky, then first understand that he is not knowledgeable about Stock markets and second understand that if you believe him, you are not going to invest in Stock market and you will remain in the same class as you are now even after 30 yrs.
Its high time to make a new beginning by taking cue from great investors and follow their path to create wealth and become financially independent.