These are some of the queries that I receive – most of them asking me ‘Should I invest in equities’ or EVEN ‘Why do YOU say I should invest in equities’. Let me first list the questions:

1. Will the next 20 years be the same as the 20 years that have gone by?

2. A recent article in a leading Pink daily said that equities and fixed deposits have given the same return, so why equity?

3. Is there some guarantee that equities will give better returns than real estate?

4. If I do not invest in equities, what will happen?

5. Why should I invest in equities at all?

6. Over the past 18 months, people have made profit only because of AVERAGING, not because the MARKET has gone up.

etc. etc.

Frankly, I do not know anybody’s portfolio, goals, attitude towards risk, attitude towards an asset with high variability (which most professors treat as risk), …so I cannot comment. Far more importantly what difference will it make in my life, IF YOU INVEST or IF YOU DO NOT? Nothing. Really nothing.

I do believe that assets with a higher variability of returns will have to give a greater return. However I am a victim of my own past behaviour, am I not?

Realty, equities, commodities, debt – all asset classes will make money for some, will lose money for some. A few brilliant human beings will make sensational gains, and a few will match the indices. However a lot of the so called ‘middle class’ traders / investors will lose money in the markets.

Making money in life is about skill and luck. If you are skilled and work hard, luck will follow.

 

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  1. I feel, in Financial world, you always need to be prepared and should keep hunting for opportunities
    Because ‘Luck is when opportunity meets preparation’

  2. Investing in Gold and RE is different than Equity. The general mindset is that these are bought for self consumption and for long term.

    When it comes to equity, you don’t see any benefit of it except buying & selling. It is another story if you are buying for dividends. For all the people who are asking should I invest in equity, they are not capable to identify the right stock and 100% of them would end up in losing or not having luck.

  3. Investing is a skill. Folks who generate high returns in any asset class are highly skilled at the game. They build these skills over their life time.

    For anyone to generate consistent returns, he needs to understands markets, economic trends, corporate India, various industries, etc. If someone has made money in market without any of these things, he is just lucky. And you can’t be lucky every time and over long time.

    The fact that someone is asking a question whether he should invest in equities means he is a novice to equity investing. Then he should work with advisors.

  4. Subra: What kind of answer is that!!! People are asking you cause they believe that as a experienced person, you can give them some pointers rather than vague answers, Isn’t it!!!

    Atleast give them some pointers to start where they can find the answers or a direction where they can get better information….

    just a opinion…

  5. May be this question is not relevant to subject of this post. However I have a question. This question is for Subra Sir and the like minded. Appreciate your responses.

    Better understand the Business you want to be in Or you are in. We study Degree, Masters and sometimes specialize in one subject before venturing out for a Job. Similarly why not do the same thing with Stock Markets. Why don’t we invest 10,000 hours in *studying* before investing in Stock Markets? Why don’t we do a small course that can help you in investing wisely in Stock Markets?

    Having said above, I want to do a small course/Degree in Stock Markets? Could you please share details of some good courses (may be 6 months, 1 year etc., correspondence, full-time etc. ) out there?

  6. โ€œMany a man or woman who would not expect to be successful as a circus clown, opera singer, or grocer, without some kind of preparation or talent, nevertheless expects to be successful right off in the stock market- probably the most intricate and difficult game on earth. The reason for this faith in success without any special qualification is doubtless the most universal belief in luck.โ€- Fred Kelley

  7. One more parent-ism: you can take a horse to the water, but you cannot make it drink… ๐Ÿ™‚
    matches your exasperation, subrabhai, in that “what difference does it make to me?”

  8. Banyan Financial Advisors

    My understanding of finance says that there are limited options wiht a person when it comes to investing their funds. These options are:
    1. Real Estate – the mostly costly option
    2. Gold – evergreen option
    3. Debt products – for safe investors
    4. Equity – Depends – if you have a long term horizon & Lastly
    5. Combination of all or any of above.

    Not every one is rich enough to have Real Estate in their portfolio. Gold – upto a limited extent. The only two options are Debt & Equity. Debt would give a safe & fixed return – but won’t give a run for your money. The last option is Equity.

    My rule of thumb says that in long term Equity returns should be more than 1.5 times of debt. The logic is simple – if the businesses can’t get that much return for the risk they take, they would rather prefer investing into Debt products – Opportunity cost.

    Does it answer that Equity as an asset class can not be ignored ?

    Regards
    BanyanFA

  9. Subra,

    I consider you as a motivator because of whom I understood the importance of equity(mostly MF in my case) in one’s portfolio. But the answer from you these fellows makes me little nervous :-). You said “what difference will it make in my life, IF YOU INVEST or IF YOU DO NOT? Nothing. Really nothing.”

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