Find below a list of some of the common questions that we come across. You might be able to relate to some of them !
Why should I invest in equities?
Equities historically have offered the best returns across asset classes. They help you capture the upside potential of good businesses. Investments in good business with pricing power also help you protect and grow your portfolio and beat inflation!
Markets fluctuate too much.
People often confuse volatility with risk. That might be true in the short term if one needs to liquidate in a hurry. However for a long term investor volatility is your friend that provides fantastic buying opportunities. The riskiness of an investment depends on the soundness of the underlying business and the capability and honesty of management. Equity Investing is as much about guts as it is about brains!
Aren't Equity Investments Risky? I have lost money in equities.
Most people invest in equities like they would play darts. How many of us take the time to thoroughly understand the underlying businesses in which we invest. Do we do as much homework before buying stocks as we do before buying a house or car? Then again do we check the prices of our House or Car everyday and get depressed or elated with every rise/fall?. The issue is with our approach to equities not the asset class 🙂 We often try to time the market to make quick bucks. Try understanding and then buying wonderful businesses and then see the wealth it creates for you 🙂
Should I invest in only midcaps or smallcaps, value or growth to achieve higher returns?
You should invest in sound, well managed companies that have a competitive advantage and that achieve superior returns on capital. The Market Capitalisation/ Size of the company should not be a deciding criterion. Although the earlier you spot a good company the longer the runway for growth, it is also that much difficult to assess the scalability of the business model, the longevity of growth or the realisation of so called ‘value’ . If you can, great, but dont get boxed into themes!
Will it give me assured returns?
Equities do not give assured returns. But if you buy good businesses at a fair price and hold them for the long term, you will get better than fixed income returns with reasonable certainty.
What is a fair return that I should expect from equity investments?
The Index has given ~ 14-15% annualised return over a long period. That can be considered a fair return over a long period of time without taking undue risks or spending sleepless nights. What’s even better, these returns are tax free! If you can cherry pick good stocks and have the stomach to put money when others are fearful, the returns could be better.
How should I start?
Ideally you should start with an initial corpus and then keep adding regularly to it every month. This not only helps you add regularly to your equity portfolio but also helps you invest across market cycles.
Why should we come to you?
If you have the time, inclination, expertise and patience to invest in the markets and take the ups and downs in your stride, by all means you should do your own investing. Otherwise we would rather have you focus on your core profession and excel at it (and make tons of money) and let us worry about your investments 🙂
Never invest in any idea you can’t illustrate with a crayon!”
…. Peter Lynch