‘Don’t attempt to time markets, invest in managed funds’

Expert says investors should focus on investing 40-50% of monthly income in equity mutual fund schemes

Even though stock markets have been seeing extreme movements, equity as an asset class remains the best channel to create wealth. However, avoiding timing the markets and making systematic investments for a long period are key to wealth creation, tells Mrunmay Das, Founder Director, Das Capital Private Limited to Telangana Today

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Markets movement

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Retail investors should not worry about where markets are going on a daily basis. They should focus on investing 40-50 per cent of monthly income in equity mutual fund schemes via the systematic investment route. Invest periodically like we used to do with recurring deposits (RD), earlier. Growth and long-term returns will come from equity only. One should have a long-term outlook to investment with a minimum horizon of five years, to get rid of volatility. Liquidity is not a problem as the investments can be redeemed in three working days if required.

Volatility

Markets, in the short term, have always been volatile in India. I have not seen the market not being volatile in any year, any month or any week. Volatility is part of a developing market, which India is. For instance, war is happening between Russia and Ukraine. India has got nothing to do with it but still, it is getting affected. Interest rates in the US are going up and that is also affecting India. All markets are connected in this digital world. Volatility in developed markets affects India but not vice-versa.

Seek help

Many retail investors have supported the markets in the last two years heavily. It is a good sign. But someone should advise them that the market is not a place to get in and get out in one or two weeks but to invest and stay long. The best option is to go for open-ended equity schemes offered by Mutual Funds. Fund managers will research the equity portfolio, and decide how long to stay invested and when to rebalance. Retail investors will not have these capabilities and tools. For a five to ten-year horizon, Indian market is predictable and affordable too.

High inflation

Inflation is going up in India after a period of 5 to 7 years but, as long as growth is visible, the real return (equity growth minus inflation) will remain positive. India has the highest growth rate amongst large economies in the World. This momentum will be there for the next 10 years, at the least. Interest rates have remained low for several years. It has started going up a bit now, and RBI has taken steps towards managing inflation in the recent rate hike.

Anxiety

New age investors are monitoring NAV almost on a daily basis. By investing in equity, you become part-owner of the company. If you are dealing with a company, it should be done at least for five to ten years and not just for a week or 15 days. Frequent monitoring will create anxiety and this will result in an action that is not warranted. It is not the job of an investor to monitor the market on a day-to-day basis.

Flavour

Infrastructure will be the theme for several years to come for India. Again within infrastructure, it can be physical infrastructure like manufacturing, railways, roads, real estate or digital infrastructure like IT, financial, banking and insurance, and fintech. That decision is best left to fund managers. Disciplined investing for 5, 10 years or longer in equity schemes in India will ensure good returns, beating inflation, and achieving financial independence.