It is the nature of the market to be volatile. But it should not be volatile in your nature me while taking investment we decisions, advises P R DILIP, Founder, Impetus Arthasutra, a SEBI-registered Portfolio Manager in an interview with ECOSTAR BUSINESS.
Equity an opportunity to be a partial business owner passively
Equity means equal ownership. Along with equal ownership, there is an equal responsibility too which is a responsibility of understanding which company an investor is investing in and what business the proposed company is into. It is not up to the capability of an average investor to understand the growth potential or the risk involved in a company, where he is tempted to invest unless a proper evaluation of the business and people behind running it are done. If an investor has only a peripheral understanding of the company’s stock in particular and equity market in general, then the person is not responsible enough towards his own capital deployment. Equities always give an impressive rate of return. Investors who understand the equity market and nuances of the chosen portfolio have always been happier. Those who have made an exit midway have never achieved their goal. like the imprudent action of getting down from a train before reaching the destination. Time and again it has been proved right what Warren Buffet said: “The stock market is a device for transferring money from the impatient to the patient”.
Savings & Investments
Savings is a natural process, a tendency inherent in most people who have a regular income. With a conscious decision, when the savings are deployed in an asset class or financial instruments, the process becomes an investment. Most people have only a vague idea about these aspects. They interchange the terms of savings and investment as if both are the same. India is known for its highest savings rates in the world with two-thirds parked in real estate and gold. The rest goes into financial assets, mostly in fixed deposits. The equity market attracts only three to four per cent of the savings, which is far below the desirable rate for a growing country like India that needs huge capital to drive the economy into a major growth. A country can grow faster only with the support of equity investments, which are the natural sources of sustainable, long-term capital On the other side, as far as an investor is concerned, returns from financial assets like fixed deposits are much less in terms of inflation-adjusted real rates of return. Such a return cannot take care of an investor’s future financial goals. Then obviously the next choice is the instruments which give high returns. High return instruments have their own risks too.
Earlier we had many products which guaranteed capital protection. As we go forward, there are less and less capital guaranteed
products. which are eventually replaced by market-linked products. This transformation necessitated investors to know the market dynamics and nuances of the financial products. A typical investor can regulate his or her expectation based on what kind of risk the person can bear and what kind of returns the investor expects. Before deploying the resources, one must understand the risk-reward ratio properly. They also must do their homework properly.