Direct Investing in Equity , Is it for you ?
Let us try to answer the question that shall you try investing in Direct Equity ?
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This is one of the questions which everybody wants answer to . You can do it, but it will require some effort , learning and dedication . Also youwill have to develop some kind of discipline and change your attitude abit .
We shall first see who all are into Direct EquityInvesting. They are Mutual funds , FII's , Big experienced Investorswith high experience and qualification . These people are 24/7 doingthis job of researching the companies for long term investing . Andeven these people do mistakes and even they can predict marketsdirections always .
So now you can be one of the two kind of people .
1. Someone who has no interest in the markets and have no desire tolearn things on his/her own . They want to earn better returns thandebt , but at the same time without bothering much . Then you betterinvest in mutual funds (SIP would be a good idea) .That way you can getreturns over long term and dont have to put much effort (apart fromchoosing good mutual funds in the start and monitoring them once in awhile in a year , which is not a big deal) .
2.Someone who is ready to take more risk and can also devote some time todo his own study of stocks (not a big one , but basic atleast) . He hasbetter than average interest in these things and also enjoys the stuff. If you are one of those than you can put some money directly inshares of companies after your own research and understanding , it canbe any way you are comfortable with . You should learn some basics ofFundamental Analysis and then apply it . For example i can say , thatAfter RPL - Reliance Merger , Reliance will be among the biggestrefineries of the world (it was anyways , but now in better position) ,It has lots of exploration projects going on and company's is in safeand great management (as per the current information) , On the top ofit Company has great valuations , and is available at many years lowprice and now overall markets are near its bottom . Just by looking atthese facts , you can understand that it would make sense to BUYReliance for long term , better accumulate it over the next 6 months ,to catch the volatility too .
Can we go wrong and itmay not give us good returns ? Definitely yes , Markets are the placewhere you should expect the unexpected . But at this moment that's thebest we can do and should do .
Can you do better than Fund managers of mutual funds ?
Somepeople may answer yes , and may be they are true , But personally Iwould say at this moment I can't do better than them . Reasons are asfollows :
- They are doing it from last 10 yrs , I might be doing it from last 6 months or 1 yrs (personally i dont do any ) .
- They are highly expert and qualified people . I learned accounts till my 12th only and it really sucks for me .
- They have access to internal information and resources to do better research . I don't have it .
So,I may be able to pick a company once in a while which gives 100% in 6months against there 20% . but over long term , chances of theresustaining in the business is very high . So think long term . Don'tover estimate yourself .
You should understand that i am nottrying to tell you cant do it . I am just trying to make sure that youunderstand your position in this game and your abilities to do things.I personally like to do things on which i am good at and transfer theresponsibility of other things to experts in that field . If I want thejoy of it anyways , I will take a small portion of my portfolio andwill play with direct equity . That is allowed :)
Why Mutual funds Makes sense for Retail public ?
Mutualfunds are the products which are formed on the philosophy that manyinexperienced and uninterested people who have money but no knowledgewill pool all the money together and hire a person who has experience ,understand the markets well , and can take better decision . Thisperson also has all the time dedicated to investing , so that thousandsof investors dont have to monitor the investments and the returns whichwill be generated will be distributed to investors after paying thisfund manager for services .
So it makes sense you any one likeyou , who may be a Software engineer , Doctor , businessman or anotherperson , who has no time for all this investing thing . Its you whohave to decide who you are ?
Dont fell in the trap of high returns , With high returns comes the disaster too .
"Good return with some risk is much better than Exceptional returns with catastrophic losses" .
Comments please .
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Manish
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