THE ZEN OF INVESTING

Investing is by no means a simple process; there are countless considerations that must be paid, and infinite risks along the way. But sometimes the best advice is extremely simple to digest. One undeniable truth of the time: an era of institutional reliance is ending; an era of self-reliance has begun.

Today, more and more of us are taking responsibility for our own retirement needs. In the process, savings and investment habits have been dramatically transformed. More and more people are investing in the stock market than ever before. More than one in three American families now invests in mutual funds – that’s more than 35 million households. Fund assets, at around $4.9 trillion, now exceed insured commercial bank deposits, which stand at $2.4 trillion. Back when most of us saved at a bank, bought whole life insurance, or had a defined benefit plan, the responsibility for investment decisions was in someone else’s hands. But that’s no longer true. By entering the less certain world of our capital markets, more investors have assumed higher risk in the hope of higher reward.

Key benefits of investing in EQUITIES as an asset class:
 Participation in entrepreneurship
 Wealth Creation in long term
 Dividend Income
 Liquidity in times of Exigencies
 Tax benefits on capital appreciation and income
 Corporate control in form of voting rights

Equity markets have historically produced higher returns than gold, real estate, bank deposits or other fixed income assets over the longer term. Historical data states that the risk of capital loss does exist especially in the shorter term but with longer periods of investments, this risk is negated.
Over long periods of time, equities do deliver in line with corporate earnings; bit it’s a known fact that the volatility in share prices is way higher than volatility of earnings themselves. This volatility in share prices results in emotional response of greed in rising markets and fear in falling markets. Mostly, these responses are way more exaggerated on upside as well downside.

BUY RIGHT: SIT TIGHT

BUY RIGHT – (QGLP)
Q- QUALITY denotes quality of the business and management.
G- GROWTH denotes growth in earnings and sustained ROE
L- LONGEVITY denotes longevity of the competitive advantage or economic moat of the business
P- PRICE denotes the approach of buying a good business for a fair price rather than buying a fair business for a good price.

SIT TIGHT
BUY & HOLD: Picking the right business, needs skill and holding onto these business to enable our investors to benefit from the entire cycle of growth need even more skill.
FOCUS: Believe in adequate diversification of portfolio so as to not dilute the returns as well not add on the market risk.

Real Wealth is created by riding out bulk of the growth curve of quality companies and not by trading in and out in response to buy, sell and hold recommendations. An approach of buying high quality stocks and holding them for long term wealth creation motive, results in drastic reduction of costs for the end investor. Long term multiplication of wealth is obtained only by holding on to the winners and deserting the losers.

Buy & Hold leads to low churn ratio of the portfolio. If the portfolio is churned many times during a year, the funds will incur higher transaction costs, thus impacting the returns. On the other hand, low churn in the portfolio indicates higher investment conviction of the Portfolio Manager.
While it is true that diversification of the portfolio leads to lesser risk, but over diversification beyond a threshold, does not add any significant value, both in terms of wealth creation as well risk minimization.

SO ACT SMART, LET THE FINANCIAL ADVISOR DO HIS JOB.