The
share market is rising right now.
What
should you do?
Here
are some tips, in Financial Planner Mr. Suresh Parthasarathy’s blog (http://www.myassetsconsolidation.com/investment-advisory/invest-now-for-a-3-5-year-goal/)
Happy
Reading.
Mr.
Suresh Kumar sold most of his investment in equity mutual funds close to his
buy price in the recent share market rally.
Savvy
investors may call it a herd mentality. But, he knows the pain of holding his
investments for 5 years.
There
is no right or / wrong in his behavior. Investors not following goal - based
investments and fixing a return target for the investments will naturally react
this way.
Retail
investors behave in a contrarian manner when it comes to equity investments. In
normal parlance individuals buy when it is cheaper & reduce the consumption
when the prices are higher.
Examples
are plenty right from onion to gold.
Investors
comes to equity market only to beat inflation & earn extra return for the
risk assumed. But, over a 5 year period, the compounded annualized return of
the BSE Sensex is 3% and if it is inflation-adjusted, the real return is
negative.
If
the returns are so poor, does it make sense to invest in the equity market?
Historically,
investments made in bad times and at low price-to-earnings (market share
divided by the earnings per share (EPS)) can be good investments.
Investments
made when the markets are at less than 15 P / E, delivered over a 5 year period
more than 25%. But, the strange thing is that investors invest less money when
the markets are low, but when the markets are close to their peak they pump in
money- savvy investors use this to exit.
In
2005, when the P / E was 12, net inflows into mutual funds was Rs. 7,400 crore,
but in 2008 when the indices where close to their peak, net inflows were Rs.
52,000 crore. Since then, in the past 5 years, net inflows into mutual funds
were less than Rs. 1,500 crore.
It
clearly shows that investors are not buying when it is cheap. On the contrary,
they buy when the prices are exorbitant.
Hence,
investors with a goal of 3 to 5 years and expecting a 15% return from equity
investment should now consider investing in a staggered manner over the next 3
to 5 months to reap a good harvest.
For
those already invested and sitting with a marginal return, it’s better to hold
the investments, provided their goals are 3 to 5 years away.
But
if you are a speculator and wish to make a quick buck, follow the election year
return in equity markets for short term investments for 6 to 8 months.
Contact
Details
Mr.
Suresh Parthasarathy,
CEO
and Chief Financial Planner,
SPP
Wealth and Financial Planners P Ltd,
Mobile
no: 98404 54737
Land
Line 044-42046359.
www.myassetsconsolidation.com.
skype suresh.partha
info@myassetsconsolidation.com
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