We all know India is called the land of opportunities. There
are opportunities in the form of setting up business, higher education, investments,
etc. for the people in India as well as people outside India. We have lot of
MNCs setup in India, FDI in certain sectors, FIIs investing in stock markets.
But when we specifically look at investments opportunities in India, there are
varieties of investment avenues for various kinds of investors across different
asset classes whether it is Equity, Debt, Commodity, Real Estate, etc.
Out of these different asset
classes, historically Equity has performed extremely well. In the last 23 years
i.e. since 1981, the 10 years moving average return of Sensex has been 16.04%
p.a., whereas Gold has given 9.47%, PPF has been 8.31%, Residential Real Estate
(returns calculated from Ready Reckoner – Colaba region) has given 8.73% (as
per our proprietary research). Mainly the stock market is driven through the
Foreign Institutional Investors (FIIs) and Domestic Institutional Investors
(DIIs); but still lots of retail investors are hesitant and afraid of investing
in equity market. This is due to the stock market volatility and human behavior
that cannot see negative returns.
Today we have different kinds of
investment instruments for taking equity exposure other than investing directly
in equity shares; like Equity Mutual Funds, ETFs (Exchange Traded Funds), ULIPs
(Unit Linked Insurance Plans), NPS (National Pension System), etc. for retail
investors. But investors still rely on traditional products like Fixed
Deposits, Postal Schemes, insurance policies (their so called investment), real
estate, and gold etc. These instruments barely earn real returns i.e. their
returns are slightly above inflation. Though equity does not fetch you real
returns year over year, but over a longer period, say above 7 – 8 years, it
does earn you significantly higher real returns comparatively.
As it is said, high returns
necessarily entail high risk; and low risk necessarily entails low returns,
which is called the risk – reward ratio. Equity investment do fetch you high
returns, but it also carries high risk. Also investing in direct equity
requires bit of research exercise to be done. It is not a magic box, where you
put your money and it multiplies over a period. But, you can take exposure to
equity by investing in equity-diversified mutual funds systematically via SIPs
(Systematic Investment Plans) route, which reduces the timing risk.
Everyone is optimistic with the
Modi-fied government, which can bring the change in the industry by introducing
new regulations for different regulatory bodies as well as different sectors,
for bringing in transparency and protecting investor’s interest, if these
aspirations are fulfilled, investment in the equity sector would increase by
leaps and bounds as I firmly believe that. Equity was and will be one of the
most wealth generating investment tool and; we have a live example of India’s
Warrant Buffet - Mr. Rakesh Jhunjunwala. It is also the next big wealth
generating opportunity for those have never invested in equities. Though it’s
said, “Past performance is not necessarily indicative of future results”; but
it is also said, “history repeats itself”, and equity has been delivering
similar returns what it has given in the past!
Published in: Moneycontrol.com, The Tribune
