The Hindu Business Line : ‘Invest long-term, pick and choose products’

Wyenad Dec. 11 “Invest long-term and pick and choose your stocks and shares with exceptional care,” advised Mr S. Jayachandran, Manager, ICICI Securities Ltd, Kozhikode, at the BL Club programme organised at Wyenad yesterday.

Addressing the students of the WMO Arts and Science College, Muttil, he cited a real-life example to prove his point.

The value of a Rs 10,000 investment in a specific Indian company in 1980 would have grown to Rs 3.3 crore by 2005, if the investor had held on to his investment. Just 100 shares in Wipro which had a face value of Rs 100 would have multiplied through successive bonus issues and stock splits to several lakh shares, generating the 330 times growth in value, Mr Jayachandran pointed out. The market is replete with such long-term stock growth stories.

Speaking on the topic ‘Introduction to Investment Planning and Investing in Equities’, he pointed out that as the economy had gained momentum, people’s financial goals have become much more ambitious. Having shifted their goal posts, people would have to chalk out new investment strategies and plan very early with utmost care to attain these financial objectives.

Students, he said, should start saving early not only to imbibe a savings habit but also to create a base for their investments for tomorrow. Later, surpluses from salary should form the basis for future investments.

Based on the financial goals and investment surpluses, individuals can build up a portfolio in equities, mutual funds, gold and real estate, matching the long-term risks with the potential returns.

Investment in equities would be best undertaken with the right intermediary, who can advice the client on the macro economic systemic risks like potential inflation, interest rates, political uncertainty etc over which the investor has no control.

There are company and industry specific non-systemic risks such as raw material availability and market for the specific product of the company or the industry group. The investment portfolio should also consider other collateral risks like market risks and liquidity risks.

There is also a wide array of financial products for the investor to undertake their investment options. The Mutual Fund route is a reliable and safe route to enter into the capital markets. With the major interest in the Indian markets from FIIs and Indian Institutions, picking equities through IPOs is another relatively safe entry. Purchase of equities from the secondary market should be backed by sound market knowledge and financial acumen.

To participate in price rallies in gold, real estate or commodities, one does not have to invest directly in property, gold or commodities any longer. One can invest in real estate and gold by buying shares in real estate and gold and jewelry companies. Also there are specific Mutual Fund products which invest in such and associated companies, reducing and spreading the risk.

Investing in bonds and debentures, fixed deposits and other financial products would also reduce the risks further. A portfolio comprising of diverse products with varying risks and returns should be built up depending upon the corpus of investment and expected returns, Mr Jayachandran said.

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