Sounding Board. Opportunity in adversity

Equity is the best route to wealth creation

Karthik Balaswamy, working with the human resources team of Chennai-based Murugappa Group, has been investing in equity schemes for the past 10 years. He has put away almost 90 per cent of his savings in equity mutual funds. “I strongly believe that equities are the best way to create wealth in the long term,” asserts Karthik.

Having seen nearly four market cycles in the last 10 years, does the massive slide in stock prices over the past month worry him? Not really. The temporary volatility in stock prices does not cause him concern. He has his reasons too. “I invest in equities to meet my long-term goals, such as creating a retirement corpus. And equities as an asset class has the potential to deliver superior returns if you stay put for a longer period of time,” explains Karthik.

He feels that mutual fund is the less risky route to investing in equities. “Fund managers understand the market and can time it better than individuals like me,” he adds. “Most of my investments are through the SIP route, so I don’t have to really worry about timing my investments.” Karthik credits his financial advisor for giving him the right advice in terms of the schemes to invest in.

Besides going for expert advice, Karthik does his own research too using web-based resources. “I feel that India’s growth story is intact and the China issue is more of a temporary blip.” So, what is he doing now with his portfolio and how different is it from what he did during the 2008 crash? “I sat tight during the 2008 fall. But now, I want to invest some more in equity mutual fund schemes. I am just waiting for the market to settle down, after which I plan to invest some more in select equity schemes,” Karthik says confidently.

Use correction to invest more

Chennai-based Mahadevan, who took voluntary retirement from Andhra Bank in 2001, is a seasoned investor in equities. His maiden mutual fund investment was in UTI Market Plus scheme launched in 1991. He has been investing regularly in various equity schemes since then. He tracks the market systematically and has been a regular speaker at various investor forums. “I started my investment during Harshad Mehta’s time and have seen several market crashes in the last 24 years. I think the recent correction is a very healthy one,” argues Mahadevan.

Why does he think so? “India’s macro economic landscape is very strong, with the fiscal deficit narrowing, forex reserves increasing, inflation moderating and there’s a stable government at the Centre,” he reasons. He feels that India is thus in a sweet spot compared to other emerging economies that are grappling with growth worries. “Besides healthy growth prospects, valuations are also looking attractive now. I strongly believe that investors should use this correction to plough more money,” asserts Mahadevan.

He also says that he learnt the art of long-term investing the hard way. “I made the mistake of selling during the 2001 correction to cut losses. Two years hence the relief rally started and that was when I realised my folly,” he explains. The lesson was quite loud and clear, he says. “You should redeem your investments, if at all, when the markets hit new highs and only buy when it hits the trough. We usually tend to do the reverse and end up losing money,” he elucidates.

The pull-back rallies that followed the last three correction cycles have been quite sharp, he notes. “If you are apprehensive about investing during such falls, wait for the market to stabilise. Nobody can really predict the bottom; so it is best to buy on dips,” sums up Mahadevan.

Have cushion to meet exigencies

Bhuvana Panchnath, who works in a medical devices manufacturing firm, has been investing in mutual funds for almost a decade. “I have invested about 40 per cent of my savings in equities. I have put aside the balance portion of my savings in FDs and other fixed return instruments to meet any exigency,” says Bhuvana. Her investment horizon is over 10 years; this is one of the reasons why short-term corrections, such as the recent one, do not baffle her.

“My cousin is a financial advisor and he guides me on the schemes to invest in and timing of investments,” adds Bhuvana. Alongside expert advice, she keeps abreast of business news by reading business papers and listening to business news channels.

“I invest even during down cycles, mostly through SIPs. The lion’s share of any bonus I receive from my employer is also invested in equity funds,” says Bhuvana.

Ignore temporary blips

Hectic work life leaves Ramesh with little time to do his own research. However, he does keep a close tab on the markets. “I have been investing in mutual fund schemes for the last 15 years. I avail myself of the services of an investment advisor who guides me on the schemes that suit me best,” says Ramesh. Like the other investors, he too is not perturbed by the market volatility and shrugs it off saying that it is all temporary. “If you are a long-term investor you need to be patient and not react to short-term corrections,” he argues.

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