Wednesday, March 28, 2012

One and forever advice – “Give time to the market”

In a meeting with my investor clients last week, there was long discussion regarding which asset class is the best?

As currently all real estate investors are very happy with their real estate investments. Almost all agreed to one asset class. I.e. Real Assets

I am happy if investors earn from whatever asset class they have invested in…..

In conclusion of the meeting, my statement to all was as per below:

In 1980’s BSE SENSEX was introduced with reference to 100, which is now around 17000 level. It shows 170 times growth in 32 years. A very good performance indeed!!! The gold and real estate have also given very good appreciation to the investors as well taking the same period on account.

So my advice to all was very simple.

The asset class whichever is preferred by investors performs only after given time. If investor fails to wait, than he gets disappointed with the poor performance which is for a time being only  or he sells the asset in desperation & jump in to other shining asset & try to chase the returns which is already left & may miss earning opportunity of both asset class & most possibly he may loose the money.

The key take away is “Give time to the investment instead of timing the market “

In last 10 years,

There was great time for all asset classes like

2003-2007 – We have seen 5 times growth in Equity Sensex.

2008-2012 – Gold & real estate have given great returns.

If investor understands the Economy cycle of ups – downs & if he rides this curve smartly, he can earn smart money. Others with patience & cool and long term investors will also earn handsome returns. Those who try to chase returns & entering at top price of assets are most likely losers.

Even at current sensex level of 17000, investors are in panic & in no mood of investing in equity. Most of their funds are invested in fixed investment opportunities & thankfully there are very good interest rate opportunities available for investing in Fixed Deposit like HDFC Ltd. & GRUH FINANCE and Debt MF schemes like FMPs & BOND FUNDs are also getting attention of investors.

SBI DYNAMIC BOND FUND, UTI BOND FUND & TEMPLETON INDIA CORPORATE BOND OPPORTUNITIES FUNDS are also some schemes where investors are looking investment opportunities due to tax advantage & its fixed income nature.

However the burning issue is, should one invest in equity now?????

I think one should invest in equity at current sensex level in the range of 17000 to 17500. However, investor should first see his risk profile, better not to jump in equity in single stroke & he should try to understand the possible loss if invested in equity.

The equity has not performed in last 5 years. Equity sensex is at a level where it was before 5 years. So, it is better for investor to find out how much risk he can take & then he can enter in equity.

As advised earlier “Give time to market”.