Direct Investment in Equity Shares

During the last two years many persons told me that they made good returns by investing directly in Equity shares, so this year I asked the same persons what happened last year and they said, there was no loss. Yesterday I asked the same persons and they just told me they were busy. Nobody was ready to talk about the stock market, the reason is the external factors have hit the stock market. Nothing is actually wrong with the stock market, but then we have so much information available that we tend to take very short term view for an asset class which should be looked at from the long term. This is the reason I suggest that even if we want to move into equity, we should go the mutual fund route. If you find it difficult to believe, try this. The amount of money you are ready to put aside for equities, put half of it in a good large cap mutual fund and you play with the other half and let us compare the amount of money you have made after three years.

The chances are that you would have made more money in the mutual funds route after removing all the costs involved with absolutely no headaches. You concentrate at what you are good at and leave market investment to professionals, you will end up making more money. But if you try to concentrate on making money in something which is not your core competency, you will end up losing time and money till you become good at it. That is the reason, businesses employ professionals for every department. So why don’t you behave like a businessman and employ a professional, i.e. a good financial advisor who will suggest how you go about with your investments.  A good financial advisor understands risks and returns and also understands when to exit.

When you try to do it yourself, you have to do all the analysis yourself, which will take time. This is the reason a good businessman concentrates on what he is good at and pays a professional to do a job for what he is good at. One o the basics on equity investing is diversification, you could do the diversification yourself, but then the amount of time you need to study all the sectors will take time, instead a mutual fund will do it for you at fraction of the cost. When you do your investments through a mutual fund you manage to beat the market returns and if you really want to get the best ask your financial advisor to choose the right fund for you.