Cusp of Change.
We are on the cusp of change. This pandemic has changed the entire working culture of industry today. The world and its working have become almost virtual. There is a huge shift the way companies used to work. Today companies are more lean and thin and running the business with super efficiency. They are investing in technology and logistics to build a "moat" which can give them very high competitive advantage and barriers to entry by others. The technology is coming in a big way to help industry to reduce cost and increase profitability. Companies which understand the technology and logistics will grow leaps and bounds. Companies with high "moat" and having high competitive advantage, dealing with items of basic day today needs, which you and me need every day, have created huge barriers to entry, well run promoters, not stealing money from it and not living flashy lifestyle like owning a jet, or buying a cricket franchise or a football team or been seen around in the cricket and football matches but rather concentrating on the business and not always seen in the power of corridors, will definitely do well. We have many....
Direct Equity or Equity Mutual Funds??
Mutual fund scheme or direct equity? Well, though both the investments are done in equities, the risk associated differs. Direct equity investments give investors greater flexibility to invest in companies they believe in and know. It involves a high risk but is a high-reward investment option.
Mutual funds, on the other hand, come with diversification opportunities which helps when the markets are volatile. Investing in mutual funds via SIPs allows investors to gain from price movements and frees them from timing the markets.
Mutual funds, as experts advise, must be the preferred option for new investors as these are professionally managed by fund managers. Investing in direct equity, meanwhile, should be opted by people who want a greater degree of freedom in creating their own portfolios and have sufficient knowledge about stocks.
However, the bottom line is whether one goes for mutual funds or stocks or a combination of both, the key lies in sticking with the investment plan.
The total number of Demat accounts increased from 39.6 million to 111.6 million between January 20 to Jul 23. The monthly average of new accounts opened has, meanwhile, stayed above the 2.1 million-mark consistently for the last 5 months.
During the same period mutual fund folios have also increased from 8.71 crore by the start of January 2020 to 15 crores by end of Jul 23. Net new SIPs registered are clocking in 23 lakhs on a monthly basis for the calendar year. Mutual fund industry registering net inflows of Rs 15,000 crores on consistent basis. Net AUM of MF industry has grown to Rs 46 Lakh Crores.
However, the question still exists -- which investment is better? How to do it??? Can you go for direct stock picking? Upto you... Acquire basic skills, just the basic... More financial noise will not make you any wise. Watching business TV channels will never make you wise rather it will do opposite. You will destroy your wealth. Just understand the BASICS of stock market. Read good books, listen to review of financial books, read excerpt of good books. *Listen to wise men of the industry*. Try to extract wisdom from knowledge. Social media is full of clutter but you need to filter the wisdom from knowledge and it takes time and patience. If you have that, please go ahead. If you feel you don't have time and patience to invest your resources, then please take the mutual fund route. Talk to someone whom you consider a financially savvy person and your friend to whom you can trust and understand. Trust is most important. Take your time but never ever invest your hard money without understanding it. Take your time before investing and not after investing. You will be much more sure of your investment and will be at peace once you have understood the concept of short term volatility of the market. Volatility is very good to grow your money. You should be able to use it in your advantage. Equity Market is not a gambling den. If you invest wisely and conservatively, you will never regret.
If you are new to the equity market, mutual fund is the best route to follow. If you have already acquired the basic skills and ready for direct equity, please explore the universe of stock market without getting over excited. Please don't start searching for Multibaggars. They can make you MULTI-BEGGERS too. No science can predict today that a new company will be a mulibaggar in future. Once it runs for 4-5 years, the earning can be predicted. Stick to the well run powerful companies with high "moat" and dealing with niche segment with high barriers to entry.
REFERENCES:
https://timesofindia.indiatimes.com/business/india-business/explained-why-indian-households-may-more-than-double-savings-in-5-years/articleshow/96250095.cms
https://www.thehindubusinessline.com/money-and-banking/financialisation-of-household-savings-gaining-pace-crisil/article66267798.ece
https://marcellus.in/blogs/marcellus-the-big-shift-in-small-town-india/
(main source of information)
https://www.youtube.com/watch?v=Q1eS6tfSaUs&t=24s
(main source of information)
https://www.livemint.com/opinion/columns/the-evolution-of-financial-services-and-savings-trends-in-india-11678620519140.html
DISCLAIMER : The above information is available on public domain and has been taken mostly from above mentioned websites and YouTube videos. The opinion expressed above is in no way recommendation of buying or selling. You must consult your financial advisor before making any fresh investment in equity market.
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