Thought and analysis tends to lead to improved investment returns!

This is a Guest Post written by Mr. Anup who is the head of www,moneyhoney.com. This is extracted from a mail written to all his associates.

The focus of this post is to clarify and restore faith and confidence in investing in Equities and Equity Mutual Funds. What we are witnessing now is not new - it has happened in the past. Reasons are always different but one thing does not change - Boom is followed by bust - this may be new for some investors and distributors but its not new for us.  Best that we leave the market collapse behind us and take a fresh look here and now. That is why BACK TO BASICS.

The next few months will offer great buying opportunities for those with liquidity and more importantly, the courage of conviction that this financial crisis will subside by the end of 2009 and pave the way for a sustainable market rally in 2010 and beyond. The best time to buy in our opinion as over the next 6 months as markets grinds lower and gloomy headlines contributes to heightened pessimism.

Eventually, the crises will be sorted out and optimism will return. However, investor who buy over the next few months will have to maintain a medium to long term investment horizon (12-18 months at least) in order to benefit from the uptrend in the stock market.

Our TOP Picks is

  • DSP TOP 100 Fund
  • HSBC Equity Fund
  • HDFC TOP 200 Fund

Observations

• As time horizon of investment increases

– Instances of (-) returns disappear

– Range of returns from low to high falls; volatility reduces

• Returns start to move into a consistently narrowing; nearly predictable range

– Out-performance over the index steadily increases

– With very long term horizons, low, average and high tend towards convergence

– The bias with equity investing is towards positive returns rather than negative returns

• Logical conclusion because as time passes, the economy and units within it tend to grow

– Active management works!!!

• The convergence comes faster with Power as compared to Index

• With passage of time, the margin of out-performance steadily Increases


Investment objectives and why one invests

• We invest to meet financial goals – buying a house, educating children, retirement etc.

– After your child is born she can not reach the critical phase of education in less than 10 to 15 years

– After you start earning you do not buy your own house on Day 1 (unless you borrow every single rupee!!!)

– Once you start your career you do not retire until 25 to 30 years

– So why expect your investments to meet these objectives in shorter time

– We know not all investments can be made for 10,20,30 years

• For shorter term investments one needs to be ready to face periods of (-) return

• Not all is bad with shorter term investment horizons - in fact history shows that sometimes shorter term horizons can deliver disproportionately high returns

EQUITY INVESTING – WORTH THE RISK – THIS RISK HAS AN UPSIDE TO IT

NOT TAKING RISK IS A RISK IN ITSELF - INFLATION KILLS VALUE - THE RISK OF NOT TAKING RISK HAS NO UPSIDE TO IT!!!

– Equity investing – START EARLY, STAY PUT

The market will do its job… Lets do ours…

For more details, please go through the attached file. If you need any more information or any assistance then please let me know.

Warm Regards,

Anup Bhaiya

Cell: 098204 52811

Email: anup@moneyhoney.co.in

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