This DHANTERAS- Put Your Dhan Smartly

 (Pray To Goddess Lakshmi For Volatility)

The word Dhanteras comes from ‘Dhan’ meaning wealth, and ‘teras’ meaning 13th day as per the Hindu Calendar. On this day, not only gold and silver, but people indulge in buying other forms of wealth like property, new vehicles, etc.

Lets take another step to create DHAN- Invest in Equity and Gold , the smarter way!

There is a NIP in the Air. The onset of winters with increasing SIP count is indicating a structural shift to financial savings in India. Indians are taking to investing in financial assets like never before. SEBI can take a clue and focus on nurturing this trend into something more structural and long term. Despite the median return of diversified equity funds over 5 year, 10 year, 20 year period being 15%, the bank deposit base is still 7 times the size of Mutual fund industry. The accountability and focus should shift on making every Indian financially literate. The debate on whether an Advisory or Distribution model can wait.

 Financial Intelligence vs Emotional Intelligence

FIIs have Bought 154 Billion USD of Indian Equities in last 23 years. They have increased their stake from 0% to 23% now.

Indians in same 23 years period have bought Gold worth 245 Billion USD

We have sold 17% CAGR asset to buy 10% CAGR asset!!

Observe But don’t overanalyse global events

Indians are more concerned about US elections than UP elections, thanks to the media buzz and expert analysis on its outcome. The below chart highlights the performance of US equities under Republicans and Democrats. What come out is, the best returns are achieved when you are fully invested and for long term.

How to Start & What to Buy This Dhanteras

1.  Buy gold the smarter way

Understand the costs involved in buying coins and bars and holding them in lockers. Refer to the various forms of holding gold.

Source- ET

So buying gold the proper way can make a difference of 5% annually!!!

2.  Buy Bank stocks instead of Bank FD for long term

When you deposit money in a bank FD account, you are giving permission to the bank to lend it to other borrowers. The bank does that at a higher rate and makes the difference as profit. When you buy a stock of a bank, you own a part of that company/business (that’s why it’s called a share) and participate in that profit.

So if we are confident that a bank is safe and going to lend at a higher rate, we should rather buy the stock of that bank vis a vis doing the FD.As per RBI (Reserve Bank of India) all depositors are protected by an insurance up to a maximum of Rs.1,00,000 only in FD.

Example- a 15 year Fixed deposit in SBI fetched 10% interest. 5 lac FD would have grown to 16 lacs. 5 lac of SBI bank shares bought in 2002-2003 would have become 5 crore plus in value!!!!

3.  Have a Plan - don’t invest on tips and Card party discussions

Before you put any cash to work, you must know what you are investing for. This will condition your target return, time horizon and appetite for risk and therefore the asset classes best suited for your aims. You cannot become rich overnight.

4.  First choice /Experience is critical

Once bitten twice shy! Most Investors who started investing in equity mutual funds and stocks at the peak of the market in late 2007 or early 2008 never came back. What should be your first mutual fund or stock investment? The answer is different for different investors and depends on their age, financial goals, risk-taking capacity, etc.

Below chart is a good reference for first time investors.

5.  Holding Power

Invest for the long term. As Warren Buffet says ‘Our favourite holding period is forever.’ Treat your investments the same way you treat your property and FD.

6.  Pray for Volatility in Markets

Don’t confuse volatility with risk. Volatility is fluctuation in prices and it reduces significantly when you extend the time frame and diversify. There is nothing better than buying quality stocks and Mutual funds cheap. Markets are trading at Fair Plus valuation zone and there is lot of debate on quality stocks being expensive. A Diwali sale would be a perfect opportunity. Stock Markets are the only place where customers run away whenever a sale season begins. Make Volatility your friend. Disruptions and corrections are lifelines of market. They help remove excesses and bring balance.

The next time you see a sale in broader market or company’s share whose products are widely used or a bank where you have a FD, drop in value – consult your financial advisor to increase allocations.

Don’t think of Next Diwali while Investing- Think of India in 2025

This is what the Harvard study says: "India has the potential to be the fastest growing economy over the coming decade, according to new growth projections presented by researchers at the Centre for International Development at Harvard University (CID). Indian GDP will expand at an average of 6.98 per cent till 2025. This means nominal GDP will nearly go up 2.5 times to around $5 trillion in 2025 at current exchange rates. The returns made in last 65 years ,will be made in next 5 years.

Lets put some numbers to explain the impact-

1.  We currently sell 2.5 lac cars a month. We would be selling 7 lacs car a month.

2.  We will build more houses in next 10 years than what we have built ,since independence.

This list is endless. Imagine the consumption of goods and services we are looking at.

Like any other long journey, there will be bumps and disruptions, external disturbance ( Global market events like US Interest rate hike, China factor). Patience, a good driver (advisor) and at times simply taking a break will help.

 Believe in India, Happy Investing!