Interview :: Not every stock can perform like Sachin, try SIPs to form a balanced team


By Kshitij Anand | ECONOMICTIMES.COM | Aug 27, 2016, 03.22 PM IST

NEW DELHI: The potential for wealth creation is immense only if you follow a disciplined approach to investing instead of hunting for the one stock that can outperform every other asset class.

Investing is more like cricket, explain experts. You need players with diverse skills such as batting, bowling, fielding, wicket keeping to make a successful team. It will be foolish if you rely on just one player such as a Sachin Tendulkar to help you win matches.

In investing too, diversification is key and mutual funds create that opportunity for you. Keep investing in mutual fund via systematic investment plans (SIPs) to harness fruits of wealth creation for the future.

“Everyone cannot be a Sachin Tendulkar. To become the number one Test team, you do not require all the Sachin Tendulkars in the team. Even if you have 10 other average players and one Sachin Tendulkar, that is more than sufficient to make you wealthy,” Nilesh Shah, MD, , Kotak AMC, said in an interview with ETNow on the occasion of SIP Day.

“It is the discipline that creates wealth rather than hitting every ball for a four or a six. Whether you are keeping your money in fixed income, bank deposits, gold or cash – these are all various ways of savings, but for an ordinary investor the way to invest is through systematic investment plan (SIPs) of equity mutual funds, especially those who are not aware of the intricacies and nitty-gritty of the equity market,” he said.

If you want to create wealth without compromising on your monthly liquidity, then investing via systematic investment plans (SIPs) is your best bet. The nextgeneration retail investors understand the potential of the equity market, and that is one prime reason why we have seen a surge in average SIP investment.

Mutual funds added 12.61 lakh investor accounts, or folios, in June quarter to take the tally to a record six-year high of Rs 4.89 crore. Retail investors accounted for 95 per cent of total mutual fund (MF) folios, Amfi said in a report.

Retail folios comprising 95 per cent of total mutual fund folios expanded for the seventh straight quarter, CrisilBSE 0.14 % Research pointed in a note last month. Around 76 per cent of the total retail portfolios put money in equity-oriented funds for the seventh consecutive quarter amid an uptrend in the stock market.

Most of the mutual fund (MF) houses are mulling launch of more variants of systemic investment plans (SIPs) to attract investors. The variants include SIP topups and smart SIPs.

“No doubt, investors have started to invest in the market systematically. Approximately Rs 3,000 crore is being invested every month up from Rs 1,000 crore two years ago,” Jimeet Modi, CEO, Samco Securities, told ETMarkets.com.

“A major contribution is coming from the working class population and HNIs, as financial literacy is rapidly crossing new frontiers in India,” he said.

Modi said there were 2 million folios two years ago and now it has ballooned to 3.7 million, indicating that more and more people are investing their savings in equities through the mutual fund route.

One prime reason for the enthusiasm displayed by the fund managers is the potential of Indian economy, which can produce wealth-creating opportunities in companies.

At a time when most of the developed markets are struggling to grow, the Indian market has the potential of clocking a growth rate of above 7 per cent. The market has already bounced back 20 per cent from its 52-week low, which is a sign of strength.

“As a thumb rule, if we have tripled our economy in last 10 years, can we not double it over the next 10 years? It is not guaranteed, but possible. Now, if in next 10 years we are going to double our economy, then that economy will create companies which will create wealth for investors,” said Shah.

“If investors give money in the hands of professional fund managers, who have track records of outperforming the benchmark indices by a reasonable margin, it is fair to assume that they will continue to outperform the indices and those funds will end up creating wealth for investors,” he said.

Source: http://goo.gl/2ojvwQ

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