Putting money in equity is challenging, get a head start with these ideas. Everyone works towards building a financially secure future, but inflation can become a big hurdle. Ms. Swati Kulkarni EVP Fund Manager, UTI MF has some tips to invest smarter.
About equity products
Depending on one’s financial needs—the quantum and time frame—and the risk appetite, one needs to allocate savings to different assets such as fixed deposits, liquid, debt and bond funds or mutual funds, and equity mutual funds, so that a portion of risk-low returns savings are earmarked for the immediate financial needs and the rest are allowed to grow in equity products over the years.
Taking exposure to equity
Investing directly in stocks can seem exciting, but it is extremely risky. Mutual funds provide a methodical, fundamental, and research- based approach to investing. A team of fund managers and analysts study the companies in detail by analysing not only the financial numbers, but also, by meeting several stakeholders, competitors, and regulators.
Different types of equity products
Equity products are classified depending on the investment universe that they commit to; for example, there are products in large-cap, midcap and small or micro-cap companies or under a specific theme like infrastructure, agriculture, lifestyle, multinational companies, or in a particular sector such as banking, auto, or pharmacy.
Right time to invest in equity
To receive real returns over the long-term, investing in equity products on a regular basis and in a disciplined manner is crucial. Market fluctuations don’t matter much here. According to a study of the past equity market data, excess return over 15 to 20 years was less than one per cent per annum, if we assume that the investor invested in regular tranches in BSE sensex on the days of correction. There are smart investors who understand the importance of regular SIP (systematic investment plans) and they earmark these savings for specific financial needs too.
Increase chances of returns from equity
Besides investing regularly in equity products, you can invest aggressively when the markets are bearish and participants are pessimistic about the short-term outlook. In practice, this is tough as the immediate returns on equity products can be subdued, and lower than returns on debt funds and fixed deposits. One needs to invest patiently, as the returns can be far superior over a longer period.