Is Investing in Markets a Gamble?

I Want To Invest In Equity Market But My Family Thinks It Is Gambling

By Vivek Karwa

source: http://adviceadda.com/article/583-i-want-to-invest-in-equity-market-but-my-family-thinks-gambling

Q: Iam Sawaan from Bengaluru aged little less than 36 years and want to plan for my Retirement at age 60. Iam confused about investing. Iam working in a good mnc pharma company in a demanding technical area and sure will have demand for my services till I retire. I can invest Rs.5000 a month with an increase of around 12% to 15% till I retire.

I have heard from lot of experts that equity markets can give good returns but my family members say that it is gambling. If I invest, some scam or bad news may arrive which can erode all my capital. Should I choose fixed deposits over equity market? Can I invest in Sensex or investing in individual companies is necessary? Can I invest every month? Please ask the best expert in your panel to solve my confusion.

Answer:

Hi Sawaan,

Your case is not typically different from many others. I find no fault, with the fallacy in the thinking of your family members, since they have been brainwashed that equity markets are a source of gambling. Let’s leave alone the common people who spread wrong news, since I consider it’s not their fault. Many of the learned politicians and academicians think that markets destroy wealth!

People who talk like this basically don’t want the public to be self dependent. If society remains dependent on them they can rule over us forever. And sorry to say most of the academicians who speak in this tone, be a school teacher or be a premier business school professor are just theoretical.

Iam myself a trainer, and know few souls who teach Portfolio Management and off record mention that they invest only in FD’s! I just tell them: Sir by faking your knowledge you are fooling yourself and not the students! At some point of time people (just like you Sawaan) will learn the truth. I would in fact suggest that anyone having doubts in the area of Personal Finance should call or write to us, we experts get mental satisfaction in helping others.

O.K. Let’s come back to the point of you investing Rs.5000 a month for nearly 24 yrs from today with an increase of 12-15% yearly. Let’s cut down the rhetoric of Anti-Market people and talk some facts and numbers.

Your question made me do some Fact Finding which Iam happy to share with you and the public at large. With these Fact’s people can reconcile their wrong thinking and come to an understanding what they have been missing, rather, what they have lost by not practising what they have been preaching!

Since you have little over 24 years to go, also you had asked if you can invest in Sensex (I call it Index… Sensex or Nifty), Yes you can invest in an Index through an ETF (Exchange Traded Funds) or an Index Mutual Fund, I have taken the Sensex closing data from Jan’1991 till date. Assumption is, had a person started around 24 yrs back with same time frame as yours. Next assumption is: he started investing Rs.1000 a month. Not considering any increase for our easy calculation purposes. Check the table below on how he would have kept on accumulating Sensex units over the period.

During the period he would have invested totally Rs.2.91 Lacs and value of the same would be approximately Rs.16.70 Lacs today. That’s phenomenal isn’t it? During the period had you hired a good adviser who could have guided you to do little adjustments, he would have enhanced your returns further! Had the investor chosen Fixed Deposits instead of the Index the value in his hands, post tax would be peanuts! At 7% post tax returns FD would have fetched just Rs.7.36 Lacs. The returns out of Index investment is totally Tax Free! Meaning you can enjoy whole of Rs.16.70 Lacs yourself!

Show this data to anyone who curses the market! During this period we have seen worst of scams, and worst of news as well. We just require discipline in market during ups and downs.

Your next query was on investing in Index or Stocks! You can choose any. As said earlier you can choose to invest in Index through ETF’s. Index itself has delivered very good returns till now, though it is considered to be safest among the equity investments.

Had you invested in one of the popular diversified equity mutual fund (name not mentioned purposely to avoid marketing it) you would have generated Rs.46+ Lacs today! During the period had someone invested in good quality individual stocks on monthly basis, he/she could have earned few crore of Rupees by now! Again not being stock specific since I don’t have the exact figures available right now with me.

So clear all your doubts on the equity markets. Choose a good adviser who can guide you buy good quality companies month after month! Be a Disciplined Investor. In Mutual Funds they are called Systematic Investment Plans or the SIP, I would term investing monthly in direct stocks as Systematic Wealth Creation Plan or the SWC. Honestly, I have coined the word SWC myself! So don’t wait, start investing today! Happy Fearless Investing.

Rgds

Vivek Karwa

Office Mobile: (+91) 9551-06-08-08

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8 thoughts on “Is Investing in Markets a Gamble?

  1. I am trying to print out this article and distribute to my circle. Do I have the permission. TKU. B.R.Nair Palakkad.Kerala

    Like

  2. Very good information Vivek Karwa, I
    would like to start investing on some potential stocks for future.. Would you mind suggesting some ? or do u provide it as a service ? Thanks !

    Like

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