Time to get Equity Wise and Fixed Deposit Foolish

Investors invest their hard earned money and expect the money to work even harder so as to achieve their Financial Freedom at the earliest. What happened to the investors who came to equity markets last year with similar thoughts? Most of them are wondering what to do this year! Most investors, who entered the markets in the previous year, either have not seen any returns or in many cases witnessed losses.

I’am assuming investments in large cap companies from the #Sensex, #Nifty, #BSE100 or the Large Cap #MutualFund’s. One may argue that certain Mid and Small cap companies have done well, certain companies have gone up many fold, but the question is how many small investors bought them? Even if few of them bought, how much money can be risked in such picks? Until services of an advisor are availed, venturing in such ideas all alone can be dangerous.

Hence when it comes to articles like this, which will be read even by small investors, the advice is always to go with larger companies. Even in case the stock prices go down, recovery can come back and at least you don’t lose money like the way u may in case you entered an operated counter. You may buy smaller companies if you are getting an advice from an experienced person.

Now the question is what’s the use of such investments when they may not give you returns or even negative?

The below answer need to be read by all investors, and should also be read seriously by Fixed Deposit Lovers! In fact certain investors who invested last year even are thinking, why didn’t they choose FD’s over Equities? Would have made decent 6% post tax returns!

Firstly, does 6% sound good? In my case, I won’t keep even my Emergency Funds in a FD. What will 6% achieve for you? The on ground inflation itself is more than 6%, hence you are happily destroying your own capital through FD’s.

Secondly, the above situation of nil to negative loss we are discussing are just for the last year. When we enter markets, it should be with a view of 3-5 yrs minimum just the way we enter the FD’s.

You can take up an open challenge… Sensex was launched in 1978 starting with just 100 points, today is Jan/2016 and we are trading around 26161. For sure you will agree that from 1978 till today markets would have fallen and risen many times.

The challenge is… take a time period of any Five years during this period and check the returns. You will not find even one negative returns period! Increase the period to 7 years and you would find returns more than what FDs gave you! I mean CAGR returns! These returns what you see are TAX FREE.

If you check CAGR returns of Sensex from its launch till date for 37 yrs, it works out to 16.24%

16.24% TAX Free returns are not small by any set of imagination. Just imagine you invested Rs.100000/- around 37 yrs before,

At 6% the value today will be Rs.863609/- and

At 16.24% the value today will be Rs.26191311/-

I know as a FD investor you may be feeling sick after seeing these numbers! Continuing in FDs may make you sicker! Choice is yours, call your advisor today.

To conclude: Look at equities for little longer period. Equities test your patience but finally reward you for same reasons.

So what this year?

Iam not god to tell what will happen, but yes, can surely mention some expectations for the year. Everyone is interested in Sensex and Nifty index levels for the year. Taking precedence from previous years, let me mention the Sensex level expectations.

Discussing the possible loss first is always better. I feel the worst case scenario for the whole year is in the range of 23300-23000. Not to forget last year’s level 24500 still remains intact, so until that stands we need not fear seeing 23000.

On the upper side Target.1 should be in the range of 29140-29500 and if thats broken decisively we may test Target.2: 30800-31320. These are targets assuming that GST will not be allowed to be passed by vested interests. If big bang reforms like GST happen, then we will surely see better times ahead and the views will be posted at that point of time. Just follow this website by subscribing with your email id.

Also track, BSE100 which constitute most large companies. The targets on that can be like this: Target.1: 8950-9050 and Target.2: 9500-9625. I feel reading Sensex targets along with BSE100 will make more sense this year.

Instead of making this too long to read, let me try conveying the reasons why things will improve from here and Equities should do well going forward. I have many times mentioned that the real effects of the government policies will be felt somewhere in middle of 2017. We are not far away!

The government is getting stronger by the day. By government I mean financial situation of the government. This is one big reason economy too will recover. How and Why we shall discuss later.

Don’t assume market is a place where in you can come few years before retirement and make all money. Market rewards who spend more time invested and when they reward they reward Big, leaving the favourite FDs far behind.

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Happy Investing & Resolve to Make Money