Invest Today, Reap Tomorrow

Bloodshed!!! Carnage amongst the bulls!!!
This was more than enough to wake my Mom from her deep slumber!
“What! Where! Who did it??!! These terrorists, what will they get by killing innocent people”, she screamed.
My dad and I were stumped with this reaction and after observing our nonchalant facial expressions, she was quite horrified. “How can you people just sit gaping at each other, no heart!!?”
“So many people must have died in this, we should be blessed that our family is together” she exclaimed. Only later did we realize that she was referring to the profusely used adjectives “bloodshed”, “carnage” which to her appeared as if it was a grave human tragedy due to a bomb explosion or a terrorist attack!
It was time for the MBA son (Ahem!!) to step in and explain the intricacies of stock market and how the fall in indices affected people as much as a terrorist attack would. This last part, I confess was slightly challenging to explain, as material wealth is nothing but mythya or illusion according to her. Now I understand that mythya doesn’t actually pay your bills or even provide you enough money for a movie and snacks at Garuda.
She can certainly be exempt from misunderstanding the market terminology, however, not the ones who we fondly call, The Analyst.
Schemes like fixed deposits and postal deposits have been around since ages (I still remember being whisked away to the nearest GPO to withdraw matured postal deposits, Ok I confess!! I was bribed with five-star chocolates) but these could only get you 6% returns and that too after a long lock-in period. The market these days is springing up a deluge of opportunities for youngsters to make money in the long run.
As Robert T Kiyosaki points out in his book (Rich Dad Poor Dad), we ought to start building our assets soon in order to make money. It simply is not enough to park your money in the savings account and forget all about it. Inflation and rising rates will make sure that you see very little of these when you most need them.
The stock market, on the other hand, offers various instruments of investments, which, if used with sound financial planning, can create wealth. Mutual funds, ELSS schemes (a kind of mutual fund which aids in your tax planning), equity linked insurance plans are the major options available to the prospective investors. Even the government is taking steps to protect the investors and make the exercise of investment regulated, read IRDA, SEBI etc. The high and mighty in the annals of Parliament are trying to align the policies to suit the growing needs of investing masses. For instance, there have been reports in the media on infrastructure funds being brought under the ambit of tax savings (even though it comes with a lock-in period and the motion is still under consideration). This just displays a growing acceptance of the stock markets by the political class.
Increasing interest of the FIIs in Indian companies has also led to sky rocketing valuations and an appetizing lure of making money.
All this, however, comes with a word of caution! Short term gains without appropriate planning has led to the downfall of many a sorry investor. Being in a profession, which doesn’t leave you with much room for consistent monitoring of the stock market, most of the times we have to rely on the media, advertisements, peers, and news articles for sound investment decisions.
However, I believe in an approach that is highly customized (pretty much like the department I work in!!). First and foremost, we must gauge our requirements and the time frame in which we would require the money. Besides that, we need to consider the risks associated with different equity based instruments. It’s always better to start slow and small and as you start climbing the learning curve, the amounts invested can be increased. A time frame of six months to one year is considered safe for new investors while investing in the equity markets. There again, a strategy which comprises of parking your funds in mutual funds and fixed deposit schemes can be adopted for a sound beginning.
In spite of innumerable examples, there are people who feel short of funds when it comes to investing. And for those who have restricted funds to theirs disposal, invest small, as small as Rs. 500 per month in order to start. This can ensure both a monthly saving as well as decent returns.
So the moral of the story should be, to start investing. That’s it!! (As simple as it may sound, many will still ignore this as just another entry on the blog and for all those people, I can think of a line form an old English number, Times Runnin Baybeah!!…)

Varun Kumar