The market has been at 30-month highs. Many are thinking is this the right to invest in the equities? Should we be doing it now or later? What goes into becoming a systematic investor? How does one evaluate risk profiles and make smart systematic investment decisions? These are some of the questions that people are looking for answers to.
To address the concerns of retail investors, Nilesh Shah, ICICI Prudential AMC, in an interview on CNBC-TV18's show, Your Money, spoke about what we should really be doing as investors at this point of time.
According to him, people should enter the markets for the long term and not invest everything in one go. He also cautioned investors to be ready to lose some money.
Here is a verbatim transcript of his expert view on CNBC-TV18. Also watch the accompanying video for the full show.
Q: The markets have gone to a certain level and perhaps the biggest mistake all of us end up making as small investors, is we almost always try and enter at a very late stage. When the market corrects from there, we feel that it is not a good place to be in. What are the one or two things that you would like to tell investors today, who are already in the market and who want to invest at this point of time?
A: As a retail investor, we have generally tried to catch the momentum, when stock prices are going up every day rather than catching a falling knife when the prices are falling but valuation is in your favour. People who have invested in equity or people who are looking to invest in equity, my recommendation is very simple. One is look at your risk profile, built your asset allocation according to that and then try to do systematic investments.
If you want to invest 50% of your networth in equities then you are only at 10%, even today it is the time to invest but don’t invest at one go because there is potential correction ahead, there is potential upside ahead. So try to invest on a systematic basis. On some investments you will probably lose money in the near-term, on some investments you will make money in the near-term. Get yourself in the market to the desired level and then give it a long-term.
For examples, if you want mangoes, you have to wait for twelve years after planting seeds. If God cannot produce mango in less than twelve years, how can stock market deliver returns from tomorrow onwards. Do your asset allocation, be a systematic investor and give time to your investment. I don’t think then you will be able to lose money.
Q: When it comes to buying anything else, we as Indians are very savvy, we will negotiate prices, we will bargain, we will go running when there is a discount on. When it comes to equities, when prices fall or when prices are lower, we run away from it, why is that?
A: Partly it is driven by our historical experience. From 1991-1992, all the way 2003-2004, we had seen equity markets virtually at the same level going up and down over a period of time. On that long time period, we were almost at the flat level.
People who developed a vision in that 35 mm tunnel, they believed equity was all about buying and selling, rather than buying and staying. If we take a 70 mm view which is from 1980 till 2010, over this 30 year period, market is up almost 180 times. During this period, we have seen war, drought, natural calamities, politics, global crisis, everything.
In spite of all those upheavals, our markets have gone up 180 times in last 30 years. Somewhere investors have to develop their horizon from 35 mm which is restricted between 1991 and 2004, to 70 mm between 1980 and 2010 and then things start becoming crystal clear.
Caller No1: I am 74 years old and I can invest up to Rs 5 lakh. Where should I invest?
A: I don’t think old age has anything to do with your allocation. It is your risk profile which matters. If I am a twenty year old person and I am extremely conservative, I will invest lesser in equity than what is required. If I am 74 years old and I am aggressive then I will still invest in equities than what is required. Age has nothing to do with your equity allocation. It is age along with your risk profile which determines how much you should invest in equity.
My recommendation will be that at this age and assuming that you want to invest in equity, and you don’t have any immediate requirement of this money for your day-to-day expenditure or any pressing need, and you have about 3-5 year horizon, you should be investing on a systematic basis. Never ever invest lump sum into equity, even if the markets maybe at the bottom, because history has suggested that this market can always fall further from the bottom. So trying to invest from a systematic basis rather than lump sum, I think that is non-debatable.
My other recommendation will be to invest directly if you can give time and energy to your portfolio. If you can do research about the stock and then if you can monitor it on a regular basis. If you are going to do all these things, then surely you should look to invest in direct basis. However, if you don’t want to invest on direct basis because you don’t have time or energy to do research and monitoring, then you should be choosing mutual fund.
Within mutual fund if you want to come via systematic investment basis or systematic transfer basis, these are nomenclature. STP will help you get into the market in a slightly shorter-term time duration, SIP will help you get into market to a slightly medium-term to longer-term duration. My recommendation is come via mutual fund, if you don’t have time and energy of researching and building and monitoring your portfolio, but please come via systematic investment plan or systematic transfer plan depending upon your requirement.
To address the concerns of retail investors, Nilesh Shah, ICICI Prudential AMC, in an interview on CNBC-TV18's show, Your Money, spoke about what we should really be doing as investors at this point of time.
According to him, people should enter the markets for the long term and not invest everything in one go. He also cautioned investors to be ready to lose some money.
Here is a verbatim transcript of his expert view on CNBC-TV18. Also watch the accompanying video for the full show.
Q: The markets have gone to a certain level and perhaps the biggest mistake all of us end up making as small investors, is we almost always try and enter at a very late stage. When the market corrects from there, we feel that it is not a good place to be in. What are the one or two things that you would like to tell investors today, who are already in the market and who want to invest at this point of time?
A: As a retail investor, we have generally tried to catch the momentum, when stock prices are going up every day rather than catching a falling knife when the prices are falling but valuation is in your favour. People who have invested in equity or people who are looking to invest in equity, my recommendation is very simple. One is look at your risk profile, built your asset allocation according to that and then try to do systematic investments.
If you want to invest 50% of your networth in equities then you are only at 10%, even today it is the time to invest but don’t invest at one go because there is potential correction ahead, there is potential upside ahead. So try to invest on a systematic basis. On some investments you will probably lose money in the near-term, on some investments you will make money in the near-term. Get yourself in the market to the desired level and then give it a long-term.
For examples, if you want mangoes, you have to wait for twelve years after planting seeds. If God cannot produce mango in less than twelve years, how can stock market deliver returns from tomorrow onwards. Do your asset allocation, be a systematic investor and give time to your investment. I don’t think then you will be able to lose money.
Q: When it comes to buying anything else, we as Indians are very savvy, we will negotiate prices, we will bargain, we will go running when there is a discount on. When it comes to equities, when prices fall or when prices are lower, we run away from it, why is that?
A: Partly it is driven by our historical experience. From 1991-1992, all the way 2003-2004, we had seen equity markets virtually at the same level going up and down over a period of time. On that long time period, we were almost at the flat level.
People who developed a vision in that 35 mm tunnel, they believed equity was all about buying and selling, rather than buying and staying. If we take a 70 mm view which is from 1980 till 2010, over this 30 year period, market is up almost 180 times. During this period, we have seen war, drought, natural calamities, politics, global crisis, everything.
In spite of all those upheavals, our markets have gone up 180 times in last 30 years. Somewhere investors have to develop their horizon from 35 mm which is restricted between 1991 and 2004, to 70 mm between 1980 and 2010 and then things start becoming crystal clear.
Caller No1: I am 74 years old and I can invest up to Rs 5 lakh. Where should I invest?
A: I don’t think old age has anything to do with your allocation. It is your risk profile which matters. If I am a twenty year old person and I am extremely conservative, I will invest lesser in equity than what is required. If I am 74 years old and I am aggressive then I will still invest in equities than what is required. Age has nothing to do with your equity allocation. It is age along with your risk profile which determines how much you should invest in equity.
My recommendation will be that at this age and assuming that you want to invest in equity, and you don’t have any immediate requirement of this money for your day-to-day expenditure or any pressing need, and you have about 3-5 year horizon, you should be investing on a systematic basis. Never ever invest lump sum into equity, even if the markets maybe at the bottom, because history has suggested that this market can always fall further from the bottom. So trying to invest from a systematic basis rather than lump sum, I think that is non-debatable.
My other recommendation will be to invest directly if you can give time and energy to your portfolio. If you can do research about the stock and then if you can monitor it on a regular basis. If you are going to do all these things, then surely you should look to invest in direct basis. However, if you don’t want to invest on direct basis because you don’t have time or energy to do research and monitoring, then you should be choosing mutual fund.
Within mutual fund if you want to come via systematic investment basis or systematic transfer basis, these are nomenclature. STP will help you get into the market in a slightly shorter-term time duration, SIP will help you get into market to a slightly medium-term to longer-term duration. My recommendation is come via mutual fund, if you don’t have time and energy of researching and building and monitoring your portfolio, but please come via systematic investment plan or systematic transfer plan depending upon your requirement.
