Why investors should invest in equities or mutual funds

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For an investor, who has a long-term view to create wealth out of his savings, a part of his savings must surely be invested into equity or equity mutual fund schemes.

It is a fact that over a longer period of time, equity may be the best performing asset class.

Now, for an investor, who has the knowledge to understand the financial health of the company and experience in the capital market, buying shares of good quality companies is one good way to invest in stocks. Another good way is, particularly for investors, who don’t have financial background or knowledge and want to experience to understand financials of the company, may choose to invest into equity mutual fund schemes.

The Do’s of both types of investing are:

  1. Start early
  2. Invest regularly (SIP may be an option)
  3. Think long term (minimum 5 years to 7 years)
  4. Have patience
  5. Ignore volatility
  6. Ignore the noise
  7. Stay the course

Investors should understand well that investing in equities simply means investing in businesses. So, an investor is actually becoming a bigger and better businessman by investing in equities or equity mutual fund schemes.

Investors should also understand well that in the short term, prices of the shares of the company or the value of the mutual fund schemes would always go up or down due to geopolitical conditions. No one would believe me, no one on earth can predict the market in the short term. Therefore, the decisions of investors should never be impacted by such short-term volatility.

One important aspect of investing through mutual fund schemes is the selection of the right distributor. Investors should always select a distributor with high integrity, high experience, and deep knowledge of the stock market. More the years a distributor has spent in the market, the better would be his advice.

One reason why stocks or equity mutual fund schemes give returns more than inflation, thereby helping in creating wealth, is because good companies would always pass on their products’ cost escalation to customers and maintain their profits and growth.

Views are personal: The author is Pukhraj Lunkar, a Mutual Fund Distributor from North-East.

Disclaimer: The views expressed are of the author and are personal. TAML may or may not subscribe to the same. The views expressed in this article / video are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.