Equity investing has always appealed to the likes of many. There are some who believe it to be gambling and choose to stay away from it.
Then, there are those who are drawn towards it and have a rather dramatic understanding of the stock markets. They interpret it to be a place to make some quick money.
I interact with clients who fall in either side of the spectrum – and I cannot explain how skewed their understanding of equity investing is. Hence, let me clear some widely discussed myths on it.
Myth – I am not rich enough to invest in the markets:
A common fallacy which I observe among most investors is that you require a huge sum to start investing in equities.
The fact is that you can start investing with a sum as less as Rs.500. Start by choosing a fund that fits your risk profile perfectly and allows you to save a sum (weekly/monthly/quarterly) as per what you can afford.
Essentially topping up your SIP by 5-7 percent every year will help you to capitalize on the power of compounding that will help you to reap higher returns in the long run.
Myth – I am too old to invest:
Investing is a painstaking activity about identifying the right companies. It involves understanding the business of the company along with the opportunities and threats it is likely to witness over time.
This analysis does not get simpler because your friend or colleague bought a specific company or because a company is in the benchmark index or because it was recently in the news. It will require your time, commitment and a proper plan.
The fact is that it is never too late to start investing with the right goals and plan. My advice will be to get in touch with an investment adviser who will help you figure out the right investment mix– which is age appropriate and will help amplify your returns.
Myth – Accumulating every stock on the dip will double my returns:
If you are going to need your money in short-term (within three to five years), equity markets may not be the right place for you.
When you are investing for the long-term, you instinctively adopt certain traits like giving the daily noise a miss and looking at companies with a more serious, enduring perspective. You automatically align your point of view with the company’s vision. The fact is that picking stocks requires discipline and focus on value. It does not always depend on the price.
Myth – Volatility can erode my portfolio:
Investors are wary of equities because it takes one downturn to erode gains accumulated over the years. Often, people try to time the market by making predictions about the highs and lows that might happen in the future.
Do not stick to such predictions. Analyse the effects of the current and upcoming economic events. Study the factors which might affect the market ongoings. The fact is that proper asset allocation will enable to amplify returns over time.
(The author is Head, Personal Wealth Advisory, Edelweiss)
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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