Direct Equity v/s Equity Mutual Fund

Direct Equity v/s Equity Mutual Fund

I have seen many investors have often not sure whether they should invest in direct equity or invest in equity mutual fund. According to me, both are good instrument to create wealth in long term but both have different type of risk. We will discuss here about these instrument today.

Direct Equity:

Investing in direct equity is suited for those investors who have plenty of time and understanding of finances of companies. It is very good for those who have time to track the financial health of the company. Such investors invest in good companies at very beginning and earn multifold return in long term. You should have large sum to invest in such companies at the starting.

Equity Mutual Fund:

Investing in equity mutual fund is very good instrument for wealth creating in long term. It is very suited to those people who have no time to track the market and companies and also not understanding of finances. One can easily invest in equity mutual fund in lump sum or in step by step in the form of SIP (Systematic Investment Plan). There is no need to have large sum at initial stage of investing like in direct equity. It also give the multifold return in long run on your investment. One can start investing a very small amount like Rs 500 also and gradually increase this as per their income.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

When should be invest in the shares?

When should be invest in shares ?

The above written question is in the mind of various investors. Unfortunately, many of us are not able to find the difference between saver and investor. India is country of great savers but poor investors. Most of us enter in share market for short term gain but become investor forcibly when the rate of our shares drops below from the purchasing price.

Investing require three main things. First is investment period, second is well understanding of the asset in which you are going to invest and third is know about the risk. In this article I will pick the 2 example of stocks which had created extra ordinary wealth.

In 1993 Infosys came with IPO of Rs 95 per share. If you had bought 100 shares of Infosys for Rs 9,500 at 1993, the value of that Rs 9,500 has become today Rs 5.05 crore.

Year	Corporate Action	Shares
1994	1:1 Bonus	200
1997	1:1 Bonus	400
1999	1:1 Bonus	800
Nov-99	Split to Rs 5 Face Value	1600
2004	3:1 Bonus	6400
2006	1:1 Bonus	12800
2014	1:1 Bonus	25600

  

The value of 25,600 share of Infosys today is 5.05 crore without including dividend. Keep in mind dividend is tax free amount which company gives to its shareholder.

The other wealth creator is Wipro. The IPO had come in 1980 Rs 100 per share. If you had bought 10 share of Wipro at that time worth Rs 1000 then, the value of that Rs 1000 has become today worth Rs 56.05 crore.

Year	Corporate Action	Shares
1981	1:1 Bonus	20
1985	1:1 Bonus	40
1986	Split to Rs10 Face Value	400
1987	1:1 Bonus	800
1989	1:1 Bonus	1600
1992	1:1 Bonus	3200
1995	1:1 Bonus	6400
1997	2:1 Bonus	19200
1999	Split to Rs 2 Face Value	96000
2004	2:1 Bonus	288000
2005	1:1 Bonus	576000
2010	2:3 Bonus	960000

The worth of Rs 1000 which you had invested in 1980 is Rs 56.05 crore today without including tax free dividend.

The above mentioned two example indicate the one thing very strongly that you should invest in shares with the view of long term goal like retirement kitty, children’s education and marriage etc. If you have not enough time to study of stocks then you should invest in large cap equity mutual fund.

Please do not try to time the market. For long term investor market is always good. For example, since last one year market has given decent 60% return but many investor has missed this market rally because they want time the market.

If you want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

Are you going to invest in real estate.?

Are you going to invest in real estate..?

I know your answer would be yes that the people more tend to buy a property. The last week I have read the story about the deal of the iconic film actor Rajesh Khanna’s bungalow which is situated on Carter Road , Bandra in Mumbai. It considered a very posh area as it also have a sea facing location. Rajesh Khanna bought this bungalow for Rs 3.5 lakh in 1970. After 44 years his heirs sold it for Rs 85 crore. The property has multiplied by 2428 times or in other words annualized return og 19.38% over 44 years.

In Mumbai, there are many more examples of the same type of property deals which has given handsome returns. Samudra Mahal in Mumbai is another expensive property. A flat purchased in 1970 at Rs 700 per sq. feet was sold at Rs 1,18,000 sq. feet in 2013. Money multiplied by 168 times in 43 years means 12.66% annualized return.

In 1963 Godrej paid Rs 1 lakh to buy his first house in south mumbai. In 2011 the property was sold for Rs 25 crore. Money multiplied by 2500 times in 48 years. It means the annualized return of 17.70% over 48 years.

Now assume if you had invested Rs 100 in Sensex in 1980. Not it has become more than 27000. If dividend yield also include assume 2% then Sensex has delivered 20% annualized tax free return. It means sensex has beaten most expensive prime properties in the point of view return.

Good mutual funds and many stocks have delivered awesome return like 25% to 30% far superior to sensex itself. Unfortunately, in India the investor are least understood about this investment. Only about 3% saving goes into stocks or mutual fund. Investment in equity have one another benefit except tax free return. You can sell it anytime according to your need and get sell amount within 2 days. You need not to sell entire mutual funds holdings or stocks. You can sell stocks or mutual funds in the part. In the case of property you have to sell whole property and it is very difficult to sell immediate. In normal cases of property deals happens between 1 month to many years. You cannot sell in part of your flat or bungalow. You need not annual maintenance or local tax for your mutual funds or share holdings.

I observe many time when I meet my friends or investors that they are more willing invest into property instead of equity mutual funds. Investment in the flat or property always their first choice and they happily take loan for it if they do not have lump sum amount. They completely ignore the cost of acquisition of that property which is very significant. The cost of acquisition means the brokerage you pay the broker, stamp and registration duty, annual municipal tax, maintenance of the property and the interest you are paying on the loan.

Give some importance to equity as you give to real estate. Give it also at least more than 10 years and ignore bull or bear run of the market. If you hold it for more than 20 to 30 year you would be amazed at the fortune created for your retirement and next generation.

If you want more information regarding investment or you need investment services, feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com