It is boring but do not miss it

 We’ve been writing to you regularly on latest on financial markets. I want to take this opportunity to share some relevant points and reemphasize some of our repeated advice exchanged during our interactions. But Good advice is boring and doesn’t change with time. 

1)   The 3 key factors to success in investing are long term orientation, patience and discipline.

2)   The minimum holding period for equity investment is 10 years. This is only minimum. The preferred holding period should be in decades.

 

3)   You buy a house, keep it for your whole life and then pass it on to children; equity investments should be viewed in the same way. It is multi-decadal and multi-generational.

 4)   You don’t look at the value of your house daily, weekly, monthly or even yearly. If you can have the same outlook towards equity as well, you would create huge wealth.

5)   There is no short term or medium term. The only term for equity is long term.

6)   The biggest blunder people commit is checking the portfolio frequently. You should check it only once a year.

7)   People who check their portfolio frequently are unlikely to stay in the market for long and create wealth.

8)   Don’t look for one year averages. Look only for 5/10 year averages.

9)   The best way to invest is to invest regularly for a long period of time. Time diversification is least understood.

10)Volatility is very normal. Temporary declines are not losses unless you sell due to panic. 

11)In markets, declines are temporary and uptrend is permanent. Keep repeating this during corrections and bear markets.

12)Completely ignore macro forecasts and market outlook. No one can predict short term.

13)Once you buy right, all you need to do is sit tight. If you ask me which is the one key trait I’ve learned during last 5 years as an advisor; it is patience. Patience pays and it pays very well.

14)Investor returns are never equal to investment returns because they chase performance. They invest after few good quarters and redeem after few bad quarters. Stay through both good and bad quarters. Then only you would create wealth.

15)Ignore financial media. Lot of it is noise. They amplify your fear during tough times and make you act impulsively. Frequent updates about economy or market are of no use to long term investor. It only has nuisance value.

16)India would grow well in next couple of decades. So corporate India, hence stock markets, would also do very well. Get the bigger picture correctly and ignore every day distractions.

17)I’m confident that equity would beat all the asset classes in the long run. The return would beat inflation and enhance your purchasing power.

18)The biggest risk to a portfolio is not having sufficient exposure to equity.

19)Volatility is not risk. In fact it is a friend for all of you who do SIPs.

20)Individual stocks may require timing in terms of entry and exit. Buy and hold would work extremely well in case of equity funds and index.

21)Actively managed funds have been doing a great job in India. Index investing is still far away.

22)You don’t need great brains to be an investor. Once you invest in few well diversified equity funds, what is needed is patience and discipline to stay the course.

23)Don’t chase performance and keep churning the portfolio. A fund has to be changed only if it under performs benchmark for 3 consecutive years. Changes to the portfolio should be as minimal as possible.

24)Out of 10 years, even a good fund or fund manager would have couple of bad years. Vanguard study shows chasing performers hurts portfolio very seriously. It is a wealth destruction habit.

25)Roughly 2% of investors only hold a fund for 10 years or more. I want all our clients to be in that precious 2%. Only few make it big from the markets and I want all of you to be in that league.

26)Compounding is back loaded. It works well over a long period of time. Give time for your investments to grow and blossom. There is no substitute for time in compounding.

27)Gains always come lumpy. So look for how your portfolio has grown over say a 5 year time frame rather than looking year on year.

28)Time + Discipline = Compounding

29)Wealth Building= Less activity+ A lot of patience

30)99% of the time, doing nothing is the best thing to do in the market. It is good to be a Rip Van Winkle investor. Activity hurts. Sit still. Let the market work for you.

Source: Mr Muthukrishnan

Last modified on Wednesday, 10 February 2016 07:07

Prakash Praharaj

Shri Prakash Praharaj has a passion for excellence. He has been awarded two gold medals for securing top positions both in Graduation and Post Graduation in Commerce. He is an MBA with specialization in Finance and marketing. He has been awarded Diploma in Treasury, Investment and Risk Management besides CAIIB from the Indian Institute of Bankers. He is a Certified Financial PlannerCM from the Financial Planning standards Board, India (FPSB), affiliated to FPSB, Denver, USA and Certified Personal Financial Adviser from NISM. He is also a SEBI registered Investment Adviser vide Reg. no. INA 000000045 dated 2nd August 2013.His book "Your Every day guide to Personal Finance and Insurance" has been published by CNBC TV 18 in August 2015.

7 comments

  • aaradhya

    posted by aaradhya

    Wednesday, 10 February 2016 10:39

    i will definitely share wid my family n frnds..very usefull

    Report
  • niraj

    posted by niraj

    Wednesday, 10 February 2016 10:37

    imp to know dis points...

    Report
  • lizi

    posted by lizi

    Wednesday, 10 February 2016 10:12

    very much imp to remember while investing..

    Report
  • pooja

    posted by pooja

    Wednesday, 10 February 2016 10:08

    29th point is very excellent

    Report
  • ranjit

    posted by ranjit

    Wednesday, 10 February 2016 10:05

    true and helpfull facts..tnx to share

    Report
  • monali

    posted by monali

    Wednesday, 10 February 2016 10:03

    excellent

    Report
  • subhra

    posted by subhra

    Wednesday, 10 February 2016 10:01

    Very helpful

    Report

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