The Importance of Investing in Equites

The boxing legend Muhammad Ali once said “He who is not courageous enough to take risks will accomplish nothing in life.”

This holds so true, especially in the world of investing and here is why. Most of us may have heard the following statements when it comes to investing in equities:

“Equity investing is only for experts” or “You need large amounts of money to invest in equities” or some going even so far to say “The stock market is a den of thieves do not invest in stocks!”. So what should you do — invest or not invest in equities — that is the question.

Our answer — you MUST own equities. Though the significance of owning equities cannot be covered in a single article, we believe in these two broad aspects -

1. Easy and simple to own

2. Comparatively better returns than most other asset classes

Owning great companies is a great wealth creator — And its not too tough!

Imagine if I told you that you can own Amazon, Tesla, Infosys, TCS, HUL, HDFC and Maruti? And that you don’t need to be Elon Musk or Jeff Bezos to buy these companies but even a small investment is enough?

Yes, this is true — before you call your friends and tell the world ‘yeh hum hai aur yeh hamari pawri ho rahi hai’ for you owning these companies, lets take a step back and see how you can own them.

A shareholder of a company — even if someone with one share — owns a part of the company and can vote in the Annual General Meeting of the company and enjoy the dividend that a company declares. Hence, investing in equities is equivalent to buying or owning a stake in the company

You can go about this in two ways:

1. Do a little homework and invest in the companies you want to own directly

2. Invest in a mutual fund that in turn, invests in stocks that you would like to own

Here’s a quick hack: You can start with an investment as low as Rs 500 in a mutual fund. You can start an SIP or a Systematic Investment Plan and invest every month! Imagine with Rs. 2,000 a month you could potentially own companies like HDFC, Reliance, TCS etc.

Better Returns

An analysis of past data does reflect that equities have delivered better returns in comparison with other asset classes in a similar time frame. If we were to look at the returns that stock markets have given over the last 10 years — that number is around 9.6% for the NIFTY TRI and around 10.1% CAGR for the BSE SENSEX TRI, thereby arriving at an average of 10 percent year-over-year. Simply put, not many asset classes can match this kind of a return for this long a time frame. Your savings bank account gives you 3.5% at best and FD’s generally deliver a modest 5%.

However Your Grandparents Weren’t Wrong…

…But only to a certain extent. Yes, equities are a risky asset class when compared to debt instruments or FDs, hence they offer higher and better returns. But this is the Naya Zamana and while the cautious optimism of our parents and grandparents is great, we want to move faster towards our goals. As such , equities provide for a great asset class in that regard.

There are many apps and software that highlight the pluses and minuses of owning a stock in an easy-to-understand format. There is a wealth of information out there which can help us take the right call when it comes to investing in a companyor a mutual fund. Our parents and grandparents had very limited access to the kind of information we can now obtain with the right app — at the touch of a button.

Last year there were 10 million (yes, you read that right) Demat accounts that were originated — showing that the interest in earning those double digit returns has been on a rise

So, Here’s How You Go About It and Not Miss Out!

The process of investing in stocks and mutual funds is really simple, all you need is the right app that allows you to invest in stocks and mutual funds (preferably both at the same time so its easy to track your investments). Our Dhanush app allows you to check stock prices and act upon our expert recommendations at the touch of a button. Click Here to download the app and start trading!