Equities

Introduction to Equities For those unfamiliar with equities, the stock market can be a maze that looks dangerous from the outside. To seasoned investors, though, the stock market presents an opportunity to amass wealth like no other investment instrument. And one doesn’t need an in-depth understanding of the market to take advantage of it. A company that’s listed in the equities market basically puts up parts of itself for sale. As an investor, you can buy a part of a company. Each part is called a share and is assigned a value. The more the number of shares you buy, the larger the part you own. This means that when the company does well, you get a share of the profits (depending on your share), and the value of the share rises. However, unless you hold a considerable number of shares, the profit payoffs will not be a large amount. For this reason, most investors make money though trading (buying and selling shares). Trading, basically, involves buying shares and selling them when their value increases. Trading, however, comes with its own complexities.

To make the right decisions, one needs to research the company and sector properly before investing. Studying the industry trends is also important. For those who don’t have the time and knowledge required to do this properly, Mutual Funds are a good option. Mutual Funds Mutual Funds allow groups of people to pool their money together into a Fund which is managed by a Fund Manager. The Fund Manager is a qualified professional who monitors the market, follows its trends, does the requisite research, develops a portfolio and takes investment decisions on behalf of the investors. Profits are distributed among the investors, minus the fee taken for fund management. The advantage of mutual funds is that the risks involved are low. An increasingly popular option among investors is the Unit-Linked Insurance Plan (ULIP). ULIPs channel a part of the premiums paid into a fund chosen by the Policy Holder. While the returns are higher, the risks involved, though low, are borne by the Holder. Insurance firms offer a choice of funds based with different levels of risk and returns.

The table shows the different types of funds generally offered. Indian Market ReturnsDespite the rise and fall of markets over the years, past data has shown that equities have consistently performed well over the long-term – giving higher returns than any other mode of investment. Consider this: An investment in the BSE Sensex for a one year period between 1979 and 2005 would surely have been a loss. But had you invested for ten years or more, your chances of incurring a loss would have been almost zero. And your average return on the investment would be a healthy 17-18% per annum. As you can see, equity as a long-term investment minimizes risks and yields better returns. Market Movements The equity market goes through cycles of growth and fall. While it’s true that investing in a growing market will invariably lead to rich profits, it is equally true that there is no sure way to predict which way the market will turn. Investors can at best make an educated guess. Most newcomers to investment (especially in equities) tend to worry about the right time to start investing.

There’s no such thing as the right time. Invest whenever you have the money. The sooner you start investing, the longer the investment period you can afford. To get the best returns, the minimum period you should look at is 5 years Will Kotak Safe Investment Plan II get me any Tax Benefits? Yes, you get tax benefits under Section 80C and Section 10(10D) of Income Tax Act, 1961. With the markets showing volatile behavior, is this a good time to invest in equities? A famous adage about investing goes like this. "It’s not about timing the market, but about time in the market" NOTE: Returns on debt and equity funds are on a ten-year average. The tax component has not been taken into consideration. If tax is taken into consideration the real rate of return will be further down on the negative chart. Source: “How to beat inflation”. Sheetal Jhaveri. Rediff Money. To beat inflation, savings alone will not help. Making the right investment, however, can help you beat inflation and secure your future. Whatever your goals may be – children’s education, retirement planning, children’s wedding, wealth accumulation – you need to start planning today. (See Investment Tips)