Logical Investor & Trader

7 Reasons why "Investing" is more important than ever before !!

Talking about "India", as a country we are witnessing that many people have started doing "SIP or Systematic Investment Plan" as a route for their "Investing" journey.

We have seen many TV commercials saying "Mutual fund sahi hai".

In 2013, the regulatory authority of Securities market known as "Securities exchange board of India (SEBI)" issued out a notice mentioning the "Investments" on "Direct plan" for the investors who have knowledge about where they should invest according to their goals and risk profile.

It is a good initiative for reducing the dependency on "Distributors" who receive some portion of the money invested in return for their service to guide people on "How to invest, Where to invest, Why to invest, For how long to invest". They gauge the risk profile of the person, the financial condition of the person, understand what are the goals that a person has, understand what is the time horizon to achieve those goals and suggest a place to invest.

If i go by my personal experience then over a duration of past 4 years i have seen many Retail investors opting for the "Direct plan" but i am assuming that not all of them completely understood the process of selecting a particular "Mutual fund" or an "Equity scheme".

Cannot blame them for the lack of knowledge because the "financial literacy" in "India" is poor.

The education system does not teach these things at the root level.

I saw people writing online after "Investing at a direct plan" asking others for their opinion on their personal portfolio.

I have received a certification on "Mutual fund distribution" so i know what the process should be, what factors should be considered before making an "Investment decision".

There are about 44 Asset management company's. There are over 500 schemes to choose from and each scheme has 4 different options.

At first i also had difficulty understanding the "In & Out" of this Industry despite of the reading which i was doing and working with a distribution firm.

Just so nobody gets me wrong i am all for "Direct plan" and people making an informed decision by themselves.

What could be better for the "Economy" ?

If people are literate on the topic, educated about it, aware of the pro's & con's and have the ability to make a right decision then there is no problem.

People even invest more if they understand what they are doing.

As an "Investor", there is no better thing for me considering how much we "Indians" save and the strength that lies in our population.

I am not working for any "Distribution company" anymore nor i am a "Distributor" myself.

Somewhere i feel that maybe people are heading about the "Investments" in a wrong direction and "Boy ! It almost never ends well". I cannot even imagine going "Wrong about my Retirement planning".

Let us take a look at the "Reasons why Investing has become more important than ever before" :

1. Savings are decreasing because of increase in expenses and wages have not grown by much since the past decade.

2. Education of children is becoming more expensive.

3. Healthcare cost is rising rapidly.

4. Doing a "Fixed Deposit" hardly beats the "Inflation rate" which means "Net annual return" is below 3 %. It means that 10,000 rupees which are sitting in the bank FD will only compound to become 18,600 rupees after 20 years. Yikes !! Forget the "Retirement". It maybe a bit "Harsh" but it is "True".

5. Planning for your Child's marriage which in itself is a costly affair in "India".

6. National savings certificate, Commercial paper, Certificate of deposits, Post office schemes, Unit linked Insurance plans & 10 year government backed sovereign bonds don't yield much return anymore.

7. Creating some wealth for the next generation which as "Indians" we all want to do but very few are able to achieve that.

10,000 rupees compounded for 20 years at the rate of 9 % excluding inflation can yield 56,000 rupees but seeking the right advice is absolutely "Necessary" for achieving that.

Going by today's standards, i personally don't think that many Mutual fund's are hand-holding "Retail investors" that well.

Also i don't think that "Many people" have the adequate knowledge or understanding to rightly make the decisions themselves.

That is the problem i see.