Quite some time ago, I had written an article on investing in the share markets – equity and mutual funds, and my experiences with both. However, a lot has changed in these few years which makes me want to think and write about it again. After all, stock market trading is so tempting that it comes back to haunt again and again.
So what has changed? The ease of investing. Mobile apps!! Today when there is an app for everything, why should investing be any different? Fund houses have their apps, Brokerage firms have their apps, Depositories have their apps (Karvy-CAMS) and even e-NPS has its own app. And what’s more, some apps are either relatively or completely free, specifically when it comes to investing in mutual funds. Even with share trading, the brokerage costs of these new applications are marginal.
All of which appeals to the younger generation, of which India has plenty. Earlier when you had to call your broker to place an order, it automatically made you place orders in multiples of 5s, 10s, 20s or more. Even if there was a website or app, the brokerage charges per transaction made you wary. Now one can buy a single share, whatever be its market price (it can even be Re.1) at the click of a button, without worrying about high brokerage / transaction charges. And the smarter amongst our youth, they do that. Buying one share per day / week / month – as per their capacity and slowly building their portfolio.
And that’s really how SIPs in mutual funds work. Small investments at periodic intervals, channeled through fund managers who have the know-how to select the best investment avenues. For those who have the know-how, and can track the markets – or at least the few good companies they like, directly investing in their shares one at a time, makes good sense. The younger generation seems pretty smart in this regard. So I have decided to take some leaves from their book and start with this kind of value investing.
First, they select the companies they like. ‘A’ group companies with strong brand image and presence. They check their share price charts – if it is one that slowly moves up in the long-term. They read reports and news articles about the companies’ recent activities. Be it new orders, new products, results or dividends. For the more finance savvy, they study the technical or fundamental analysis. All this is easier when you are looking at only 4-5 companies or less. And then they decide where to invest, for the long-term.
And this kind of investing is good for the companies too – having long-term investors. People who have faith in the company and will not off-load shares on minor distress signals. It keeps their share price safe and allows them to focus on the business, rather than the markets, which is how it should be.
This write-up, although written at a time when the markets are volatile and jittery with pre-election result blues, I hope will still be worth reading post May.
