Occasional Column

Plan Your Investment in Equities

NITIN GABHANE
MBA 2008
He can be reached at
nitingabhane@gmail.com


Before starting this article, I would like to throw some light on the word INVESTMENT.

In today’s world, every earning individual plans some investment for himself, which can give him a handsome return quickly and with minimum risk.

INVESTMENT is nothing but the redirection of resources from being consumed today to creating profits in the future. Investment can be of many kinds, like investing in financial markets, real estate, etc…

Here, I am focusing on the investment in equities. It is said, “An investment in equities possesses high risk and high returns”. This is absolutely true. A person who wants high returns in a minimum period of time by investing in equities must have the capability of taking high risks.

Here are some of the GOLDEN RULES FOR INVESTING IN EQUITIES:-
Choose the Right Sector: As we all know, today the world is facing a global recession. Despite this, our country is continuing on its remarkable growth trajectory. So here it is very important for us to be careful in our investment and choose the right sector, which has minimum impact of recession, or which can grow in a better way compared to other sectors, when the growth phase comes in the global economy. Always try to focus on the sector which caters to the basic needs of human beings. For example, sectors like power, infrastructure, healthcare and telecom can be some of the best investment options.
Choose the Right Company:
After choosing the sector, again it is most important to choose the right company within that sector. For choosing the company, one should keep in mind: what are the companies operating in that sector, who forms the management team; what is the business model; what are the future plans; and how is the company performing in financial terms? It is always advisable to choose benchmark companies with a good track record and a good management.

Be firm in your decision:
This is one of the most important aspects while investing in equities. Most of the investors get distracted by the views of friends or other investors or views which are flashed in various business channels. One thing I would like to stress is: “this is your investment; so the decision should be exclusively yours”. So do your analysis, plan your period of investment, calculate your risk and return, and have confidence and faith in your decision.

Apart from these GOLDEN RULES, there are some basics which one should always follow to make profitable investment in equities.....

1. Always be patient and have faith in your decision.

2. Always diversify your portfolio within various sectors and companies.

3. Always be content when the market rises and be happy when the market dips, this means that when the market rises, sell your equities and book profits and when the market dips, take it as an opportunity to buy good value stocks.

4. Always calculate your risk and return for your period of investment.

5. Always invest a part of your hard earned money in equities, maybe 20%-25%. Don’t ever invest all of your money in equities.

6. Always learn from your mistakes. No one can beat your experience and let your experience be your “guide” for emerging as a smart investor.

I hope this article will help you to take right decision in investing in equities and earning good returns.