Direct Investment in equities: Problems


Whenever I do a program on investments or personal finance, people rush to me, and ask “Are you saying direct investment in equities is so difficult, that we should not do it ourselves?”

My answer is normally yes. That is because for most of the people I meet – whether they be Relationship Managers in banks, employees of some engineering company, employees of a fund house or a life insurance company, the connect to equity is at best remote. They are never in the thick of equity. Normally they all have the following problems:

1. Not enough capital to create a portfolio: To create a sensible portfolio today it will cost you at least Rs. 10 lakhs. If you start out with Rs. 20,000 to invest, you can achieve really little.

2. No knowledge of portfolio construction: Buying just a bunch of shares will not (sorry may not) create wealth in the long run. You need to construct a portfolio consisting of value stocks, growth stocks, large cap, growth cap, across business houses, across geographies, etc. this is not easy.

3. No time commitment: For heavens sake do not treat direct investing in equities as a part-time activity. It takes a lot of reading, talking to people in the market, trying to figure out the economic indicators, – if you are not ready for the effort, go to a mutual fund or a unit linked plan.

4. Confusing between trading and investing: If your long term portfolio is all your short term decisions gone wrong, man your portfolio is in trouble!

keep reading…also see why people lose money in equities..

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One Comment on “Direct Investment in equities: Problems”

  1. Ravinder Makhaik Says:

    I will vouch for that: Equities is no small or short term game.

    It is as serious as trying to raise a horitculture farm. Each tree will only fruitfy many years later.

    Till then it is only trying to grow and nuture the right tree which will bear fruit that pays rich dividends after the many years of gestation.


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