Lets try and Understand what really happened in the last few years. Stock Markets /Real Estate / Gold / Commodities …………all went berserk.Average Returns became things of the past. Greed started to set in quickly and fiercely. There was no money for safety and everything went in for returns.
Then in 2008 beginning the NEWTON LAW started playing in……..”WHAT GOES UP……COMES DOWN” and so it did. It fell and fell fiercely than the rise. So what did some of us conclude………..”EQUITY IS THE WORST ASSET CLASS”. The Money started going back to safety because of “FEAR”. Today Real Estate is too in a bad shape but people still think that real estate will rise quickly and is still the “BEST OPTION”.
So what do we do now?……………..Sit back and wait or invest everything into real estate or keep buying Gold. The problem with most of us is that we get carried away with emotions.
This lull in the markets also gives each of us time to understand our Current Financial Situation and PLAN WELL.
When we were buying at 21000 levels it makes more sense to buy today at 8500 levels provided we have the time period for Equity Investment. Now the question is whats the time period for equity investing. The answer is a question……How much time does a business cycle take to give returns?
I believe that a 5-7 year Horizon is a decent time Horizon to invest in EQUITY Mutual Funds. In MF’s the risk is dispersed amongst various stocks and therefore you are not running a single Stock Risk.
We all talk about real estate being the best asset class………………lets understand the cycle here. The real estate demand comes basically from 3 sectors today:-
- Retail Investors
- Corporates
- Foreign Investors
Reasons:
- Population Blast: More people more space
- Increase in salaries: Affordability
- change in family style (nuclear): Compulsion
- rise in business: more factories/ more warehouse / more showroom space
therefore the demand for more homes and offices and commercial places. Now if we analyze the root cause is the GROWTH OF BUSINESSES due to which salaries increase, affordability rises, demands for goods rises and thus demand for sale space has gone up. If the root cause is businesses then how can we miss not investing in these BUSINESSES. Therefore no portfolio is complete without EQUITY, REAL ESTATE, GOLD and DEBT. All of these combined together for a purpose in mind help making a sound Investment Plan. The variants could be different but the objective is to prepare the RIGHT MIX according to the risk taking capacity and requirements of each and every individual.
TIME TO THINK, ANALYZE & PLAN.…………………………………….
