We Indians believe that it is not wise to stretch legs beyond bed which means “don’t spend beyond earning capacity”. I think, by following this age old concept (taught by Indian moms) we remained financially fit when the whole world was struggling to survive. Even during the peak of economic recession, majority of Government owned Banks functioned normally simply because banking industry followed all basic rules of banking while sanctioning loans. Happy news is that most of the economies including US have freed themselves from the clutches of recession and I feel the time has come to increase our financial activities.
During the successful visit of American president Mr. Obama, various deals were finalized between corporate giants of USA and India and it is believed that their out come will be a win-win situation to all concerned. It is generally expected that Indian stock markets may boom after the announcement of $10 billion deal but as usual Indian investor’s response was Luke warm. Individual investors who have got burnt their fingers like me are not in a position to take further chances in this most volatile financial market and I want to give an example to justify it. A dream deal of $2.2 billion is announced between Indian based Reliance Power ltd and US based General Electric. In spite of the announcement of such a huge deal, R. power share price did not move up substantially which is still below its IPO price. What it shows? Majority of individual investors in India invest cautiously and their contribution is negligible in the stock market performance compared to Indian mutual funds, FII and hedge funds. I feel, only because of the participation of foreign institutional investors and hedge funds we could see sensex crossing 20k again and again.
Systematic investment plan (SIP) was practiced in Indian households since centuries. Indian moms used to collect some portion of food grains and money separately to meet emergency requirements if any. For an Indian investor who wants be part of share trading activities but with minimum risk, investing in mutual fund through a SIP is a good option. Since there is a stiff competition between major mutual fund players like Birla Sunlife, SBI, UTI, Tata, Kotak Mahindra, LIC, Franklin Templeton, Morgan Stanley etc. we can expect better service and returns to the customers. A small investment for a longer period may become a huge fund which may take care of future requirements like higher education for children or their marriage. Indian middle class always play safe in all aspects and I feel SIP in few companies will increase the value of their portfolios, keep them free of stock market tension. Browsing the internet to know the past track record of companies and NAV levels of different funds before selecting a fund will end up with a good selection. I am investing through monthly SIP in two different funds of Birla Sunlife Mutual fund and already received handsome dividends which are quite higher than Bank interest.