Its been a promising year for the stock markets, with most of the blue chip stocks yielding 14-20% returns in 2014. Some of it has to do with the feel good factor of having a PM & a team who at least communicate their schemes and plans to set right the impasse at the center, and the rest due to the dire straights that most of the developed economies, including China finds itself in today. With more and more dollars being circulated, it is but normal that all this paper money needs some place safe to hang out in, and one such location seems to be our Indian Markets.
My own mutual Fund investments, which I commenced in 2013 have been yielding a healthy 20% returns in the past year and I am not complaining at all. Well, to most of us who dabble in the equity markets, it is a pain to keep track of daily fluctuations of individual stocks and outright collapse at times, and this is where creating a portfolio basket of equity schemes within a mutual fund helps. I have currently built a portfolio basket within UTI Mutual fund as follows:
UTI-BALANCED FUND - DIRECT PLAN - DIVIDEND
UTI-BANKING SECTOR FUND- REGULAR PLAN - DIRECT PLAN - DIVIDEND
UTI-EQUITY FUND - DIRECT PLAN - DIVIDEND
UTI-PHARMA & HEALTHCARE FUND - DIRECT PLAN - DIVIDEND
UTI-INDIA LIFESTYLE FUND - DIRECT PLAN - DIVIDEND
UTI-MID CAP FUND - DIRECT PLAN - DIVIDEND
UTI-MNC FUND - DIRECT PLAN - DIVIDEND
UTI-NIFTY INDEX FUND - DIRECT PLAN - DIVIDEND
UTI-OPPORTUNITIES FUND - DIRECT PLAN - DIVIDEND
Each of the above are pure equity investments with its yearly (hopefully) Dividend payout transferred to my bank account. This way, I have ensured a steady cash flow to my account and at the same time the principal that I have invested grows steadily over a period of time in the market. The diversified portfolio also means that if one or two sectors suffers a fall, the rest should help balance this. Even now, in this portfolio, there are outright star performers like the MNC fund and the Transport & Logistics fund, that are running at close to 100% returns in one year, to their poorer cousins like the NSE Index fund and the Equity fund which are giving me a mere 5-10% returns.
The idea that I am trying to present above is that equity investments are not a devil, but a necessity in one's portfolio, if one needs to gain financial independence in the coming years. It is mandatory to have equities as a percentage of your overall investments thus helping your assets grow due to stellar returns over a medium to long term. If anything, Equities are the turbo chargers for your investments. They are also subject to collapse and dreadful returns if the idea is to get short term returns, and hence this should form a part of your longer term investment strategy only. In pursuing this portfolio, one website that has been of real help in doing analysis has been moneycontrol.com. You could go through the Mutual Funds listed there, their individual schemes, the NAV, their returns and even compare how these funds are performing in comparison to their peers from other Mutual Funds. This gives you a guidance on the schemes that have performed consistently over the years, especially those that have ridden against the recessionary tides of 2008-2011.
After one has built a portfolio, it is also essential to keep modifying it from time to time after reviewing the returns that they are providing you. It is important that your returns cross 10% year on year compounded, without which any equity investment would not be worth it in an Indian context. Hence re-balancing one's portfolio is a continuous process that one needs to do at least every quarter. So, as a start, do consider mutual fund investments with monthly investments of small sums so that you are not stuck in situations like entering the market at its peak and then losing a decade to reclaim the sum invested! Hence periodic small investments would balance out any peaks or troughs that are typical of any equity investment cycle.