Investments Can Be Boring



Everyone is in a hurry to earn quick returns. They do not have the patience to follow some disciplined approach to investing and creating wealth. Systematic Investment is viewed as boring .0ften we hear investors talk about not getting any kick out of these boring ways of investing or that there is no adrenalin rush.


However, what they fail to appreciate is that there are no short cuts to making money. If one tries these short cuts; over shorter periods they may make some money but in the end, they will always falter and burn their fingers. They actually get a kick on the wrong side by these short term approaches to investing such as day trading, investing on tips and hearsay, speculating, and ignore time tested strategies of investing for longer periods or investing through strategies like Systematic Investment approach.


For a seed, to grow into a tree it needs a lot of patient waiting, nurturing, and withstanding fury of rain, sun, dust. Similarly, to create wealth, one needs a long term patient approach to investing; ride volatility during various phases of economic cycles to come up on top. The study of a long term asset such as Equity has shown that 15-20% Compounded Annual Growth Rate (CAGR) does not happen in one linear line. To get an average, one needs to ride the highs as well as the lows. A few years might be highs in equity markets, some flattish and some lows during bear phases, Only the average of these cycles create long term double digit high returns.


Review the following table to realize the importance of a long term approach. Years 2006-2007 saw a lot of equity New Fund Offerings (NFOs) being launched. Many investors became traders during these bullish periods. They invested in NFOs and disinvested for a quick buck post the NFO reopening. The table demonstrates the difference in returns of long term investing v/s trading for short term gains in the same schemes. Longer an investor held onto these investments; returns have gone up:


Summary:

Think Investment Think Long Term. If you want kick from your investments - Go to a Casino.



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