—May 9, 2018
Amazon India had a very successful marketing campaign – “Aur Dikhao…., Aur Dikhao” which drove one key message to the Indian consumer that it has a wide variety of product options to choose from and that too from the comforts of their phone. The campaign was an instant success and underscores the psyche of the Indian consumer who will make shop keepers empty their wares from shelves, zero-in on a few and then would again go scouting for more in other shops. This is fine as far buying goods for personal use. However the problem arises when this habit extends to selecting suitable investment products.
We have seen that there is the unending quest for finding the newest and hottest exciting new investment product/ stock/ commodity/ fund. Investors are not happy owning 20 -25 companies from the BSE 100 i.e. the stalwarts; the steady compounders. They are always searching for the next Infosys, the next Titan& the next HDFC bank. Investors lament the fact that their advisors showcase or advise only on the plain-villa mutual funds, stocks, bonds. They want to hear about structured products, Alternative Investment Funds (AIFs), private equity, crypto currencies, various commodities, precious metals etc. The more exotic, the more elusive– the better.
The suitability of the investment product for a particular investor is of essence in building an investment portfolio. A particular outfit may look super cool on the model shown on the online app of a store. However it may not be the ideal fit for your body structure. Likewise an AIF or for that matter any other product may not suit your risk appetite and investing horizon. The purpose of building an investment portfolio is to derive income from it to achieve your future financial goals. The time-lines for those goals also become important. So effectively if you have been planning to go on an international holiday for the last couple of years and that date is finally arriving the next 1 year, there is no point in punting that money on crypto-currencies or stocks or any product which doesn’t have certainty of returns. On the contrary, if your goal for your child’s education is 10 years in the future, and the return required on your portfolio is 12% compounded, the probability of you achieving your goal with a diversified mutual fund is very high. You don’t need a riskier product which promises to return 18%. Picture this – you need 6 runs to win a cricket match and you have 1 over to achieve it. That does not mean that you have to finish the game with a six! Hitting a six will only give you bragging rights but you should not lose sight of the fact that ensuring your team a victory is the only goal!
—Parag Telang