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March 30, 2017

Complex equity investing simplified via MFs

Equity is known to be the best wealth creator in the long term. Equity benchmark S&P BSE Sensex has returned, onaverage, 15% p.a. in the 15-year rolling period from 1979 to February 28, 2017. However, volatility is an intrinsic partof this asset class in the short term, which necessitates regular tracking of stock movement and expertise in directinvesting to reap maximum rewards.

Direct investing
is not everybody’s
cup of tea

The pre-requisites for direct investing are research skills and time. Investors should have a sound knowledge of equity research and valuation in order to select stocks. They should also have access to a variety of information, which may not be easily accessible and usually comes at a cost. Selecting the best stock from a huge universe is also a Herculean task. A performance analysis of about 3,600 listed stocks shows only 50% of them have outperformed the market benchmark Nifty 50 in the one year ended February 2017. Hence, selecting a winner consistently is time-consuming.