Let me start by saying that when I see you kids wasting your money in savings bank account, buying Endowment policies (unit linked or otherwise), keeping money in bank fixed deposits (to get 80C benefits), …etc. my blood boils. The bank manager is trained to give YOU a pathetic return so that his (bank’s) shareholders a good return.

I hate it when people misuse my name saying ‘we also invest with Mr. Market’. Most of them are liars. When the returns are good, they claim credit when the returns are bad, they blame me. Seriously they deserve a kick.

I hate to see you getting into bed with them without knowing what precaution you should take. The main precaution with all these agents using my name is the atrocious charges that they make you pay. Sorry that is for a different date.

I hate it when you listen to your parents who tell you “Mr. Market is all about speculation”. You should be thrilled that Mr. NR Murthy or Mr. Azim Premji’s parents did not think that way. I need manufacturers of shares (companies) and consumers of shares (you, the investor) to be a good market to develop well.

Some of you tech-savvy youths may have switched over to a savings bank account with a higher interest rate. Sorry guys but even that does not protect you against the biggest monster of your life – INFLATION.

If you shift to a fixed deposit, your money is earning 7 percent now – meaning if you have Rs. 10,000 in savings, it’s earning about Rs. 700 a year instead of Rs. 400.  But invest with me, and you’re likely to see the return rates closer to  8 to 12 percent. Even if I only gave you a 10 percent return, that’s nearly Rs. 500 more than the post tax percent interest savings account would net you. Now imagine the compounding effect over a 30 year period. 

Individual stock picking can indeed be difficult for somebody who does not do it for a profession. However, creating a well-diversified investment portfolio can be the difference between retiring on a beach in Goa (Bahamas did you say?) and living at your kid’s house. Make the choice now. Learn about investing and compounding. Once you see the impact of time you will kick yourself for the few months that you have already delayed.

There are a few ways you can start: invest in finding a good financial adviser, invest in an  index fund, and learn to pick stocks that the mutual funds cannot pick. Just cannot pick for whatever reasons.

Any of you with some discretionary income – money not earmarked for retirement, emergency savings or debt repayment – should consider doing a bigger sip in the form of an index fund.

Let’s say you invest Rs. 10,000 in a nice fund which is an index fund and diligently put in Rs. 10,000 a month for five years. On average you see a 12 percent return on your investment. After five years, you’ll have a decent sum of money. Now instead of this if you had signed up a Top UP SIP your contribution would have been Rs. 120,000 for year one, Rs. 144,000 for year 2, Rs. 168,000 for year 3 , Rs. 196,000 for year 4, and Rs. 216,000 for the 5th year. Not bad at all. So stick to this jumping up of RS 2000 every year and see the amazing returns in your portfolio. And see the wealth that you create. You will enjoy the process as much as I am enjoying writing this. Wealth creation is a great fun process.

There is a time and place for Fixed deposits, bonds, PPF, and cash – but it isn’t right now. Please wait for a decade.

In a time of financial crisis, an aggressive equity portfolio will see a significant hit. But ha. I said a few times earlier, I am cyclical. Stay invested, even buy more shares at a lower price (okay that requires guts, but at least do not sell), and I’m bound to swing back up. I am like a lion in action – a couple of steps back is just to spring higher and further.

However, as you get closer to retirement, you might get into PPF (say age 45), or a more moderate portfolio. Look to bonds, cash and even a FD if you feel it fits your investment plans.

Hey kiddos, you have a precious gift, the gift of time. For an investor, that’s everything. You can handle some of my dips, turns, twists, panics, crashes, and take more risk. Like Mohammad Ali would have said, put in the efforts now, and then relax.

So that’s my case for you to work with me.  I promise, I can be your friend. The fund managers of today like Prashant, Naren, Ramdeo,….all of them got lucky and benefited by the 2003-7 Infra boom. Its your turn now.

Sincerely,

Mr. Market

you missed part 1?

http://www.subramoney.com/2016/06/youngsters-and-the-stock-exchange/