Why investing for 7 years is important for equity mutual fund investors
Subir Jha also told the participants to not extend the instant gratification culture in their regular life to investment life.
Subir Jha explained that historically seven years is the minimum holding period, which has not seen negative returns in the market. “According to the past performance data of the market, the market goes through a complete cycle in around seven years. So, in the past, we haven’t seen an investment not making money in seven years. Investors can make money in two years also, but that is not sustainable,” Jha said.
Jha also told the participants to not extend the instant gratification culture in their regular life to investment life. "It can ruin your investment decisions," he said.
He used the examples of OTT platforms like Netflix and various applications like Zomato to drive home the point about the `dangerous habit' of instant gratification where "nobody wants to wait for anything."
“If you want instant gratification or if you want results quickly, you would not succeed in your investments. Ideally, your investment should be as long as one market cycle, so you can earn good returns in seven to 10 years,” Jha told the participants at the ET Wealth Investment Workshop.
Jha said that many investors fail because they try to copy what other investors are doing. “Investing is like living your life. The problem starts when you start copying others. So you need to prepare YOUR financial plan,” Jha said.
Jha listed four steps for the participants to follow in their financial planning:
1. Analyse your current situation
2. Define your financial goals
3. Create a financial plan
4. Construct your portfolio.
He said investors generally make the mistake of starting with the last point- constructing a portfolio. Your investment cannot start with selecting schemes, that should be the last point that you reach after finishing the other three steps.
He also cautioned DIY- Do It Yourself -- investors against the volatile nature of the equity market. He said no new investors should think that they can time the market or they can’t lose their capital. “Equity investments are risky and investors should be aware of this fact. Direct investors should do the due diligence before investing in equity scheme or they can lose money,” Jha said.