Why I recommend Nifty BeES (ETF)
I’ve been around the stock markets for several decades and followed many ‘hot shot’ fund managers and market analysts. While there are many really good analysts or fund managers, even the best of them rarely ever get to beat the overall market index OVER A PERIOD OF TIME – that spans one or two years.
Individuals often believe that if they pick stocks selectively they’ll get better returns than if they invested in a mutual fund. No doubt this is also selectively true. Traders are even more aggressive in believing that since all stocks don’t move equally – either in direction or amplitude – they’ll be better off making selective trades.
All of this is both true and false. It works sometimes and doesn’t work at other times. Most people have realised this and hence place most of their funds in mutual funds or in mainline stocks while literally gambling with a smaller proportion in stock or futures trading.
However, ALL of this begs the REAL question: Do you invest to keep your money safe and growing well OR do you play the stock market as a pastime or to satisfy a gambling instinct?
Any investor should answer this question as honestly as possible if she/he wishes to be at peace with the results she/he has in this “game”.
If you are playing the gambling game, then I have nothing to say. But if you are wanting to create wealth with your savings growing while you attend to other occupations, then you should know:
1. Over a period of time, no one beats the market index.
2. Managing ALL of your investible surplus assumes far greater importance than some smaller sums used to ‘gamble’ fetching good returns. i.e. the ROI on your ENTIRE investible surplus is more important than the ROI on some smaller bets on stocks or futures.
3. Stocks rally (or drop) in cycles. Different sectors ‘rotate’ the waves of rise & fall. Picking which will be next isn’t possible successfully over longer periods of time. Gains in one can be lost on the next.
4. Safety should be the first priority (greed is a recipe for disaster) for protecting capital over longer time periods of 1 or more years.
5. Long Term Trading in the ETFs of the market Index can more easily result beating the very market index you track.
Test this out: Keep two equally large enough sums in portfolios. One trades NIFTYBEES and the other your usual style. Check results over 12 – 24 months.
I’d be happy to hear your views: @jsvasan
