In complete contrast to conventional investment rules, a recently published Sebi study showed that retail investors sell almost half of its stakes in initial public offeringShares sold on initial public offering (IPO) in a week. Individual investors sold 50 percent of the shares allotted to them by value within a week of listing and 70 percent of the shares by value within a year, the report said. study noble Analysis of investor behavior in initial public offerings.
These ideas are antithetical to the investment rules occasionally shared by wealth advisors, which say that investors should stay invested for a long period of time.
Of Ben Graham to Peter Lynchand Warren Buffett to Ray Dalio – everyone tends to emphasize the importance of long term investmentThis means that you should buy stocks based on their long-term growth potential and not panic or euphoria at an immediate price drop or rise; you should buy well and wait, they say.
5 key and timeless investment lessons to follow:
TO. The magic of capitalization:The returns generated by an investment are disproportionately higher in the later years than in the earlier years. The power of compounding is so potent that it is also referred to as magic. In fact, the Oracle of Omaha, Warren Buffett, has often emphasized that a key reason for his wealth lies in the power of compounding.
B. Ignore Mr. MarketIt is often emphasized that the price of securities traded on financial markets should be ignored, just as a random person known as “Mr. Market” tells you the price of your assets on a daily basis.
These prices are as insignificant as that of any individual – Mr. Market – who offers a price to buy his assets based on his purchasing power.
DO. Ignore volatility: Sometimes stock prices go up and sometimes they go down. In either case, you are not expected to act impulsively and instead, you should overlook the volatility and hold on to your investment, as you are committed to the company whose shares you have purchased.
Warren Buffett once said, “You should invest in a business that a fool can run, because someday a fool will.”
D. Equity is for the long term: When building a portfolio, investors are supposed to allocate the majority of their portfolio to equityThis is the part of investing that is meant for the long term. Conventional wisdom says that the younger an investor is, the higher this allocation should be, and as they get older, they should reduce their equity allocation.
The underlying idea behind this is that when you are young you have more time ahead of you to achieve your financial goals.
MY. Investing through SIP: To summarize the learning highlighted in the points above, investors are often advised to make the most of price volatility and invest systematically on a monthly, weekly or quarterly basis, i.e. over systematic investment plans (SIP).
Investments through mutual funds
It is interesting to note that the Mutual fund Houses often follow this long-term investment advice while managing their plans, as noted in the Sebi study.
The study found that mutual funds tend to invest for longer periods in stocks that go public. While individual investors sold 50 percent of their shares in the week following the listing, mutual funds sold almost 3 percent in that period alone.
“Mutual funds sold about 3.3 percent of their allocated value in a week, compared with 79.8 percent for banks,” the report said.
It was also found that during the first week of trading, individuals were net sellers, while mutual funds were net buyers. In the first week, individuals sold shares worth approximately ₹15,000 crore worldwide IPOwhile mutual funds bought roughly the same amount of shares.
Furthermore, nearly 37.7 per cent of the total shares were allocated to FPIs, followed by individuals (31.9 per cent), mutual funds (16.0 per cent) and companies (5.2 per cent).
Catch all the Instant personal loan, Commercial loan, Business News, Money news, Breaking News Events and Latest news Updates in Live Mint. Download Mint News App for daily market updates.
FurtherLess
Disclaimer
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.