Importance of Investing in Equities

 Dear Investors

Warren Buffet has said “If you are not prepared to hold a stock for 10 years, don’t hold it for 10 seconds.”

And what do you do? If you have bought the stock in the morning you want it to go up by 5% on a daily basis. Well!  I wish that could happen.

We are seeing more and more interest of the retail investors as the markets are going up. I have a friend named Rajubhai, to whom  when I told to invest when the markets were low, said, “ Arey Anup bhai!, abhi paisa nahi hai” or “Abhi toh market khatam ho gaya hai, apun toh abhi Ek property mei invest kiya hai dou saal pehel, aur abhi 20% profit mei builder hi wapas maang raha hai.”. Now the same Raju bhai is getting interested and saying, “ Arey Anup bhai, kya daam ho gaye, ek saal pehele jo stock sau rupye me mil raha tha, aaj 350 ka bhav hai, yeh daam meh kaise leh, woh jo property liya tha uska builder ne abhi tak koi kaam bhi nahi start kiya hai, aur profit toh chodho, aasal bhi nahi mil raha hai. Bahut paisa atak gaya hai.”

The above story is true not only for Raju bhai, but all the friends I know off who have invested in the stocks or Property. Now let’s look at these two asset class separately and analyse them.

Real Estate is a good asset class and generally it is seen that people who have created wealth from real Estate have encashed on assets created by their forefathers or held by them for a long period of10 years and more.  The returns in real estate are in the range of 16% to 19% when held for a long time. The example I can give of is the flat my father bought in 1969 for Rs 70,000 is today worth Rs. 6 crores which gives it a CAGR of 16.13% in 45 years. There could be exceptions but generally this is the case. I have not sold it yet and have spent lakhs in its maintenance and renovation.  When I try to sell it, don’t know how easily it will sell and at what rate.  Let’s take another case, where I had booked a property in the suburbs in the slow period of 2008. The builders have still not started work and we have paid almost 80% of the money. How do I value this asset? How do I exit this asset? What returns do I calculate on this asset?

Now let’s look at Equities.

Equities give an average return of 17% to 18% CAGR, over a long period, plus dividend of 1.5% totaling to 18.5 to 19.5% CAGR. An example, BSE SENSEX  in  Dec 1979 was 119 and in end Aug 26638 giving CAGR 16.72 plus dividend of 1.5%  totaling to 18.22% CAGR in 35 years plus other corporate benefits. Equities are most easy to invest, very easy to handle, especially after dematerialization and the most important aspect; it is Tax free in the long term.

In equities also there are exceptions, for e.g. Rs.10000 invested in Wipro Ltd., in 1980 has become Rs. 558 crores, which translates into a CAGR of 47.58% for almost 35 years. (The detail working of the same is available. Please email to info@sre.co.in). In some cases people have lost their entire investment.

 Friends,  you may make your own calculations of the growth for the investments you have made in real Estate vis a vis Equities.

I am a man of Equities and would always advocate Equities and SIP i.e. Systematic Investment Plan with a diversified portfolio in the frontline stocks. These provide consistent return, free of any fear of non completion of project, encroachment, maintenance cost and legal hassles etc., and above all, tax free.

Anup Gupta

Equity Investments are subject to Risk. The views expressed in the above article are my personal views. Investors are warned to take their own investment decisions and understand  any investment product before investing. The writer, SREIL , its directors and any of its assigns will not be held responsible for any loss occurred to the investors based on this article.

Recent Situations in J&K and our Responsibility

Will continue to write on financial matters, however looking at the current flood situation in Jammu and Kashmir couldn’t hold myself.

Natural calamities happen. Nature is beyond any body’s control. The question is how soon the civilized world can respond to set thing back in order. How soon the state provides relief measures to the affected in such challenging times. How the people of the country contribute to soften the impact on their fellow countrymen for the loss of family members, loss of livestock, loss of homes, loss of work place, loss of roads, loss of power, loss of food and more...

The recent floods, in the state of Jammu and Kashmir are one more of such natural disaster. A National Disaster for India. The PM has already announced a relief package of 1000 crores and assured more would be made available if required, the state has also announced relief packages to the affected families to the extent of Rs 2 lacs, and 35000 army personnel have been deployed. This information would give you some kind of idea of the magnitude of the disaster in the region.

All known charitable organizations and corporate and individuals are doing their bit. Every friend I have, wants to do something for our fellow Indians. The feeling of Nationalism is at its peak. Whoever I meet says, ‘thodha sa mei bhi kuch karna chahunga, apne bhaiyon ki madad ke liye. Apne desh ke liye’.

And dear friends these small contributions you make, goes a long way to the fellow countrymen who give you countless blessings, from every corner of their heart.

Luckily for us we have a leader who has done a wonderful job in restoring the various cities, towns and villages in the earth quake affected Saurashtra and Kutch. These are testing times in an equally testing terrain. Show it to the world, that India cares and use all your good experience to restore our Jammu and Kashmir.

The losses people have incurred is immeasurable and irreplaceable, at the same time please lets ensure they do not lose HOPE.

And to restore Hope, let us all wow to contribute with a large heart, in cash or kind. Every contribution is welcome no matter how big or small. 

These acts of charity are the best investments one can make. The returns of this investments are beyond your or anybody’s comprehension. No portfolio manager or investment advisor, using all their talent and research can ever in their life time come close to the benefits you will get for money invested  for charity.

Please continue Investment in charity.

PMLA and Its Implications

Hope you all have updated your email Ids and mobile nos. as appealed to you in my previous article. Today I would like to share some information on the Prevention of Money Laundering Act (PMLA).

Now how does this regulation affect the common man? It needs to be understood that all transitions in the financial markets are monitored and transactions above a certain value are scrutinized. They are reported to the relevant authorities by the banks, stock brokers, mutual funds and very soon jewellers and property dealers will also be reporting transactions.

Have you ever wondered what the authorities are monitoring? They are monitoring mainly terror money, proceeds of crime money and any other form of black money. Now the question arises, what is terror money? Terror money is- Funding by organisations for unlawful violence and war for a religious, political, or ideological goal; and deliberately to target or to disregard the safety of non-combatant; violent acts that are intended to create fear in the minds of normal public at large. What are proceeds from crime money? Money acquired by acts of crime like drugs, human trafficking, extortion, bribes, etc. What is black money? Black money refers to funds earned, on which income and other taxes have not been paid.

Please understand that money earned by legal transactions on which tax is not paid is tax evasion which is also punishable, this is black money. But money of terror and crime is illegal even if you pay tax on the same and is punishable as a criminal activity.

Handling of money from any of these activities is called money laundering. This money is not only illegal but also criminal.  Therefore there was a need of PMLA regulation to stop illegitimate money to enter the system in any form. There is a need to strictly monitor this illegitimate money so that it is not used to create any form of asset, moveable or immovable.

Friends, for all of the above mentioned activities, money is the consideration for the people involved, and these people try to park this illegitimate money so that the same can be used later. And if all the avenues to use this money are blocked by monitoring the movement of money, this world would be a safer place. There would be no incentive to commit crime or terror or evade taxes as the same would not be financially beneficial to anyone.

Therefore, it is a primary responsibility of every person to ensure that no person can get away by doing acts of terror, crime or tax evasion and should ensure proper reporting to the relevant authorities whenever they find out of the same.

So strengthen the arms of the Government in prevention of money laundering by reporting any kind of illegitimate money. That is the least you can do for your own safety and the safety of your family, friends and the country.

The Prevention of Money Laundering Act, 2002 (PMLA) was brought into force with effect from 1^st July 2005. Necessary Notifications / Rules under the said Act were published in the Gazette of India on July 01, 2005. Subsequently, SEBI issued necessary guidelines vide circular no. ISD/CIR/RR/AML/1/06 dated January 18, 2006 to all securities market intermediaries. These guidelines were issued in the context of the recommendations made by the Financial Action Task Force (FATF), a global body on anti-money laundering standards.  Compliance with these standards by all intermediaries   and   the country   has become imperative   for international   financial relations.

Some important events in the week; The PM had a fruitful trip to Japan with commitment of about 35 billion of USD investments, Australia inking the Uranium supply to India, the EPFO committing to deploy 5% to the equities market and of course, after more than 50 years our PM Modiji addressing the children on teachers day. All this have helped to boost the sentiment which translated into the Sensex crossing 27000. Stay invested. 

Latest Important Circulars

Dear Investors,

Greetings from Anup Gupta!

After being in the world of finance for more than 25 years now and continue, I was suggested by a dear friend; why not share some of your experience with others. Hope I can connect with you all.

I am a fan of regulation, and though at times have got annoyed with the constant regulations and changes by all our regulators, have realized that, they are in the benefit of all, and especially the investors.

So I sincerely thank the regulators for bringing in discipline, transparency and accountability for the capital markets. It is the best thing that has happened for the investors. There are still various issues which are being represented, to increase investor participation in the capital markets, of which I am also a part of, but I am sure the big picture has been well accepted by one and all.

Another recent regulation concerning updation of email ID and the Mobile number of the Investor will help to reduce the no. of complaints related to unauthorized trading is one of the best things that can happen for the investors and for better regulations of the Capital markets.[NSE Cir. No. NSE/INSP/27339 dated Aug 12, 2014, NSE/INSP/27368 dated Aug 18, 2014 and BSE Cir. No. 20140811-25 dated Aug 11, 2014]

The gist of the circulars is; the brokers have to collect the email Id and Mobile no of all clients who want to participate in the Capital markets and upload the same to the Exchanges, latest by 30^th September.

Now why I am really happy about this circular is the multifold benefits this will have in the overall transparency to the markets is;

From the client perspective: It will ensure same day confirmation of trade to the client, as the email and SMS would be send to the client by the exchanges, there would be enhanced authenticity, most of the brokers also have been sending the confirmations by email and also sending SMS to clients to confirm the trade so placed by the client. If any discrepancy, the same could be resolved on the same day, thus avoiding disputes and unwanted loss.

For the Broker: It would help in sending email & SMS to all the investors , confirming trades executed on their behalf and error if any, could be reported to the broker on the same day itself. It would help further in making margin calls wherever required. It would also enable brokers to give price alerts to clients to further improve services to clients.

For the Regulator: The exchanges would directly email and SMS the trade confirmation directly to the investor, imposing a stamp of further transparency and reliability to the clients participating in the capital markets. It would prevent any kind of misuse by the investor or the dealer, and would greatly help in reducing the complains of unauthorized trading.

Hence I say, this circular is very helpful for all the retail investors, and they should ensure that, their right email Id and mobile no is uploaded by the brokers to the Exchanges.

The markets are looking good in the long term and it would be a pity if you, as investors are deprived of participating in the markets for a simple compliance, of not having an Email Id or a Mobile No.

The views expressed by me are my personal and request every investor to take his own decisions before investments in the capital markets. Remember that all investments are subject to risk and the writer or the company or any of its assigns would not be held responsible for any investment decisions taken by the public based on this article. The writer is the director of Sykes & Ray Equities and actively invests in the capital markets.