Look at some of the richest
people in the world, like Bill Gates, Mukesh Ambani or Laxmi Mittal—they aren’t
rich because they own a piece of real estate or quantum of gold, but by their
investments in ownership of quality and productive businesses.
The ownership in a business can be gained through equities–so if
one buys a stock in Nestle, the makers of
Milkmaid, Maggi, Nescafe and KitKat, they actually own a part of the
conglomerate. Investors, who have equity ownership in select, quality
businesses, can benefit a lot by means of capital appreciation and dividend.
Around the world the greatest investors are investors in equity.
All the great wealth is created by enterprises, by businesses. Nowhere in the
world is a billionaire just wealthy due to investments in other options. Owning
good equities is like owning a good and productive business or real estate. The
trick is to buy great businesses, great franchises and stick to it through good
times or bad.
A growing economy offers plenty of opportunities for investors,
and slowly the new age Keralites are emerging
: not all are limiting themselves to invest in physical assets such as gold and
real estate and bank Fixed Deposits. Kerala till now doesn’t have an
entrepreneurial culture—it is more of a consumer society and the only
businesses we have are in education, healthcare and hospitality sectors. That’s
why equity is an unpopular asset class in this state and most money gets
channelized in physical assets or bank FDs.
Out of India’s 120 crore
population, less than 2% invest in equities. Equity is the most underrated
asset class in our country, and for a developing economy like India that is
something that should be worried about. The situation in Kerala is much worse
because they still prefer investing in gold and real estate over equities.
In the past decade, there had been a rush to invest in real
estate and the asset class boomed globally. The real estate in USA and Middle
East bubbled. In India it did not bubble out, but the prices are so high and
new investments in real estate is no more attractive.
Most of the people in India
consider equity investment as gambling and believes in investing in physical
assets more. In fact ,equity is not a risky asset class as long as you proceed
to invest with the right culture. It is true that equity investment is not
easy, but it is not a tough task either, as Warren Buffet said. The equity
market is neither a gambling place nor an arena, to watch as a spectator.
The lack of equity investments
by the general population in India is a concern
for the Government because in order to have an economic revitalisation,
there is a need to channelize the investments to productive areas and not to
dead investments.
It is important for every
investor to learn the true discipline of investing, show patience in staying
invested, build knowledge about the true culture of equities and keep the right
company. This calls for a credible, knowledge-based platform that inculcates in
the investor the healthy habit of equity investing.
What
NRIs should realise?
The money they made abroad is legal money and when
they invest it in real estate in India where
a good quantum of illegal money is floated, a part of it becomes black money. When they sell it, the buyer will
give at least a part of the purchase value as black money. This becomes a
problem for the NRI who unknowingly makes
a part of his wealth as unaccountable money. This has prompted many of them
these days to opt for equity investments. Gold has also lost its luster and has
gone back to its position, giving returns just above inflation.
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