Equity Investing at a glance (Part 1)



What is Equity Investing: Investment in equity shares of companies.

Why Equity Investing in India?
  • Equity is the best asset class in the world in terms of return over a period of time. 
  • India is one of fastest growing economy in the world. 
  • Unorganised sectors converting into organised sectors after big moves by Indian Government like: Demonetisation, GST, RERA. 
  • Currently Long Term Capital Gains (More than 1 Year) on Equities are exempt in India.
Myth about FD Returns:

We all thinks that we are earning interest on FD’s but the real fact is these Interest rates are just Inflation Compensation, so you are earning nothing.

Now comes to equity performance over a period of time:

We all have fear of year 2008 crash and why not? Even our leading bank (HDFC bank) crashed by 50 odd percentage. But if we see returns over a period of time from equity, it is much better than Fixed Deposits returns.

Here’s is the returns of well-known companies (or Products) over a period of last 10 years (01st Jan 2008 to 31st Dec 2017), it includes effect of year 2008 crash.

Company Name
Absolute Returns
CAGR over 10 Years
1. HDFC Bank (Banking)
442.18%
18.42%
2. Maruti Suzuki (Cars)
882.92%
25.68%
3. Eicher Motors (Royal Enfield)
7332.35%
53.86%
4. Asian Paints (Paints)
950.20%
26.51%
5. TTK Prestige (Pressure Cookers)
3852.07%
44.44%
6. PAGE Industry (Jockey)
5203.63%
48.75%
7. Pidilite (Fevicol)
827.83%
24.95%

Fixed Deposit
115.89%
8.00%
                                                       Source: Vaibhav Khandelwal Research, BSE Website
·        * Dividends paid by companies are not included in these returns.
·        * CAGR stands for Compounded Annual Growth Rate.

What to expect from equities: 12-15% CAGR over a Period of Time. (Moderate Expectation)

As a coin have two sides, equity investing also have two sides, I have explained only one side another side I will explain in next blog, till then “Think about your Financial Goal & Financial Plan”.

Post your queries & suggestions.

Thanking You.

“Know what you own, and know why you own it." - Peter Lynch                                                                                                                

Comments

  1. Unknown13 January 2018 at 16:39

    This is an amazing analysis on equity investment. I have to feel glad that I have following ur blogspot.

    ReplyDelete

Post a Comment

Popular posts from this blog

Power of Compounding: Those who understand it, earns it and those who doesn't pays it.

Friends its eleven months have been passed since my last blog in which I have mentioned that we will learn about power of compounding in next blog, now time has come to learn about “ Power of Compounding” . Albert Einstein have once described Compounding as “The Eighth Wonder of The World” : Those who understand it, earns it and those who doesn’t pays it. We all have solved sums on compound interest but never gone into depth of compounding, how it effects our investment value. How one step can change whole of your investment value. We will learn all those effects of compounding, how investment value changes over period of time and why Einstein have described it as “The Eighth Wonder of The World”. Original Investment Value of Rs. 1 Lakh with different time horizons and rate of return: Years & Rate 6.00% 8.00% 10.00% 12.00% 15.00% 18.00% 20.00% 25.00% 2 1.12 Lakh 1.17 Lakh 1.21 ...
Read more

Taxation on Long Term Capital Gains

Image
In Finance Bill 2018 , Finance Minister Mr. Arun Jaitely introduced long term capital gains tax on sale of listed equity shares or Equity oriented mutual funds . Here's simplified implications of this provision. Highlights of the provision: 10% Tax to be levied on Long Term Capital Gains on sale of listed equity shares or Equity Oriented Mutual Funds of more than ₹ 1,00,000/- w.e.f   F.Y. 18-19 (A.Y. 19-20): This means no tax would be levied if you sold your long term investments on or before 31.03.2018.   Gains till 31.01.2018 are grandfathered: This means any gains till 31.01.2018 will not be consider for calculation of Long Term Capital Gains.   How to calculate Long Term Capital Gains: Sale Consideration – Deemed Cost   Deemed Cost: Higher of [Actual Purchase Cost or Day’s High Price /Closing NAV (In case of Mutual Funds) as on 31.01.2018] - Applicable only for securities purchased before 01.02.2018.   There is no change in calculations o...
Read more