The investment game is akin to test cricket. You need patience, discipline, perseverance, planning, and a solid determination to win. Like a test match where victory depends on how many sessions a team wins, investment calls for winning the little battles in the journey to accomplish success in the end.
Long-term investment warrants inculcating these attributes. Irrespective of whether you want to build a sizable retirement corpus, accumulate funds for your child’s higher education or want to beat inflation, long-term investing is the way out. How to do so? Let us find out.
1. Know Your Financial Goals
Before getting into long-term investing, have a holistic view of your financial goals. The ultimate objective of any investment is to achieve a goal. Hence, unless you have a clear understanding and vision of your goals, it is unlikely for you to ace the rigours required for long-term investing.
Divide your goals into three broad buckets – short, medium, and long. While short-term goals have a time horizon of six months to a year, medium-term goals generally require three to five years for accomplishment. On the other hand, long-term goals have a time horizon of above ten years or more.
Once you know the goals, you can estimate the money required to accomplish them. It will help you sort your finances and, more importantly, keep you motivated to save and invest for them. So, get back to the drawing board, chalk out your life goals, take stock of the finances, and get going.
2. Start Investing Early
As long-term investing requires discipline and patience, it is vital to start early. An early start imbibes financial discipline and brings compounding into play. Compounding has a multiplier effect on wealth creation. It also helps you accumulate a larger corpus.
For instance, if you are 25 and wish to retire by 60, a systematic investment plan (SIP) of INR 5,000 in an equity mutual fund offering annualized returns of 10% will help you garner a corpus of INR 1.9 crore. If you delay the investment by five years, the corpus will be INR 1.13 crore.
Therefore, being an early bird has its perks. It gives your money more time to grow and allows you to counter inflation.
3. Invest in Instruments That Have a Long Lock-in Period
Another way to remain invested for long is to invest in instruments with a long lock-in period. The lock-in serves twin purposes. It does not allow premature withdrawals and allows compounding to take its effect. Certain instruments like the public provident fund (PPF) and National Pension System (NPS) have long lock-ins.
15 years is the lock-in of PPF, while the NPS locks in funds until you turn 60. The former, though, allows premature withdrawals subject to certain conditions. However, it is in your interest not to withdraw unless absolutely necessary.
In the NPS, you can withdraw 60% of the corpus as a lump sum when you turn 60 and use the remaining 40% to buy an annuity plan that will give you a pension. Another financial product you can contemplate investing in is a unit-linked insurance plan (ULIP). ULIPs provide the dual benefit of insurance and investment in a single product and have a lock-in of five years.
However, to maximise gains from ULIPs, you need to remain invested for a long time, beyond five years.
4. Invest in Equities
Equities are volatile, especially in the short term. However, they can be equally rewarding and have the potential to deliver inflation-beating returns in the long run. Panicking and exiting following short-term market fluctuations can convert notional losses into actual ones.
The lure of earning inflation-indexed returns from equities prompts many investors to remain committed to their investments for extended periods. And they get rewarded for this too. For example, when markets nosedived in March 2020 after Covid-19 was declared a pandemic by the World Health Organisation (WHO), many investors remained committed despite seeing their returns in the red category.
Their perseverance eventually paid off, with markets recovering astoundingly well. Returns soared, and soon investors were sitting on meaty gains. Equity investment also builds patience to stay committed for long periods.
5. Ignore Market Noises
Markets are full of opinions and views that appear to fly thick and fast, especially when things go a little wayward. Suddenly, you will find everyone becoming an expert and sharing opinions. For long-term investing, you must ignore noises as they end up as distractions that can impinge on your goals.
Consult your financial advisor, who understands your financial plan, positioning, and goals if the situation demands so. More often than not, market noises force investors to act under impulse, resulting in flawed investment decisions. Therefore, look at the big picture and remain committed to your goals.
While individual brilliance can help you win a game or two, it takes a collective effort to win. It is the same for long-term investing. You cannot or rather should not depend on one financial instrument.
Diversify your holdings across different asset classes – equities, bonds, gold, among others – and also within an asset class. For example, within equities, spread your investments across large-cap, mid-cap, and small-cap funds. Diversification will provide stability to your portfolio and balance risk and reward.
Optimal diversification is an effective risk hedging strategy. A fundamental investment principle, optimum diversification also augments returns as market events affect each asset class differently.
Long-term investing requires periodical review. This is because situations change with time. The review will help you weed out laggards and tailor your investments based on your goals. Long-term investing has multiple benefits. Doing the right way can help you stay on a solid financial footing and be on your path to financial freedom.
Tense diplomatic relations may not impact trade, investment ties between India, Canada: Experts
NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.
Apple supplier Foxconn aims to double India jobs and investment
Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.
Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.
V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.
He did not give more details.
Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.
In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.
The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.
Taiwan election: Foxconn’s Terry Gou taps star-powered running mate
Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.
He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.
The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.
Foxconn to double workforce, investment in India by ‘this time next year’
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