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Essentials To Consider While Planning Equity Investments For 2022

With the market leaping to new highs despite COVID worries and new IPOs in full swing, 2021 is the year that confirmed our faith in the equities market. With 2021 ending on a high note and 2022 expected to keep the post-pandemic momentum going, experts believe investors are anticipating a big year this year, and the current landscape backs them up. People across the board, including in the financial market, are optimistic about the future.

“The green shoots of recovery are here to stay and there is still strong faith in India’s ability to reach the ambitious 5-trillion-dollar mark by 2025. Within this overall economic growth, the infrastructure and banking sectors are likely to be at the forefront and can provide compelling investment opportunities. A great way to participate in this growth is through investments in equities, and you can chart this by investing in companies that are contributing to economic growth in a significant manner,” says Anu Jain, Head Broking, IIFL Wealth Management who feels while equities do offer you the opportunity of growing with the economy, it is imperative to understand that equity investing can be challenging and fraught with risks. “That’s not to say that you should stay away – in fact, here's how you can plan your equity investments for 2022 and also mitigate underlying risks,” she adds.

Important considerations to take in mind when making equity investments, according to Jain:

Do Your Homework If Investing Directly In Equities: The equity market is a difficult beast to train. So, if you are going to be investing directly in equities then you must also invest some of your time and energy in research. Read more reports and track the investment and economic landscape diligently. This will help you identify themes and sectors that are likely to play out over the long term. Once you have identified the themes and sectors, then judiciously invest in stocks based on valuations, competitive advantage, growth prospects, management quality, and a variety of other factors that can assume significance. Most importantly, when investing in equities, it is better to invest from a long-term perspective to avoid short-term market volatility. Further, it might be better to invest in a staggered manner – you can easily start a single stock SIP. This would entail investing a certain sum of money in select stocks monthly. This would, to a certain degree, mitigate the risk in direct equity investing.

Take Control Of Your Emotions: There is an array of financial psychology books that claim people are poor because they are swayed by emotion, over logic, when it comes to making financial decisions. Do not let this be the case with you. Understand that equity markets are volatile in nature and can, thus, experience sharp movements in the short term. Don't let these movements dishearten you or impact your ability to make smart investment decisions. Avoid getting trapped in the cycle of greed and fear and stay committed to your financial goals.

Invest For The Long-Term: One thing you will learn on your equity investment journey is that this is a long-term relationship, and the greater your commitment, the higher can be the potential reward. Long-term investing offers you a variety of benefits ranging from lower taxation to an enhanced ability to withstand short-term volatility. In addition, you need not worry about day trades or short-term profit booking, making it low stress, high-reward scenario. Let 2022 be the year you commit to the equity market.

Leverage The Mutual Fund Vehicle For Equity Exposure: In addition to direct investing, you can also gain significant equity exposure through investment in equity mutual funds. These investment vehicles pool investor money, are professionally managed by investment experts, and can provide the desired asset class exposure. Within this offering, you can choose to invest in a mix of pure equity funds and balanced advantage funds. This way you will be able to reap the long-term benefits of equity investing while limiting portfolio downside through exposure to some debt investments.

As is commonly said, nothing ventured, nothing gained. Let this be the push you need to begin your 2022 equity investment journey and here’s hoping that the journey is filled with many more gains than losses!

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