Tuesday, November 6, 2012

Who Cares About The Longterm...?

Every analyst I have spoken to in the past couple of years has two views,one is for the short term and another for longterm.Depending on individuals the definition of 'long term' stretches anywhere from One year to a decade.
There is unanimity that if you hold your investments for the 'long term' you will always get a higher return on your investments.The truth is not always so simple!
Generally the value does go up in segments that are in demand or those having inflationary pressures.Gold,silver have responded to safe haven demands giving average returns of 20% YoY after stagnating in the 1980s-1990s.
Art on the ther having given phenomenal returns of 130% in the mid 2000s has been -19% since 2008.
An exception does not prove the Rule.It breaks a generalisation.
What I want to get at is the duration of holding your investment becomes important ONLY if you have picked the right one(or close to the right one!).No point holding something for 10 years if it just returns you the capital invested.
The guy from whom I buy fruits at the local bazaar on being queried on high prices for common fruits that used to cost pennies a couple of years back,asked me a very pertinent question,"Where is the land to grow fruits and vegetables when all available land is being taken over for apartments and offices?"
I keep saying that the inflation in India is supply side dynamics and its sticky simply because our infrastructure is unable to prevent wastage or better storage and we will not see it below 7.5% in the forseeable future whatever measure the Goverment takes.
Pay more attention to choosing the investment options than on leaving it.Audit them on a yearly basis(I would prefer to do it half yearly)and you need to spend time,get a financial services professional if you cannot give time.The bucks you earn should give you a decent return(10%+ in India) to stay ahead of the race and build a retirement corpus.
Those who dream of sipping a martini on a golden beach in Bali watching the sun go down need to get aggresive in managing their returns.Silver(MCX  58015) looks like surprising on the upside with demand from China and a taget of around 64000 in the next 6 months for those who like commodities.Finance and capital investments are required by  infra,capital goods,consumers at all times and the best conduit are the Banks.Banks with manageable NPAs and with scalable business models with presence in Tier-I&II cities stand the best chance.
But do ask yourself....how long is long term??