How will you plan to avoid economic fluctuations?

A: The investor first and foremost needs to learn which are the choices are available. They need to also figure out what are their needs going to be as far as they can see. If they are young they would want to have differently vis-à-vis people who are in retirement and so they need to figure out what they want to invest for, what are the choices they have available and then they need to take a call as to what has happened to that asset class.

Although we are taught in economics that when the price of an asset goes up, the demand goes down, that is true for consumption items like potatoes and so on and so forth, but for investment items people invest more if the prices go up more. So we tend to believe that the past behaviour of an asset class will continue to be the same in future. So for me the real estate has given huge returns over last 10 years in India. Gold has given pretty large returns partly due to the gold prices going up internationally, but partly due to rupee's depreciation also.

Effectively India's money which is going into non-financial instruments, over last 10 years they have gone from gold to real estate in a large way. India invests now less than 8 percent of its savings into financial instruments, but if you invest now in financial instruments either by way of fixed deposits or insurance or mutual funds or directly investing in stocks or ETFs and so on and so forth you would be basically investing in India's growth, because what you are investing goes to the companies for setting up manufacturing plants or setting up services activities or hotels or defense and so on and so forth and those guys create jobs.

Today on stock markets you can invest in equities, equity derivatives, debentures, corporate debt as we call it, mutual fund distribution and many instruments including currencies. How do you estimate your requirements, your horizon in terms of the timeframe and by looking at the past saying if this asset has given so much returns in the past will it give similar returns in the future or something else needs to be gone into is the trick you need to employ and nobody is better than the investor himself to gauge that.