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Post the Union Budget for 2019, and subsequent correction in the market due to FPI surcharge many investors were confused about how they should proceed to invest in equity. The rollback of FPI surcharge offered some boost to the market and investors who had earlier preferred to adopt a wait and watch approach are now back in the market.

But given the uncertainty surrounding US-China trade wars and signs of an upcoming recession signaled by the America’s inverted bond yield curve the question “How to invest in equity?” still looms large across minds of most investors.

To find the answer to this question, let’s look back in time to the last union budget of 2014. When Narendra Modi rode to power in 2014, one of the top priorities announced by the government was the cleanliness mission emphasizing on hygiene and construction of toilets for all under the Swachh Bharat Abhiyan.

After Prime Minister Narendra Modi’s Independence Day speech, the ministries involved in the Swachh Bharat Abhiyan disbursed funds for sanitation campaigns. Investors who priced in the benefits expected to accrue as the Swachh Bharat Abhiyan mission progressed made substantial gains as the share prices of companies engaged in manufacture of sanitary ware products increased.

The below table reveals how the budget allocation and Prime Minister Narendra Modi’s push for Swachh Bharat Abhiyan helped leading sanitary ware manufacturers indirectly.

So you can see that the budget 2019 too gives some definite clues to investors which can help in answering the question “How to invest in equity post budget 2019?”

Electrical vehicles and infrastructure, the best two sectors to invest in equity currently

In the Union Budget for 2019, the government has specified its intention to promote electrical vehicles as an alternative for petrol and diesel vehicles. This move is expected to not only bring down huge import bills of fossil fuels as well curb rising emissions which cause huge health problems.

This presents a huge opportunity for companies which manufacture electrical vehicles as well those into manufacturing batteries for electronic vehicles. According to estimates the market for electric vehicle battery itself is estimated to reach $300 billion by 2030. The electric vehicle segment offers a big opportunity for investors who wish to invest in equity currently.

Another sector which received a huge boost in the form of a 100 lakh crore allocation is infrastructure sector. This amount will be mainly used for development of water grids, modernization of railways, and construction of 60,000 kms of national highways, regional airports, ports, new townships and urban centres.  This massive push in infrastructure announced in the budget 2019 will be highly beneficial for companies operating in the construction, cement, capital goods & engineering sector. Hence investors looking forward to invest in equity can definitely consider investing in some of the top performing companies in the infrastructure sector.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Recently I met a cousin of mine, Pranay who asked me, “Should I go for high growth stocks or look for value stocks?’’

His question took me by surprise, given the fact that he had just started investing, but I assume he must have read up about these investing styles somewhere.

It was even more surprising for me because till date, nobody had asked me this important question, not even people I know who have been investing for several decades now.

Nevertheless, I told Pranay what legendary investor Warren Buffet had told the shareholders of Berkshire Hathaway many years ago, “Value and growth are joined at the hip’’.

“What does this mean? Can you explain in detail” he asked with a confused look on his face.

Even as you read this, I am sure you too must be having the same doubt after reading Warren Buffet’s comment.

Well what it means is growth is one of the parameters an investor needs to look at while investing in high value stocks. Irrespective of the fact, whether growth is positive or negative, it is an important factor which should not be ignored.

Before we proceed further, let’s take a look at what exactly growth and value investing approach means.

Growth investing is all about looking for companies that have a potential to grow faster than others. Such stocks have low dividend yields and higher price-to-earning (P/E) ratio and price-to-book value (P/B) ratio.

Growth stocks generally tend to perform better when interest rates are falling and company earnings are rising. However, they are the first to fall during economic downturns.

On the contrast, value investing is all about buying undervalued stocks for a market price below its intrinsic value. Such stocks have above-average dividend yields and low (P/E) ratio.

Value stocks, generally do well early in an economic recovery phase but appreciate slowly during a sustained bull market phase.

Most investors feel that ‘Value’ and ‘Growth’ belong to two opposite styles of investing. In fact in his letter to his company’s shareholders, Warren Buffet himself admitted that he too used to think on the same lines previously, but realized that it is not the case.

Here’s an excerpt from Warren Buffet’s letter:

“Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation, except to the extent they provide clues to the amount and timing of cash flows into and from the business. Market commentators and investment managers who glibly refer to “growth” and “value” styles as contrasting approaches to investment are displaying their ignorance, not their sophistication. Growth is simply a component – usually a plus, sometimes a minus – in the value equation.”

In simple words, the phrase ‘Value and growth are joined at the hip’ means that growth and value are closely connected. Instead of looking at growth and value as separate fundamental approaches, an investor should look at growth as a component of value, while investing.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Do you remember the story of the Trojan horse used by Greeks to win the war against the kingdom of Troy?

The city of Troy was protected by a high wall built around the city and Greek warriors had been trying to breach the wall for about ten years. After a failed 10-year siege, the Greeks constructed a beautiful and huge wooden horse, and hid some soldiers inside and pretended to sail away. Trojans were so impressed by the horse that without thinking about anything else pulled the horse into their city as a trophy. That night the Greek force crept out of the horse and opened the gates for the rest of the Greek army, which had sailed back under cover of night. The Greeks entered and destroyed the city of Troy, winning the war. That was the end of Troy.

What happened in the above incident was that the Trojans were so focussed on the horse that they failed to see the bigger picture i.e. the Greek enemy soldiers hiding inside the horse which ultimately led to their downfall.

With an aim to find how many people failed to notice other things (the bigger picture), when asked to focus on a particular task, a thought-provoking study was conducted in the year 1999. In a study conducted by cognitive psychologists Daniel Simons and Christopher Chabris, the participants were told to watch a video and asked to count how many times three basketball players wearing white t-shirts passed a ball. After a few seconds, a woman dressed in a gorilla suit entered the room, faced the camera and even thumped the chest before walking away. Nearly half the viewers missed the gorilla and did not see it.

After a few months, there was a sequel to the video. The viewers were expecting a gorilla, and it did make an appearance. But they were so focussed on the gorilla, that they missed the other prominent changes such as a change in color of the curtains and one player exiting the match.

The question is: How could they miss something so evident? This limitation is not in the vision of the eye, but of the mind. When one develops ‘inattentional blindness’, it is difficult to spot the details they are not looking for.

But why I am telling you this story?

A few weeks back, the stock markets had touched new lifetime highs.

From a high of 38,896.63 points in August 2018, the BSE Sensex has fallen to 34,790.93 losing around 4105.7 points due to unfavourable global cues, depreciating rupee, soaring oil prices and a default by mega infra-finance company, IL&FS. There is a sense of panic among a large section of investors who are worried about the future direction of the markets.

Many investors are watching the market movements and ticker price so closely, that they have almost forgotten that there is a gorilla in the stock market.

But what is this gorilla we’re talking about?

Considering the Q1 2018 – 2019, India’s GDP grew at 8.2%, which is the highest in the last two years. With this, credit rating giant Fitch has upgraded its forecast for India’s growth from 7.4% to 7.8%.

GDP of a country tells a lot about the size of an economy, and the stock markets are nothing but a reflection of the health of an economy.

India’s growth is at an inflection point and the best time is yet to come. There is an uptick in the credit growth, expansion of capacity utilization, acceleration in manufacturing activity as well as the surge in consumption power.

While inflation has moderated, foreign direct investments are at a historic high and foreign exchange reserves have peaked. At the same time, ease of making investments and doing business in India has increased attracting new businesses.

India’s structural growth story is just beginning to play out! For long-term investors who wish to ride on India’s ascent story, this market correction is a golden opportunity to accumulate stocks of sound businesses at a bargain price.

In spite of this opportunity, many investors have become cautious and are focussing their full attention on the current volatility just like we discussed in the gorilla story above. However in this process of waiting they are likely to miss-out this untapped goldmine in the market.

While the stock market is loaded with vulnerability, certain proven standards can help investors to support their changes for long term investment.

Market correction is a great time to buy high-quality stocks at a bargain.

For the long-term investor, a stock market correction is a best time to pick up high-quality companies at a good discount because fundamentally strong stocks are first to recover when the market reverses from a correction. In fact, investments over a long run have always delivered better returns on account of the phenomenal effect of the ‘Power of Compounding.’

When asked about the uncertainty in the markets, Warren Buffett in an interview told CNBC, “Don’t watch the market closely. If you’re trying to buy and sell stocks, and worry when they go down a little bit … and think you should maybe sell them when they go up, you’re not going to have very good results.”

Stop focussing on the temporary ups and downs of the market and maintain a long term view. Remember a fall in the price of a fundamentally sound stock does not mean its values have also fallen. It has just corrected as a part of broader market correction. As long as the quality of the stocks in your portfolio remains intact and is in sync with your financial goals, remember this – Doing Nothing Can Be The Best Thing!

Read more:  How Long-term investing helps create life-changing wealth – TOI.

With India aiming to transform from a current USD 2.6 trillion economy to a USD 5 trillion economy over the next 4 to 5 years, there are many long term investment opportunities available in multiple sectors such as infrastructure, banking, non-banking financial companies (NBFC), fast-moving consumer goods (FMCG) and defence.

Even though currently there is some uncertainty in the market due to multiple reasons, there is no dearth of long term investment opportunities for investors who have an investment perspective of more than 5 years.

Post the FPI surcharge announced in the Union Budget 2019 on 5^th July, Indian markets have been experiencing a free-fall. According to data released by National Securities Depository Ltd (NSDL), Foreign portfolio investors (FPI) were net sellers in July, withdrawing around Rs 12,419 crore from the Indian equity market, the highest since October 2018, when foreign investors withdrew Rs 27,622 crore from the stock market.

This huge outflow shows that investors have started shifting to other developing economies in their hunt for higher returns. This has made many investors worry about the road ahead for Indian equity markets. Another big reason for the current volatility is the fresh round of trade wars between USA and China.

However there is nothing to worry for investors who have made a long term investment as India’s growth story remains intact and an analysis of Indian stock market reveals that it follows the path of GDP growth over the long run.

It took around 60 years for India to become a $1 trillion economy but only seven years for its next trillion. Given the current rate of economic growth, India can easily touch the $5 trillion mark over the next 5 years. As the economy grows significantly, businesses will also report better growth and earnings. Currently many of these businesses are available at cheap valuations making them ideal for long term investment.

Here are some of the top reasons which makes India a stock picker’s market for long term investment:

• Growing domestic consumption due to large and fast growing middle class with rising purchasing power, changing lifestyles and rising aspirations

• Indian government’s continuously evolving investor friendly policy

• 100% FDI through the automatic route in several sectors, without the need of government approval

• India’s strategic and convenient location with easy access to markets of Gulf region, South East Asia and Europe.

Global industry experts are of the view that Indian markets will do better than international markets over the next few years. Even foreign investors know the potential for long term investment in India and that is why as per UNCTAD list of Investment, India remains the third-most preferred investment destination after US and China.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Markets are rallying. Few investors are excited about the rally in small-cap and mid-cap stocks. What a start of the month it’s been!

Time and again we spoke about the golden opportunities stock markets have thrown at us, yes, even during times of market correction.

Now since markets have started to bounce back, many investors are asking us: Can Sensex reach 40,000 in 2019?

To answer this, we do expect a few headwinds or difficult phases for the markets. This can be due to the uncertainty around the elections and trade war outcome. Even oil prices and micro indicators such as inflation, fiscal deficit needs to be watched out for.

But we are still optimistic about the times ahead. Allow me to explain why?

Why 2019 is a good year for Sensex?

We are seeing the positives such as earnings revival led by policy reforms, improvement in asset quality, and recovery in corporate capex.

We all know that Sensex is an average reflection of the prices of the top 30 well-established and financially sound companies listed on the Bombay Stock Exchange. So if the Sensex touches 40,000, it essentially means the corporate earnings of those 30 companies forming the index is improving.

The revival of corporate earnings is seen as one of the major drivers of stock markets. Subdued corporate earnings in the first 3 quarters of 2018, can be attributed mainly to high input costs for manufacturing companies and high credit cost for banks. We strongly believe that these factors have already started reversing.

A strong consumption-led demand growth, growing economy, a huge consumer market, rising corporate earnings to positive macro-economic factors, India has it all.

In our last few mailers, we already spoke about the sectors that will outperform in the coming years, the reforms that will RE-FORM your portfolio and why this is the golden time to invest.

India is today the fastest growing economy in the world and given the current rate of growth, many analysts even predict that India will become a superpower by 2030.

But when a country becomes a ‘Superpower’?

Superpower is a term used to describe a country that has a major influence on policies and decisions, on a world level. When a country is powerful economically, militarily, and has the latest technology and excellent international relations, it is deemed as a superpower. And if India becomes a superpower, Sensex may be between 40,000-50,000 levels.

But till then, to answer your question: How the Sensex will perform in 2019?

According to a report by Morgan Stanley, the stock markets could start pricing in stronger poll outcome in coming weeks and Sensex could touch 42,000 as early as December 2019.

The brokerage expects earnings growth to accelerate to 7-10 per cent in FY19, and 23-25 per cent in FY20.

India is all set to become a $5 trillion economy. And in this process, many opportunities will grow 10-20-50 times or even more in the next few years.

But the question remains: Are you all set to take your share and grow your wealth while India grows? The opportunities are many, all you have to do is invest in superior quality companies and hold on to them.

We would recommend business with high competitive moats in form of strong business fundamentals, attractive valuations, sustainability and adhere to corporate governance policies.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Most Indians who are heading towards retirement are either invested in Fixed Deposits or Post Office Savings Scheme. With a minuscule return of 4-7% while inflation remaining stubborn in the range of 4-5%, their earnings have fallen sharply in the last few years. So, my question remains, is there any rescue?

There are mutual funds and equities that cater to the cumulative needs of millennial. They not only give you higher returns than the traditional products but are also liable to a lower tax outgo, thus making the post-tax returns more attractive.

However, many novice investors are confused when it comes to making the choice between mutual funds and stocks. On prima facie, they both may look the same, as equity mutual funds are also invested in equities. Also, both provide the flexibility of investing small chunks at regular intervals rather than an upfront lump sum amount. Lastly, both provide the scope to well-diversify your portfolio to mitigate the risks.

However, the management, flexibility and composition of these asset classes are what makes them truly distinctive from each other. Let’s look at the key differences between the two.

Caveats While Selecting Your Investments

1. Don’t compare apples with oranges: When the markets are in bull-run, both equities and mutual funds deliver impressive returns as compared to fixed deposits, PPF’s or Pension Schemes. Coming to the returns, many investors commit a mistake of comparing apples with oranges. If you’ve invested in mutual funds, then your overall direct equity portfolio needs to be compared with the returns of your mutual funds’ scheme. Again, the composition of mutual funds i.e. growth funds, dividend funds depends on the overall objective of the fund.

John C Bogle, Founder former CEO of Vanguard Group once quoted, “Surprise, the returns reported by mutual funds aren’t actually earned by investors.”

While investing in direct equities, the returns are crystal clear. Also, these returns depend on the selection of the stocks in your portfolio. If these stocks are selected carefully, then equities have the potential to deliver 10x-20x-50x or even more in 10 years. If history is to go by, many stocks such as Eicher Motors, Bajaj Finance, CEAT, Amara Raja, etc. have gone to register returns of 20x and more in the last decade.

2. Identifying right fund vs. right stocks: Lastly, for the beginners, many stock advisors recommend investing in mutual funds as investing in equities demand identifying the right stocks and a lot of efforts. However, this assumption may not always hold true. With more than 2000 primary mutual fund schemes in India, selecting the right mutual that suits your goal and risk requires equal efforts.

“The goal of the nonprofessional should not be to pick winners—neither he nor his “helpers” can do that—but should rather be to own a cross section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.” – Warren Buffett

With the arrival of many knowledgeable and credible stock advisors in the investing space along with the level of personalization, the potential of returns and flexibility that direct equities offers, it can be the way forward to create significant wealth for the future.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Time and again, the stock market offers many valuable opportunities and lessons to investors. It is perfectly okay for investors to miss some of those opportunities, but it is crucial not to miss out on the lessons.

One of the most important lessons which every investor should know is the perils of investing in debt-laden companies and why it makes sense to steer clear from such companies.

Why companies go for debt?

Businesses need capital for expanding or diversifying their business. In case the company’s earnings are not generating a surplus, the next option is opting for loans. However going overboard with debt can be disastrous, at times for businesses as it puts too much pressure on them, especially when there is economic distress.

Videocon, a classic example of how massive debt can destroy a business and shareholder wealth

I am sure you might have heard of Videocon, which ruled the Indian consumer electronics market long before Samsung, LG and Sony entered the scene. Videocon was a household name across India until a few years back with a vast product line-up which included washing machines, refrigerators, air conditioners, televisions and home entertainment systems.

Everything was fine as long as the company was dabbling in consumer electronics in the ’90s. However, in the 2000s, the company went on a rapid expansion mode by entering into new verticles of business such as DTH, energy and telecom. And for this, it took massive debts.

On one side while the company’s debt started piling up, on the other hand, the company’s capacity to pay off the debt started weakening as the new businesses were highly capital intensive and were not making enough revenues. Despite Videocon’s diversification to multiple businesses, consumer electronics was still the biggest revenue generator. However, Videocon’s consumer business too suffered a considerable setback with intense competition from international brands.

With falling revenues and rising interest costs, Videocon was unable to service its debt. Selling off its DTH and oil and gas business did not help much. As a result, the company ended up with more debt than value.

Massive debt for expansion turned Videocon Industries from a profit-making company to a bankrupt company which is currently undergoing insolvency proceedings under the National Company Law Tribunal (NCLT).

An investment of Rs. 1,00,000 in shares of Videocon Industries on 1st Jan 2008 would be worth just Rs. 176 today. Can you imagine the extent of investor wealth the stock has eroded?

Don’t invest in debt-laden companies: A timeless lesson at Dalal street

Unitech, JP Associates, Reliance Power and Suzlon are some of the best examples of debt-laden companies which have destroyed investor wealth by huge margins. It is a well-known fact that debt-laden companies take the biggest hit during a phase of an economic slowdown.

In an economic downturn when earnings of businesses fall, the interest payments on debt don’t stop. As a result, there could be a default of payments, piling up of additional interest. As a last resort, businesses may even have to resort to selling assets. On the other hand, cash-rich companies have enough funds to withstand the recession, which at the most, may last for a few months or a year or two.

Investors often make the crucial mistake of selecting their investments based on market capitalization. However, market capitalization does not denote the actual value of a company as it does not include vital factors like the company’s debt and its cash reserves.

To give you an example of why investing based on market capitalization is a bad idea, let’s take a look at the case of Tata Motors and Maruti Suzuki, which are market leaders in their respective segments in the auto industry.

Tata Motors has a market capitalization of Rs. 49,258.17 crores whereas Maruti Suzuki has a market capitalization of Rs. 216,159.43 crores. At Rs. 170.20, the stock of Tata Motors looks quite cheap compared to the share of Maruti Suzuki which trades at a high price of Rs. 7130.90.

But does this make the stock of Tata Motors a better buy among the two?

The answer is no. Because the total debt of Tata Motors stood at Rs. 28,826 crores as on Mar 2019, as compared to Rs.149.60 crores of Maruti Suzuki during the same period. So despite trading at a higher price, the stock of Maruti Suzuki offers better value to investors.

To conclude, not all companies with high debt may turn out to be bad investments. However, as an investor, you need to invest only in those companies which have a debt to equity ratio of zero or less than one. For some companies, loans may be necessary to expand and grow. Still, from an investor’s perspective, it is essential to undertake thorough due diligence to avoid debt traps like Suzlon or Videocon Industries.

Click here to know more about investing in fundamentally sound companies which can multiply your wealth creation by 4-5 times in 5 years.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

In our previous article, we spoke to you yesterday about 2 types of investors, let us start by showing you 2 charts showcasing Automobile Production in India and how you are forced to think negatively with the noise outside.

Chart 1 showcases the trend line over the past 18 odd months.

Chart 2 showcases the trend line over the past 20 odd years.

Chart 1

Chart 2

Chart 1 shouts out that India is going through an extremely rough phase, and if the chart is to be believed, doom is something we would see ahead.

Chart 2 shows a longer trend and shows a completely different picture. The trend line shows what to expect in the future.

Let me highlight a couple of pointers to you on this:

1. 1. To start, check the phase between 1997 & 1999, automobile production was flat and then had a fall. And after that, they jumped up. The same has got repeated each and every time the line dips for a short period.
   2. Every time there has been a dip, there is usually a big jump up that follows.

The automobile production has had a CAGR increase of 10%+ if I look at the data over the past 19-20 years.

It really amuses us when all the noise out there is only about short term happenings and spelling doom for the future.

The good part of the story – every time this has happened – in 1999-2000 or in 2008-2009 – if an investor ignored the noise and preferred to be Type 2 investor, he would have been a participant in the big bull runs that followed.

But, if you are a Type 1 investor who invests only when everything looks green and wonderful… not sure what I can say to that approach.

And in view of the phase that we are at currently going through, data suggests that we will see a repeat of or rather see a bigger bull run in the coming few years.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

Portfolio management is all about guiding your investments in the right direction.

Wealth creation is not an easy job. But with the right guide to steer your investments in the right direction, it can be a very simple task.

This reminds me of a story from the great epic, Mahabharata. Before the start of the great war, both Arjun and Duryodhan went to Krishna to seek his support. Arjun chose Krishna over his large and powerful army known as the Narayani Sena.

When Duryodhana heard Arjun’s choice, he was very happy. He was foolish enough to think that Krishna, who wouldn’t even fight in the war, would be of no use to Arjun, but Krishna’s huge army would certainly be of great help to him.

We all know the outcome of the war. It was Krishna’s guidance and support that led to the Pandavas victory in the war.

Time and again, we have heard of many such cases in the past, where expert guidance can make a huge difference between success and failure in any field. And trust us, stock market investing is no different.

The primary objective of portfolio management services is to ensure that your investments are performing as expected and that they are moving on the right track to achieve your financial goals.

Portfolio management includes:

• Identifying fresh investments to achieve your financial goals
• Evaluating the performance of your investments regularly
• Exiting those businesses which are not performing as expected
• Identifying new opportunities, wherever possible
• Risk management

Now let’s take a look at the different benefits offered by portfolio advisory services:

Make the right investment choices:

Not every investment can create wealth for you. Hence, it is very important to invest in the right business opportunities that can multiply your wealth over a period of time. Portfolio management can help an investor to invest in the right business opportunities for maximum wealth creation with minimal risks.

Tracking performance and rebalancing the portfolio:

In today’s world, you can no longer afford to invest and forget. There are multiple variables that affect your investment, and hence, it is very important to track the performance of your investment and rebalance it as and when required. Portfolio rebalancing includes exiting those business opportunities which are no longer performing and replacing them with better-performing stocks.

Regular and disciplined investing:

Serious wealth creation requires regular and disciplined investing. When you invest on your own, the discipline and effort to invest regularly often takes a backseat due to other priorities in life. However, when you invest through portfolio advisory services, you have a dedicated expert who ensures that you invest regularly in a systematic way to achieve your financial goals.

To conclude, portfolio advisory services is one of the best ways to multiply your wealth. Portfolio advisory services can help you to effectively plan for a wide range of financial goals, including retirement, child’s education, house and wedding.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

As an investor, you may think that equity is all about having a torrid affair with excel sheets and complex trading algorithms. However, here’s a little revelation that may surprise you!

Most of the times, investors fail in the markets not because of inadequate technical skills, but their unfavourable daily habits which are driven by their thoughts.

Here we debunk 4 phrases which you may think is completely okay to use, but are outrageous crimes when it comes to stock market investment. And, a small warning – These phrases are definitely preventing you from creating wealth.

1. Is baar time alag hain!

A panoramic view of the stock markets reveals that markets have been volatile before and shall remain so. They have been swathed by the most powerful bulls and the most frightening bears before, and it’s not going to change ever. Crisis such as Harshad Mehta scams, Lehman Brother fallout, demonetization, soaring crude oil prices, and trade war fear had their transient control before their effects wiped out.

The point is no one has been able to predict these events, not even an astrologer. These events may change the course of direction of the markets for a transient time. However, it fails to change the fundamentals of a strong company.

So my dear friend, no time is different unless you make it different. Focus on investing in the right stocks. If required, hire a credible expert to guide you, rather than leaving it to your destiny and hoping markets would favour you. Markets don’t give two hoots to your hopes and emotions. They only favour investors who are addicted to rigorous research and sound stocks and remain invested in such stocks for a long term.

2. Kal invest kar lenge. Jaldi kya hain!

Rs. 10,000 invested every month at the age of 30 for the next 20 years aggregates to Rs. 75,75,332 at 10% interest p.a. compounded on a quarterly basis.The same amount sums up to Rs. 20,55,685 if invested for 10 years.

Numbers never lie! The sooner you start, the better the rewards. And, anytime is a good time to start when the rewards are lucrative!

3. Kitna returns milega ek saal main?

Yes, annualized returns and impressive CaGR are always the ultimate objectives of any investor. However, when you are investing in stocks, you are actually investing in businesses. Businesses take time to grow and definitely, that is not a chapter which will last just a year. With returns, the correct question to ask your advisor would be the strength of the fundamentals to stand the test of time in a long run.

4. Lastly, yeh stock kharid lete hain, kisine bola hain toh acha hi hoga.

There are only three golden rules of investing. 1. Research 2. Research 3. Research. If your friend / relative / broker is recommending a particular stock, check the investment rationale before you put your hard-earned money in the stock.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

Kaun Banega Crorepati (KBC) is one of the most viewed shows on Indian television. The immense popularity of the show even today reveals that everyone desires to become a crorepati.

When KBC first aired on Indian television, two decades back, one crore was a considerable amount. It still is. No doubt. But from an investor’s perspective, the more relevant question one should ask is “Kaise bane crorepati? (How to become a crorepati)?

Do you know that getting selected for the KBC game show is very difficult and there’s only a one in a 10 million chance of it according to estimates? Even if one does get shortlisted and reach the hot seat, the probability of eventually winning the full prize money is very less.

But don’t worry, there are many other ways to become a crorepati, and the easiest way is to give up those habits which are stopping you from becoming a crorepati.

Here some things one should give up to become a millionaire:

Thinking small:

Thinking big is the key to becoming financially successful. If you ask any average person, what they want to do in life, their answer would be to work up to the age of 60 and retire with enough savings to last their lifetime.

It is imperative to think big because that is what the wealthy do and makes them even more prosperous. According to ancient wisdom, we get what we expect in life. Many people limit their thinking and refrain from thinking big to protect themselves from failure.

Investing too much in traditional life insurance policies

There is no doubt that life insurance is essential for every individual who has dependents. But to be honest, in our country, life insurance is sold and purchased more as an investment and tax-saving product.

I know a lot of people who pay several thousand and even lacs every year for traditional life insurance policies which offer meager returns in the range of 4-6%. The best form of life insurance is term insurance, where one can get a high-risk cover for a marginal premium.

Buying things we don’t need can’t afford

Impulsive buying and buying unwanted things on credit can be the most significant deterrent to creating substantial wealth for the middle class.

“If you buy things you don’t need, you may need to sell things you need” – Warren Buffet.

In spite of being the world’s third-richest person, Warren Buffett believes a lot in frugal living. He still drives a 7-year-old car and prefers to stay at his modest three-bedroom villa in Omaha, ignoring the hustle and bustle of living close to the Wall Street.

In his best selling book ‘Rich Dad, Poor Dad’, Robert Kiyosaki reveals the reason why middle-class people are unable to move the ladder of wealth. He states that it is because they spend most of the money they earn on necessities and luxuries, many of which they don’t even need. On the other hand, the wealthy invest first to create streams of wealth and buy luxuries from it.

Depending on a single source of income

It can be challenging to become a crorepati with a single source of income for most middle-class people. One of the most sure-shot ways to become rich is by developing multiple streams of income. A recent study on self-made millionaires has revealed that most of them had anywhere between three to five or more streams of income such as rental income from property, dividend income from stock markets, partial ownership in multiple businesses.

Not investing in equity

Bank fixed deposits and small savings like PPF and post office deposits have been traditionally the preferred first choice of investments for most Indians for several decades. However, with interest rates in a downtrend, these investments have lost their sheen. Despite this, many investors prefer to invest in these investments, primarily due to the less risk associated with them.

While the risk associated with them is low, so are the returns. On the other hand, equity has given the highest returns till date among all asset classes. I am not saying that one should stop investing in bank fixed deposits or small savings schemes altogether. However, it is equally important to allocate a significant portion of your investment portfolio (at least 50%) to equity. Equity has the power to generate double-digit returns in the long run which means the chances of becoming a crorepati are far higher by investing in equity as compared to all other investments.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

Hi,
Let me start with a question today…
Which category of investor do you belong to?

1. I will not invest now because the Nifty has fallen to the 10,700 levels.
2. This is the best time to invest because the Nifty has fallen to the 10,700 levels.

Why do I ask this question? Let me tell you why I ask this in a bit.
With what we are experiencing in the overall economy these days, is something extremely similar to what the economy had experienced in 2001-2002.

What are those similarities?

1. Auto sales are down
2. Consumer sentiments are extremely weak/poor
3. The growth rate is down
4. Banks are facing the NPA roadblock

And also take a look at the table below:

How similar was it then to now? Extremely similar right?

• 1999 was a year with a negative EPS growth – 2016 was a year with a negative EPS growth

• 2000-2002 were slow years. Similar to the slowdown we are witnessing from 2017-2019.

And then what happened between 2003 and 2007 was every investor’s dream run.
Unfortunately, not many investors benefitted from this bull-run.
Coming back to the question I asked at the start, the investors who fell in category 1 probably repented.

But for investors who fell in category 2, they would have created a fortune for themselves and their family during that phase.

Coming now, the past 3-4 years have witnessed negative to slow growth in EPS because of the much-required cleaning process initiated by the government. And this seems to be the time when the economy should be reaping the rewards, and these rewards look a lot more certain and sustainable going forward.

In view of this, we do not want you to miss out on starting your wealth creation journey during such times.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

Yesterday, I met my friend after two months.

The first line was “Harsh, Sensex crossed 37,000 levels. I should have listened to you and not hit the panic button.”

I listened silently to what he had to say.

He continued, “Harsh, I think if we see a political stability, Sensex can easily pick up another 1,000 points in next two months. But you don’t look excited to me, why?”

I replied, “I am genuinely not looking at just 1,000 points. I am looking at the big picture. India has become one of the most favoured investment destinations in the world today. I am sure the reforms that the government introduced over the last 2-3 years, will significant RE-FORM my portfolio as well.”

My friend looked curious now. He asked, “Which reforms are you talking about? Do you think they can drive the markets in the coming days?”

Well, if you have similar questions, you would be surprised to know that these reforms can significantly alter the performance of your portfolio.

Now, what are these reforms we’re talking about? Let ‘s take a look at them.

GST Implementation:

Implementation of GST has enabled the removal of bundled indirect taxes and reduction of manufacturing costs due to a lower burden of taxes on the manufacturing sector.

Introduction of GST and digitization of processes has made the process of tax payments simpler, effective and automated. As a result, India has improved its ranking on the Paying Taxes indicator in the World Bank Doing Business Report 2018.

Push For Digitization:

Systems from taxation to incorporating a company are now online. This means it is now possible to incorporate a company in India in just one day.

A new online system has also streamlined the process for getting construction permits, reducing both the number of procedures and the time required to get a permit. This has improved India’s ranking on the Construction Permits Indicator of the World Bank Doing Business Report.

Implementation Of Insolvency Code:

The Insolvency and Bankruptcy Code 2016 consolidates the existing framework relating to insolvency and bankruptcy into single law, which in turn boosts the confidence among investors.

FDI liberalization:

FDI liberalization in 87 policy areas across 21 sectors has provided a major impetus to employment and job creation. Due to this ease of doing business, India is now one of the most open economies in the world for FDI.

Infrastructure Development:

With a vision to enter the $5 trillion club economy by 2025, the government has adopted a multi-modal approach towards infrastructure development in the country in the last five years. This approach has not only boosted the overall economy but also provided a much-needed momentum to the real estate sector across India.

Some other significant reforms:

• The introduction of the Real Estate Regulatory Authority (RERA) Act to empower homebuyers and address pertinent issues such as project delivery delays, property pricing, quality of construction, etc.

• Improvement in terms of access to credit

• Decreased border compliance cost for export and import

• Implementation of Skill India program to equip and train the nation’s workforce with employable skills and knowledge which will enable them to contribute substantially to India’s industrialization and economic boom.

• Micro reforms like Direct Benefits Transfer, UDAY scheme, crop insurance, which will enhance sectoral efficiencies.

• Implementation of structural macro reforms such as ‘Make in India’ and ‘Fuel Price Deregulation.’

• Administrative reforms like e-biz portals and revamped online process for auction mechanism for natural resources

• Recapitalization of Public Sector Banks (PSBs) by injection of capital mainly through an equity investment by government to financially strengthen them.

So what does this mean to you as an investor?

India has seen considerable progress on the reforms front over the past five years and due to a favourable environment, private investments are on the rise.

Growth & stability: India’s growth and stability has prompted companies to expand their business in the market leading to large scale employment opportunities and creating a positive sign for investors which reflects in the performance of stock markets and generating more capital inflows.

Multiple quality investment opportunities: It is true that there has been some volatility over the last few months, however, with the implementation of revolutionary reforms, there are going to be many sectors that will grow 5-10-15 times or even more in the coming years. Infrastructure, defence, auto and technology are few sectors that are expected to mushroom along with the trajectory of India’s growth story.

It is important to identify growth opportunities that can multiply along with these development.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

It was a Tuesday afternoon. I was busy in the office working on the presentation. Suddenly, my ringing phone caught my attention. I could see ‘Dad’. I put the receiver on my end.

‘There’s good news beta. I have bought an awesome holiday home & we will get it in the next 3 months,’ he said from the other end.

‘Amazing papa,’ I yelled in excitement.

It was his dream (and mine) to buy a holiday home and he had started preparing for the same 20 years back.

I was filled with thrill and joy to see our dreams turn into reality till the time one thought suddenly struck me. ‘Will I ever be able to build or come even close to living such dreams? Will I be able to take forward his legacy of fulfilling most dreams of my family, now and even in the future?’

With these thoughts, hundreds of other questions gripped me completely.

Though my parents never displayed or complained, they compromised their dreams to fulfil ours. When I hear their early struggling days, it surely wasn’t as simple as it is for me now.

They followed a simple investment methodology that has been passed down for many generations. The trick is simple: save as much as you can and spend as little as you can. At the age of 35, he was able to purchase his first home by investing in PPF’s, Pension Schemes and FD’s throughout his life.

But now, the scenario is completely different.

The millennial wish-list is increasing, wants are mounting and with this, the chances of retiring comfortably is becoming leaner.

Today we have long bills of branded clothes, restaurant costs, exotic vacations, latest gadgets, clubbing, etc. To make it worse, the use of plastic money or digital wallets makes you spend more than what you intended, and then end up paying interest on it. For them, a car was something that lasted for a couple of decades, for me, a car would surely not last for over 5 years.

The traditional investment methods such as PPF’s, FD’s, etc. are no longer going to help us to buy our dream home or lead the retirement of our choice

To tick off the extra to-do-lists, we need to take an extra step.

That’s where my quest for a solution to accomplish my objectives began.

As a first step, I had to assess my risk appetite against the returns expected. FD’s, PPF’s, ELSS, Pension schemes may be less risky, but they are not capable of beating inflation.

To have a retirement corpus of Rs. 5-6 crores (will that be enough then, I doubt) in the next 20-25 years, I have to invest starting now and I doubt with the returns on investment as low as what FDs and PPFs provide, I can never expect a happy retirement.

This gets me to a burning question, WHAT DO I DO?

Probably apart from equities, there is no other way.

But there are 5,000 stocks listed plus hundreds of research reports on the internet. Plus, there are so many so called financial advisors out there, some qualified but most self-certified.

How do I craft a portfolio which is meant for me? How do I develop a portfolio that targets my financial concerns and is designed to accomplish my financial objectives?

The complexities are many and the time is less.

I just don\’t need any random offering. I need a solution which takes into account the needs of my future generation and help me craft a solution to realise their objectives and aspirations.

What I need is an end-to-end solution, where I can concentrate on my work and forget the financial stress and worries in my life.

I know that money is not everything, but it does help ease out a few things. And I cannot afford to be only concentrating on it. It will either cost me my job or my family time.

I have seen many families suffering from the financial stress at one point or the other, which impacts their children as well.
My parents did the best and a lot more for me, so my life could be smooth and easy.

But as I introspect, I wonder how it would have felt to compromise any of my dreams or objectives. I am sure it’s an awful feeling and I don’t want my children to go through that.

Financial habits are like a legacy, which are passed from one generation to the next. Good financial habits help an entire family and even their future generations achieve financial bliss.

It’s time to give your child & your loved ones a priceless gift – An Healthy Financial life.

It not only helps you to be free you from all the financial stress, but also somewhere helps you to achieve emotional stability & security.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Let’s take a detailed look at these two parameters used for best stock research to understand what they represent and their importance.

Earnings – Why it is an important parameter in best stock research?

A company’s earnings in simple words refer to its profits. The basic formula to find a company’s earnings is to subtract the costs from the revenue.

Earnings per share (EPS) is a parameter used for best stock research to compare the earnings of different companies as every company has a different number of shares owned by the public. It is calculated by dividing the earnings left over for shareholders by the number of shares outstanding.

Earnings are important because it is what drives stock prices. Strong earnings will usually result in the stock price moving up whereas weak earnings will result in stock prices taking a beating.

EPS is an important indicator of a company’s financial health. Investors and analysts keep a close track on the earnings reports released by companies every quarter as increasing earnings reveal that a company is on the right track to provide good returns to investors.

Management pedigree – Why it is an important parameter in best stock research?

A visionary, decisive and transparent management is the backbone of any successful company as the most crucial decisions of the company are taken by the management. When shareholders invest their hard-earned capital in public listed companies, they expect that the company will create value for them.

However, it doesn’t always happen that way. There have been numerous cases of fraud and misappropriation of funds by management which has eroded investor wealth.  Some of the best-known examples are Ranbaxy, Leel Electricals, DHFL, and IL&FS.

That is why management pedigree is an important parameter in best stock research. By taking a detailed look at the management’s past history and success or failure of projects managed by them in the past can give a brief picture of what to expect.  Wipro, HDFC Bank, Tata Consultancy Services (TCS) and Infosys are some prime example of professionally well-managed companies which have created enormous wealth for their shareholders.

To summarize earnings and management pedigree are two very important parameters among the numerous parameters used for best stock research. For best stock research one should ideally look at other factors such as the debt level of the company, its future growth prospects, and other key financial ratios.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

Investing in small-cap, mid-cap and large-cap have nothing to do with the market scenario. It has to be more in line with your risk appetite.

The small and mid-cap segment witnessed a dream run in 2017. However, things did not remain picture perfect. Since Jan 2018, the small & mid-cap has seen a lot of battering since Jan 2018. Nifty Small-Cap 100 has seen a steep fall of approx. 35%, while the drop stands at approx. 23% for Nifty Midcap 100 segment. On the other hand, BSE Sensex large-cap index soared by approx. 8% until July 2019.

Mid-cap and small-cap stocks are bleeding in my portfolio. Which are the reasons that are causing a trouble in the paradise of small-cap and mid-cap universe?

The reasons are multiple: Corporate governance issues (Remember the infamous case of Vakrangee and Manpasand), the reclassification norms for mutual funds, IL&FS and DHFL crisis and obviously the recent announcement of the minimum public shareholding of 35%. This all factors and a few more led to a transient liquidity challenge in India.  Hence, even many small & mid-cap businesses that displayed consistent valuations and performance are going through subdued response and low-interest levels by the retail investor. In simple terms, we have more customers with less stomach to withstand the risk, and that’s why more investors are selling than buying.

Due to the ongoing mayhem in small-cap and mid-cap, many investors are reconsidering their exposure to this segment, while few are contemplating whether the risks associated with these stocks will translate into decent returns in the future.

Ok, wait a minute…But what are mid-cap and small-cap stocks?

To get started, the mid-cap universe of stocks represent businesses that rank 101 to 250 based on their market capitalization. The small-cap world includes stocks that populate the ranks 251 to 500 based on the market capitalization. Because mid-cap falls between large-cap and small-cap stocks, they are not as risky as small-cap and comparatively has more muscle to withstand slowdowns as compared to small-cap. Similar to small-cap stocks, they also have a high potential to grow when the economy is flourishing, and interest rates are low. To summarize, the large-cap segment represents stocks of established and stable businesses, while mid-cap and small-cap consist of stocks that are more volatile and susceptible to economic downturns.

Considering the slump in the mid-cap and small cap stocks and when the economic is suffering from liquidity issue and FII outflows, should you still invest in them?

Firstly, the Nifty mid-cap and small-cap are down only by 10% and 8% respectively from the start of the year. The fall of 8-10% is not a crash, so retail investors can hold some breath here. Obviously, the fall is steeper if you compare from 2018 highs. However, if you look at a longer horizon, Nifty generated 72.93% returns between FY2014-19, while Nifty Mid-cap delivered 112.01% and Nifty Small-cap delivered 80.20% in the same period. While the performance have not been so impressive over the last 1.5 years, the story was not always the same!

Also, the stock market is all about cycles. Few years are bumper, few are muted, and few can give you nightmares. So if you have a stomach to ride this volatility, the answer is YES. But if not, forget equities (Don’t even think about small-cap and mid-cap also in this case). The reason is – during the economic boom, these stocks tend to give a higher return, while in cases of downturns, the fall is steeper as compared to large-cap stocks.

If I want to invest, where should I?

There are many high-quality small-cap and mid-cap stocks that are rich in valuations, display consistent cash flows and earnings as well as helmed by strong leadership. And, this is where you need to invest!

Many investors believe that they will strike gold by investing in small-cap and mid-cap stocks. As they are not as expensive as large-cap stocks, they buy them as lottery tickets only to see their hopes getting vanished later.  Yes, it is easy for a stock price at Rs. 100 to become Rs. 200 as compared to Rs. 10,000 stock to become Rs. 20,000. However, many companies never recovered from the fall and are now reduced to penny stocks. Plus, TV and the internet is bombarded with stock recommendations. However, one should only invest when they know where and why they are investing. Unless you are aware of this, forget investing in the stock market.

Now tell me how should I invest in these stocks?

Investors who are looking forward to building a well-diversified portfolio of small-cap, mid-cap and large-cap should take exposure in small and mid-cap via the Systematic Investment Plan (SIP) route. Starting SIP and continuing it in a disciplined fashion will help investors average their cost and benefit them in the long run. Talking about the asset allocation, it purely depends on your risk appetite and nothing to do with the market scenario, as generally believed by many investors. There is no thumb rule on ideal asset allocation, as everything depends on your level of risk tolerance i.e. how much risks you’re willing to take to generate alpha.

Now tell me, where these stocks are headed…

We expect government to take adequate steps to arrest the economic slowdown, address liquidity concerns, address problems plaguing various segment of economy and target other economic prerogatives by giving a push through various reforms. If this happens (which we are sure about), the economy will flourish and many opportunities will be unlocked.

Rest, you know, what will happen to the mid-cap and small-cap stocks.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

India is the world’s fastest growing economy, with favourable demographics, countless investment opportunities and consumption-led demand growth.

Welcome to a New India or should I say New Bharat.

Today, let’s discuss the numerous opportunities that awaits us as investors.

We know for sure by now how fast the Indian economy is growing. Currently at $2.6 trillion, we are expected to double this number over the next few years. With this, India is expected to emerge among top 3 economies as early as 2030. A major driving force behind this economic growth will be India’s millennials.

By 2020, India will become the country with the highest number of millennials. With a median age of 29, Indian millennials will constitute 46% of its workforce and contribute a whopping 70% of total household income.

The implications are: More income in the hands of a young population means more spending on food, two-wheelers, cars, FMCG, clothes and electronics. With increased spending, the demand of financing is also bound to improve.

According to a white paper published by the Boston Consulting Group on the FMCG sector, growth in disposable income, increased urbanization, and the increase in the number of nuclear households are driving the growth in the FMCG sector.

The sector, which is currently pegged at about $65 billion, will continue to grow by 13-14 per cent over the next 5-10 years and is likely to become a $220-240 billion industry by 2025.

India is among the top three global economies in terms of number of digital consumers. India had 560 million internet subscriptions in 2018, making it the second-largest internet subscriptions market in the world, second only to China. The number of internet users in India is projected to grow to 666.4 million by 2023. Internet users in India don’t think twice before switching their network in the quest for the fastest speed. So there is a huge potential for the telecom sector.

Opportunities Galore

Infrastructure & housing

According to estimates by McKinsey Global Institute, by 2025, India will have 69 cities with a population of more than one million each. Development of infrastructure and housing in these cities means huge demand for construction companies, building materials, infrastructure developers, capital goods sector and housing finance.

Manufacturing

India ranks 30th in the global manufacturing index report released by the World Economic Forum. This report is based on the assessment of the manufacturing capabilities of more than 100 countries. The government’s “Make in India” initiative to focus on job creation and skill enhancement in 25 major sectors of the economy has played an important role in elevating country’s position. In the past three to four years, India improved on nine out of ten parameters for ease of doing business.

India is all set to become the hub for hi-tech manufacturing with global giants such as GE, Siemens, HTC, Toshiba, and Boeing setting up manufacturing plants in India.

Automobiles

The Indian auto ancillaries industry has seen tremendous growth over the last few years. The industry accounts for 2.3 per cent of India’s Gross Domestic Product (GDP) and its turnover touched US$ 51.2 billion in FY 2017-18.

According to the Automotive Component Manufacturers Association of India (ACMA), the turnover of the Indian auto ancillaries industry is expected to touch US$ 100 billion by 2020, supported by strong exports ranging between US$ 80- US$ 100 billion by 2026.

Electronics

Electronic goods industry in India, is one of the fastest growing industries and is expected to be worth US$ 400 billion by 2020. To support export of electronic products, government has revised Foreign Direct Investment (FDI) norms and set up port-based electronic manufacturing clusters, Electronic Hardware Technology Parks (EHTPs), Special Economic Zones (SEZs).

Defense sector

From being the world’s largest arms importer, India is steadily making a move to creating a self-sufficient domestic arms industry. This can be attributed to government’s recent policy changes and reforms such as the defense Procurement Procedure (DPP 2016) and revised FDI norms which have attracted global defense companies to partner with Indian companies.

The opportunities are endless, all you’ve to do is tap them. With this rate of growth, the level of stock market indices we have seen till date is nothing compared to what we can expect in future.

It’s time to capitalize on this growth potential by investing in the right opportunities.

At Research & Ranking, we help you identify such opportunities that can multiply your wealth in the long run and monitor them periodically to ensure you’re in sync with your investment goals.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

“Hi, Doctor. I am not feeling well,” I said as I entered her swanky clinic.

“Long time Rahul. What happened?” she asked with a concern on her face.

“I was not well and was suffering from fever and allergies. Took the same medicines which you prescribed to my sister one month ago. But seems it is not working,” I replied with an irked smile.

“That was for her. Not for you. You are allergic to this composition.” She said after picking up one medicine out of the bundle of four. “So the other three tablets were fine?” I asked.

“The dosage was wrong for you and even though I would have prescribed you the same composition, the brand would have been different.”

Seeing my nervous face, she further continued, “The dosage and frequency for each medicine differ as per the tolerance level of the patient. Also, sometimes different pharmaceutical brands need to be prescribed for the same composition. There are many solutions to the same problem, but would all choose the same? It’s always about taking decisions that fit your situation and goals.” In two minutes, she made me realized the most essential element for making a successful decision.

Many times we forget the importance of personalisation in our lives. We often take medicines which worked for our friends relatives, try reading the books which others enjoyed only to quit it midway and most importantly, invest based on stock market tips and hearsays.

A few days back when I was chatting with my neighbour Ramu uncle, who told me how he committed a blunder by investing in stocks recommended by his friend. He is 65 years old retired citizen, who is primarily looking for low risk and stable returns. Once, his friend suggested him to invest in growth fund. These funds were high in risk and hence, had the potential to deliver high returns as well. On the other hand, Ramu uncle was looking for risk-free investment options in India. The disaster was obvious in his case.

Personalization is the first step while designing a portfolio, yet remains the most overlooked aspect of portfolio advisory services in India.

And it’s not just Ramu uncle or his friend to be blamed for the losses incurred. Even the brokers, stock advisor or wealth managers are aggressively looking out for ways to sell their products to achieve their targets. Now, this is not a wrong practice. The incorrect part is when you sell the same product to investors with distinct financial needs.

Here are three reasons to have a personalized portfolio:

It addresses your goals: You are different, your goals are different and so are your challenges. If your background is different from other investors, is it justified to hold the same portfolio which is designed for him? The answer is a BIG No! Having a personalized portfolio will help you to overcome this challenge by investing in stocks that suit your risk appetite and financial objectives.

You know what to do with them: You already have few stocks in your portfolio. And, you are completely clueless whether the portfolio recommended to your friend family can be designed concurrently with your existing stock portfolio. This gives birth to chaos and confusion. Enter the role of Personalization. If you have a portfolio that doesn’t collide but complements your existing portfolio, then the path to wealth creation becomes easier.

You know what you own and why you own: You have purchased the stock portfolio as per your friend’s advice, but you do not really understand the allocation of the portfolio. You are not cognizant about the stock’s long-term growth potential. Due to this, you may end up:

Selling stocks too early even if the fundamentals are intact, or
Selling too late after the fundamentals have deteriorated

Having a personalized equity portfolio will help you stay in sync with your goals.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

The stock market in India can be described as a place where two types of people meet up every day: those with experience and those with money. At the end of the day, they exchange their assets with each other and go back home.

The above sentence though a bit sarcastic describes the reality of the stock market in India, where majority of investors, which according to estimates is around 90%, lose money while only a miniscule 10% investors make profits. Even from this 10% only a tiny proportion of 2% investors are able to consistently create wealth from stock markets in India.

There are many reasons why majority of the investors end up losing their hard earned capital in stock markets. Let’s take a look at some major pointers which will help an investor in effectively managing his risks while investing in the stock market in India.

Best strategies to manage risk in stock market investing

Invest only for long term

In the short term periods, stock market in India is highly volatile. This is because of the fact that in the short term, stock prices are influenced by external factors such as fluctuation in oil prices, global conflicts, trade wars between countries, political instability, increase or decrease in interest rates etc. However in the long term it is the earnings and growth of the company which reflect in the share prices. Stock markets tend to stabilize over the long term and that’s why it is very important for an investor to think long term while investing in the stock market in India.

Invest only in fundamentally sound stocks to reduce risk in stock market investing

Stocks that have strong business fundamentals and are professionally well managed are known as fundamentally sound stocks. Strong business fundamentals include a sustainable and scalable business model, low or zero debt and consistent growth in earnings over a long period of time.

Fundamental analysis is one of the best ways to know about the stock, it helps the investor understand the stock better and make better investment decisions. If you have invested in fundamentally sound stocks then you don’t need to worry even during market corrections as they usually correct at a slower pace and are the first ones to recover when the market rebounds.

Don’t invest in penny stocks

There is a reason why penny stocks are called penny stocks. There is no real value attached to the stock as they lack the fundamentals.  Penny stocks have low market capitalization and hence they are easily manipulated by fraudulent operators with an aim to trap unsuspecting investors and dump worthless shares on them. At times there are no buyers for such stocks and hence investors who have invested in them may find it impossible to sell the stock in the stock market in India.

Never invest on the basis of stock tips; It will multiply your risk in stock market

Never invest on the basis of stock tips received from others in the stock market in India. It is important to understand that people who offer stock tips themselves depend on others for it and these stock tips are rarely based on fundamental analysis.

Seek expert advice for investments

Stock market investments are complicated. If you do not have the time or the skills required to read balance sheets of companies it would be best to seek the help of an expert advisory. Using their research skills, an equity advisory firm would be able to assist you effectively in choosing the best 

This article was last updated on 25/02/21

Read more:  How Long-term investing helps create life-changing wealth – TOI.