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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:

Year	Nifty EPS	Growth YOY	Year	Nifty EPS	Growth YOY
1999	61	-19%	2016	394	-5%
2000	66	7%	2017	417	6%
2001	69	5%	2018	445	7%
2002	74	7%	2019	487.0	9%
2003	91	23%	2020e	580-617	19-27%
2004	136	50%	2021e	680-729	17-18%
2005	165	22%
2006	187	13%
2007	273	46%

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.