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One of the most common questions I often come across from investors is “When should I sell my stocks?”

To discuss that, we first need to talk about the worst reasons to sell a stock. And unfortunately, these are most commonly implemented by investors.

Being in an advisory business for the last 9 years, many investors have I have personally come across who sell stocks for all the wrong reasons.

Let’s take a detailed look at the top 3 worst reasons for selling a stock.

Reason 1: “Because the stock went up”

It is undoubtedly challenging to hold a stock if it is on an upward movement. And when the stock price rockets, the first thing many investors think of is booking profits. In our view, one should do it only if the original reason behind buying the stock is no longer valid, i.e. it is too overvalued, or the fundamentals have deteriorated. In simple terms, if you think that the current market price is too high to justify the value of the stock.

If we go by the history, many companies have delivered 50-100-500 and even 1000 times returns in the past few years such as Wipro, Infosys, Page Industries, Eicher Motors and Maruti to name a few. Now, there would be few investors who might have secured 50-100% gain, but those who remained invested created fortunes.

Reason 2: “Because the stock went down”

Rather than looking at market corrections as opportunities, many investors view it as a time to abandon a sinking ship. Ideally, one should never sell a stock when the stock price has fallen. If you feel your research is robust and exhaustive, and you believe that the XYZ stock is worth at least Rs. 100, you should not be worried even if the stock price falls to Rs. 50. Of course, this holds valid only if the fundamentals are intact. If you think the fundamentals haven’t changed, then a falling stock price should be seen as a great buying opportunity rather than a reason to part away with the stock.

Let me give you an example of L&T here. On 28th May 2019, the stock price of the Indian multinational conglomerate touched a 52 week high of Rs. 1607. However, due to weak market sentiments in the last two months post the FPI surcharge announced in the budget, the stock corrected heavily and touched Rs. 1,307 on 13th Aug 2019, a decline of 22.95%.

Now just because this stock is down by 22.95%, it does not mean that it is time to sell this stock. If fundamentally nothing has changed,

Reason 3: “Because the business is facing temporary headwinds”.

The moment there is a temporary headwind, the first thing few investors think of is to sell and exit.

Talking about the headwinds, it can be an exit of a top-level person from the management team or a temporary slowdown.

Stock markets rise on account of positive news and vice-a-versa. However, as a long-term investor, it is vital to understand whether the news would have a long-term impact or if it’s just a temporary hiccup.

Having talked about few worst reason to sell a stock, many investors would have this question: So which are the good reasons to sell a stock?

One should only sell a stock if there’s a change in fundamental and the investment thesis no longer remain the same or if one needs money or if there are more lucrative opportunities available. The other reason, which we feel depends from individual to individual is portfolio rebalancing. Definitely, a change in stock price should not be a reason to sell a stock.

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

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When it comes to equity investing, stability definitely matters. This is especially true for the risk-averse investors who are looking for steady growth rate without taking too much risk on their shoulders. That is where the importance of large cap stocks in designing a well-balanced portfolio comes into the picture.

Mid-cap and small-cap stocks have very high growth potential over a longer term but that normally comes with high risk. On the other hand, large-cap stocks offer steady and stable returns with low risk.

Before getting into the benefits of owning large-cap stocks, let’s first understand various types of stocks as per the market capitalization. Market capitalization refers to the total market value of a listed company’s outstanding shares.

What is a large-cap stock?

Large-cap stocks are the stocks of well-established companies that have a strong market presence and high market capitalization. It is easier to track the performance of large-cap stocks as they regularly disclose information through various media platforms. As per the recent SEBI guidelines, the top 100 stocks as per the market cap fall under large cap stocks.

What are mid-cap stocks?

Mid-cap stocks are stocks of smaller than large-cap companies in terms of revenue, profitability and market capitalization. These have high growth potential over a 3 to 5 year time period, albeit come with a comparatively high risk when compared to large cap stocks in India. SEBI defines 101st to 250th companies as per market cap fall as mid-cap stocks.

What are small-cap stocks?

Small-cap stocks are stocks of startup firms or companies which are in developing stage with low revenues and small market capitalization. According to SEBI, 251st onward companies as per market cap fall under the category of small-cap stocks. In comparison with large-cap stocks, small-cap stocks are considered highly risky in nature. Information available on small-cap stocks is very limited making it very difficult to analyze their future growth potential.

Among all three categories of stocks discussed above, investment in large-cap stocks in India is less risky compared to mid-cap and small-cap stocks in India.

Due to the humongous size of the business and high stock price, many investors feel that investing in large-cap stocks won’t help them to generate mind boggling returns over a period of time.

One look at the below table can you give you a brief idea about the outstanding returns generated by large-cap stocks in India.

 

Now let’s take a look at 5 benefits of owning large cap stocks in India.

Stability to portfolio:

Large-cap stocks in India are majorly known for their stability because large-cap stocks are less likely to get less affected by any uncertainties in the economy as compared to small-cap stocks in India. This is because they are well-established businesses with a steady consumer base and hence they are less impacted during uncertain times as compared to small-cap stocks in India. This builds a sense of trust and value buying among risk-averse investors.

Steady dividends:

Large-cap stocks in India are famous for offering steady dividends. This offers a steady source of income to investors and can compensate for the slower rate of growth in the stock price of large-cap stocks as compared to mid-cap and small-cap stocks in India.

Well managed business:

It takes great managerial and entrepreneurial skills to maintain sustainable growth. Any large-cap stock in India that has consistently outperformed is likely to follow the trend in future as well, assuming the fundamentals doesn’t deteriorate dramatically.

Clarity in valuation:

Due to the stringent public disclosure regulation, investors of large-cap stocks in India have easy access to the company’s information, making it easier to track its future performance and forecast growth earnings. These are crucial factors in understanding the risk and reward of investing in large-cap stocks in India.

The Bottom Line

To conclude large-cap stocks in India are good for those investors who want to create wealth with low-risk exposure. On the other hand, small-cap stocks in India have more room to grow in spite of the associated risks.

As the English proverb says, “Don’t put all your eggs in one basket.” It is always advisable to diversify your portfolio with a mix of large cap stocks in India, along with mid-cap and small-cap stocks.

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

After a sluggish growth since February 2018, Sensex and NSE have patched-up again with their all high-time highs. In spite of this appreciation in the benchmark indices, weakness can be observed in the broader markets as many mid-cap and small-stocks underwent free fall irrespective of the robust earnings growth. Clearly, many investors are either resorting to large-cap stocks or following a ‘wait-and-watch’ methodology or have entered the panic state.

Investment quote by Warren, “Be fearful when others are greedy and greedy only when others are fearful.”

On account of many uncertainties and market headwinds, fear and panic have gripped many investors.

Reasons Behind The Fear of Today

Global trade war fear: The erratic commentary by Donald Trump and counter-reactions by China is expected to continue for some more time. As long as the domestic consumption story continues, India is expected to be less impeded by the transient impact of global trade war fear.

US yields and its impact on EM flows: Hike by Federal Reserve and its impact on emerging market inflows is again no longer a sealed secret. However, the recent trend of financialization of savings has made our markets more Domestic Institutional Investor (DII) driven than Foreign Institutional Investor (FII) driven.

Reclassification of mutual funds: Not just small-cap and mid-cap stocks, even many large-cap stocks have faced the heat of SEBI’s recent guidelines on mutual funds. However, going by the history, markets will quickly absorb this shock leaving this episode as another temporary hiccup in the books of Indian stock market.

Erosion of trust: Scams-infected and auditors resignation from companies such as Manpasand Beverage, Vakrangee, PC Jewelers; investors are losing trust in small-cap stocks.

Reasons To Invest – The Greed For Tomorrow

Investments waiting in the pipeline: Our interaction with a lot of investors suggests that there is ample institutional capital waiting on the sidelines to get invested. In fact, large investments could be seen in select stocks which are driven by value.

Low quality vs. high valuation: In this stage, high-quality franchises continue to attract flows irrespective of their high valuations. On the other hand, any stock that has delivered below expectations has been punished harshly by the markets. For example: Bajaj Finserv on positive, whereas Motilal Oswal & Force Motors on negative.

GST collection: I strongly think that investors will now be focussed on GST collection month-on-month – a data point for us also to keenly watch.
Corporate earnings growth: CNX Nifty 500 excluding PSU banks has witnessed more companies where results exceeded their estimations rather than falling short. This is very encouraging despite GST disruption, weak exports and weak investment cycle.

Play out of revolutionary reforms: The reforms set by Government such as GST, JAM, Bankruptcy law etc. will have its positive ramifications for the Indian economy irrespective of the party in power.

Indian Markets – Way Ahead

In the end, markets trade on fundamental strength of core earnings and not entirely polity.

If the general sentiment improves, as stated in points above, markets can roll over to an average of FY19-20 EPS of approximately Rs. 2050 and discounting it at 20-22.5xs implying Sensex range of 41000-46000, an upside of 12%-26% over the current levels.

Even in the most pessimistic of scenarios, markets will trade at ~18xs average of FY19-20 EPS by Oct-Nov 2018 implying Sensex levels of 36000-37000. Given that Indian economy is on track of recovery and amongst world’s largest fastest growing economy’s, downside from current levels on a fundamental call looks limited as long as market sentiments don’t deteriorate.

In short, you don’t have anything to lose if invested now. However, if the opportunity is missed, you will miss out on significant gains in the future.

Investment Methodology

We can’t do anything about the short-term volatility as they are influenced by various macro and micro fundamentals. However, it is important to understand that this volatility only temporarily hampers the ‘stock price’ of a company and not the ‘future value’ of the company. Volatility in the markets is absolutely normal and there is nothing to worry about it. In fact, it gives you an opportunity to buy quality businesses at bargain rates.

When identifying stocks, it is advised to stay invested in companies driven by value along with strong signs of visibility in the corporate earnings and stringent corporate governance policies.

We would like to conclude with: Now is the time to be greedy and invest in sound companies for a long term investment. Clearly, the opportunity to create wealth is Now Or Never!

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

When it comes to investing in stock markets in India, there are numerous paths one can take. Long term investing in stocks is one of the best ways to invest in creating wealth.

Intraday traders try to time the market and catch the highs and lows. While they might taste some success in their initial trades, in the long run, the disadvantages of intraday trading far outnumber its benefits by a huge margin. On the other hand, long term investment in stocks offers countless advantages that intraday traders simply can’t take advantage of. Here are a few reasons why long term investing in stocks is much better than intraday trading.

Long term investment in stocks does not involve emotional investing decisions

Long term investing in stocks completely does away with emotions in investing. This is because when you have a clear long term investment mindset, you will not be excited to sell stocks when you see a jump of 10% or even panic and exit when markets are crashing due to some international issues like Brexit or rising oil prices for example. By remaining invested in long term you are simply giving enough time to the business to grow and realize its actual potential because no business can grow overnight.

Compounding works in your favour with long term investing in stocks

Long term investing in stocks enables you to take advantage of compounding as well the ability to reinvest your dividends over time which will enable you to generate even bigger profits. When you invest for long term, time is your greatest benefactor.

Most stock market investors must have read about the enormous wealth created by long term investment in stocks of technology giants, Infosys and Wipro. However, there are plenty of other stocks too in the market which have created substantial wealth for long term shareholders.

Take HDFC Bank stock, for example, which has been one of the greatest wealth compounders in Indian stock markets. If one had bought 100 shares of its stock on 2nd Jan 2001 for Rs. 22.44 and held on to it till today, the price will have gone up to Rs. 1587 per share. That’s a whopping gain of over 5400% in 20 years. That means the initial investment of only Rs. 2244 in the year 2001 would have grown to Rs. 121,600 simply by buying and holding the stock of HDFC Bank. That’s the power of compounding.

Some other examples of stocks which have multiplied investor wealth by multiple times when held for long term include stocks like Bajaj Finance, Eicher Motors, Maruti Suzuki, Asian Paints, Reliance Industries, Pidlite Industries, MRF, Ultratech Cement and Hero MotoCorp to name a few.

Long term investing in stocks is stress-free

Rajesh Desai is a self-employed software developer who makes custom payroll and inventory-control software for small to medium sized enterprises. Apart from this he is also an active trader in the stock market who indulges in both intraday and short-term trading.

He starts his work at sharp 9.15 every morning and works late till night as on most weekdays as he is too occupied with his trading activities till 3 PM hampering his software development work. To make up for it he works till late night in his software development activities. This dual role combined with high stress and irregular sleep patterns has not only taken a toll on his physical health but also strained his family relations. Although he stays with his wife and 2 children, he is able to spend quality time with his family only on the weekends when the markets are closed.

Rajesh Desai is not alone. There are thousands of traders out there who constantly juggle between trading and their regular day to day work without realizing how high frequency trading is affecting their profession as well as increasing their stress levels.

Intraday and short term trading are highly stressful. Intraday traders are constantly hooked to their computers or mobile phones so that they don’t miss out on opportunities. This highly impacts their other activities and day to day work causing high levels of stress. On the contrary, long term investing in stocks means one does not have to wake up at the opening bell every day to check whether your portfolio is going up or down. Investing in good quality businesses is a definite way to keep your portfolio volatility low, which in-turn makes investing a stress-free experience.

Long term investing in stocks enables you to save more on taxes and commissions

Active trading involves frequent buying and selling of stocks which means not just higher brokerage costs, but also higher taxes as short term capital gains are chargeable at a higher rate than long term capital gains applicable on selling stocks after holding them for a period of 1 year or more.

On top of it there are other charges too like Securities Transaction Charges (STT) and GST which further lower the profit.

To give you an example let’s take a look at the various charges involved in an intraday trade of buying 1000 shares for Rs. 100 and selling it for Rs. 102 with a full-service broker. In this case the total turnover would amount to Rs.202,000. The brokerage charged would be Rs.101 while an STT of Rs.25.51 would be applicable. Besides this SEBI turnover fees of Rs.0.30, stamp duty charges of Rs.4.04 and GST of Rs. 19.36 would also be applicable. All these charges will reduce the overall profit generated from intraday trading.

Surprisingly most intraday and short-term traders tend to overlook this crucial aspect involved in trading which silently eats away their profits. It is equally important to remember all these charges are payable by the intraday trader, irrespective of whether he makes a profit or loss.

Bottom line: Long term investing in stocks is best for wealth creation

Given the huge stock market volatility, the odds of making losses over profits are very high in intraday trading. That’s is why long-term investing is considered as a hassle-free and reliable way to create wealth from the stock market.

To invest in a portfolio of 20-25 multibagger stocks click here.

This article was last updated on 03/03/21

Rajeev is a new investor in stock market who invests actively on the basis of stock tips in India. He is excited every time he receives a message on a Whatsapp group titled ‘Best stock tips in India’ of which he is a member. He strongly believes the stock tips sent on this Whatsapp group are the best way to create wealth from stock markets as it has been started by some of his close friends.

Few days back he received a message “Buy Jet Airways @151.275.  100-200% upside expected in a month as UK based NRI group ready to invest 1000 crore’’ on his Whatsapp group.

On the basis of this stock tip, Rajeev picked up 1000 shares of Jet Airways on 10^th May 2019. Three months down the line Rajeev is sitting on a huge loss as the share prices have gone below Rs.50 and he is clueless on what he should do.

Rajeev is unaware that the original buy message he received on the group was probably a trap to lure innocent investors as there very few buyers for the stock.

No matter what you do, stock tips in India can never create sustainable long term wealth for you. Stock prices are driven by a wide range of factors including supply and demand and company\’s earnings and profitability.

Portfolio creation approach is all about creating a multipronged strategy for wealth creation. On the other hand, investing on the basis of stock tips in India is all about immediate wealth creation.

So when your focus is only on wealth creation through stock tips in India, you are actually missing out on the actual fundamentals which create wealth.

A portfolio creation approach involves creating a robust portfolio of 15-20 fundamentally sound stocks from different sectors. This way one can maximize the returns of portfolio while minimizing the risk because even if some stock or sector does not perform, the performing stocks in your portfolio can average those losses and helping in generating overall profits.

Many investors fail to understand this and consider stock tips in India as the best way to invest. By luck some of their initial trades may generate some profit. This gives them a false confidence, and an encouragement to take up additional trades even on leverage. This often results in huge losses and without understanding the real reason for their losses they blame the stock market.

Portfolio Creation Approach Works Best For Wealth Creation

To create wealth from stock markets, it is very important to ignore stock tips in India. Instead one should opt for a portfolio creation approach for long term investment as it reduces the risks associated with equity investments while maximizing the potential for profits. Historical analysis of stock markets has revealed that they are generally stable in the long term and the best way to create wealth is to remain invested for long term in a portfolio of fundamentally sound stocks.

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

Wealth creation strategies can help you build immense wealth over a long period of time. The absence of an effective wealth creation strategy may result in delay or compromise in one’s financial goals.

Ever wondered if you stop working today, how long can you continue before going back to work?

As Warren Buffet rightly said, “If you don’t find a way to make money while you sleep, you will work until you die”.

This reminds me of a famous story coined as ‘The Parable of the Pipeline’.

In a small village, there lived two friends named Pablo and Bruno. One day, the village mayor gave them a job to carry water from the distant river outside the village for payment of Rs. 1 per bucket they carried.

On the first day, both earned a good amount of money by doing 50 trips carrying heavy buckets. One day, Pablo thought of a wealth creation idea by building a pipeline from the river to the village. When he shared the idea with Bruno, he made fun of Pablo and told him that he is happy with his income.

Pablo was very confident of his wealth creation idea that he decided to construct the pipeline on his own by digging the ground in spite of being ridiculed by Bruno and the villagers. Bruno started splurging on his money by buying new things and spending his evenings at the local bar. But after few months, Bruno started looking tired due to wear and tear of his body.

On the other hand, Pablo’s relentless work helped him to finish his pipeline which helped him deliver more water to the village without physically carrying it. Pablo recovered his investment in a very short time and the implementation of his wealth creation idea resulted in income generation without him working every day.

Like Bruno, most of us try exchanging time with money. We forget that we only have a limited amount of time to generate wealth by investing our wealth. In order to achieve our short-term goals, we forget about our long-term wealth creation investing.

Now the quintessential question is: How can you create wealth?

Equity is the best way to create sustainable wealth in the long run. One look at the below table will tell you why.

Despite this outperformance over all other asset classes, many still think equities are risky.

Yes, it is. But over a short-term i.e. 6 months or 1 year.

As you can see from the above graph, the risk is very negligible when you invest for the long term in quality businesses.

But if investing in equities was is so easy, why is everyone not rich?

Because most investors commit the below mistakes:

• They confuse stock price with the business value
• They chase penny stocks to earn quick money
• They try to time the market
• They don’t know when to sell
• They follow others blindly

Let’s take a look at the best wealth creation ideas for equity investments:

Don’t speculate, rely on empirical evidence

Nobody likes to buy substandard quality products. Research is one of the key elements for wealth creation investing. People often compare equity investing to gambling. This is mainly due to investor’s tendency to invest on the basis of tips. One of the golden rules for equity wealth creation investing is to avoid tips and speculation. For wealth creation ideas, it is necessary to do some research and find good quality stocks that have shown consistency with their performance and have the potential to deliver results in the coming years.

Don’t be a chicken, have a hawk’s eye

Investing in the right stock in the right quantity is important for wealth creation investing. Just like a chicken who eats everything that comes in its way, do not invest in too many stocks that can divert your attention or make it difficult for you to manage. Experts recommend a maximum of 15-20 quality stocks for wealth creation investing.

Don’t time, believe in ‘time’

Patience is one of the key factors for long term wealth creation investing. Successful investing is all about buying the right business and holding it for the long term. As legendary investor Charlie Munger rightly said; ‘Big money is not in buying or selling, it’s in waiting’.

Don’t buy and hold, monitor it

Some stocks in your portfolio may outperform others while some may turn out to be duds. For wealth creation investing, it is necessary to rebalance your portfolio as and when required to ensure that your strategy is on the right track.

To summarize, wealth creation investing is more of an art rather than science. Anybody can create wealth by following the above mentioned simple but powerful wealth creation strategies and ideas.

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

A few weeks back we met one investor. While he was sharing his success story of long-term investing in stocks, he gave us a quick foretaste that yoga somehow helped him to earn better returns on his portfolio. While he thought it was just a sheer coincidence, we could quickly spot a pattern between long-term investing and yoga.

Yoga has been an age-old method towards physical and mental well-being. But why?

There is a popular adage which explains this, “You cannot always control what goes on outside. But you can always control what goes on inside.”

And no quote can be more germane to what we imply here.

Stock markets are volatile. Even when the interest is swamped with many stories on the importance of focus and long-term investments in stocks, many investors turn a deaf ear and indulge in short-term trading. They fall into the prey of futile attempts to time the market, greed while trading and lack of focus while transacting in a stock market.

As per Patanjali Yoga Sutra, which is one of the oldest manuscripts related to yoga, talks about five main ailments or kleshas which are the root cause of all the sorrows which the human faces. They are:

1. Avidya (Ignorance)
   Consider a scenario of how we purchase the latest gizmo. We check the features, compare prices, check reviews on the internet, ask users and then finally zero down on our list. When making an equity investments or a mutual fund investment, one needs to perform the fundamental analysis of stocks and even scrutinise the credentials of the fund manager.
2. Asmita (Egoism)This is observed in a scenario of a bull market when investors book humongous profits. Engulfed in this victory, many investors wear the ‘I know it all’ attitude and become overconfident. They tend to miss the trends, start betting on risky stocks and eventually over-leverage themselves.
3. Raga (Attachment)In India, gold or real-estate always hold a sentimental value. Many investors are also attached to a particular stock and hold them for their lifetime irrespective of the downtrends. In a stock market, one needs to take a rational call and avoid any form of attachment which can lead to decisions dominated by emotions.
4. Dvesa (Aversion)Due to past losses, many investors are averse to the risks associated with the equity markets.

In a bull run when they hear success stories, they get encouraged to invest the lump sum amount in an attempt to earn double returns. And when the market corrects, they book losses which deter even other investors from investing in the Indian stock market. These losses are due to attempts of timing the market instead of patiently staying invested in a stock which has high growth potential.

1. Abhinidvesa (Fear)
   This is the main reason why many investors hold back themselves from healthy investing. The magnitude of loss always surpasses the joy. To avoid this fear, many investors take the traditional route of investing in fixed income, post office savings scheme to earn predictable returns. However, equity markets have outperformed all the asset classes in the past and a Yogi who carefully invests in strong stocks for a long-term enjoys the benefits of the power of compounding.

Yoga can also teach a lot about financial health. Here’s how chanting ‘Om’ can help you in achieving financial well-being:

1. Gain consciousness of the bigger picture: We all breathe in and out while practicing yoga to gain consciousness of our mind and body. Being aware of the options you have and the impact of these options, can help an investor to take an informed decision.
2. Practice make man perfect: Learning yoga asanas and becoming comfortable with it demands an investment of time, efforts, and patience. While making stock market long term investments, you need to be patient to let your investments grow while simultaneously monitoring them.
3. Life is all about balance: It is all about striking a right yoga pose to gain the maximum benefits. Stock market long term investments are also all about the right balance of stocks in your portfolio.
4. Life is too short to learn from your mistakes: A yoga expert guides you to understand when to hold the yoga pose, when to breathe in and out and the importance of each asana. Similarly, a good financial advisor conducts fundamental research so the probability of you falling into a trap is minimal. They guide you on when to exit and enter the market, portfolio composition and the rationale behind why a particular stock is a good buy or a sell.
5. Panicking never helps: Imagine you doing a handstand for the first time, swinging in mid-air and then you try to swiftly swing your legs towards the ground. You will injure yourself, right? But what if you have calmly waited and allowed your feet to reach the earth safely? Similarly, taking an impulsive decision with regards to investments can result in financial damages.

The purpose is to achieve the state of harmony, also called ‘Sattva’. This is the utopia state which is between the state of Tamas (inactivity) and Rajas (energy). Here, investors thoughtfully invest in asset class based on their risk profile, research and financial goal. They build a diversified portfolio based on the fundamental analysis of a stock which results in a low churning rate of the portfolio, high returns in the long-term and financial well-being.

Happy Yoga! Happy Investing…

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

Many investors, especially first time investors are confused about how to invest in shares. In fact “How to invest in shares?” is one of the most asked questions on search engine Google.

In case you already have a PAN card and bank account the primary step would be to select a stock broker who will open a demat and trading account for you. For those investors who don’t have a PAN card, it is possible to apply for the same on the NDSL website by visiting www.onlineservices.nsdl.com.

Currently the only way a retail investor can invest in share market is by opening a trading and a demat account is through a stock broker. An important thing to understand is that whichever broker you open your account with would be a part of one of the two depository services in India and would be known as Depository participant (DP). Stock brokers cannot hold your stock and they have to maintain them with one of the depositories. So when you open a trading account with a broker, they will also open your Demat account with one of the depository service.

Demat services are provided in India by Central Depository Services (I) Limited (CDSL)and NSDL and National Securities Depository Limited (NDSL).

It take approximately three days for the paperwork to be processed and for your trading and demat account to become active. Some brokers, now offer online account opening within 30 minutes on Aadhar based activation, however you would still need to send physical copies of some documents by post.

In case you are planning to do lot of trades, you can consider opting for the services of a discount broker which can help you in substantially saving on brokerage and associated costs, as they offer a flat charge on brokerage per trade. In case you don’t intend to do lot of trades it would be best to go for a full-service broker as they offer a lot of value-added services in addition to the basic services.

Once you have opened your demat and trading account, you can start off with the process of investing. The above points should clarify all your doubts about how to invest in shares. However apart from “How to invest in shares?” the second most query which rages across minds of investors are “Where to invest in shares?”

Hence it is very important to understand how the stock market works and the different components and the different participants of the stock markets. Many investors ignore this crucial factor and as a result end up with losses on their stock market investment.

As you might be aware of, there is hardly any substitute for knowledge. That’s why before investing one should read and understand the complexities of stock market by reading books on stock markets written by market experts and successful stock market investors. But still, if you have any doubts in your mind it is would be highly advisable to seek professional advice from a stock market advisory service.

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

We are just 3 days away from our 73^rd Independence Day. The celebrations have already begun and many people I know, have already planned a short vacation for the long weekend.

Honestly, we find it quite surprising that many people plan for their vacations way in advance, but hardly bother about planning for financial independence.

A major reason for lack of planning for financial independence, can be attributed to misconceptions about it. People assume that financial independence means having a well-paying job or wealth inherited from family.

We often come across statements from people having a false illusion of financial independence like:

“I have a well-paying job that makes me financially independent.”

“I have enough in my bank account which will last for my lifetime.”

“I am from a well-do family.”

But believe it or not, a well-paying job or money inherited from family is not the real meaning of independence.

Anybody can lose a high-paying job anytime. Remember what happened with Lehman Brothers post American sub-prime crisis in 2008? Almost 25,000 employees were left jobless when the world’s fourth largest investment bank shut its shop.

In fact, we personally know a person who had given up his stable and prestigious position at a leading Indian private bank, to join Lehman Brothers at a senior designation, just one year before the Lehman Brothers crumbled.

So in such a situation when people with a well-paying job loses their jobs, they are forced to live off their savings which will eventually run out. Rising inflations and economic recessions can wipe out of years of savings quickly.

Even money inherited from previous generations does not really mean financial independence. Miss-management of money can destroy fortunes. The best examples are Vijay Mallya and Singh brothers of the Ranbaxy fame who had inherited huge fortunes but destroyed everything due to lack of proper money management skills.

So what exactly is the real meaning of financial independence?

Financial independence means creating a steady or rising cash flow through additional sources of income, so that you are no longer dependent on your monthly salary or monthly income.

We’re sure you must be thinking about the best way to achieve financial independence. Well, it is no rocket science.

For this one needs to buy and create assets that generate additional sources of income. Once the cash flow from the additional sources of income is equal to or greater than one’s monthly expenses, then the person becomes financially independent as he/she will no longer have to work for money. And when one no longer has to work for money, he/she becomes financially independent.

This is the real meaning of financial independence.

Now that you know the real meaning of financial independence, we want you to ask yourself three questions.

How long will it take for me to achieve financial independence?

What actions I have taken till now to achieve financial independence? 

What additional actions should I to take to achieve financial independence? 

Do share your thoughts on same by writing to us at support@researchandranking.com.

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

With hundreds of SEBI registered portfolio advisory services in India, how does one choose the right portfolio advisory services for wealth creation?

While choosing between many portfolio advisory services, it is important to partner with an expert that focuses more on wealth creation rather than wealth management. What sets R&R apart from others is our philosophy of wealth creation through value investing.

We strongly believe that wealth cannot be created overnight and hence conduct rigorous research and due diligence to curate a personalized portfolio that is tailored to your situation.

According to estimates, only 2 per cent of Indians invest in stocks and the average Indian investor is often confused, misguided or uninformed despite the fact that equities have delivered the best returns among all asset classes till date. Our objective is to change this scenario by busting the myths about equity investing and providing investors with the best portfolio advisory services in India with an emphasis on long term wealth creation.

Also Read: SEBI Registered Investment Advisor: Meaning & Eligibility

Our investment methodology rests on the below-mentioned 5 pillars of wealth creation:

• A well-balanced and diversified portfolio of 15-20 high-growth potential investment opportunities backed by rigorous research and due diligence
• Absolute return strategy
• Using the power of compounding for wealth creation by investing for a long term
• End to end solution
• Focus on educating and empowering investors about healthy long-term investing habit

The following table depicts why R&R is one of the best portfolio advisory services in India:

More About Research & Ranking

Since inception, R&R has educated, empowered and realized the financial goals for more than 6000+ investors by offering a tailor-made equity portfolio advisory services based on their profile.

Our equity portfolio advisory service is backed by detailed research comprising of team of in-house research analysts with a collective experience of several decades. Despite the uncertainty surrounding equities in 2018, the model portfolio recommended by our equity portfolio advisory services has delivered an outstanding returns of 77.96% in just 32 months.

We are a part of the Equentis Group that was incorporated in the year 2009. Currently. R&R is led by the team of passionate and knowledgeable 90+ professionals with 3 offices across India.

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