The stock market is a maze…
When and what to buy or sell is the riddle!
And the investor is just a little bit caught in the middle.
Therefore, if you take the wrong direction (make the wrong investment), it is hard to find your way (money) back.
With the mammoth Nirav Modi disaster preceded by the LTCG tax imposition in the prevailing budget 2018, the equity markets have been glooming sorrowfully. Adding a pinch of pessimistic judgement by the media and a dash of scepticism by the investors, it becomes the perfect recipe for chaos and panic selling further drowning the markets.
But there are certain investors who swam through it catching bigger fish, capitalizing on the situation. So let’s try and solve this riddle on how to strike the hammer when the iron (equity markets) is hot, because no matter how erratic or volatile equity markets can be if you want to augment and strengthen your personal wealth to achieve financial soundness, equity investing cannot be ignored. It’s the most gratifying investment option among the cosmos of investment options available.
Why the bull may be chasing INDIA:
- Our country’s GDP has grown from around $40 Billion in 1960 to around $2100 Billion in 2017 i.e. a 5150% growth in less than 60 years.
- The Sensex has grown from 100 to 29000 in less than 40 years. There is no reason why we can’t grow in the future like we did in the past.
- Spending power is increasing, education is increasing, cities are widening, infrastructure is mushrooming, people are travelling abroad, internet penetration is increasing, more and more companies are opening up and more and more companies are flourishing. This is nothing but pure growth.
- So if you as an individual can be a part of this growth, then why not participate from the most direct and sensible route i.e. via equities?
- India saves over $650 Billion a year. In four to five years, this figure will go up to a $1000 Billion. Even if 10% of that money flows into the equity markets, about a $100 Billion worth of stocks are set to be purchased. Isn’t that massive? Remember, India is not going to stop growing, and if that is the case, why can’t you make the most of it?
Tricks to Beat the market:
1. Panic and chaos= POT OF GOLD
Act fast when opportunities present themselves (crashes, demonetization. Capitalize on other investor’s sentiments which are driven by media coverage around the predictive future events.
It’s a known fact that the markets tanked post Demonetization and the reverberations were felt in the stock market until mid-December. Everyone at the time was selling in hysteria, thereby following the herd mentality. But for a long-term investor, this opportunity was a goldmine. This was the time when exceptional businesses were starting to be available at bargain valuations, not because of any change in the model of the company, but simply the sentiments, which were bound to reverse post the dust settling. And that’s exactly what happened.
2. Quick profits and quick exits shall make you sick!
No matter how volatile the markets are, if you have made a rock solid investment based on research, it will reap profits in the long run provided you sat on the investment for a long period (eg:5 years) and did not sell when the markets underwent a correction.
3. Half margarita –half pepperoni pizza (Diversification of portfolio)
How brilliant is the idea of having two completely different pizzas in one? The same works for equity investments. Do not invest all your money in a single stock. Margarita saves the day when pepperoni gets too spicy. The same way, one needs to allocate investments across various stocks to hedge risk and safeguard ones hard earned money.
4. When in doubt, ask the STOCK-EXPERT!
If you are not an expert in financial markets then get one to do your job. Utilize the services of equity investment advisors to decide on which stocks to invest in. They shall provide you with all the necessary information about the stock company specifics, calculate the future stock valuation and decide the appropriate entry and exit points for you.
5. All that glitters is not gold!
When buying stocks of companies, first look at what the company can become in the future and not just whether the company is a ‘known’ one or not. Buying a known stock, just for the sake of its brand can prove to be a laggard investment. Hence, you as an investor should not, for the comfort the brand name and reputation, pay a very high price for the goodwill of the company. As Sir Warren Buffett rightly quotes, “It’s better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Other Perks of Ploughing Money Into Equity Markets
1. Most rewarding investment asset class:
Equity as an asset class has outperformed other asset classes over the long term like real estate, fixed income products(bank deposits, provident fund, NSC) etc.
2. Regular dividend income:
Apart from building wealth through the rising value of the owned shares, equity investors receive regular income in the form of dividends distributed by companies.
When you buy shares of a company, you become a part owner of the company to the extent of your shareholdings.Thus giving you benefits like voting rights that gives you an opportunity to exercise control in decision making.
4. No cap on investment:
There is no cap on the amount of money one can invest in the equity markets which provides flexibility and convenience to the investor.