“Invest in shares to grow your wealth !!”
When I suggest anyone to invest in shares,the first and the common reply is:
” I don’t know how to invest and neither do I have any interest/Knowledge of stock markets”.
Another one – ” I don’t have time to keep a track of stock market and I don’t want to lose money”.
I remember , I used to parrot the same lines when someone suggested the same to me.
It was only after a colleague of mine kept insisting that I opened a demat & trading account .
Since I am quite money-wise, I decided to open one only because it was free for me.
In hindsight, I regret not starting early. If you wish to be successful, you HAVE to start as early as possible.
The earlier you start ,the sooner you can retire and achieve other goals of life.
There is concept called ” Opportunity Cost of Capital“ in finance. This is the cornerstone of finance.
In brief, it talks about the monetary/financial value of any investment decision you make.
For example, If you keep INR 100,000/- in your savings account idle for one year, you lose the extra interest you could have earned by booking a one year fixed deposit of this 100,000/-.
That is a neat difference of at least 4.5% to 5.5 % as savings interest rate/year is about 4-5%.
The deposit interest rates are between 7.9%-9.5%. This is a plain vanilla example of opportunity cost of keeping funds idle.
Why Stocks / Shares ?
Now that you’ve understood why you shouldn’t keep your money idle, the logical question that follows is “Where should I invest my money for best returns” ?
There are so many option before an investor where he/she can invest his/her funds.These are shares, bank deposits, bonds, debentures, tax free bonds, property (residential/commercial) and so may more. I am going to give an example of some mind blowing returns given by equity stocks/shares. If you had invested in these shares (also known as multibaggers) you would have been one hell of a happy investor today.
Eicher Motors , Hawkins Cooker , Bayer Cropscience , 3M India , Bajaj Auto Finance, Lupin etc..
These stocks have shot up more than a mind blowing 1000% in the last 8-9 years. this is like a 100 % growth / year . Now tell me ,where else can you find such astounding return on your investments?
If you know of once such asset where you can invest without having a significant capital, I am all ears!
What to Do / How to begin?
Open a Demat/Trading account. read about what makes a good stock, when to buy it, Read a bit about financial ratios, follow articles related to company and keep a close track of quarterly performance numbers. Nowadays, there are so many business channels that we don’t have to do much on our own.
We just have to invest with discipline and not let market volatility affect our mindset while investing in stocks.
You can read a few books on value investing. Trust me, this is any day better than reading some fiction.
If you read a great book and apply the principles, you could easily become a better investor and make money from the market. You just have to own the shares and hold on to it.
I know it is easier said than done but you gotta start some day . You will never make money sitting on the sidelines.
Start by buying a few shares of good bluechips form diverse sector and notice how news/numbers sway respective stock prices.
Once you have seen the price fluctuation, sit back and make a note of where you made the wrong decision and learn from it.
Remember, It is very difficult to time the market. Legendary investors like Benjamin Graham, Warren Buffett practice value investing.
If you wish to build long term wealth, you should imbibe value discipline lessons.
If you wish to make money daily, then you can read more on technical charts and intra-day etc.
As a normal investor, I prefer to hold on to my stocks for at least a year or until the stocks have reached a high of let us say 20 % ( a target that I set while buying).
- If you hold on to your stocks for more than a year, the capital gains are tax free (LTCG)
- Don’t let the greed get the better of you. Sell when your target has been achieved, book profit.
- Don’t lose patience if the investment hasn’t performed.
- Remember, every loss comes with a lesson. be wiser for it.
- Don’t trust analysts blindly, there is a reason they are analysts not legendary investors.
- Take calculated risk, the one you can afford if you were to lose money.
- You can save tax on gains made if you hold for a year. this is better than fixed deposits and many other assets with longer lock-in period and very high initial investment requirement
Hope this post inspires you to begin your successful journey ahead in the world of investing.
Do share your feedback.