What are your top 5 Investment Lessons in 2017?
14 Jul 2017
Nutan Gupta
New Page 1
In 2016, the total wealth in India stood at $5.2 trillion. According to
market research group New World Wealth, this means we are the 7th richest country in the
world!
People are often under the impression that they have to be an economist
or have a strong understanding of investments to know how money works. But that’s not
true. All we have to do is look at everything that happens around us; the constructions of
residences and malls, people vacationing, jobs created by new companies, money earned and
spent, etc.
Some look at investing as a science, some look it as an art, and others
look at it as a craft. But we can improve our understanding of investments and other
related decisions only with practice. There is much to learn from the perceptive insights
and thinking. Here are just a few things that we learnt this year.
Time
It’s essential to invest in the stock market for a long-term. The
right time to invest in stocks is when they are available cheap, i.e. the bear phase.
Purchasing opportunities in the downturn can help your stocks multiply and become wealthy,
over a period of time. One should wait till their stock appreciates a good percentage.
Value
Before buying a stock, it’s important to study closely all aspects
of the company. Value oriented companies tend to offer higher value for the long term. If
there are two products similar nature, go for the one that is less expensive.
For instance, direct plans of mutual funds are priced lower than
regular plans. A lower expense ratio directly translates into higher returns for the
investor.
Stability
Consistent investment in the stock market will reap a lot of benefits.
If done right, the stock market will always deliver, though the quantum or strategy of
investments can differ.
For instance, the banking and financial sector was benefitted with
people forced to deposit cash into their bank accounts during demonetization. Any investor
who could have thought about this strategically would have made a windfall from his
investments by now.
Inspection
You can’t make wealth the same way someone else did. You need to
do your own research before making any investment. You can take advice and help from
someone but it’s important to make your own decisions as per your requirements. One
should invest only in businesses that they understand.
Evaluation
Tangible and intangible assets are also considered while valuing a
company. Investors must be wary of the intangible assets, i.e. goodwill, involved.
Sometimes due to goodwill, companies with good brands usually trade at higher multiples.
Paying too much, even for a great branded company, might not be a good investment then.
To sum it up
Here is a quick recap of the important investment lessons:
-
Time: Buy when stocks are cheap, sell when they are high.
-
Value: Value-oriented companies offer higher stock value for a longer
term
-
Stability: Consistent, and not sporadic, investment for greater
benefits.
-
Inspection: Advice from experts is necessary as scenario changes for
every person.
-
Evaluation: Tangible and intangible assets (such as goodwill) to be
assessed while evaluating company’s stocks.
The coming year could play a crucial role in achieving India’s
long-term potential of sustainable economic growth. Investors such as us can participate
in this growth story through the equity route.