How to Create Wealth by Investing in Indian Stock Market-2023

How to Create Wealth by Investing in Indian Stock Market

I believe that achieving wealth can be simplified by investing in shares. Yet, it’s important to note that this approach also comes with risks that can result in financial losses if not managed wisely.
Drawing from my own experiences as an investor, I’ve witnessed individuals becoming overly optimistic or pessimistic at precisely the wrong moments, leading to significant financial setbacks. Often, this happens when people rely solely on market performance without truly grasping a stock’s intrinsic value. This is particularly true when indicators like the P/E ratio reach all-time highs.
I’ve noticed many people purchasing shares solely based on recommendations and tips from others. However, this isn’t a prudent approach to stock investing. Successful investing demands a set of skills and qualities.

“Give a man a fish, and you feed him for a day. Teach him how to fish, and you feed him for a lifetime.”

Depending on others’ advice is like receiving a fish from them. The real focus should be on learning how to catch the fish independently.
Cultivating a lifelong habit of understanding the market and learning from failures is essential. One significant lesson that guided me in selecting the right stocks for building wealth was the importance of trusting your instincts and making independent decisions. “One Up on Wall Street” significantly influenced my financial journey.
Consider this: if you had invested Rs.1 lakh in Bajaj Finance in February 2009, your investment would now be valued at Rs.679 crores (as of November 2019). An astonishing growth, isn’t it?
Similarly, if you had invested Rs.1 lakh in Relaxo Footwears in December 2011, your investment would have grown to Rs.46 lakh in just eight years (as of November 2019).
With that context, there are instances of individuals achieving substantial wealth, as evident from the statistics above. However, I’m now going to share some invaluable insights that aren’t readily available in any book or from other investors.
Here are the qualities one should possess to succeed in the stock market. If you lack these qualities, it’s essential to work on developing them, as they can significantly impact your investment journey.
    1. Patience is Paramount

One glaring deficiency many people exhibit is a lack of patience. Allow me to share my own story: I bought Adani Green Energy stock at Rs.44, intending to hold it long-term after conducting thorough research. However, when its price dropped to Rs.40 and remained stagnant for a while, I grew impatient. As soon as it rose to Rs.52, I sold it. Now, the same stock is available at Rs.106 just a few months later. Had I remained invested, my wealth would have doubled in just two months.
Stories of individuals purchasing stocks at the right time only to sell prematurely abound. Successful investors are known for holding long-term positions, or even indefinitely.
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for ten years.” – Warren Buffett
This strategy is precisely what we should adopt. Our impatience can often sabotage us. In an era of instant gratification and rapid deliveries, we need to resist the urge for immediate results. Successful investing requires patience, as quality companies take time to gain recognition.
The growth in a company’s market capitalization, which underpins potential profit, demands that someone else be willing to pay more for the same company. Generally, this occurs after years of sustained profitability and promise.
    1. Embrace Letting Go of Regrets

Timing the market perfectly—buying at the exact low and selling at the exact high—is a near-impossible feat. I emphasize: it’s improbable, except for those with inside information.
Thus, when investing, it’s essential to accept the reality that we’re either buying when the price is dropping or selling as it’s still rising.
Regret is an inevitable part of investment decisions. Selling a stock that continues to rise can trigger regret for selling too soon. Similarly, losses in an investment lead to regret for having invested in that particular company. Additionally, good profits can trigger regret for not investing more in that company.
Managing regret requires adopting either a mindset of contentment with our decisions (since those were the decisions we wanted to make at the time) or crafting a comprehensive strategy before investing (such as setting specific timelines and amounts and sticking to them).
    1. Think a Decade Ahead at Minimum

Each time I make an investment decision, I ponder its relevance a decade or two down the line. For instance, do you believe companies like Instagram or Reddit will maintain their current market standing a decade from now? Conversely, do you think established names like Coca-Cola or McDonald’s will sustain their market position in the future?
If you answer “yes” to the former, it’s crucial to recognize that IT companies have recently surged, facing heightened competition. Facebook was launched only 13 years ago, and Quora emerged a mere 10 years ago. In contrast, Coca-Cola and McDonald’s have been around for over 70 years. While the dynamics of how people use the internet may change, their eating and drinking habits are likely to remain constant. Even if preferences evolve, these established companies are poised to stay relevant.
This doesn’t imply that investing in IT companies is unwise. Rather, the key is to identify startups or companies with the potential to capture future markets. It’s unwise to invest in companies that are already saturated and over-covered by media.
    1. Take Calculated Risks

This tip is widely recommended in the stock market, but let me share my perspective on risk-taking.
When we decide to buy a product, like a laptop or a smartphone for Rs.50,000, we engage in thorough research. We follow a structured process, researching the best phones in that price range, narrowing down options, scrutinizing features, and even checking reviews online. We devote several days to researching before making a decision.
Similarly, when investing, we should follow a systematic approach to shortlisting companies and evaluating their financials to gauge their health. Many individuals invest substantial sums without adequate research and hastily sell when the stock dips. This approach is a sure-fire way to lose money.
Invest only funds you won’t require for the next 5-10 years (or the duration you plan to remain invested). Stock markets exhibit volatility, and needing funds during a downturn could result in substantial losses. Safer investments might be a better option during such times.

In Conclusion

Succeeding in the stock market demands patience, skills, and a unique mindset. It’s more art than science, where a stock’s performance might not align with the logic behind the initial purchase, yet still yield profits. While no universal laws govern stock market success, trusting your intuition is crucial. Profits accumulate through experience and perseverance.

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