One of the Ways to Create Wealth
Our Education system has never taught us ways to create wealth. There are many ways of creating wealth, investing in the stock market is one of them. Most of us have heard people losing money in the stock market. There are two types of people in the stock market Investors and Traders. Investors look for short to longer time horizons whereas Traders look for very short time horizons. In the short term markets are very volatile and to do trading we need a lot of capital which is risky and it cannot be done as a part-time job.
Pros of investing in the stock market:
- Unlike Real Estate, Physical gold we don't need a large capital to start it off. The key point is to start off early.
- High liquidity, we can sell/Buy whenever we want with a single click.
- Good companies growth rate easily beats inflation(6%),FD returns(5.8%).
Where to invest?
we use products/services of many listed companies in our daily life.
Let's take the Consumption sector for an example, HUL is one of the giants in this sector, we use daily care products like Closeup, Pepsodent, Dove, Pears, Surf excel, Kwality walls, Horlicks, Boost and many more. It is one of the companies which got deeply penetrated our daily life. The same is the case for companies like ITC, Dabur, Tata Consumer goods.
Below is the rate of annualized stock price growth for 10,5,3 years time horizons
10 Years :24%
5 Years :22%
3 Years :19%
As the population of the country increases the consumption of these products also increases and if any of these companies want to introduce new products, it is very easy as they already have a strong distribution network in place and a brand value.
How to pick stocks for longer time horizons?
Fundamental analysis is the key to find good companies. It includes understanding the
- Profit & Loss statements
- Annual results
- Balance Sheets
- Cash Flow statements
There are many videos on Youtube to help us in doing Fundamental Analysis. Let me know in the comments for more information 😀 .
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Very good information to start with
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DeleteWell this brings me joy by learning a way of earning wealth. Thanks for sharing this informative article by providing a viable way.
ReplyDeleteUseful information to go through.
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