Want to become crorepati by investing in the stock market? Follow these golden rules
All the parents want their child to do well in life and to secure a good financial future.
Becoming a crorepati in long-term investment is most sought investment goal among investors as taking inflation in mind one would require crores to meet those investment goals that are being met today in lakhs. Since today's investors are not shy of investing in equities, the stock market has emerged a good option, especially in the retail or cash segment. Nowadays, people have started to invest in stocks for long-term keeping investment for the child as well.
Speaking on the stock market investment that can help an investor become a crorepati in long-term Ajit Mishra, VP – Research at Religare Broking said, "Every parent wants their child to do well in life and they try providing all the needed support in their growing up years. Needless to say, finance plays a crucial part in that support system. We believe wisely investing in the financial markets could help the parents to attain a milestone like Rs 1 crore by the time the child turns 19 but one needs to abide by certain rules."
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Elaborating upon those rules Mishra said that firstly, a thorough risk profiling should be done for the investor and based on it one should invest in Equity, Debt or Gold. Generally, investors having such a long-term horizon, equity as an asset class have rewarded them handsomely. Therefore, one should start investing at an early stage and hold onto the investment for longer duration i.e. more than a decade (10-15 years). So, longer the time horizon for holding the stocks, higher returns can be earned through the power of compounding. Besides, it would be prudent to invest in the stocks having a strong promoter track record, healthy corporate governance and sound long-term growth prospects, as it can fetch healthy returns over the long term. Further, if the market remains volatile or is in a downturn then one should consider buy on dips approach and add more fundamentally sound stocks as the valuation would be cheap and within the comfort zone. To know what all stocks fall under the category of fundamentally sound, we advise taking help from your financial advisor or broker.
On the contrary, one should not get attracted to stocks having low-value or have low liquidity and high price volatility as investing in penny stocks with poor fundamentals can wipe out your investments drastically. Similarly, a conservative approach would be to invest through mutual funds route or even ETFs by doing SIP’s in a timely manner.
Mishra of Religare Broking said that one can invest in Gold or debt instruments which are a traditionally safer asset class, but the investor would have to compromise on returns citing, "Historically, if we see returns in the last 19 years, Nifty index has given CAGR of around 12%. Similarly, if you had invested in quality and fundamentally sound companies like Titan, Berger Paints, Axis bank and Britannia then one would have earned a strong CAGR of 38 per cent, 31 per cent, 27 per cent and 21 per cent. So, if you would have made investment in stocks then you could have fetched more returns than index. Likewise, if the investment is made in assets like Gold or in Debt instruments (like Bonds, etc.) then it can fetch a return of around 7-10 per cent per annum and it can be considered for risk-averse investors."
Therefore, to conclude one should plan its investment route based on its risk profile and invest in a staggered manner for the long-term.